Asymmetrical Information

Better yet, force everyone in Congress to invest all their money in Social Security.

Jane, this has been one of your best weeks in recent memory. Your vacation will be well-deserved (because blogging is your real job, of course.)

Cheers, Klug

Jane, this has been one of your best weeks in recent memory. Your vacation will be well-deserved (because blogging is your real job, of course.)

Cheers, Klug

Why not use the insider info rule; if they sell something within six months, have the profits go to the US treasury.

Ziobrowski was on my dissertation committee; nice to see a fellow Kent State grad doing well.

Geez, you people aren't any fun! Let's just have a afternoon show on CNBC, featuring a rotating panel of Senators, in which they provide their opinions on equities. Hollings on the entertainment industry! Graham on sugar concerns! Stevens on the petroleum sector! Lott on the defense industry! Who needs Dobbs, Insana, or Rukeyser, when sages of this magnitude are available?!

Not sure the blind trust would work well, at least in the case of small business owners, including farmers. If you require them to sell out and put the money in a blind trust, I think it would just discourage them from running for office (and we'd end up with even more lawyers in Congress).

How about if incoming Congress(wo)men have to declare their total net worth. When they leave, they have to turn any increase in total net worth over to the Treasury; maybe we'd adjust for inflation and/or savings from their salary. This would avoid egregious situations like LBJ's.

Then you'd have to consider how to handle the assets of spouses, siblings, children, parents...

Power corrupts. While corrupting levels of power are concentrated in private enterprise, such levels are also concentrated in government. This post demonstrates the folly of trying to eliminate corruption by having government usurp power from the private sector.

How about we don't vote for the ones we don't like.

Mr. Woodworth,

That sounds fine with me. Just one little condition, though. The same rule applies to any insider trading laws for corporate executives or the financial markets. Specifically, we just don't exercise our proxy votes for executives we don't like. Fair enough?

Sorry, but I don't think that "vote the rascals out" is a powerful enough tool to eliminate government greed.

When a corporation gets greedy, I can "vote with my feet" and take my business elsewhere. For example, if I get a whopper with extra lettuce and no tomatos, they charge me extra. So I don't buy whoppers anymore. I buy my burgers elsewhere.

I am only one person. And, apparantly, not that many people feel as strongly as I do about this practice. But sometimes copnsumers acting en masse can induce change. Coca Cola changed the formula for Coke. Consumers chose not to drink it. Coke switched from "New Coke" to "Classic Coke".

Fortunately, government does not control fast food. I do not need to buy burgers from the state owned hamburger stand. I have options.

With government, there are no options. In some cases, this makes sense. Examples are the common defense and public roads. We cannot punish government for bad decisions by ceasing to do business with them. Without moving, we cannot induce government to change by taking our business elsewhere.

So we have another tool, elections, to control government. If we don't like the current road system, we can wait for the next election and change our vote. If we don't like the current defense posture, we can wait for the next election and change our vote.

But we only have one vote per election. We can't vote for one person based on our national defense and another based on roadways. We have to select one person to represent our beliefs in both areas (and social security, education, trade policy, space exploration, etc.) With all that to think about, fraudulent activity such as insider trading sometimes slips through the cracks.

I do think we can reform government. (Why election day? Why not weighted legislative voting?) But even with that, the invisible hand of Adam Smith does a better job of allocating resources than the schlerotic hand of government. We need to limit the size of government wherever possible.

If it wasn't for congress, Enron wouldn't have happened.

Without the government setting these rules (so companies just have to comply with them) the free market would demand real accountability... isntead we're assured that the government is looking after us, which of course it isn't.

Enron is proof positive that the government has no desire to protect investors... but people are so indoctrinated with socialism that they think the government can do nothing but good-- instead of the truth which is the exact opposite.

Government, all government, is a disease masquarading as its own cure.

The only way to reform government is to get rid of it. By definition, government is a gang of thugs who run the country for their profit. These elections are a joke-- only government chosen candidates are allowed to run-- for instance, Iraqis only got to vote for Saddam-- any vote was a vote for the regime. We only get to vote for Bush or Kerry-- any vote is a vote for the regime.

Third party candidates are illegally kept from running, kept off TV, kept off of many ballots, and of course who's going to stop it? The government? No.

Government is a disease. The only cure is to kill the disease.

If it wasn't for congress, Enron wouldn't have happened.

Without the government setting these rules (so companies just have to comply with them) the free market would demand real accountability... isntead we're assured that the government is looking after us, which of course it isn't.

Enron is proof positive that the government has no desire to protect investors... but people are so indoctrinated with socialism that they think the government can do nothing but good-- instead of the truth which is the exact opposite.

Government, all government, is a disease masquarading as its own cure.

The only way to reform government is to get rid of it. By definition, government is a gang of thugs who run the country for their profit. These elections are a joke-- only government chosen candidates are allowed to run-- for instance, Iraqis only got to vote for Saddam-- any vote was a vote for the regime. We only get to vote for Bush or Kerry-- any vote is a vote for the regime.

Third party candidates are illegally kept from running, kept off TV, kept off of many ballots, and of course who's going to stop it? The government? No.

Government is a disease. The only cure is to kill the disease.

Well, Don Galt, the alternative is to see how well 280 million people do at governing themselves in the absence of an enforcement authority. You'll have to forgive me if I'm not too eager to discover what that's like; I figure my prospects for survival under such terms are a bit thin, since I don't already own a backwoods Montanan cabin stockpiled with automatic ammunition and bottled water.

But isn't Jane proposing a regulatory solution to a perceived failure of the political process?
Would she propose a regulatory solution to a perceived failure of the marketplace? PJ has brought up the `unintended consequences' that libertarians are so sensitive to in economic spheres. Why are we better able to fine tune the political process through regulation?

Those who believe in the market trust the collective result of millions of individual choices. Why not the same trust that voters have evaluated the virtues and foibles of those seeking election, and not finding the perfect candidate, have made a choice to accept the bad with the good?

You want to do away with needed and essential regulation because some congresspeople get lucky with their investments for a few years? Please.

Yeah, lets close down the SEC because some Senators invested in tech funds in the 90s. The free market regulated the securities industry in the 1920s, look how well that turned out.

Well, Don Galt, the alternative is to see how well 280 million people do at governing themselves in the absence of an enforcement authority.

Exactly, mouse. That's Don's point--people self-regulate far better than governemental crooks regulate them. Your fear that you won't survive is overblown and stupid; unless of course you assume that the vast majority of people (excepting your wonderful self, of course) arre venal murderers waiting to kill you. Because, as we all know, there have never in all of recorded history, been any people or cultures without defined governments.

Oh, and there's no such thing as "automatic ammunition". No wonder you worry that you won't survive.

people self-regulate far better than governemental crooks regulate them

The Haitian government is plenty corrupt, and yet this latest bout of anarchy has meant more looting and chaos, not less. If you want to try self-regulation, why not take your automatic weapons and your non-automatic ammo and head to northern Haiti? It might be fun fending off the minority of venal murderers, now that there's no police force to do it for you. You wouldn't suffer from any overblown, stupid fear of not surviving, the cost of living is nil, and hey, it's the Caribbean. What's not to like?

The Haitian government is plenty corrupt, and yet this latest bout of anarchy has meant more looting and chaos, not less.

Thank you, Katherine. You make my point for me. Why is there a problem in Haiti right now? You said it yourself--a corrupt government. Do you think that Haiti would be in this state if it hadn't been ruled by a corrupt government (government being the operative word here).

I am consistently amazed by the willingness people have to place their faith in "government", like it's some benevolent father there to take care of you. It's filled with those who seek the power that government grants over others. Why on earth are you so delusional that you would willingly give anyone power over you?

The Haitian government is plenty corrupt, and yet this latest bout of anarchy has meant more looting and chaos, not less.

Thank you, Katherine. You make my point for me. Why is there a problem in Haiti right now? You said it yourself--a corrupt government. Do you think that Haiti would be in this state if it hadn't been ruled by a corrupt government (government being the operative word here).

I am consistently amazed by the willingness people have to place their faith in "government", like it's some benevolent father there to take care of you. It's filled with those who seek the power that government grants over others. Why on earth are you so delusional that you would willingly give anyone power over you?

Government does not create thugs. Thugs go where the power is. The arguement for limiting government does not mean less thuggery, it means the thugs go somewhere else. Thugs in private corporations can screw their stockholders, employees, and maybe their customers. Thugs in government can screw everybody. Thugs in anarchy may not have as much scope to their power, but they can be much more intense in their smaller sphere. The justification for government is to provide a common defense so individuals do not have to spend so much time providing their own defense. The problem is that official power attracts the same sort of people it is supposed to defend against, and it grows. Self government is the theoretical answer, but history seems to indicate it is difficult to maintain. There is a self-organizing principle among people, but the natural unit of self-organizations seems to be the gang. Elections don't solve the problem, but they seem to moderate it by providing a non-violent path to power for the people who would be pursuing a path to power anyway. Don't let the perfect be the enemy of the good.

Too bad they didn't have to publicaly disclose what they are going to buy and seel 24 hrs in advance.

PJ:
How about if incoming Congress(wo)men have to declare their total net worth. When they leave, they have to turn any increase in total net worth over to the Treasury; maybe we'd adjust for inflation and/or savings from their salary. This would avoid egregious situations like LBJ's.

They already have to file financial reports each year, that's where the data for the survey came from, no doubt. They don't have to disgorge any gains, that's just a stupid notion.

I will take a contrarian position. Many members of Congress are very wealthy to begin with. Many are fairly bright. Many are engaged in economic, domestic, and international issues. They have good experience, pay attention to many issues, and have a some ability to take the pulse of these issues. They are surrounded by staff who can be much the same. Just maybe this is not a sinister situation: they have access to a wealth of information, which is deliberately funnelled to them by the government in the course of their jobs, they take that information, and use it in their investments. Being decently smart and with experience investing, as most wealthy people do, they do alright.

PJ:
How about if incoming Congress(wo)men have to declare their total net worth. When they leave, they have to turn any increase in total net worth over to the Treasury; maybe we'd adjust for inflation and/or savings from their salary. This would avoid egregious situations like LBJ's.

They already have to file financial reports each year, that's where the data for the survey came from, no doubt. They don't have to disgorge any gains, that's just a stupid notion.

I will take a contrarian position. Many members of Congress are very wealthy to begin with. Many are fairly bright. Many are engaged in economic, domestic, and international issues. They have good experience, pay attention to many issues, and have a some ability to take the pulse of these issues. They are surrounded by staff who can be much the same. Just maybe this is not a sinister situation: they have access to a wealth of information, which is deliberately funnelled to them by the government in the course of their jobs, they take that information, and use it in their investments. Being decently smart and with experience investing, as most wealthy people do, they do alright.

PJ:
How about if incoming Congress(wo)men have to declare their total net worth. When they leave, they have to turn any increase in total net worth over to the Treasury; maybe we'd adjust for inflation and/or savings from their salary. This would avoid egregious situations like LBJ's.

They already have to file financial reports each year, that's where the data for the survey came from, no doubt. They don't have to disgorge any gains, that's just a stupid notion.

I will take a contrarian position. Many members of Congress are very wealthy to begin with. Many are fairly bright. Many are engaged in economic, domestic, and international issues. They have good experience, pay attention to many issues, and have a some ability to take the pulse of these issues. They are surrounded by staff who can be much the same. Just maybe this is not a sinister situation: they have access to a wealth of information, which is deliberately funnelled to them by the government in the course of their jobs, they take that information, and use it in their investments. Being decently smart and with experience investing, as most wealthy people do, they do alright.

I read all the attempts at erudition here and it brings to mind one guestion: why do we need a government with geniuses like this in such plentiful supply? It boggles what passes for the mind!

Your looking for a Social Security fix.

They already have to file financial reports each year, that's where the data for the survey came from, no doubt. They don't have to disgorge any gains, that's just a stupid notion.

Gee Chris, thank you for telling me my suggestion is stupid. Your comprehensive rebuttal has sure opened my eyes.

I don't think much of your contrarian position. The NY Times article states, "Corporate insiders (defined as senior executives) usually outperform by about 5 per cent." Doesn't it seem a bit odd that Senators are almost two and a half times better investors? Do you think their staff is that much better, or their info that much more reliable, than typical senior execs? Seems to me much more likely that the statistic is the result of Senators being tipped off to good investments by people hoping to earn their goodwill.

If elected officials had to disgorge exceptional stock gains, it would make it harder for them to be bribed in this way.

The solution to this is easy. Securities regulations make it a matter of public record when corporate officers buy/sell their own stocks. Why not treat trades by public office-holders the same?

Or would we have to stop speculating that Congress is nothing but a club full of self-serving, lying thieves because we'd finally have the goods on 'em? Never mind.

Securities regulations make it a matter of public record when corporate officers buy/sell their own stocks. Why not treat trades by public office-holders the same?

Or would we have to stop speculating that Congress is nothing but a club full of self-serving, lying thieves because we'd finally have the goods on 'em? Never mind.

A couple of factors I've not seen mentioned, here:

When you're amillionare to begin with, you're likely more on the ball than the average investor, and in any event, can afford to hire professional help... niether of these suggests anything insiderish.

Chris and Bithead,

The efficient markets hypothesis (see http://www.investorhome.com/emh.htm for example) states that abnormal returns should be impossible without the Senators possessing information unavailable to other investors. Being a millionaire is irrelevant. Even if you are smarter or can afford to hire professional help, these abnormal returns should not be possible. Investment banks and money managers hire thousands of very intelligent people well-educated in financial theory and do not produce results like this. There really is no explanation except that the Senators are profiting on insider knowledge.

It's not the Senators who have the insider knowledge: it's the people who manage the money. My broker explained how Ms. Rodham managed to make a $100 K in a year on a $1K investment. The brokers typically trade for a whole group of clients in a day, and the trades cover a range of prices. In an honest world, all clients pay the average trade cost. When a broker wants to favor a client, the best trade of the day is allocated to the favored client, and the balance are allocated to the rest of the clients. Nothing spectacular in any one day, but slowly and surely the favored client pulls away from the rest. Same thing with timing. There's likely to be some trades in a broker's accounts at the optimal market time. Most managed accounts allow a lot of leeway to the broker: I do {he bought me Enron at $18 and sold it at $65 ;-) } The best timed ones go to the favored client.
You think the brokers would think of Senators as favored clients?

It's not the Senators who have the insider knowledge: it's the people who manage the money. My broker explained how Ms. Rodham managed to make a $100 K in a year on a $1K investment. The brokers typically trade for a whole group of clients in a day, and the trades cover a range of prices. In an honest world, all clients pay the average trade cost. When a broker wants to favor a client, the best trade of the day is allocated to the favored client, and the balance are allocated to the rest of the clients. Nothing spectacular in any one day, but slowly and surely the favored client pulls away from the rest. Same thing with timing. There's likely to be some trades in a broker's accounts at the optimal market time. Most managed accounts allow a lot of leeway to the broker: I do {he bought me Enron at $18 and sold it at $65 ;-) } The best timed ones go to the favored client.
You think the brokers would think of Senators as favored clients?

It's not the Senators who have the insider knowledge: it's the people who manage the money. My broker explained how Ms. Rodham managed to make a $100 K in a year on a $1K investment. The brokers typically trade for a whole group of clients in a day, and the trades cover a range of prices. In an honest world, all clients pay the average trade cost. When a broker wants to favor a client, the best trade of the day is allocated to the favored client, and the balance are allocated to the rest of the clients. Nothing spectacular in any one day, but slowly and surely the favored client pulls away from the rest. Same thing with timing. There's likely to be some trades in a broker's accounts at the optimal market time. Most managed accounts allow a lot of leeway to the broker: I do {he bought me Enron at $18 and sold it at $65 ;-) } The best timed ones go to the favored client.
You think the brokers would think of Senators as favored clients?

I think it may be time for another Abscam-style investigation by the FBI.

I've always wondered how it was that people go to Congress as middle class and come out rich. I guess now we know. We really need more investigative journalism. I don't think more laws are needed. More information is.

I don't trust big media to do this, however, because they're so protective of (a) Democrats and (b) sources of leaks and, these days, (3) their own stock portfolios. If they told all the things they know about politicians, it would do wonders for problems like this.

It's not the Senators who have the insider knowledge: it's the people who manage the money. My broker explained how Ms. Rodham managed to make a $100 K in a year on a $1K investment. The brokers typically trade for a whole group of clients in a day, and the trades cover a range of prices. In an honest world, all clients pay the average trade cost. When a broker wants to favor a client, the best trade of the day is allocated to the favored client, and the balance are allocated to the rest of the clients. Nothing spectacular in any one day, but slowly and surely the favored client pulls away from the rest. Same thing with timing. There's likely to be some trades in a broker's accounts at the optimal market time. Most managed accounts allow a lot of leeway to the broker: I do {he bought me Enron at $18 and sold it at $65 ;-) } The best timed ones go to the favored client.
You think the brokers would think of Senators as favored clients?

"There really is no explanation except that the Senators are profiting on insider knowledge."

This seems to be not only Bradley Rolfe's opinion but everyone else's here, except those who attribute unusual financial acumen to Senators.

May I suggest we calm down a bit? This study covered five years, 1993-98. If we assume some concentration of wealth in the Senate, we're probably talking about a situation where the performance of a handful of portfolios determined the result. That in itself is enough to suggest that this performance could easily be no more than the result of normal variation.

Remember too that the period in question was not only short, it was one in which there were a large number of spectacularly successful investments available. To take just one example, Microsoft returned almost 70% per year over that period, while the S&P returned about 21%.

Would you say that someone who (in violation of basic principles) had his entire portfolio in Microsoft over that period, and thus outperformed by 49%, not a piddly 12%, must have had inside information?

Relax, everyone.

"Just maybe this is not a sinister situation: they have access to a wealth of information, which is deliberately funnelled to them by the government in the course of their jobs, they take that information, and use it in their investments." But if someone outside of government does the same, they can go to prison for outsider trading.

Chris do you really want a privileged class that is not subject to the same laws as the rest of us?

Okay, where did he get his info on the senator's transactions from? How soon after they trade is it available? I'd like to the same.

Bernard writes: "Remember too that the period in question was not only short, it was one in which there were a large number of spectacularly successful investments available. To take just one example, Microsoft returned almost 70% per year over that period, while the S&P returned about 21%."

Those same investments were, theoretically, available to everyone else, yet the average investor underperforms the market.

Unless, of course, members of Congress have access to IPO stocks that are *not* widely available. IPO pops would go a long way toward inflated portfolio performance.

As would inside information.

I think Congress should have to disclose all stock purchases or sales, prior to the actual transaction, as if they were insiders.

Bernard,

You are right that a few large, very successful portfolios could have randomly outperformed the market, and accounted for the results. An investment in Microsoft would have achieved excellent returns, certainly, and I would like to see how diversified the Senators' portfolios are. Clearly, if they invest in just a few stocks, these abnormal returns are less statistically significant. It would also be nice if the study covered more than 5 years.

However, this study does show excellent market timing, which your Microsoft example does not address. The implication then, is that Senators did not pick excellent companies, but bought and sold ordinary companies at fortuitous times. As Professor Ziobrowski says, "The results clearly support the notion that members of the Senate trade with a substantial informational advantage over ordinary investors.

I would like to read the study itself, to find out if there is any evidence for your argument that normal variation could account for these results, but I can't find it online. I think the 12% number is fairly strong evidence of insider knowledge producing abnormal returns.

Bernard,

If the returns gained by the Senators could be explained by normal variation, Prof. Ziobrowski would not have a paper to publish. That's an elementary error that any editor of a financial theory journal should immediately recognize. It may be that a study conducted over a longer time period would show that Senators do not obtain abnormal returns from their investments, but the evidence thus far is that they outperform the market. The best (and simplest) explanation is that they profit on inside information.

Jon H is right--members of Congress should be subject to the same disclosure requirements as corporate insiders. If they are such astute investors, these returns will continue unabated.

Mark Schmitt has taken a closer look at the study and argues that the results are inconclusive:

http://markschmitt.typepad.com/decembrist/2004/02/a_heavy_accusat.html

Mark Schmitt has taken a closer look at the study and argues that the results are inconclusive:

http://markschmitt.typepad.com/decembrist/2004/02/a_heavy_accusat.html

Jon and Bradley,

I agree that if senators had exceptional access to IPO's then there would be something rotten. That is something I would like to see more data on. Of course, even here you have to be a little bit careful, since large-scale investors, senators or not, typically have superior access. You need to separate the "senator" effect from the "rich guy" effect.

Would Ziombrowski have had a paper if the results were not significant? Maybe. This is a pretty important group of people, after all, so even if the result fell into the range of normal variation it would be interesting. Notice that the results of sales were deemed "intriguing" even though it was fond that stocks sold performed in line with the market after the sale. What's so intriguing about that?

Let me make another point. Because these results could easily have been the result of a handful of very successful portfolios,it is hardly fair, without more information, to condemn everyone. Just a few crooks would be enough to produce this result. I'd like to see the actual data.

I understand your comment. I have the same opinion of the Washington Post. Make the Post responsible for the goverment. I mean Jeez they have yet to make a mistake. Just ask the omsbudsman. Len Downey feels that yada yada yak yak ad infinitum. They all live in the area. No moving costs.

I understand your comment. I have the same opinion of the Washington Post. Make the Post responsible for the goverment. I mean Jeez they have yet to make a mistake. Just ask the omsbudsman. Len Downey feels that yada yada yak yak ad infinitum. They all live in the area. No moving costs.

We're reminded of Senator Clinton's early market savvy , during her hubby's first run for governor, when she parlayed a $1,000 investment in the commodities market into an unheard-of $100,000 return. She really IS the Smartest Woman in the World.

Oh, and who's the Smartest Man in the World? That would be the only senator to break the $600,000 barrier in individual campaign donations from those he calls "influence peddlers," John Kerry.

We're reminded of Senator Clinton's early market savvy , during her hubby's first run for governor, when she parlayed a $1,000 investment in the commodities market into an unheard-of $100,000 return. She really IS the Smartest Woman in the World.

Oh, and who's the Smartest Man in the World? That would be the only senator to break the $600,000 barrier in individual campaign donations from those he calls "influence peddlers," John Kerry.

We're reminded of Senator Clinton's early market savvy , during her hubby's first run for governor, when she parlayed a $1,000 investment in the commodities market into an unheard-of $100,000 return. She really IS the Smartest Woman in the World.

Oh, and who's the Smartest Man in the World? That would be the only senator to break the $600,000 barrier in individual campaign donations from those he calls "influence peddlers," John Kerry.

How many of our senators are multi-millionaires?

In the US economy there are now four types of players:

1) the Big Winners, who take all: very successful entrepreneurs and certain investment bankers, very well set-up CEOs and others who arbitrage between the entrepreneurs and the rest of us. Senators Frist, Corzine, Feinstein (through her hubby) are in this class, as is the very entrepreneurial John Edwards.

2) the Connected and the Professional Servants to the Big Winners: the lawyers, consultants, higher-level managers and execs, and well-connected Senators like Hollings, Tauzin and so many others;

3) the Vast Middle: other professionals, managers, self-employed workers with stock portfolios, and homeowners in strong housing markets who have seen their wealth increase at a modest but steady rate over the last 15-20 years. This class nonetheless must worry about retirement and is forced to work harder and harder to preserve its comforts.

4) the Great Unwashed: the 30-40% of the population that has neither the connections, skills, opportunity nor the work ethic to claw its way up to the third tier.

Of course, there is a fifth group, notable both for its enormous wealth and its minuscule numbers, comprising those who earned their money the old-fashioned way: they inherited it (or married it). It is in this group that most of our Senatorial plutocrats belong: Kennedy, Kerry, Dodd, Rockefeller, former senator Danforth...

How many of our senators are multi-millionaires?

In the US economy there are now four types of players:

1) the Big Winners, who take all: very successful entrepreneurs and certain investment bankers, very well set-up CEOs and others who arbitrage between the entrepreneurs and the rest of us. Senators Frist, Corzine, Feinstein (through her hubby) are in this class, as is the very entrepreneurial John Edwards.

2) the Connected and the Professional Servants to the Big Winners: the lawyers, consultants, higher-level managers and execs, and well-connected Senators like Hollings, Tauzin and so many others;

3) the Vast Middle: other professionals, managers, self-employed workers with stock portfolios, and homeowners in strong housing markets who have seen their wealth increase at a modest but steady rate over the last 15-20 years. This class nonetheless must worry about retirement and is forced to work harder and harder to preserve its comforts.

4) the Great Unwashed: the 30-40% of the population that has neither the connections, skills, opportunity nor the work ethic to claw its way up to the third tier.

Of course, there is a fifth group, notable both for its enormous wealth and its minuscule numbers, comprising those who earned their money the old-fashioned way: they inherited it (or married it). It is in this group that most of our Senatorial plutocrats belong: Kennedy, Kerry, Dodd, Rockefeller, former senator Danforth...

As alkali points out, Mark Schmitt has looked a little more deeply into the report, and finds that 4 senators account for most of the trades. He says that Claiborne Pell and John Danforth were of unquestioned integrity, leaving John Warner and Barbara Boxer. He's a millionaire by marriage, and she was a stockbroker.

Boxer being a stockbroker actually makes her behavior more suspicious, as she would be more likely to know which minor technical amendments would be likely to have significant stock-price impacts. I hope Bill Jones (or Rosario Marin) can make some hay with this.

Bernard writes: "I agree that if senators had exceptional access to IPO's then there would be something rotten. That is something I would like to see more data on. Of course, even here you have to be a little bit careful, since large-scale investors, senators or not, typically have superior access. You need to separate the "senator" effect from the "rich guy" effect."

This should be countered by considering the 5% returns of executives.

Surely the executives would be precisely the sort of well-connected high-net-worth investor you speak of? Presumably, they don't only invest in their own company, so they'd have investments which wouldn't be regulated due to insider status.

If it were a "rich guy effect", the executives ought to have had investment performance closer to that of the senators.

That said, it appears that the study in question specifically ignored IPOs. Which makes it even stranger that they did so well.

I fail to glance over this thread for a few days, and look what happens. Neuman, I think the main points of your response have been answered, save for this one:

Oh, and there's no such thing as "automatic ammunition". No wonder you worry that you won't survive.

This works well enough as a demonstration of one's own lacking in social grace I suppose, but doesn't really damage the statement. Admittedly I don't hang around the kind of places where gun lingo is regularly bandied about, but I do have several friends who use firearms for recreation and hunting, and none of them would have trouble understanding "automatic ammunition" as meaning "ammunition intended for use in an automatic weapon" or similar.

None of them are obsessive-compulsive English majors either, which may explain why they wouldn't be sufficiently concerned about the grammatical implications to bother correcting the statement.

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