Congressional Effect Investor Fund

bee

CEFFX:

Manager Info:

Eric Singer, Manager of the fund Advisor, Congressional Effect Management, first published an article on the general effect of Congress on daily stock prices in an article published in Barron’s in 1992. Since then the idea has attracted support and evidence from both the financial and academic community

Interesting strategy...Congress in Session = Go away.

Invests in the S&P 500 index when congress is not in session. Not sure if the fund follows this exactly but here's (was) the congressional schedule for 2011:

http://www.thecapitol.net/FAQ/cong_schedule.html

Interesting stats:


http://www.congressionalfund.com/

msf

Though I'm not a Jaffe lover, his calling FAIRX (Fairholme) a stupid investment generated enough comments that I figured I'd point out he's also called this fund a Stupid Investment of the Week.

bee

Hi msf,

I agree...but, it sure seems like our "do nothing congress" is adding to the recent markets down turn.

Now my question to Jaffe...did he check to see if congress was in session the week he wrote his article?

msf

What's the difference between a "do nothing Congress" and a Congress that's out of session? If the theory is "the biggest risk to investors in today's market is political risk--the risk that the rules will change" (that's a quote from the fund page), then Congress not doing anything (i.e. not changing the rules) would seem to be just as good for the market.

So when the House refused to change the rules by rejecting Paulson's three page legislation granting him carte blanche to give away tons of money to the banks with no conditions, the market rejoiced. No wait ... the Dow dropped by 777 points in response.
http://www.thestreet.com/story/10439887/1/dow-plunges-777-as-house-rejects-bailout.html

And in this global economy, is it really Congress' actions that the market fears (or hopes for)? From this morning's Weekend Edition (Sunday): World Powers Seek To Contain Europe Debt Crisis "The underlying problem is the inability of Europe, so far, to follow through on a plan its government leaders agreed to in July. ... The agreement needs to be ratified by the legislatures of all 17 euro zone nations, and fewer than half have approved it so far."
http://www.npr.org/2011/09/25/140771542/global-economy-entering-dangerous-phase-imf-says

Legislative inaction and holidays on a global scale, and global markets reacting in tandem. Not toward the upside.

bee

Seems we have a set of parents (the house and senate) that refuse to act as parents. Governing, like parenting. can be a dirty job (that someone has to do) for the greater good of the family (the country). Special interests seem to polarize parties and capture individual politicians. This, I believe, causes them to reject compromise, ignore criminal activity, and ultimately harm the moral and economic fabric of a civil society.

Do they harm markets? Probably. Especially over longer time frames of "do nothingness". My point is that doing nothing is often a choice and often a very stubborn childish choice. We seem to have a lot of children in office that either are ignorant (don't know the harm they do) or implicit (know exactly what harm they do).

Governing is the foundation of civil societies and ultimately productive societies.

I just find this fund an interesting commentary on governance or the lack of governance...maybe not a home run strategy but, governance should be high on the list of what investors screen for when they invest globally.

[Deleted User]

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bee

But more importantly... can I count on your vote in November?

Bad idea...agreed. We are in a very sorry state when politics has the ability to conjurer up this kind of thinking by money managers. Not sure which I trust less these days.

As Will Roger suggest "Never miss an opportunity to shut up"...sorry for the venting.