Infrastructure, infrastructure, infrastructure

Last year, I highlighted which elected officials had their hands (read: financial portfolios) positioned in infrastructure prior to Biden’s Big Infrastructure Bill getting passed. It was interesting to see who was buying what to potentially profit from the influx of $550B in new infrastructure funding. Why is this still allowed? Read my coverage here.

The Fed

Although not elected by the people, high ranking officials at the Federal Reserve were exposed for insider trading in the latter part of 2021. Who watches the Fed? No one, it seems. Read the post here.

Counter China by making chips

The pandemic has caused a lot of problems on supply chains. One of those resulting in a major shortage in semiconductor chips, which are used in literally everything. Currently, China houses most of the world’s chip manufacturing capacity and in the last 2 years, we saw them hoard that supply for themselves. Congress was aware of this dependence (read: national security issue) back in 2020 and legislation was drafted accordingly. Proposals included ramping up domestic chip manufacturing capacity and tax credits for manufacturers. Throughout 2021, we’ve continued to hear about the urgency required to address this problem. With the following events happening:

• February: Biden signed an executive order to review critical supply chains such as chips and drugs
• June: Senate passed the United States Innovation and Competition Act of 2021 (USICA) that proposed $52B for domestic chip manufacturing
• Now: The House never took up the USICA or made any progress with past proposals

As it stands, no funding has been provided to address the problem. But this hasn’t stopped Congress from dipping into the chips industry! I highlighted this fact here.

Investing in pharma while funding pharma

Isn’t it a bit odd to be an elected official, where your colleagues and agencies you oversee are negotiating the finer details of vaccine pricing with pharmaceutical companies and funding the deployment of those vaccines, and you still decide to invest in said companies? Well that’s been happening throughout 2020 and 2021. You can read about my recent coverage on this topic here.

Congress + crypto

2021 was a year of firsts. One of those being the first time Congress entered the world of cryptocurrencies. Not only in legislation to regulate the industry, but also adding crypto to their financial portfolios.

A total of 6 congressional members bought and sold cryptocurrencies last year. They included:

House Representatives:

• Felix Moore: Invested up to $45k in ADA, $15k in DOGE and $15k in ETH
• Marie Newman: Invested up to $50k in GBTC
• Mark Green: Bought and sold BAT, CELO, DOGE, EOS, ETC, LINK and XLM with disclosed amounts varying between $15k to $30k
• Michael Waltz: Invested up to $100k in BTC

Senators:

• Patrick Toomey: Invested up to $15k in ETHE and GBTC each
• Cynthia Lummis: Invested up to $100k in BTC

Gotta have options

The general public has become aware of Speaker Nancy Pelosi’s proficient options trading. We have covered her trades and her portfolio elsewhere on this site. However, there are a couple other Congressional members who also traded options in 2021. Most notably is House Democrat Josh Gottheimer. We can see that he bought and sold over $60 million in calls alone. These disclosed values are so big that they skew other amounts disclosed by his colleagues. So I removed him in the following chart so we could better see other trades.

Speaker Pelosi comes in second with her calls totalling over $10 million, followed by Senator Tommy Tuberville and selling puts, calls and shorts.

Options were bought and sold for a diverse range of companies. The first set of heat maps show the number of times each member bought or sold options for specific companies. We see that all of Rep. Gottheimer’s calls were exclusively for Microsoft. Clearly, not an Apple fanboy. Meanwhile, Senator Tuberville’s puts were for his infrastructure and tech stocks.

The second set of heat maps show the total value spent per company options. As expected Rep. Gottheimer’s $MSFT calls outshone everyone else’s total traded amounts. If you’re wondering why Speaker Pelosi’s family trades options the way they do, we've got a post on that coming out later this week! Stay tuned.

In 2021 and 2020, we witnessed several elected officials trade options. I've written about Pelosi's options strategies here. It appears most of these politicians like to wheel certain trades, and seem to also be doing covered calls on larger share positions. Some even seem to be selling cash secured puts.

Because we cannot verify aspects of these individual trades (as details on options trades vary in detail per disclosure), we have to make a few assumptions about the options trading. For the sake of argument, we looked at around 100 option trades by members in 2021, and assumed these trades were buying/holding. Very simple long or short positions, nothing complicated. Although not fully accurate, let's determine the approximate returns overall:

It looks like the House Representatives are quite good at options trading (with an overall average returns of 35.7%). The best options trader in the House, from this limited analysis, is Rep. Blake Moore with an average return of 62.5%, followed by Speaker Pelosi with an average return of 36.6% at the time of this analysis. You can track her returns in real time at our i_am_the_senate page.

When we exclude puts, their returns are even better at an overall average of 47.1%. Here’s a chart of their returns on call contracts in 2021.

It should be stated that elected officials making leveraged options trades off privileged information should probably not be allowed. Here are some unusual option trades and the context around them:

• Pelosi’s DITM call leaps filed in December 2020, right before Biden’s Presidency started (ie. Her legislative influence in Congress increased exponentially)
• $BABA puts from Senator Tuberville and Rep. Moore who both sit on the Senate and House Armed Services Committees privy to information on emerging threats such as China
• Rep. Blake Moore’s super profitable $WYNN puts prior to its September collapse
  

Late Disclosure Club

First introduced by the STOCK Act, Congress has at most 45 days to file their financial disclosures from the transaction date. If they require more time, they have at most 90 days from the transaction date, but must file an extension request. Late disclosures are subject to penalties in both the House and Senate. See screenshots below from Ethics Committee websites.

Here is a list of elected officials who filed late financial disclosures in 2021 (ie. more than 45 days late. I did not confirm if extensions were filed for these). It is interesting to note Senator Tommy Tuberville’s 132 trades that were disclosed late. Apparently, he didn’t know the procedure. Right… Furthermore, the only consequence for filing that many transactions late is the single $200 fine! Senator Tuberville did not comment on whether he paid the fine. I wish the IRS were that easy on us. However some elected officials took action this past year to act in more of an ethical manner. For example, Rep. Tom Malinowsku moved his entire financial portfolio into a blind trust… after he was found to be in violation of the STOCK Act in early 2021.

Concluding Remarks

Whether it’s questionable timing or something the individual may or may not know, our elected officials put themselves in tough situations when they are allowed to trade in specific equities and derivatives while actively legislating. They open themselves up to perceived conflicts of interest, which can make the public question their motivations.

This is why many have called for measures that go above and beyond the STOCK Act. These include moving financial portfolios into blind trusts, being restricted to broad sector index funds only (and not individual company stocks), or not being able to trade at all while in office.

Ultimately, without any support from the Old Guard, such as Speaker Nancy Pelosi, these measures will never be implemented. Pelosi has been very vocal about whether elected officials should be able to trade while in office.

This report shows that in 2021 Congress continued to trade in the very sectors they were tasked to create legislation for. Our politicians traded in huge volumes and amounts while being privy to closed door meetings and negotiations on committees in the House and Senate. I have previously highlighted how our elected officials have profited during the beginning of the pandemic (links to House and Senate reports). This report shows that some continue to make mad gains. We track these trades daily on our website. It’s free.

For me, this analysis was surprising, maddening and upsetting. Despite what Speaker Pelosi thinks, the general sentiment amongst regular folks is that our elected officials should not be trading in the stock market while they represent us in office. We should remember though that we, the people, wield the power to elect folks who also believe in the same. One encouraging stat is that for every one Congressional member that did disclose trades in 2021, there were around 3 that did not trade at all in 2021. Until Congress changes, we’ll continue to highlight their financial ties here at www.unusualwhales.com.