Tuesday, August 30, 2011

Congress CAN Do One Thing

It can suck, scare people, prevent investment, and reduce the value of existing investments. Of course, IF that were true, you could trade on that information.

And perhaps you can. Why do stocks do better when Congress is OUT of session? It could be that the risk is lower, so lower variance (though in that case options should do better when Congress is in session). A more likely explanation is that Congress sees its job as ordering people around and claiming credit for steering the economy. Iceberg! Dead ahead!

A nod to Prof. Newmark, for pointing this out. I like his "exercise for the reader."

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