Congressional Wealth DestructionSaturday, June 27, 2009
He launched the Congressional Effect Fund that makes investments based on when Congress is on vacation. He has produced studies that show the S&P goes up when Congress is on vacation, and it goes down when Congress is in session. Eric follows the correlations between government intervention and the stock market, including one intervention that is my most hated (because I deal with this daily), Sarbanes-Oxley (SOX). In Investor’s Business Daily, he writes this about SOX:
Sarbanes-Oxley and its amplification by our rapidly growing litigation industry have turned our securities markets upside down.
Historically, private equity had a lower valuation than public equity because the initial investment was discounted based on the belief that some day the company would go public and that first investors would be rewarded for their risk taking and patience.
Now, private equity is available at higher valuations than public equity across certain sectors of the market. The ironic consequence of this “inverted equity curve” is that the guardians of the public markets are discouraging risk taking, diminishing wealth creation and ultimately hurting small investors.Sarbanes-Oxley and its amplification by our rapidly growing litigation industry have turned our securities markets upside down.
Ultimately, the clowns in Congress are violating property and destroying wealth. But they are deemed “public servants.” And, for the most part, the people who are “served” by their crimes are walking around in the fog of the unknown.