July 29, 2008

 

Dear Followers of the “Congressional Effect”:

 

Rasmussen polls recently showed Congress’ approval rating at an all time low of 9%. Congress could not have such a low rating without being mostly despised by members of both parties. And with good reason. This Congress appears dedicated to imposing its will upon the private sector while operating with general disregard for fiscal prudence or economic logic. Perhaps more than any other Congress in history, this Congress exhibits an astonishing degree of hypocrisy and spin that defies common sense, repeatedly pummels the economy and causes investors in other countries to further flee from the dollar.

 

One blatant recent example is Congress’ inability to promote existing domestic energy sources, instead blaming speculators for driving up the price of oil.  Making the perfect the enemy of the good, Congress’ posture on domestic drilling is that, even if we start it now it won’t immediately decrease the price of gasoline, so why bother doing anything? Instead, they propose solutions requiring exorbitant and unaffordable subsidies, while rounding up “evil speculators”.

 

Now that Congress has spent billions on ethanol subsidies, the country is starting to appreciate that ethanol subsidies do nothing to lower the price of gasoline, but do dramatically drive up the price of food and reduce the supply of water. When the price of gasoline predictably doesn’t respond, Congress calls on the CFTC to stop speculation.  They actually propose to distinguish between “legitimate” and “non-legitimate” trading, “non-legitimate” including those who might simply want to hedge against future price increases. I wish I was I making this up, but the name of this Senate bill (S.3268) is the “Stop Excessive Energy Speculation Act of 2008”.  (A better name for this latest piece of nonsensical legislation would be the “Shoot the Messenger Act of 2008”.)

 

So, rather than absorb, understand and measure the market’s predictable reaction to Congressional obstruction that has strangled domestic oil supplies over a period of decades, it appears that Congress now seeks to drive free energy trading markets overseas dealing yet another blow to our already beleaguered financial markets. As Boone Pickens shows us, at today’s prices we will transfer $10 TRILLION to foreign oil suppliers over the next decade, representing the largest transfer of wealth in history, and mostly to countries quietly to overtly hostile to the United States and our people.

 

One of the frequently overlooked results of Congressional denial is bad performance in the stock market, which relentlessly measures Congress’ approach to problems.  As Congress has gotten more illogical, we believe the market has responded with more fear. Year-to-date, the S&P 500 Index is down about -14.9%.   Going back farther, since 1965, the stock market, as measured by the S&P 500 Index, had an average annualized price gain of 1.6% when Congress was in session, and 17.6% when they were on vacation.

 

The Congressional Effect Fund seeks to avoid the ill effects of Congressional action and proposed action by only investing in the stock market (via positions in the S&P 500 Index) when Congress is on vacation. Since its launch on May 23, 2008 to July 28th, the Fund is up +.8%. This compares with the S&P 500 total return during this same time period of about -11.1%.  Past performance is not a guarantee of future results. Please review the Congressional Effect Fund prospectus [hyperlink to prospectus] carefully before investing or sending money.

 

The Congressional Effect Fund is the culmination of my many years of frustration with Congressional action.  I am proud to have launched and be managing a vehicle I hope will reward investors and, in so doing, also highlight the effects of Congressional deliberation.   It is my sincerest hope that strong investor support of this endeavor will promote and further freedom in America as our founding fathers intended. You can immediately open and fund an account online at www.congressionaleffect.com. If you need assistance completing the investment application, or have additional questions about the Fund, please do not hesitate to contact me directly. Or, you may contact the Fund’s distributor, Matrix Capital Group at 1.888.553-4233.

 

Please let me know if you have other questions, or if there was a time you lost money in the stock market due to Congressional action. I am eager to build a database of real life experiences so that people can better appreciate just how dangerous Congress is to your wealth.