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Trading the Portfolios of the Powerful

On Monday's show we recommended Clean Energy Fuels because Nancy Pelosi, the speaker of the U.S. House of Representatives, and her husband happen to own between $100,000 and $250,000 worth of its stock with her husband, according to The Wall Street Journal. Tuesday, the stock climbed $1.44, or 10%, and is up again about another 5% during Wednesday trading. Let's call that the Pelosi effect.

I think it's absurd that we let the speaker of the House or her spouse own any stock, given how much power anyone in that position can wield over the market in general and individual stock prices specifically. But if you read the Journal article you'll see that the rules about who can own what are so narrowly defined that, if you're a powerful legislator, you could get away with some pretty shady behavior, owning stocks that benefit from legislation you write, vote for or push in other ways using the rules of congressional procedure, and not technically be in any trouble. Here's how Ian Talley put it in the Journal:

"Legal experts say that unless policies promoted by a lawmaker exclusively benefit him or her, no ethics laws are violated. The ethics rules are so incredibly narrow that unless you are pushing or voting for something that will impact only you, it doesn't count as a conflict," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington."

I think that leaves a fair amount of shady wiggle-room. I mean, if your legislation benefits all the shareholders of a company, it doesn't "exclusively benefit" you, does it? I won't speculate as to whether our legislators would actually do anything like this, but I'd suggest you keep an open mind because there could be some real opportunities here.

So let's play a game. Members of Congress are required to disclose their holdings annually. Look at what the committee chairmen own. Does Carl Levin (D-Michigan), the chairman of the Senate Armed Services Committee, happen to own any defense contractors? What's Jeff Bingaman (D-New Mexico), the chairman of the Senate Energy and Natural Resources Committee, own? How about John Dingell (D-Michigan), chairman of the House Committee on Energy and Commerce?

What's in Harry Reid's (D-Nevada) portfolio? I think, given what the Journal story says about ethics rules regarding what stocks our congressmen and congresswomen can and can't own, that doing a little homework about the holdings of the politically powerful could lead to some pretty investable ideas.


Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.

Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.




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