Nancy Pelosi | The Absolute Chaos Of Insider Trading

What's up guys, it's Graham here. So, I have to say, I was not planning to make this video, but when I see hundreds of people quietly talking about the latest way to make a lot of money in the stock markets, I'm gonna listen. And believe it or not, the secret is Nancy Pelosi. No, seriously, it's Nancy Pelosi.

Despite what you might think about the success of Warren Buffett, Charlie Munger, and Kathy Wood, this 81-year-old Speaker of the U.S. House of Representatives has become an investing meme because she's made a lot of money with Wall Street bet-style trading that anyone could copy, since it's all publicly available for anyone to see.

So today, let's break down exactly how much these trading strategies are actually making, how she's able to make an absurd amount of money in the stock market, if it's profitable to copy her trades, and then, most importantly, what she's buying right now that could signal the direction of the market over these next 12 months. All of that and more on this episode of "It's not insider trading" because we are a free market economy, even though her stock returns crowned her the 2021 Crater of the Year.

But before we start, according to my analytics, almost half of you watching are unsubscribed. So it would mean a lot to me if you could do me a quick favor. If you enjoy the video, appreciate the information, and want to see more content like it, feel free to join the community and subscribe or hit the like button for the YouTube algorithm.

Alright, so for those that don't know, this all begins with what's called the Stock Act of 2012. This is a provision enacted to help combat insider trading from within members of Congress. As a result, anytime they or a spouse buy or sell a stock, it must be publicly disclosed. In this case, if they make an investment in excess of a thousand dollars, they have a maximum of 30 days to publicly report that trade, or up to 45 days to report the trade if it was made from a broker or a spouse, meaning all of us could see exactly what they're buying and selling and then just copy along.

And when you look at the overall picture of Congress in terms of how well their stock picks perform, they actually do quite well. For example, the blog Market Sentiment—a link to it is down below in the description—analyzed nearly 10 trades made from members of Congress over a two-year period in excess of fifteen thousand dollars. Now, he found that over one month, their stock picks beat the S&P 500 by 12 percent, over a quarter they beat the benchmark by 1.34, and until present day, their stock picks outperformed by almost six percent.

But here's where things start getting even more interesting. Even though they have a maximum of 30 days to report each trade, the median disclosure is made at day 28, and the average is at day 52, meaning almost everybody waits until the last possible moment for their information to be made public. Well, some even report late to get hit with a $200 penalty. Yeah, it's basically not even a slap on the wrist. Although still, it was found that had you copied their trades even on a 30-day delay, you would be beating the S&P 500 by 5.9 percent.

So perhaps they know something that the rest of us don't. And that's what brings us to Nancy Pelosi, the new stock-picking genius. For the last three years, her stock-picking strategies have consistently beaten the S&P 500. She's grown her wealth by an estimated 16.7 million dollars in 2020 alone, and she reportedly has a net worth of around 100 million dollars.

Both she and her husband recently locked in a 5.3 million dollar profit from Alphabet call options. They invested in Apple during the June 2021 tech dip. That also includes a one million dollar bet into Tesla and bullish bets on Disney. And to top it all off, a five and a half million dollar investment in big tech right before the shutdown in 2020.

Needless to say, now people believe that either she and her husband are stock-picking oracles or they have inside knowledge into the stocks and companies that are about to see explosive growth. And that has led to the recent controversy. Their first large foray into the news occurred when her husband made a 5.3 million dollar profit on Alphabet call options right before the House voted on an anti-trust regulation, which was not a threat to big tech.

When asked for a comment, Nancy explains that at the time, she had no knowledge of the purchases and that she owns no stock herself. But that isn't stopping the retail trading community from taking on a new stock strategy—and that would be copying Nancy Pelosi. I mean just take a look at the latest posts on Reddit: "Nancy Pelosi latest trades," "Anyone at Nancy Pelosi's latest stock options," "Nancy Pelosi buys Roblox 100 January 23 calls," along with others.

Here's the whole list: looking to copy Nancy and Paul Pelosi's trades. What tools or websites should I use? It's really not surprising either when you see tweets comparing the world's most successful investors, and Nancy Pelosi is at the top of the list.

So what is she buying now? In her most recent disclosure, her first purchase was 10 call options for Google worth between 500,000 and a million dollars, with a strike price of two thousand dollars and an expiration of September 16, 2022. And by the way, if you look closely at this, you'll notice the letters "SP," signaling that her spouse is the one making these investments and not her directly. This is a really important detail, but we'll come back to that in a moment.

But anyway, for those unaware, a call option is simply the option to purchase a stock at a specific point in the future at a predetermined price, and what makes this so unique is that every call option is actually worth a hundred shares of that underlying company.

More simply put, they believe that Google will continue to do well throughout the rest of the year, and if that happens, they make a lot of money. The second, there was also a purchase around the same time for a hundred call options on Micron Technology stock at fifty dollars, also expiring at the same time on September 16, 2022.

Of course, you might be looking at these stocks at the same time that I'm mentioning them and thinking to yourself, "Wait a second, Graham, the stock is trading for ninety-four dollars a share? How is she able to buy it for fifty dollars?" And that is a great question.

This is what's referred to as an in-the-money call option because as of today, they would be paying a forty-five dollar premium for the right to buy Micron in the future at fifty dollars a share. It's really no different than me saying you could buy my thousand dollar stock one year from now for the cost of five hundred dollars. Just pay me a five hundred dollar premium right now, and that way, if the stock is worth more than a thousand dollars at the time our contract expires, you keep anything above that amount.

Think of this as another way to get a lot of leverage without paying a lot of money up front, and that's basically what they're doing. The third, we also have fifty to a hundred thousand dollars spent towards a hundred call options for Roblox, with a strike price of a hundred dollars, expiring January twentieth, twenty twenty-three.

As you can see, the price of Roblox stock is currently trading for eighty-nine dollars, meaning they're a lot more optimistic on the long-term outlook on the stock, and they're taking a lot more risk compared to the previous two options we discussed. And fourth, we have a very large 500,000 to a million dollar investment in Salesforce call options at a strike price of two hundred and ten dollars.

Then we have a Disney call option with a strike price of a hundred and thirty dollars, which leads us to believe that overall, Nancy and her husband, Paul, are quite bullish on the long-term outlook of tech over the next year, and they're investing a lot of money on the chance that the market's going to be a lot higher in the future than it is today.

But given her most recent trades, you have to ask yourself: is it actually worth copying? And how have they performed in the past? Fineprintdata.com found that the Pelosi index beat the market by five percent in 2019 and by 14 in 2020. As they say, based on the stocks purchased and disclosed from 2019 through Q4 in 2021, her portfolio grew by 96 percent over that time, gaining 62 million dollars in value, and that's not even including the 2.8 million made from options trading.

Prior to then, they've made perfectly timed investments in green energy in 2016 before it was cool. Just weeks before their investment announced a merger with another company, which sent the stock price soaring. In 2014, she increased her net worth by 4 million dollars through investments in Facebook and Comcast. And in 2008, they got 5,000 shares of Visa at the rock-bottom price of forty-four dollars a share, and just two days later, the value skyrocketed to sixty-four on their IPO and successful legislation.

So I think it's pretty safe to say that overall, the Pelosis have done quite well and probably outperformed the overall market, depending on exactly when they've exercised those call options. Although, even though it's easy to call it insider trading, one thing to keep in mind is that her husband Paul is a renowned investor, venture capitalist, and consultant who could have access to the brightest minds in the world. Therefore, between the both of them, they happen to be a very profitable team.

Now, at this point, if you're thinking, "Perfect! I could just copy all of their trades and make a ton of money!" Not so fast! Like I mentioned earlier, since Nancy Pelosi's husband does the vast majority of the trading, they have a full 45 days to report those investments publicly. So by the time all of us peasants get access to it, it might be too late.

Fortunately though, they all do seem to be investing for the long term, so there is the chance that a 45-day delay might not actually impact your returns that much. But realistically, it just wouldn't be feasible to copy their trades exactly without a significant amount of money to be worth your while. Not only that, but in order to accumulate their average, you would have to buy everything that they do in exact proportion.

So practically, it’s just not worth it, even though it sounds great in theory. Fineprintdata.com even noted that if you want to achieve similar sized returns in terms of dollars, you would need about 20 million dollars invested, which, let's be real, is just not attainable for pretty much everybody watching.

Not to mention, Nancy Pelosi and her husband are not the only all-star traders. For example, we have Senator Perdue, who outperformed nearly all of his peers throughout almost 2,600 trades, including companies that stood to benefit from upcoming policy changes. If we look at his overall portfolio, we could see that from 2015 to 2020 he lagged the S&P 500. But if we count the stocks that his committee had direct oversight of, they outperformed by quite a large margin.

So is it worth copying? And the honest answer is maybe, but it's probably more beneficial to look at their largest holdings instead and then do your own research. For instance, in terms of Nancy and Paul Pelosi, the majority of their money is in Apple, Microsoft, Facebook, Amazon, and Nvidia, which are stocks that they've been buying on a regular basis and have done quite well.

But to be fair, all of these are great companies in their own regard, and I have millions of people regularly investing in them, so it's not like they're out there trying to buy penny stocks and pump them on Twitter. It's also really important not to take these stock picks too literally either because in Pelosi's case, their 2021 performance was quite lackluster, lagging the overall market by 15.5%.

Had you followed along, even with the 45-day delay, you would have spent more time and energy earning less, so it just wasn't worth it. So, moral of the story, even though it seems fun to think that you might have an edge on the market, and even though some of their trades did do well, the 45-day delay combined with higher risk makes me think that you're not going to get rich copying their trades anytime soon.

Instead, you could use it as another tool to analyze potential options, but nothing more. Honestly, it just seems like a funny meme to think that Nancy Pelosi is the only stock trader with inside knowledge that you would be able to follow along to make a lot of money. But at the end of the day, Congress as a whole does tend to outperform the market by a marginal amount.

Although it's probably not enough to be losing any sleep over, it is, however, enough to subscribe if you haven't done that already or post your own comments down below because I read pretty much all of them, and I want to see what you have to think about this. And if you're feeling extra generous, just make sure to leave a like if you appreciate the information.

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