Every few months a headline goes around about some member of Congress who bought a stock right before it jumped. People get angry, someone launches an ETF, and a lot of folks decide the move is to copy whatever Congress buys.
I get the appeal. I built a page for these trades on Nakag.ai because I wanted to see them too. But after reading thousands of these filings, I think most people read them wrong. Here's what the data really is, and how I use it.
Where the data comes from
In 2012 Congress passed the STOCK Act. Among other things, it says members of Congress have to report stock trades over $1,000 made by themselves, their spouse, or their dependent children.
The report is called a Periodic Transaction Report. It's due within 30 days of when the member learns about the trade, and no later than 45 days after the trade itself.
That last part is the first thing to understand.
Problem one: it's late
A trade made on March 1st can show up as late as mid-April. By then the stock may have already done whatever it was going to do.
And some filings come in even later than that. The penalty for filing late is a $200 fee, which, for people who are often wealthy, isn't much of a reason to be on time.
So when you see a trade on our politicians page, always check two dates: when the trade happened and when it was disclosed. The gap is the part of the move you already missed.
Problem two: you don't get the real amount
You'd think a disclosure would tell you how much someone bought. It doesn't. It gives a range:
- $1,001 to $15,000
- $15,001 to $50,000
- $50,001 to $100,000
- $100,001 to $250,000
- and so on, up to "over $50,000,000"
A trade listed as "$1,001 to $15,000" could be a thousand bucks or fifteen thousand. That's a big difference when you're trying to tell how much conviction was behind it.
The ranges are still useful for one thing: spotting the rare big trade. When someone who usually trades in the smallest bucket suddenly shows up at $250,000 or more, that stands out.
Problem three: you don't know who decided
Many of these trades are made by a spouse, or by a money manager running the account. Some members say they don't direct their own trades at all. The filing often doesn't make it clear who actually made the call.
A trade in a member's name is not the same as that member having a hunch.
So what's the data good for?
Here's how I actually use it.
Look for committee overlap. A member who sits on a committee that oversees an industry, buying stock in that industry, is worth noticing. It doesn't prove anything. But it's the kind of trade people are worried about for a reason.
Look for clusters. If several members from different offices buy the same company in the same few weeks, I want to know why. Sometimes it's nothing, like a big, popular stock everyone owns. Sometimes it's worth reading more.
Look at the buys more than the sales. Same idea as insider trades. Selling happens for lots of boring reasons. Buying is a choice.
Ignore the noise. Large, popular stocks get bought and sold constantly by people with big portfolios. A senator buying a slice of a mega-cap index name tells you almost nothing.
Should you copy Congress?
I wouldn't, at least not blindly. Between the 45-day delay, the vague amounts, and not knowing who made the decision, you're copying a blurry picture of a trade that happened weeks ago.
What I do think is fair: these filings are public for a reason. They're there so the rest of us can watch for conflicts of interest. Reading them that way, as a public record and not a stock tip, is the most useful thing you can do with them.
How we show it on Nakag.ai
Our politicians page lists the trades as they're filed, with both the trade date and the filing date. You can search by member or by ticker, and look back over a full year. On each stock page, the "Insiders and funds" section shows any congressional trades in that company beside the insider and fund data, so you can see everyone at once.
Chris
Nakag.ai
This post is for learning, not investment advice. Do your own research before you buy or sell anything.