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How to Beat the Market: Follow the Trades of 19 Senators on the Senate Armed Services Committee Who Own Stocks on Prohibited List

In a new academic study, four university professors examined investment results on more than 16,000 stock transactions made by 300 House delegates from 1985 to 2001. The result was clear: They beat the market by an average of 0.55% per month, around 6.6% a year. The professors note a previous study showed members of the U.S. Senate did so well they outperformed hedge funds.

In fact, if members of Congress didn’t beat the market, they’d be bigger morons than you already think they are. Why? Because insider trading laws don’t apply to members of Congress…

You heard that correctly. The Securities and Exchange Act does not apply to members of the U.S. Senate or House of Representatives. Congressional ethics rules say Congressional members aren’t allowed to use privileged information for personal gain. But it’s just a rule, not a law. It’s not legally enforceable. And it’s obvious they’re taking excess profits out of the stock market…

This must be one of the most underreported financial stories of the century. Take one example: The Senate Armed Services Committee forbids staff and presidential appointees requiring Senate confirmation from owning securities in more than 48,000 companies that contract with the Defense Department.

But 19 of the 28 senators on that same committee held assets worth between $3.8 million to $10.2 million in companies on the prohibited list between 2004 and 2009.

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