ERIC T. SINGER manages the Congressional Effect Fund, traded under the symbol CEFFX (CEFIX for institutional investors), a public mutual fund launched in 2008 through his registered investment advisor, Congressional Effect Management, LLC (www.congressionaleffect.com). He was the first to document the general effect of Congress on daily stock prices in an article published in Barron's in 1992. His opinion pieces have appeared in Investor's Business Daily as well as Forbes, the American Spectator, American Thinker, Townhall, Seeking Alpha, and Newsmax, and he has been featured on national TV and radio, including Fox Business News and Bloomberg TV.

• Acknowledgments xiIntroduction 1Our Damaged Economy 2Congress’s Role in Wealth Destruction 8Summary 9Notes 10CHAPTER 1 What Is the Congressional Effect? 13How Was the Congressional Effect Discovered? 14Early Returns Showing the Congressional Effect 19The Smoot-Hawley Act: The Mother of All Congressional Effects 23The Congressional Effect Data and Launching a Mutual Fund 24Summary 26Notes 26CHAPTER 2 The Congressional Effect and the Limits of Modern Portfolio Theory 27How MPT Has Been Used by Financial Advisers 30Formulas Distort Valuation if Inputs Are Not Free Market Inputs 33What Caused the Crash of 1987? 36The Magnitude of the Crash of 1987 Refutes MPT 38MPT Assumes All Daily Pricing Is Random, but the Congressional Effect Shows It Is Not 39Summary 41Notes 42CHAPTER 3 Congressmen as Issues Entrepreneurs 43The Time-Money-Vote Continuum: Congress as a Business 44Congressmen as Traders and Real Estate Entrepreneurs: Making Money Outside Their Day Gig 54Summary 57Notes 58CHAPTER 4 Behavioral Finance, the Stock Market, and Congressional Dysfunction 59Overview of Behavioral Finance Concepts 60Survey of Behavioral Finance Concepts 61Congress’s Approach to Behavioral Finance 67Summary 78Notes 78CHAPTER 5 If Congress Is Malfunction Junction, What’s Its Function? 81Economic Lifeblood: Investment Capital Formation, the Stock Market, and Congress 81Dodd-Frank Overview 90Health Care Reform 95Burning Coal and Other Energy Investors 103Summary 110Notes 110CHAPTER 6 Where Will Washington Strike Next? 113Where You Can Find Information 114How to Leverage This Glut of Information 123Summary 124Notes 125CHAPTER 7 Sidestepping Congress’s Wealth Destruction with a Macro Approach 12711,832 Data Points Support the Congressional Effect Theory 128Congress and the Tragedy of the Commons 130Adam Smith, Call Your Office! 131Summary 136Notes 136CHAPTER 8 Are Democrats or Republicans Better for Your Portfolio? 139Who Gets the Credit for the Bull Market in 1980? 140Unified Government Favors Nominal Returns 142Split Government Favors Real Returns 145Republican Congress vs. Democratic Congress 146Filibuster-Proof Majorities Hurt Returns 147Summary 148Notes 149CHAPTER 9 Leverging the Election Cycle 151The Presidential Cycle and Real Returns 152The 2012 Election and Beyond 156Notes 157CHAPTER 10 Are Lame Ducks, Impeachments, Resignations, Vetoes, and Litigated ElectionsGood for the Market? 159President Bill Clinton 161President Andrew Johnson 165Resignations 167Lame Duck Sessions 167Litigated Elections 168Vetoes 170Summary 171Notes 171CHAPTER 11 More Ways to Dodge Congress’s Stray Bullets 173Value Funds: Longer Time Horizons than Congress or the Somali Pirates 174Gold Funds: Avoiding Congressional Debasement 177Beyond Congress: International Funds 179Reducing Global Security Risk 181Summary 182Notes 183CHAPTER 12 ‘‘That Government Is Best that Governs Least’’ 185Prognosis: Increasingly Partisan Politics Is Not Good for the Market 185Conflicting Government Mandates Promote Market Instability 189The Cumulative Effect of Unintended Consequences Is Congressional Wealth Destruction 191Congress’s Dysfunctionality and the 2012 Election 193What Happens When Congress Does Not Know the Price? 195Congress Needs to Attract the Best Talent 197In Conclusion 198Notes 199About the Author 201Index 203

ERIC T. SINGER manages the Congressional Effect Fund, traded under the symbol CEFFX (CEFIX for institutional investors), a public mutual fund launched in 2008 through his registered investment advisor, Congressional Effect Management, LLC (www.congressionaleffect.com). He was the first to document the general effect of Congress on daily stock prices in an article published in Barron's in 1992. His opinion pieces have appeared in Investor's Business Daily as well as Forbes, the American Spectator, American Thinker, Townhall, Seeking Alpha, and Newsmax, and he has been featured on national TV and radio, including Fox Business News and Bloomberg TV.

• Acknowledgments xiIntroduction 1Our Damaged Economy 2Congress’s Role in Wealth Destruction 8Summary 9Notes 10CHAPTER 1 What Is the Congressional Effect? 13How Was the Congressional Effect Discovered? 14Early Returns Showing the Congressional Effect 19The Smoot-Hawley Act: The Mother of All Congressional Effects 23The Congressional Effect Data and Launching a Mutual Fund 24Summary 26Notes 26CHAPTER 2 The Congressional Effect and the Limits of Modern Portfolio Theory 27How MPT Has Been Used by Financial Advisers 30Formulas Distort Valuation if Inputs Are Not Free Market Inputs 33What Caused the Crash of 1987? 36The Magnitude of the Crash of 1987 Refutes MPT 38MPT Assumes All Daily Pricing Is Random, but the Congressional Effect Shows It Is Not 39Summary 41Notes 42CHAPTER 3 Congressmen as Issues Entrepreneurs 43The Time-Money-Vote Continuum: Congress as a Business 44Congressmen as Traders and Real Estate Entrepreneurs: Making Money Outside Their Day Gig 54Summary 57Notes 58CHAPTER 4 Behavioral Finance, the Stock Market, and Congressional Dysfunction 59Overview of Behavioral Finance Concepts 60Survey of Behavioral Finance Concepts 61Congress’s Approach to Behavioral Finance 67Summary 78Notes 78CHAPTER 5 If Congress Is Malfunction Junction, What’s Its Function? 81Economic Lifeblood: Investment Capital Formation, the Stock Market, and Congress 81Dodd-Frank Overview 90Health Care Reform 95Burning Coal and Other Energy Investors 103Summary 110Notes 110CHAPTER 6 Where Will Washington Strike Next? 113Where You Can Find Information 114How to Leverage This Glut of Information 123Summary 124Notes 125CHAPTER 7 Sidestepping Congress’s Wealth Destruction with a Macro Approach 12711,832 Data Points Support the Congressional Effect Theory 128Congress and the Tragedy of the Commons 130Adam Smith, Call Your Office! 131Summary 136Notes 136CHAPTER 8 Are Democrats or Republicans Better for Your Portfolio? 139Who Gets the Credit for the Bull Market in 1980? 140Unified Government Favors Nominal Returns 142Split Government Favors Real Returns 145Republican Congress vs. Democratic Congress 146Filibuster-Proof Majorities Hurt Returns 147Summary 148Notes 149CHAPTER 9 Leverging the Election Cycle 151The Presidential Cycle and Real Returns 152The 2012 Election and Beyond 156Notes 157CHAPTER 10 Are Lame Ducks, Impeachments, Resignations, Vetoes, and Litigated ElectionsGood for the Market? 159President Bill Clinton 161President Andrew Johnson 165Resignations 167Lame Duck Sessions 167Litigated Elections 168Vetoes 170Summary 171Notes 171CHAPTER 11 More Ways to Dodge Congress’s Stray Bullets 173Value Funds: Longer Time Horizons than Congress or the Somali Pirates 174Gold Funds: Avoiding Congressional Debasement 177Beyond Congress: International Funds 179Reducing Global Security Risk 181Summary 182Notes 183CHAPTER 12 ‘‘That Government Is Best that Governs Least’’ 185Prognosis: Increasingly Partisan Politics Is Not Good for the Market 185Conflicting Government Mandates Promote Market Instability 189The Cumulative Effect of Unintended Consequences Is Congressional Wealth Destruction 191Congress’s Dysfunctionality and the 2012 Election 193What Happens When Congress Does Not Know the Price? 195Congress Needs to Attract the Best Talent 197In Conclusion 198Notes 199About the Author 201Index 203