Betting against the U.S. economy can be exceptionally lucrative, especially if you’re one of the people who has intimate knowledge of the laws that govern and regulate it. After all, politicians know what laws will be passed before they are passed and can thus take positions, or buy options that they can directly control the outcome of. Moreover, politicians betting on stock market crash dynamics have a vested interest in ensuring such crashes occur, once more pitting them against their constituents.
That sounds more like treason rather than insider trading since it directly requires those politicians to make bets against the American investor whose livelihood may depend on the funds and stocks those politicians short. As such, here are just three examples of U.S. senators and representatives who directly took perfectly timed positions against various exchange-traded funds. These exchange-traded funds (ETFs) are all derived from the performance of the U.S. stock market due to their large size and composition.
Representative Mark Green
Representative Mark Green shorted the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), the largest and oldest ETF in the United States. Its value is tied directly to the performance of the S&P 500 which represents the performance of America’s 500 largest and most economically influential companies.
Mark Green purchased a put option on SPY back in August of 2023 with a target price of $440 set to expire on January 19, 2024. This trade implies that Representative Green expected the fund to dip well below this price before then, as a put option would result in his option sale profits multiplying by whatever the odds ratio was at the time.
Once QuiverQuantitative publicized this trade online, Green sold his shares a few weeks later. However, this openly proves that Green was expecting something to negatively impact market dynamics at the time, which means he might have had advanced warning of such.
Representative Tom Malinowski
Another example of politicians betting on stock market crash outcomes, Representative Tom Malinowski shorted the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) back in 2020. Since the trade, the ETF has lost 45% of its value, marking its largest drawdown in history. That sounds almost too perfect to be a coincidence.
As interest rate hikes climbed over the years following the trade in 2020, the value of the treasury bonds in the ETF dropped. Of course, Representative Malinowski might not have had any control over the Federal Reserve’s rate hike schedule to tame inflation, but he likely had insider information as to when it would occur, and timed his option to profit off of it.
This kind of decision-making is even more disturbing when you consider that the value of U.S. Treasury bonds comes directly from the taxes the government can levy on its citizens. Thus, for the bonds to pay out, the government must raise taxes on U.S. citizens who already struggling with persistent inflation and stagnating wages.
Senator Thomas Carper
One of the longest-standing and leading members of Congress, Senator Thomas Carper aggressively shorted the U.S. stock market in 2023. His most recent short included his purchase of the AdvisorShares Ranger Equity Bear ETF (NYSEARCA:HDGE). This trade included potentially purchasing up to $45,000 worth of shares.
This transaction mirrors similar trades made by Carper in November 2022, when he had bought up to $110,000 in HDGE. This ETF directly appreciates capital investments through short sales of domestically traded equity securities. To put it more simply, Carper makes money when the market suffers.
These trades are even more concerning when considering that Carper sits on the Senate Finance Committee. As a result, he almost certainly has some level of insider knowledge as to government decisions that will impact the U.S. banking and trading system. So if you’ve ever wondered how regular people become politicians go into Congress and come out millionaires, look no further than the trading activity of Thomas Carper.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
