Tag Archives: u.s. stock market


STOCK Act: What You Need to Know

The STOCK Act prohibits Congress members from making investments based on nonpublic information, giving you (somewhat) of fair ground.

As an individual investor – whether you are managing your own money, or having someone else invest it for you – it is important for you to understand how your financial future is affected when the playing field is not level.

In February, The STOCK Act (Stop Trading On Congressional Knowledge) was passed by both the House & Senate, theoretically banning members of Congress from using nonpublic information to make their investments. As it stands without the law, many members of Congress are multimillionaires – not because of their $174,000 per year salary, but because of previous wealth, plus the inside knowledge that they use to make money in the stock market, in sweetheart land deals, etc. Up to this point, the insider trading ban in federal law, like so many other statutes, has not really been applicable to members of the federal government. If anyone in this country is, our “representatives” are truly the one percent.

If you are questioning the need for legislation, these numbers may shock you. Between 2004-2009, the average American had no real increase in net worth. During this same time, one in every four members of Congress had their net worth at least double, and one in three had an increase of at least 50%. The members who doubled their net worth went from an average of $850K in net worth to $3.6M in five years, on a $174,000 salary. These gains are directly related to trading on material, nonpublic information, land deals, having lobbyists for relatives and more.

Conceptually, this bill prohibits members of Congress from trading stocks and other securities using the confidential information that they receive as lawmakers. In addition, the bill requires all members of Congress to disclose the purchase or sale of stocks, bonds, commodities futures or other securities within 30-45 days of transactions.

Unfortunately, the STOCK Act does not do as much as the federal government would like us to believe. In fact, once this is act is signed by President Obama, it may make it even harder for the SEC to prosecute members of Congress, because they have narrowly defined inside information. In addition, enforcement by the SEC may become problematic since their budget is overseen by Congress, and there will be extreme pressure on them not to rock the boat.

This law is a half-hearted step in the right direction to protect individual investors and traders who are not privy to the information that Congress has, but we still have a long way to go to level the playing field. The simplest answer is to prohibit all members of government from owning stock in any individual company. If they would like to invest, they can put their money in the S&P 500 so that they only profit if the overall economy does well, not just when their hand-picked and protected favorites flourish

Always remember, even if others have an informational advantage over you, you can still profit if you have the right skills. The key to winning starts with understanding the game you are playing.


To Create Phoenix Jobs, Resuscitate IPOs

Job creation in Phoenix is a critical issue that threatens our hope for a sustained economic recovery. While we have heard many suggestions for creating Phoenix jobs, we have yet to hear of the positive role that resuscitating the initial public offering (IPO) market can play on job creation. By taking a look back at successes of the past, perhaps it can help to resuscitate IPOs as we move forward to economic recovery.


  • Net creation of more than 20 million jobs in the United States
  • Average of 530 corporate IPOs per year (excluding funds, LPs, REITs and SPACs)
  • Nearly half of IPOS came from traditional America (neither venture capital nor private equity sponsored)

IPOs in the 1990s inspired confidence and created a source of capital that led to equity investment in private companies, giving rise to a “virtuous circle” of capital formation, job growth, innovation and increases in tax revenues.


From 2000 to 2009, we saw an average of only 126 corporate IPOs per year – down more than 76 percent from the prior decade, nowhere near enough to replace the 360 public companies that are lost annually to delistings.

Common sense dictates that when the number of IPOs declines, the availability of capital for job creation shrinks; when the number of companies de-listed from stock markets exceeds the number listed, jobs are shed. This “circle of destruction” undermines investment in private companies — considered the “foundation of job formation” — leaving behind a “foundation for unemployment.”

Consider that by 2000, unemployment had fallen to a mere four percent after an eight-year decline that coincided with the robust IPO market. Unemployment began to rise in the next few years amid the bursting of the dot-com bubble and the dissolution of thousands of businesses, but then ebbed once again from 2004-2007 as IPOs modestly reemerged. As we have seen, the credit crisis and the concurrent disappearance of IPOs in the past couple of years has been the backdrop for a sharp rise in unemployment.


The antidote is simple: restore the ecosystem that supported the allocation of capital to small Phoenix companies.

To do this we need to create a new stock market structure — subject to the same regulatory oversight and disclosure requirements that govern the NYSE and NASDAQ — that provides specifically for adequate economic incentives for Wall Street to return to the business of supporting small companies with research, capital and sales support. This new market would have minimum spreads of $0.10 for stocks below $5 per share and $0.20 for stocks trading at or above $5 per share, thus restoring incentives for brokerages to pursue profitability, while providing sufficient economics to support small cap liquidity.

The U.S. stock market once was the envy of the world — in large part because it fueled economic growth. Access to capital is the life blood of growing companies.

Resuscitating the IPO market for small cap businesses may not be the sole answer to Phoenix job creation, but it certainly should be part of every conversation.

For more information about resuscitating IPOs, please visit gt.com.