The Congressional Millionaires Club

The Congressional Millionaires Club (Membership Unlimited)

“As of 2020, over half of the members of Congress were millionaires and the median net worth of members was approximately $1 million,” says Wikipedia — citing a report from the OpenSecrets watchdog group.

[Like the corporate media, Wikipedia must be evaluated with a critical eye. In this instance, the claim appears credible — at least based on the available information.]

Our theme this week — the intersection of money and politics — takes us back to Capitol Hill today. How can over half of congresscritters be millionaires when they collect annual pay of $174,000?

A few — think Sens. Mitt Romney (R-Utah) and Mark Warner (D-Virginia) — were already rich before they got into politics. Others like former House speaker Nancy Pelosi married into wealth.

Many more, as we indicated yesterday, got wealthy with shrewd stock and option trades — possibly based on inside information, even though in theory that’s prohibited under the STOCK Act of 2012.

In 2022, economist Serkan Karadas found what The New York Times called a “suspicious pattern” of higher-than-average returns — which “suggested that at least some Congress members were profiting off their jobs.”

But the stock market isn’t the only way a member of Congress can leverage his or her status to amass a fortune.

There’s also straight-up influence peddling. Consider the disgraced Dennis Hastert — one of Pelosi’s predecessors as House speaker.

Hastert, a Republican, was speaker during the last two years of Bill Clinton’s presidency and the first six years of Dubya Bush’s. First elected to the House in 1986, he amassed a $6 million fortune by 2006.

Not bad for a high school teacher and wrestling coach from Yorkville, Illinois.

How did he do it?

Together with wealthy patrons, “Hastert manipulated a series of complex land transactions,” wrote Norm Ornstein at The Atlantic in 2015 — “buying land at a low price while his associates purchased adjacent land at a much higher price, then merging the parcels and creating a trust that gave Hastert an inflated share.

“Hastert then used his clout as speaker to jam through a stalled transportation bill to which he attached an earmark to fund a highway interchange unwanted by the Illinois Department of Transportation and local residents that was a mile from his land.”

All of which was legal. And routine.

House Speaker Denny Hastert, Land Shark of the Fox Valley

➢ Strictly speaking, Hastert was convicted only of a bogus federal crime — “structuring” the withdrawals from his bank accounts to evade federal reporting requirements. The statute of limitations for the abuse had long since run out. Hastert is a bad man, but the structuring charge was a bum rap.

And then there are the staggering sums of congressional net worth that are just… inexplicable.

How did former Rep. Liz Cheney (R-Wyoming) amass a fortune of nearly $15 million?

How did Senate Minority Leader Mitch McConnell — elected to the Senate nearly 40 years ago! — accumulate $34.1 million?

Well, as we’ve said all week, you can get mad — or you can get rich.

Tomorrow night, Joe Biden delivers his State of the Union speech. And Paradigm’s own Jim Rickards has gotten a heads-up about what’s coming.

“I’ve received some critical intel from a former congressional insider who’s a very trustworthy source,” he says. “And he told me he believes Biden will mention two critical words during his speech that could send three stocks skyrocketing higher.”

And yes, at least some members of Congress are already positioned for this trade.

You can be positioned too. That’s why Jim is taking part in a 24 Hour Countdown Event tonight at 7:00 p.m. EST. There, Jim’s insider contact will even give the name and ticker of one of those stocks, free of charge.

We still have room — but available slots are filling up fast. Secure your spot immediately with one click on this link.

Think Small (Again)

After a couple of false starts, the much-anticipated “rotation” is finally underway in the U.S. stock market — an exit from giant tech-adjacent companies and an entry into other names.

There was a broad sell-off in the market yesterday. The only one of the “Magnificent 7” stocks to stage a rally was AI chip darling Nvidia.

But contrary to what you might think, “we’re probably not headed for a nasty crash,” says Paradigm trading pro Greg “Gunner” Guenthner. “Too many stocks are exhibiting strength, and the list of names making new lows is virtually nonexistent.

“Instead of an impending crash due to a top-heavy market, we’re seeing the beginnings of a rotation away from mega-caps into tech laggards and small-cap stocks — a rotation that has become more pronounced over the past week.”

And right now, the hot money is flowing into small caps — companies worth less than $2 billion.

Paradigm authorities like Sean Ring and Alan Knuckman have been talking up small caps in this space recently — and Gunner sees the same thing they see.

“The Russell 2000 has snapped out of its stupor and broken above its December highs following a rocky start to 2024. It’s now green on the year and working on playing catch-up with the major averages.”

About time. This index severely underperformed the major averages for nearly two years.

“The Russell was hit hard by the regional banking crisis in early 2023,” Gunner reminds us. “It also failed to rally with the major averages into the summer months, leading to a hard reset that lasted from August through October.

“Most mega-caps were stable during this period while smaller names took a beating, acting as a safe haven for investors worried about the potential for a bigger drawdown heading into the fourth quarter. When the big move lower failed to materialize and the melt-up rally ignited, the Russell flipped its switch and posted a 20% move off its lows.

“Now, IWM has completed a base breakout and is just a few bucks away from new two-year highs, erasing much of its bear market drawdown. If the rotation theme continues to play out, we could see the smaller stocks outpace the big boys — even as the major averages take a break.”

The big story in the markets today is the reaction — or lack thereof — to Federal Reserve chair Jerome Powell’s twice-yearly testimony to Congress.

There were no surprises, given that he’s previously ruled out cutting short-term interest rates this month.

“Reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy to get inflation back to 2%,” Powell said in his opening statement. “At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

It’s in Powell’s interest to not alter market expectations right now. Paradigm senior analyst Dan Amoss — Jim Rickards’ right-hand man — reminds us that Powell’s testimony at this time a year ago inadvertently touched off the crisis in regional banks.

Then, Powell gave the impression that the Fed was on the verge of “a super-easing cycle,” as Dan puts it.

It turned out that wasn’t the case — but at the time, perception trumped reality. Yields on 1- and 2-year Treasuries surged, blowing up the Treasury holdings of Silicon Valley Bank — which began melting down three days later.

With no such drama in view today, the major U.S. stock averages are recovering some of yesterday’s losses.

At last check the S&P 500 is up nearly 30 points on the day, back above 5,100. Another 30 points and the index will be back in record territory. The Nasdaq’s rally is even stronger, the Dow’s a little weaker.

Precious metals popped slightly on the heels of Powell’s testimony — gold at $2,140 and silver just 2 cents shy of $24. Crude is back above $80 a barrel after the Energy Department’s weekly inventory numbers.

Bitcoin looks positively tame by recent standards — hovering a little over $66,000. [Reminder: While Paradigm crypto evangelist James Altucher expects Bitcoin to top six figures sometime this year, it won’t hold a candle to what he calls “the No. 1 coin of 2024.” He names that coin in this presentation.]

De-dollarization Update: BRICS Adopt the Blockchain

The BRICS countries are taking the next logical step on the road to undermining the U.S. dollar’s role as the globe’s reserve currency.

Details are scarce but apparently the idea is to build a new payments network on the blockchain, using member nations’ own currencies and bypassing the dollar.

"We believe that creating an independent BRICS payment system is an important goal for the future, which would be based on state-of-the-art tools such as digital technologies and blockchain," Kremlin aide Yuri Ushakov tells the Russian news agency Tass.

The BRICS grouping of Brazil, Russia, India, China and South Africa welcomed five new members at the start of this year — including Middle East archrivals Iran and Saudi Arabia.

Interest in the BRICS grew in 2022 after Russia’s invasion of Ukraine and Washington’s unprecedented economic sanctions on Russia. By last year, South African diplomat Anil Sooklal declared, “The days of a dollar-centric world is over. That's a reality. We have a multipolar global trading system today.”

The BRICS now comprise six of the top 10 oil-producing countries. (If this is all new to you, here’s our write-up from the day the new members’ applications were approved.)

Copper Is Lights Out!

From the Department of “Problems We Hadn’t Started Thinking About Yet”...

At $3.85 a pound, the price of copper is squarely in the middle of its trading range going back to the start of 2023.

But evidently, that price is good enough for thieves eyeing the copper wire that helps light up interstate highways in and around Louisville, Kentucky.

There’ve been four thefts in the last two weeks alone. The Kentucky Transportation Cabinet says the lights are out at 25 interchanges. “It’s a problem that has persisted since at least August 2022,” reports the local Fox affiliate.

In some cases, the thieves strike again as soon as the state does repairs. "Our effort to restore lighting at some locations has been counterproductive as thieves tend to target the same interchange," says state engineer Matt Bullock.

"We think these people know what they're doing,” he adds — “because we haven't seen any dead bodies on the side of the road from getting electrocuted."

True. I’ve been chronicling copper thefts off and on for more than a decade. Manhole covers are one thing, electricity something else altogether — but it happens more often than you might think.

The most brazen case goes way back to 2010 — when thieves took copper tubing from a high-voltage TV transmitter in Kansas City. Somehow they managed to avoid getting zapped by 35,000 volts of electricity — or scalded by the coolant flowing through the tubing.

Mailbag: Scarce Gold and Cheap Thrills

On the subject of beaten-down gold miners, a reader writes…

“I believe I recall the great late Mr. Jim Sinclair noting a couple of years ago that there were a few funds controlling the gold equities.

“However, I do not see that continuing when serious money comes into the gold market considering the size of the market for gold equites remaining — especially the few blue chips.

“I think we are looking now for a fast run to $2,500 minimum in my opinion.”

Dave responds: The total amount of investment capital in precious metals is tiny, just tiny.

There’s a commonly cited figure from CPM Group that says in 1960, gold made up about 5% of all financial assets worldwide. By 1980, that figure was under 3%.

It’s spent more than 30 years below 1%. The most recent figure we can locate while crashing deadline is 0.7% in 2020.

Even if it got back to 2%, that could be fuel for a gold price over $5,000. At that price, even the worst-managed miner in the world could turn a profit!

“Thanks for featuring my comment yesterday,” says our final correspondent.

Not sure why that’s so satisfying but it must be part of why you’re so fun to read. You’re not afraid to take a little flack.

“I can see your point, that the eclipse thing is oddly overplayed. Keep the good stuff rolling!”

Dave responds: We’re good for a cheap thrill now and then!

Best regards,

 

 

 

 

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets