Is America Too Big To Fail? Eric Cantor Doesn’t Think So.

Investing in Failure

A reader pointed out this interesting bit of news, with the question “Why hasn’t this gone viral?” The answer? I don’t know:

Putting his money where his mouth is? Eric Cantor, the Republican Whip in the House of Representatives, bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF last December, according to his 2009 financial disclosure statement. The exchange-traded fund takes a short position in long-dated government bonds. In effect, it is a bet against U.S. government bonds—and perhaps on inflation in the future.

Given that it seems the Republicans are hell-bent on destroying the economy in order to stick it to Democrats, I fail to see how this isn’t a big deal.

Perhaps I am not reading this correctly and it isn’t a conflict of interest, but it certainly seems like it is: These folks have a stake in the failure of the U.S. economy, but IOKIYAR.

I’d ask where the jobs are, but why bother.

(H/T starshine!)

[via Think Progress]

[cross-posted at ABLC]

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70 replies
  1. 1
    Martin says:

    according to his 2009 financial disclosure statement

    Um. I think we have a cause and effect sequencing problem. That would suggest that he bought them at least a year and a half, and possibly two and a half years ago. Is he still holding them?

  2. 2
    Ed Drone says:

    And the little shit probably expects to take his profits at a low, low, low tax rate, too.

    To hell with them all! Why do Republicans all refuse to pay for what they get?

    What do they have against America, anyway?

    Ed

  3. 3
    Evolved Deep Southerner says:

    That would suggest that he bought them at least a year and a half, and possibly two and a half years ago. Is he still holding them?

    If he’s sold them – hell, that he ever “shorted America’s future” – it still looks positively shitty.

    If he’s still holding them, that’s even worse – and the more interesting question would be whether he’s increased his stake.

  4. 4
    Han's Solo says:

    The GOP: Short Selling America!

  5. 5
    celiadexter says:

    Of course it’s a blatant conflict and the man is pond scum with a tie. That said, Eric Cantor isn’t going to sell out his country for a piddly-shit $15 grand; he’s going to sell out his country to (he hopes) gain power for his party and thus himself, and the return on the investment is a nice little side benefit.

  6. 6
    Zifnab says:

    Is he still holding them?

    They haven’t exactly appreciated in value. US Treasuries have been rock solid.

  7. 7
    pete (I'm tired of using my initials, PS) says:

    I saw this somewhere that I can’t seem to find immediately, which pointed out that this is a very small fraction of his investments, of the order of 15 grand out a million or two. Stupid of him, but what do you expect from Cantor? An apology? First you have to explain to him what that is.

    Seriously, if he had bet the farm it would be different (IMHO) but this just seems, well, dumb. And much as I’d enjoy seeing him turfed out for a bad reason (couldn’t happen to a more noxious jerk), I can’t bring myself to turn the outrage up to 11 for this one.

  8. 8
    Yutsano says:

    US Treasuries have been rock solid.

    That will be true if they pass a debt ceiling bill before the 2nd of August. After that, though, Cantor cashes in and makes a mint. In severely inflated dollars. Oopsie.

  9. 9
    jane from hell says:

    oh ABL, you’re not supposed to write stuff that makes sense, you’re supposed to write about CURAAAAZY shit that starts flame wars. Also, I was wondering about this my ownself, why aren’t we hearing about Cantor and why he Hates Amerrka?

  10. 10
    Davis X. Machina says:

    Can’t shame the shameless. Or clue the clueless.

  11. 11
    pete says:

    More details at Salon: http://www.salon.com/news/poli.....f_interest
    The investment is “between $1,000 and $15,000” …

  12. 12
    DonkeyKong says:

    Now your smile is spreading thin
    Seems you’re trying not to lose
    Since I’m not supposed to grin
    All you’ve got to do is win
    (That’s all ya gotta do)
    (Ooh, it ain’t over)

    Me, I’m fresh on your pages
    Secret thinker sometimes listening aloud
    Life lies dumb on its heroes
    Wear your wound with honor, make someone proud
    Someone like you should not be allowed
    To start any fires.

    Win- David Bowie

  13. 13
    Evolved Deep Southerner says:

    Seriously, if he had bet the farm it would be different (IMHO) but this just seems, well, dumb. And much as I’d enjoy seeing him turfed out for a bad reason (couldn’t happen to a more noxious jerk), I can’t bring myself to turn the outrage up to 11 for this one.

    You can “bet the farm” that if this was a Democrat, we’d never hear the fucking end of it. Whether it’s $15, $1,500, $15,000 or $15,000,000, they need to beat this smarmy cocksucker over the head with it like he bet every God damn dime he had.

    If you can’t turn the outrage up to 11 for it, fuck, fake it. This “high minded” shit (at least in terms of messaging) is failing epically, and has been for a while.

  14. 14
    ThatLeftTurnInABQ says:

    @pete (I’m tired of using my initials, PS) #7

    this is a very small fraction of his investments, of the order of 15 grand out a million or two.

    On the other hand $15k is 6 months worth of take-home pay for a lot of average folks. If the positions were reversed the GOP would destroy the Dems with this:

    “The other party is led by a man who took as much money as you earn in half a year and used it to bet against America. But that’s OK, he’s already a millionaire, so to him it’s just a big joke.”

  15. 15
    patrick II says:

    @ celiadexter

    I believe the $15,000 is what it costs to buy the short position. I don’t think that is the limit of his potential profit if the bond market tanks.

  16. 16
    Disgruntled Lurker says:

    meh.

    I typically like Think Progress, but they’ve been serving up some pretty weak sauce lately.

  17. 17
    Brain Hertz says:

    Holy shit. That’s just unbelievable. Also:

    this is a very small fraction of his investments, of the order of 15 grand out a million or two

    is irrelevant. As noted before, it’s a lot of money to a lot of people, but the amount doesn’t really matter. How much did Martha Stewart make insider trading? And what percentage of her wealth was it?

    This should be all over the press.

  18. 18
    TaMara (BHF) says:

    I just popped in to see who was going to be the first to bitch about an ABL thread.

  19. 19
    David in NY says:

    I can’t get all wound up about this. In a much bigger portfolio, it’s a sensible hedge against the, quite likely, eventual rise in rates that will drive bond prices down. That’s just got to happen sometime — rates can’t stay at this level forever, and the only way they can go is up. I suspect he’s been losing money on this since he invested in it, because rates haven’t budged, but then, that’s not an enormous bet he’s placed, and it was probably a hedge anyway (hedging is like insurance, you lose unless the worst happens, in which case you’re glad you had a little cushion).

    In fact, now that I see something like this is available, I may look into it myself.

    The conflict does exist here, of course. But I suspect the far larger parts of his holdings are in common stock, and I’d wonder if he was shorting that. If he’s not, then his self-interest is probably in not letting the country default on August 2.

    In other words, this is hardly earth-shaking.

  20. 20
    Yutsano says:

    I just popped in to see who was going to be the first to bitch about an ABL thread.

    So far, shockingly, no one. But it’s a damn good topic I must admit.

  21. 21
    JPL says:

    Tamara, Who is ABL that you speak of? This post is by not ABL in case you didn’t notice. LOL

    BTW.. I didn’t invest much but did vote against the dollar while Bush was President but I’m not a public official. The reason I didn’t invest more is because I didn’t have it. When he was appointed by the Supreme court though, it was tempting to invest in defense stocks and high end retailers but I do have some values.

  22. 22
    David in NY says:

    And I think that what I said may answer Brian’s question about what difference it makes that it’s a small portion of his investments. If 985,000 is in common stock, and 15,000 in this, it can hardly be said he’s investing against the economy, since if the economy tanks, and the markets tank with it, he’ll take a bath, no matter what happens to the 15,000. So it’s a little harder to see the force of the allegation.

  23. 23
    Dr. Squid says:

    Brain Hertz @17:

    About $65k, and a really small percentage of her billions, which didn’t keep her out of the slam. Because someone had to go to jail for Enron’s billions, even if she had fuck-all to do with it.

  24. 24
    pete says:

    Oh, if you can beat Cantor up with this, go ahead, be my guest, I’d be delighted to see it. And if it shows voters that he’s the kind of “man of the people” who has cash lying around, great. But do note that the $15k is the top of the range — it could be as little as $1k. And that is “invested in ProShares Trust Ultrashort 20+ Year Treasury EFT” which (I think) is not the same as taking a short position himself. His overall portfolio has a million bucks in real estate “and a number of six- and seven-figure loans to private entities and limited liability companies.” (That’s from the Salon link, see above @11.)

    Basically, I’m pretty sure that if he screws up the markets, he’s screwed too. And he’s dumb enough that he might just do that.

  25. 25
    Evolved Deep Southerner says:

    David in NY

    In fact, now that I see something like this is available, I may look into it myself.

    Are you a lying, faux-patriotic sack of shit who holds a high enough position in the U.S. Congress to fuck up the entire country and drive the worth of your investment up in the bargain?

    If the answer to that question is “no,” then your situation and Cantor’s are pretty different.

    Hell, I may look into it my own self – but I’m not walking around self-righteously talking out of both sides of my mouth like this dickwad.

  26. 26
    gnomedad says:

    Obligatory Underpants Gnome reference.

  27. 27
    Just Some Fuckhead says:

    I just popped in to see who was going to be the first to bitch about an ABL thread.

    It only seems to devolve when she’s drinking and/or wants to make it all about herself.

  28. 28
    Danny says:

    This goes to character. Here is a man working as a representative of the american people. His freaking job description is to look out for the best interest of our country. Then he goes right ahead and bets fifteen grand on the failure of our country.

  29. 29
    WereBear says:

    Here I was trying to figure out what makes some people Galtian Overlords and me, not.

    Turns out when the global economy gets threatened with meltdown, they short part of their bond portfolio, and I start looking up recipes for squirrel.

  30. 30
    TenguPhule says:

    These folks have a stake in the failure of the U.S. economy, but IOKIYAR.

    To be fair, I and probably others have money betting against the GOP elected’s long term life expectancy.

    I earn triple if they mysteriously die violently too.

  31. 31
    Cliff in NH says:

    LOL he’s as stupid a investor as he is a legislator

    Those ultrashort funds suffer from tremendous decay, they are only intended to be traded intraday or for a week or two at the most.

    Even if he is right he will lose his shirt =)

  32. 32
    Mike Kay (Democrat of the Century) says:

    any news on the NFL lockout?

  33. 33
    Cliff in NH says:

    the Ultrashort(leveraged): http://www.google.com/finance?q=tbt

    the unleveraged short: http://www.google.com/finance?q=NYSE:TBF

  34. 34
    Alex S. says:

    Cantor is a prissy little kid that never grew up because it never experienced anything outside of the beltway bubble.

  35. 35
    Valdivia says:

    I just can’t stand him, he thinks so highly of himself. Ugh.

  36. 36
    Not!ABL says:

    It only seems to devolve when she’s drinking and/or wants to make it all about herself.

    which is like, all the time. amirite? high five!

  37. 37
    Jim C. says:

    That is an interesting find. I’m honestly more than a little surprised that the hostage taking Republicans are doing with the debt ceiling isn’t getting more play in the media considering the potentially massive ramifications of any messing around with doing the right thing there.

    I do think that it’s a relatively small chunk of Cantor’s cash in the big scheme of things, but the idea of looking into how Republicans invest their money and what they shift their investments to as a predictive model to see how serious they are about forcing the U.S. into default is a pretty good one.

  38. 38
    Cliff in NH says:

    lol @abl w00t!

    cliff cracks a beer.

    and offers a doggie interlude:
    http://mollymaesden.blogspot.c.....-ride.html

  39. 39
    Felanius Kootea says:

    @Martin
    No cause and effect problem here – the article is from June 2010. We are currently in June 2011 :). It took a year for enough people to pay attention to an old Cantor story sitting on a Wall Street Journal Blog. I bet he’s gotten rid of it by now.

  40. 40
    Mike Kay (Democrat of the Century) says:

    Bachmann fucks up the history of slavery again, saying John Quincy Adams was a founding father, and then her groupies get caught trying to change JQA’s wiki page.

    http://www.deathandtaxesmag.co.....alin-camp/

    Looks like this is gonna be standard operating procedure.

  41. 41
    Lysana says:

    It only seems to devolve when she’s drinking and/or wants to make it all about herself.

    I almost fixed that for you, but it’d be chum in a shark tank.

  42. 42
    Dennis SGMM says:

    @Felanius Kootea

    You’re telling me. He could have a million tied up in shorting America and the MSM would praise his seriousness and game changing initiative.

  43. 43

    Let’s just imagine if Nancy Pelosi had invested $15G in an ETF such as this. OMG the outrage, it would have been all over Fox News, there would have been a viral e-mail campaign, her patriotism would have been questioned, on and on …. there would have been calls for her resignation and there would have been bills in the House to prevent any leader of Congress from holding assets of this type ever again … Tweety would have been all over it and Bobo would have written sober columns condeming the action.

    IOKIYAR, peeps …

  44. 44
    flounder says:

    You should read my DKos diary about the same topic from April. Thought the info is old it is still relevant.
    http://www.dailykos.com/story/.....log_553352
    The Salon story notes his new fin. disclosure is out.
    As i noted, in 2009 he also bought $1000-15,0000 of iShares Barclays TIPS Bond Fund (TIPS), which profits from the spread between T-Bills and inflation protected securities. This is also betting against his employer (i.e. the USA). He sold these this year.
    There is some more new info in the 2010 financial disclosure: he owns $50-100,000 in a Vanguard TIPS fund. This means his bet against America is possibly more like $100,000.
    It is scummy for any executive who can affect the bottom line of his employer to “short” that employer. It is especially scummy if you work the United States of America.

  45. 45
    Dennis SGMM says:

    @Mike Kay (Democrat of the Century)

    More proof that being a conservative is more about being tribesmen and co-religionists than anything else. Rather than question Bachmann’s fitness to hold high office her supporters attempt to edit history. 1984 was an almanac.

  46. 46
    Sir Nose'D says:

    Why hasn’t this gone viral?

    A minority of Americans know what an ETF is or know what shorting is. A smaller minority still can wrap their brains around how to make money shorting bonds. I mean, its not like we caught him with his dick in a alpaca. Now THAT would be news. Someone both positioned to profit from a US debt downgrade/default AND actively working to make that downgrade/default happen? That’s boring Bob Roberts stuff.

  47. 47
    Sly says:

    I remember this back when it was first published. I immediately thought, “What kind of fucking moron shorts treasuries during a deflationary period? A person who doesn’t know how to manage their money, that’s who.”

    Also, too, the future House Majority Leader.

  48. 48
    Mojotron says:

    This was probably purchased as part of diversifying his portfolio, but that doesn’t mean he shouldn’t be bludgeoned with the question “why are you saying that there’s no likely negative consequences if we don’t raise the debt ceiling, yet you’re betting tens of thousands of dollars against America’s financial future?”

  49. 49
    TaMara (BHF) says:

    It only seems to devolve when she’s drinking and/or wants to make it all about herself.

    Or writes about cute kids singing lovely songs.

  50. 50
    Cliff in NH says:

    @TaMara:

    Well…. he is a self admitted fuckhead… so it’s no surprise.

  51. 51

    http://tpmdc.talkingpointsmemo.....hp?ref=fpb

    “When you look at the price for buying insurance for the default of a U.S. Treasury bond one-year out, that price, that cost has doubled since the beginning of the year,” Zandi noted. “If we get on the other side of July, particularly as we move to the second, third week of July and nothing has happened — if the world looks like it is today — then I think people are gonna start getting nervous, one investor at a time.”

  52. 52
    JRon says:

    I’ve been tweeting this to my four twitter followers for the past couple days.

    But seriously I think T-Bonds will be fine. The 14th Amendment says so. In fact, it’s all part of the GOP plan– the constitutional requirement that the nation not default on its debt will mean that when the ceiling is not raised, that all popular domestic programs that the GOP has opposed for decades will have to be cut immediately. All money will go to creditors and forces to put down internal rebellions, as the constitution says it has to.

    It’s a deliberately backdoor way of finally getting to their dream of ending entitlement spending.

  53. 53
    OzarkHillbilly says:

    Insider trading anyone????

  54. 54
    pete says:

    I’m coming round to changing my mind on this. This issue is, I still think, basically trivial, but I agree that flaying Cantor (and Republicans in general) is a good idea on general principles. More important, I may have been underestimating most people’s lack of understanding about our electeds — Congresscritters are rich, they do not understand ordinary life, they think making $250,000/year means you are struggling. All that stuff.

    I suspect the few grand Cantor has in this fund is essentially lost down the back of the couch — and that’s the point. He’s too damn rich to miss it. Also, he’s an incompetent money manager, and that’s a large part of what we “hired” him to do.

    And finally, what fun to see him try to defend this.

  55. 55
    flounder says:

    Seriously,
    The TIPS funds that he also owns makes this a $115,000 bet against America, and not a $15,000 bet.

  56. 56
    Odie Hugh Manatee says:

    I don’t care how much (or how little) Cantor has invested in this fund. What really matters is that his investment is betting against our economy and he is supposed to be a leader who is doing his best to make sure that America has a strong economy. If a Democratic officeholder was doing this you know that the Faux Nooz division of the Republican party would be foaming at the mouth in reporting how much that Democrat hates America and is betting against the economy that they say they want to make strong again.

    Cantor is a lying scumbag who hates his country and wants to profit on its economic failure. End of story.

  57. 57
    Hamlet says:

    Do you people realize that this is simply a bet that interest rates will rise, which will likely happen when the economy improves?

    It’s not a bet against the US economy, it a bet for it.

    Treasuries typically go up when the economy is collapsing, and down when the economy gets better and interest rates go up.

    I agree with Cliff from NH, though. The nature of the leverage makes holding these longterm an almost sure loser.

  58. 58
    Cliff in NH says:

    if it makes you guys feel any better If he put 15,000 in tbt in dec 2009 he now has ~10,000

    He’s just dumb.

    tho, tip is a much safer bet
    iShares Barclays TIPS Bond Fund (TIP)

    Why buy a fund tho? just buy or short the underlying bonds.

  59. 59
    Brain Hertz says:

    And I think that what I said may answer Brian’s question about what difference it makes that it’s a small portion of his investments. If 985,000 is in common stock, and 15,000 in this, it can hardly be said he’s investing against the economy, since if the economy tanks, and the markets tank with it, he’ll take a bath, no matter what happens to the 15,000. So it’s a little harder to see the force of the allegation.

    Excuse me, but that’s bullshit. I don’t care if it’s part of a “balanced portfolio”. Can you really not see the impropriety of a public official currently playing chicken with the administration with a stated lose-lose position of defaulting on public debt, and at the same time shorting US treasuries? However much it is, him being in the position he is in makes it very different from a private individual taking out some sort of hedge.

    If this was a Democratic official, the GOP would nail them up on a fucking tree.

  60. 60
    Brain Hertz says:

    Treasuries typically go up when the economy is collapsing, and down when the economy gets better and interest rates go up.

    What do treasuries do if the US defaults on interest payments?

  61. 61
    liberal says:

    @31 Cliff in NH wrote,

    Those ultrashort funds suffer from tremendous decay, they are only intended to be traded intraday or for a week or two at the most.

    Yeah, I read an article on that somewhere a couple years ago. Guy claimed it had to do with the difference between arithmetic and geometric means. And if you hold any of them much longer than a day you’re going to start to lose money.

  62. 62
    Cliff in NH says:

    generally the reason people use these funds is that most 401k’s won’t allow going short. thus the short fund was born.

    the prospectus for these things should throw up big red flags for any sane human with brains tho.

    usually there will be a sentence somewhere saying that you are making a bet and that they can use the funds raised from the sales of these bets for whatever they want. and oh btw there are huge roll losses and fees… that affect the value of your bet.

    (yup, it’s all synthetic and just exists only to fund the issuing company’s proprietary trading desk)

  63. 63
    Cliff in NH says:

    @ liberal, usually the decay is due to futures roll costs and fees, depends on the fund.

  64. 64
    Cliff in NH says:

    if you want some free money, go long /ng futures and short the equivalent value of UNG

  65. 65
    Cliff in NH says:

    @ liberal, also, a large portion of decay in some of these is from the difference between intraday moves and overnight moves + fees and roll costs. depends on the fund.

  66. 66
    bobarian714 says:

    @cliff in NH. I work out the TBT decay problem by selling in-the-money/out-month calls upon purchase. Pretty much breaking even on that.
    I doubt Cantor cares about his puny hedge.
    As a Virginian, I apologize for my fellow Virginian’s behavior. But we all recognize that 5 percent of all people are jerks, so that explains Cantor.

  67. 67
    TenguPhule says:

    But we all recognize that 5 27 percent of all people are jerks, so that explains Cantor.

    Corrected so that you are now aware of all internet traditions.

  68. 68
    Joe Buck says:

    It doesn’t matter when he bought this fund; almost every company forbids its employees to short that company’s stock, because it’s a huge conflict of interest: you profit by tanking your own company. He’s an elected official betting against the United States.

  69. 69
    Chris says:

    It doesn’t matter when he bought this fund; almost every company forbids its employees to short that company’s stock, because it’s a huge conflict of interest: you profit by tanking your own company. He’s an elected official betting against the United States.

    The stakes are higher, but it’s really no different from what we’ve been doing for thirty years; electing Republicans to run the government is, in effect, hiring employees with a personal stake in seeing the company fail. This is just that being played out to its logical end.

  70. 70
    Nemesis says:

    The question here is whether or not canker self manages his account or if his account is managed by an outside individual. A fund manager has the latitude to buy and sell any number of financial vehicles. Plus it old news.

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