CHEVY CHASE, Md. — Legislative risk is an area portfolio managers should be looking at, according to Stuart Sweet, president of the Capitol Analysts Network, a legislative risk management firm in Chevy Chase, Md.
According to the firm's research, the personal equity portfolios of U.S. senators, on average, outperformed the Standard & Poor's 500 index by 12.5 percentage points per year over the past five years, he pointed out.
One distinct advantage senators have over the average investor is that they are more aware of the political climate and can better predict legislative changes then ordinary investors, Mr. Sweet explained. "What they (senators) are doing is not illegal, because no single senator can write the law. But they can have opinions just like everyone else. The difference is that they are more skilled at predicting future political events and in speculating upon what's going to happen."
"The whole theory of our firm's practice is to emphasize the fact that legislative risk is an underanalyzed area of expertise," said Mr. Sweet.
Capitol Analysts assigns numerical values between 10 and -10 to sectors that will most likely be affected by legislative and government decisions. In the next session of the 109th Congress, Mr. Sweet's firm said the most-favored sector is the medical information technology sector, which is composed of medical software and technology. His firm assigned that sector a +6 weighting because the U.S. Department of Health and Human Services is seeking to lower costs in the medical profession. "There is a bipartisan consensus that something has to be done about lowering the costs of medicine," said Mr. Sweet.
"For example, when you go to the doctor and he writes a prescription for you, then you have to go to the drugstore to get that prescription. Then, if something goes wrong, the drug store has to call your doctor, and then your doctor has to write another prescription. Meanwhile, there is a line of people behind you who are feeling crummy who all should probably be lying in bed at home with their pillows flapped on their heads.
"Policy-makers from Newt Gingrich to Hillary Clinton believe that handwritten prescriptions should end and that medical records should be computerized and be easily accessed any time someone visits a provider," he said. "The standard for e-prescriptions will come first, but other initiatives will follow."
The Department of Health and Human Resources already issued rules favoring e-prescriptions, he said, and "you have to have software that is centralized for everyone's needs." E-prescriptions will dramatically lower the cost of health care for providers and for patients, he said.