Senator Mikulski, you're supposed to buy low and sell high, not the other way around. You, too, Senator Cardin.
Maryland's senators dumped stocks last year as the end of the world was forecast and the Dow Jones industrial average plunged below 6,600, according to recently available disclosures.
Again showing the all-too-common weaknesses that can hurt a portfolio, Sen. Barbara Mikulski sold thousands of dollars in stocks almost exactly at the market's bedrock bottom in early March 2009. Sen. Ben Cardin, too, pulled a lot of money out of stocks a couple of months earlier and put it into a safe but low-yielding money-market fund.
Of course, stock markets sprang back from their lows. Even though stocks have struggled recently, both senators would have been better off if they had held on through the turmoil.
They seem to have joined numerous other investors last year in ignoring basic financial advice: Don't panic when stocks plummet. Don't try to time the market. Invest for the long term.
"Be fearful when others are greedy and greedy when others are fearful," is the famous advice from Berkshire Hathaway's Warren Buffett. But it's human nature to mimic the crowd.
Every year, I check the investment behavior of Maryland's congressional delegation, partly for the lessons it teaches and partly because I'm a financial peeping Tom. All these figures are from congressional financial disclosure forms made available online by the nonpartisan Center for Responsive Politics at OpenSecrets.org.
Last year was characterized by breathtaking new lows for the Dow, which, thanks to the mortgage crisis, had fallen from 14,000 in late 2007 to nearly 8,000 in November 2008. It plunged even more in 2009, bottoming out at 6,547 on March 9.
Most members of the Maryland delegation who owned stocks held tight through the chaos.
House Majority Leader Steny Hoyer maintained his loyalty to Bill Miller, the struggling superstar fund manager at Baltimore-based Legg Mason. Hoyer held between $250,000 and $500,000 in Miller's Legg Mason Value Trust at the end of 2009, enjoying a spectacular 98 percent rebound that Miller achieved from the March lows through the end of December.
Investing heavily in housing-related shares, Miller badly trailed the market average for a while before beating it again in 2009.
By contrast, Baltimore County Rep. C.A. "Dutch" Ruppersberger fired Miller in September 2008, removing between $315,000 and $650,000 that he had held in Legg Mason funds for many years — all of his Legg Mason investments.
I doubt he regrets it, however. While the market continued to plunge, Ruppersberger put much of the cash back into stocks. Alone among the Maryland delegation, he bought while everybody sold during the worst of the turmoil, adding several U.S. and foreign stock funds in November and December 2008 as well as between $1,000 and $15,000 in gold.
He kept it up in 2009, sinking between $15,000 and $50,000 into S&P; 500 stocks at the bottom of the market in March. That investment had earned 68 percent by the end of the year. He also put money into junk bonds, which also did well in 2009, and stock in Johnson & Johnson, McCormick & Co. and GE Capital.
Meanwhile Cardin and Mikulski were selling with the crowd.
In January 2009, when the Dow was at 8,600, Cardin unloaded stakes worth between $230,000 and $600,000 in several U.S. stock mutual funds and tucked the money into a stable but low-return money-market fund. He eventually put much of it back into stocks — but not until August. By then the Dow had recovered, hitting 9,370.
The timing for Mikulski, who has a history of selling at the bottom and buying at the top, was worse. She dumped between $3,000 and $45,000 in U.S. and international stock funds on March 5, 2009, when the Dow was at 6,594. Markets hit their lows four days later and then sharply rebounded.
To be sure, neither senator was ejecting anything close to her or his entire stock portfolio. At the end of 2009, Mikulski owned stock funds worth between $8,000 and $120,000. Cardin owned stock and stock funds worth between $314,000 and $985,000. Smartly, both senators were diversified with substantial money in bonds, savings accounts and other nonstock investments.
Cardin "has a pretty steady investment history," said his spokeswoman, Susan Sullam. "He tries to take a moderate, steady approach, and he isn't terribly reactive to various markets ups and downs."
Mikulski's spokeswoman didn't call me back.
Maybe the smartest investor lately, in Congress or the universe, has been Western Maryland's Rep. Roscoe Bartlett. For years he has owned farm and residential rental property, precious metals and hardly any stock. His stake in gold and other precious metals was worth between $250,000 and $500,000 at the end of 2009.
As Wall Street trembled and mortgages went bust in their millions, gold was about the only investment to go pretty much straight up.
jay.hancock@baltsun.com
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