Troop Chat: A Conversation With Unusual Whales
Washington’s least favorite cartoon muckraker on congressional trading and combating information asymmetry.
Troop Chat is an interview series featuring activist investors, shareholder advocates and other wise folks.
Members of Congress, in case you didn’t know, are allowed to trade stocks. Many do: Over 180 current senators and representatives reported trades by themselves or immediate family members in the last three years, by The New York Times’ count. More than half of these congresspeople made trades in industries affected by legislative committees on which they sat. This is allowed as long as they don’t trade using material nonpublic information; legislators are often briefed on events confidentially. The audacity of some of these trades may blow your mind.
If you did know this quirk of congressional privilege, there’s a decent chance you learned it from a cartoon marine animal. Unusual Whales — a pseudonymous finance muckraker, retail trading tool provider, and prolific tweeter with a whale avatar — started publishing reports on congressional trading after an eventful 2020 that saw a number of uncannily timed moves by elected officials, most infamously Sen. Richard Burr, who unloaded six-figures worth of stocks due for pandemic hits around the same time he was publicly touting U.S. preparedness.
Unusual Whales wasn’t the first to dig into this topic. They themselves are quick to shout out journalists like Zach Everson and Bryan Metzger, or ethics watchdogs like Walter Shaub and CREW. But in certain online circles, at a time when very online retail traders were waking up to ways that big finance institutions have legs up and little opposition, Whales made the quandary of congressional trading newly salient. Short-selling hedgies weren’t the only ones mocking the idea of a fair playing field.
Today, there are several bills aiming to ban congressional trading to varying degrees, introduced by members on both sides of the aisle. None have reached a vote. The STOCK ACT, passed in 2012, introduced new disclosure requirements that allow us to know about these trades in the first place, but non-compliance is not uncommon: 75 members of Congress have recently failed to report properly, per Insider. After the midterms, we called up Unusual Whales to discuss the debate, information asymmetry in the market, and supporting the little guy.
How did Unusual Whales begin?
I had been releasing a lot of [reports] in the open source world for a while and one of them ended up catching on, something interesting that happened with Kodak back in the day. Then, I don’t know if you remember, Grubhub and Uber were supposed to have a deal and [implied volatility] wasn’t properly priced yet, so there were very large gains that happened for people very quickly. This was back in 2020.
These were fairly big deals and my tools had caught them. I was like, oh, I guess I should start working on this in a more significant capacity. Then you saw the tools really expand with regards to Covid funding. A lot of that was telegraphed very early on in the options market. Just was building tools, and they were useful, and I believe they still are useful, and then that gave me a leg to speak about some of these data transparency problems.
Why is data transparency important?
People always want a fair game. Markets by definition are competitive and markets by definition are not fair. There’s a lot of friction to information. An efficient market hypothesis relies upon the tenet that there’s no resistance to information, information is able to flow freely. But that’s not the case. Obviously there are information asymmetries everywhere and that’s what Unusual Whale’s tools are hoping to help solve. With the congressional reports, I’m just hoping to show that at times there are informational asymmetries. Is that a good thing or a bad thing? That’s not up to me to decide. It’s just for the data to show.
How do you view your research’s impact?
Everyone says, oh, you must be so proud. Because it’s very interesting: the closest we’ve ever come to a congressional stock ban is because of a stupid chagrining whale. People say you must be proud that your cartoon whale did so much. In actuality, not really. One, the deed’s not done yet. Two, I was just providing data. It’s everyone else, the conversations people were having at the dinner tables with their friends, with their families, that really propelled this forward. I’m just happy to be a conduit for the data.
Has anything about those conversations surprised you?
There was one report, I believe, something with regards to Congress and war, some of the history behind it, as well as the recent Ukrainian crisis. I was in Costco, I believe, the next day. This is not an endorsement of Costco, but I was eating a hot dog. I was eating it and suddenly the El Salvador president retweeted my report. I’m just trying to eat a hot dog. I’m like, uhh, what the heck? You are tweeting a cartoon whale.
What’s next for Unusual Whales?
We have a congressional ETF coming. Hopefully that’s a good nail in the coffin for this cause. I can’t think of a better instrument or tool for pushing things forward. But we’ll see. With the midterms, it changes the congressional balance. I’ll keep publishing data regardless.
