You can’t say that Trump didn’t warn us

By “us” I mean well connected GOP investors:

On the afternoon of Feb. 24, President Trump declared on Twitter that the coronavirus was “very much under control” in the United States, one of numerous rosy statements that he and his advisers made at the time about the worsening epidemic. He even added an observation for investors: “Stock market starting to look very good to me!”

But hours earlier, senior members of the president’s economic team, privately addressing board members of the conservative Hoover Institution, were less confident. Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy. To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.

The next day, board members — many of them Republican donors — got another taste of government uncertainty from Larry Kudlow, the director of the National Economic Council. Hours after he had boasted on CNBC that the virus was contained in the United States and “it’s pretty close to airtight,” Mr. Kudlow delivered a more ambiguous private message. He asserted that the virus was “contained in the U.S., to date, but now we just don’t know,”

. . .

To many of the investors who received or heard about the memo, it was the first significant sign of skepticism among Trump administration officials about their ability to contain the virus. It also provided a hint of the fallout that was to come, said one major investor who was briefed on it: the upending of daily life for the entire country.

“Short everything,” was the reaction of the investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.

Of course none of this is illegal:

[L]egal experts say . . . it is not apparent that any of the communications about the Hoover briefings violated securities laws. The Justice Department and the Securities and Exchange Commission would have several hurdles to clear before establishing that Appaloosa or other funds that received insights from Mr. Callanan, either directly or through intermediaries, acted improperly.

In America, the SEC focuses on finding witches. For instance, just imagine how they’d react if I gave investment advice in the blog—such as my opinion on Tesla stock. I call this a “witch hunt” because there is no scientific evidence that registered investment advisors can pick stocks better than a monkey. But actual government corruption? Nothing to see here — move right along.

PS. I feel a bit less stupid about all my previous stupid posts on society’s increasing stupidity, now that Tyler has dipped his toe in the water. (Yes, I know, linking isn’t endorsement.)

PPS. Speaking of stupidity, this caught my eye:

You’re the president,” Guthrie said. “You’re not like someone’s crazy uncle 

Trump’s not like someone’s crazy uncle? What kind of drug was she taking?


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8 Responses to “You can’t say that Trump didn’t warn us”

  1. Gravatar of Ray Lopez Ray Lopez
    16. October 2020 at 09:49

    Isn’t Congress and the President immune from insider trading laws? Googling this…Yep, it was legal for Congress to do insider trading before the STOCK act of April 4, 2012. But how about the President? Not clear, but arguably the president can engage in stock market insider trading since the executive branch is different from the legislative branch. Move along, nothing to see here.

  2. Gravatar of sean sean
    16. October 2020 at 13:31

    Is there any reason to think the administration actually had inside information on the virus? I don’t see anything in America’s intelligence apparatus that would have given them better predictive abilities than Wall Street (like bridgewater that lost and has billions in money to spend on research) or major media outlets like the NYTimes NYC has people all over the world less capabilities than Washington but maybe more than Mexico.

    Therefore, I tend to dismiss these conversations as just speculation and nothing sinister. I don’t even think Appaloosa crushed the virus trade. Might of hedged some and avoided losses, but there not up 200% this year like they would have been if they went max short and flipped.

  3. Gravatar of Christian List Christian List
    16. October 2020 at 18:06

    Isn’t the alleged increase in stupidity simply the result of increasing openness in the sense of democratization and liberalization?

    Either one continues along this path, which I think is the right one, but then one gets people at universities, in important professions, and in high offices, who on average are not as intelligent as their predecessors.

    Or one goes back to strong restrictions, a closed elite, let’s say comparable to the photo from the fifth Solvay conference with IQ monsters like Einstein, Bohr, Planck, Curie, Dirac, Lorentz, Knudsen, Bragg, Compton, Schrödinger and Heisenberg in just one picture.

    You can’t have it both ways. It’s either open bar for everyone (with a Trump now and then) or an elite project, a closed club, similar to what the Founding Fathers did.

    Regarding the other topic: Were there not some press reports of insider trading by Senators and House Representatives from both parties? What has become of it? Apparently nothing. That seemed really shameful.

    The fact that Kudlow spoke cautiously behind the scenes does not seem to be sufficiently scandalous. It sounds like meaningless statements that politicians keep saying all the time. We don’t even know the exact wording and what he meant by it.

    One would have to investigate whether there has been any relevant insider trading based on his speech, then one would could assume that he knew more than we did. My impression so far is rather that the Trump government has been almost completely clueless.

    Some pundits once again want to have it both ways: A completely clueless Trump government, but also completely ingenius, so smart that they predicted the greatest catastrophe long before the stock markets even knew.

  4. Gravatar of ssumner ssumner
    16. October 2020 at 18:57

    Sean, You said:

    “Is there any reason to think the administration actually had inside information on the virus?”

    No, they probably didn’t. But they did have inside information on the fact that the federal government had absolutely no plan to deal with the problem. None. That’s what was a surprise to me, and probably to investors.

    It actually is unethical to tell one (false) story to the public and another truer story to rich GOP investors. Most people can understand that fact.

    Christian, You said:

    “My impression so far is rather that the Trump government has been almost completely clueless.”

    “Almost” clueless, but they did know that things were worse than they let on, as Trump told Woodward privately. (It’s on tape, so don’t say fake news.)

  5. Gravatar of anon/portly anon/portly
    17. October 2020 at 12:29

    “But hours earlier [on February 24th]…. Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy. To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.”

    Here is this very blog on February 24th:

    “A few weeks ago, markets were too complacent about Covid-19 becoming a global pandemic. Who knows, perhaps today they are too fearful. But markets do provide the best guess as to what’s likely to happen, and today the best guess is that the odds of recession just increased, albeit still remain below 50%.”

    I can’t help but wonder if this Callanan guy wasn’t wasting his time at the Hoover meeting – if he’d just been reading TMI (and/or Econlog), he probably could’ve written an even more forceful memo a week or two earlier and then all the geniuses downstream from his insights could have timed up their sell orders to more profitable effect….

  6. Gravatar of anon/portly anon/portly
    17. October 2020 at 12:44

    Note by the way how atrociously this entire article is written – it wanders around and is not really persuasive that this memo, or e-mail, or whatever it was, was actually of much significance. The NYT writers seem clueless.

    “To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.”

    Surely to anyone in the financial world with a pulse, by late February the “could prove worse” thing was already a somewhat hoary observation. No?

    How was Philipson supposed to be able to “estimate the effects of the virus on the American economy,” given that a recession was obviously possible but not certain? Maybe I don’t understand what that is supposed to be mean….

  7. Gravatar of anon/portly anon/portly
    17. October 2020 at 12:55

    And check this out:

    “That investor, and a second who was briefed on the Hoover meetings, said that aspects of the readout from Washington informed their trading that week, in one case adding to existing short positions in a way that amplified his profits. Other investors, upon reading or hearing about the memo, stocked up on toilet paper and other household essentials.”

    When I came upon that last sentence, I had to double check to make sure I hadn’t somehow wound up at The Onion.

    And check this out also, from that same TMI February 24th TMI post referenced already:

    “PS. Americans are increasingly “risk averse” (i.e. scaredy cats). I worry that an outbreak in the US could lead to panic.

    PPS. If I don’t respond to comments immediately, that’s because I’m at the store stocking up on toilet paper.”

    I liked the earlier, funnier Pandemic Sumner.

    (I’m kidding – that “[d]oes his neck look thicker?” line a few days ago was pretty good).

  8. Gravatar of ssumner ssumner
    17. October 2020 at 13:10

    anon/portly, Lots of good points, but you are focusing too much on what was said to the investors, and not enough on the difference between what was said to the investors and what was said to the public.

    Consider this:

    The government says A to the public, knowing its a lie.
    The government says B to well connected big investors
    Any smart person understand B
    B turns out to be true, or at least truer.

    Give those facts to Joe 6-pack, and he’s not happy.

    And as I said earlier, this was to some extent inside information that the administration didn’t have a plan. They were not prepared, and knew it. That’s useful for investors. Even I sort of assumed that if the Chinese could control it then we could too. Wrong!

    You said:

    “I liked the earlier, funnier Pandemic Sumner.”

    Me too.

    But like this lady, I’m doing good despite the pandemic, I’m not letting it get me down:

    https://twitter.com/yayalexisgay/status/1312914775211421700

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