insider trading news

Anyone who knows how Wall Street works will not be surprised to learn that when the novel coronavirus epidemic began to turn into a full-fledged pandemic in the first two months of 2020, people in the know saw a major opportunity to play Monopoly. Any major shift affecting society and people’s behavior will lead to the possibility for the clever to cash in.

In a New York Times article with the title “As Virus Spread, Reports of Trump Administration’s Private Briefings Fueled Sell-Off,” Kate Kelly and Mark Mazzetti report on how the arrival of a pandemic was received as good news for those in the know. Because of the way it was handled, it made some wealthy people close to the Trump administration if not happier, then at least wealthier.

Kelly and Mazzetti tell the story of a president and his savvy economic team led by Larry Kudlow who, while publicly downplaying the probable consequences of an epidemic, privately encouraged their cronies to prepare for the worst. In Wall Street terms, of course, “the worst” translates as “potentially the best.” 

Warren Buffett’s Struggle With Class Struggle

READ MORE

During times of instability, intelligent traders who get wind of a factor that has a high probability of affecting the price of some types of stocks at a time when the general public still sees things as either normal or unpredictable will know what to do and when to act. If they are already holding those stocks, they will sell them and eventually buy them back later at a lower price when things begin getting back to normal. If not — and this is far more convenient — they will short them. As everyone should be aware, people close to the halls of power, and often members of the government themselves, tend to think like traders.

The Times article takes us back to the scene on February 24, when “President Trump declared on Twitter that the coronavirus was ‘very much under control’ in the United States.” Earlier on the same day, in a private meeting, the president’s economic team had with board members of the conservative Hoover Institution, Tomas J. Philipson, a senior economic adviser to the president, informed them that the government “could not yet estimate the effects of the virus on the American economy.” Anyone with ears to hear understood what that meant: The economy was in for a rocky ride.

According to The Times, from that moment on, things began accelerating: “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.”

Here is today’s 3D definition:

Donors:

Wealthy people, known for giving generously to political campaigns, who have developed the skill required in modern democracies of using a small portion of their immense wealth to get various kinds of favors from politicians, the most significant of which is access to inside information that will serve to make them wealthier and thereby better prepare them for future political campaigns, where their continued generosity will be required to ensure the stability of democracy.

Contextual Note

Larry Kudlow then became the key player. He had already claimed on CNBC that the virus was not only contained but reassuringly added that “it’s pretty close to airtight.” Shortly afterward on the same day, speaking to the donors, Kudlow nuanced the message, telling them that the virus was “contained in the U.S., to date, but now we just don’t know.” Savvy investors immediately understand the expression “to date” to mean: “Things are likely to change radically in the near future, so it may be time to act.” Kudlow was undoubtedly sincere when he added “now we just don’t know,” but the word “now” suggests that they already had assessed a strong probability.

Kelly and Mazzetti sum up the entire story in a single sentence: “The president’s aides appeared to be giving wealthy party donors an early warning of a potentially impactful contagion at a time when Mr. Trump was publicly insisting that the threat was nonexistent.” They describe the tight timeline in which events began accelerating. It started as soon as “elite traders had access to information from the administration that helped them gain financial advantage during a chaotic three days when global markets were teetering.” The authors cite one investor who, after reading the memo of the meeting and having understood the scope of the threat a pandemic represents, gave the order: “Short everything.”

Historical Note

What would capitalism be without its recurrent crises that create the kinds of seismic shifts that enable the cleverest and wealthiest to increase their wealth, consolidate their power and drive the weaker actors in the Darwinian struggle for survival out of the marketplace? That is how the elite drafts new members and protects its own.

Stock market crashes are usually followed by a recession or depression. That is when commentators in the media begin lamenting the suffering imposed on the economy as if they were reporting on a natural catastrophe unaffected by human agency. They often cite statistics that will incite the public to commiserate with the wealthy who might officially “lose” billions of dollars in a single day. They spend less time commiserating with the anonymous hordes who, several months later, will have lost their jobs and had their mortgages foreclosed, finding themselves homeless and, in the best cases, simply hopeful that no one comes to repossess their car since it might serve either as shelter from the cold or the means of making a living if they manage to become an Uber driver.

When Lehman Brothers collapsed, not only did the thousands of people who worked for the bank find themselves rudderless, the tsunami that collapse unleashed across the globe affected the lives of millions of people in multiple ways. It led to an estimated 3.8 million foreclosures during the Great Recession. The implications of the drama the world is living through today as the pandemic and its consequences keep unfolding will be far greater. Not only has the pandemic directly killed over a million people, but its continuing effect — not just on the economy but on what was considered the “normal way of life” in a consumer society — has created severe social disarray, aggravating the consequences of the 2008 crisis from which society had never truly recovered. And what about the effect on the lives of the wealthy people who created the 2008 crisis? What has their suffering been like?

In September 2018, The Guardian brought its readers up to date on the plight of Lehman Brothers chief executive, Dick Fuld, known familiarly as the “Gorilla of Wall Street.” He now runs Matrix Private Capital and advises “high-net-worth” clients. His net worth, which “once exceeded $1 billion,” is now estimated at a paltry $250 million. Philosophizing on his career seven years after the fall of Lehman, he famously said: “Whatever it is, enjoy the ride. No regrets.”

The cronies and traders who benefitted from the diligent effort of Trump’s economic team to guide them in their investment strategies in the face of an impending pandemic have also been enjoying the ride and appear to have no regrets. Their traders have served them well. The stock market has prospered at the same time as small businesses are disappearing by the thousands and millions of people have become dependent on government handouts that have been slow in coming and not been adapted to the nature and the scale of the crisis.

Today’s Wall Street donors, sensing an imminent Joe Biden victory, have been exercising their generosity in the Democrat’s direction in recent months. Many of them are probably the same who benefitted from the memo from that private meeting in the White House in February. How ungrateful of those disloyal bastards!

*[In the age of Oscar Wilde and Mark Twain, another American wit, the journalist Ambrose Bierce, produced a series of satirical definitions of commonly used terms, throwing light on their hidden meanings in real discourse. Bierce eventually collected and published them as a book, The Devil’s Dictionary, in 1911. We have shamelessly appropriated his title in the interest of continuing his wholesome pedagogical effort to enlighten generations of readers of the news. Read more of The Daily Devil’s Dictionary on Fair Observer.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More