White House chief economic advisor Larry Kudlow with Donald Trump — Kudlow’s private briefing on Coronavirus helped investors reap stock market profits in spring by “selling short”.
Supporters of the Trump Administration reaped stock market profits from insider briefings by Administration officials — assessments of Coronavirus’s threat that contradicted the denials of Donald Trump.
On February 24, a month into the epidemic, Trump proclaimed on Twitter:
The Coronavirus is very much under control in the USA. We are in contact with everyone and all relevant countries. CDC & World Health have been working hard and very smart. Stock Market starting to look very good to me!
— Donald J. Trump (@realDonaldTrump) February 24, 2020
Hours earlier in Washington, the Administration’s senior economic advisors gave a different message to the board members of the conservative Hoover Institution, according to eight sources for The New York Times. Tomas Philipson, the acting chair of the National Economic Council, told the members he could not estimate the effects of the virus on the economy, including growth in 2020, because the situation was still unfolding.
The statement was in sharp contrast to Philipson’s public statement in the morning to the National Association for Business Economics. He said the Administration was taking a “wait-and-see approach”, noting that manufacturing shutdowns in China could affect the American economy. However, he assured that the potential impact had “been exaggerated”.
The next day Larry Kudlow, the director of the National Economic Council, said on TV that that virus was contained and “it’s pretty close to airtight” in the US.
But he told board members, among them Republican donors, hours later that the virus had been “contained in the US, to date, but now we just don’t know”.
In a summary of the the three-day meetings of Hoover’s board, hedge fund consultant William Callanan wrote: “What struck me” was that almost every Administration official raised the virus “as a point of concern, totally unprovoked”.
The summary played up the warnings of the Administration officials and included projections from the Centers for Disease Control and Prevention without clear attribution.
Callanan e-mailed the summary to David Tepper, the founder of the hedge fund Appaloosa Management, adding that US health agencies appeared to be unprepared for a pandemic. He emphasized that Kudlow, Secretary of State Mike Pompeo, and economists at the Council of Economic Advisers were expressing alarm in contrast to the Administration’s public statements.
“If you can keep the comments below confidential, I would be grateful,” he wrote to Tepper.
However, staff of Appaloosa briefed at least two outside investors. Callanan also informed at least one of his clients, a wealthy private investor.
The assessment soon circulated among others, who informed their contacts. Elite traders, using the inside information from the Administration, reaped profits in three days of unprecedented movement on the US stock market.
A major investor summarized the response in two words, “Short everything” — betting on a fall in the stock prices of companies.
US Death Toll Nears 217,000
At the outset of the pandemic, Donald Trump repeatedly assured that deaths would be “close to zero” and the virus would soon disappear.
But he privately told journalist Bob Woodward on February 7 that coronavirus “goes through the air” and is “more deadly than even your strenuous flus”.
At the time of the Hoover briefing, there were 17 confirmed cases in the US, with more than three dozen American cruise ship passengers also infected.
Trump continued his public denials of any threat. He called it a Democrat and media “hoax”. He said on March 10, “It will go away. Just stay calm. It will go away.”
But by March 16, when White House medical and public health experts finally overrode Trump’s line and announced guidelines to contain the virus, there were 3,714 cases. And by April 4 — as Trump was demanding the removal of the guidelines to “reopen” the US — there were 35,099.
The US death toll is now 216,872, with 7,916,100 confirmed cases. The daily infection rate, at its highest point since mid-August, is rising in 36 states with 16 recording their greatest increases during the pandemic.
The Hoover Institution has close relations with the Trump Administration. Dr. Scott Atlas — Trump’s medical confidante after experts like Dr. Anthony Fauci and Dr. Elizabeth Birx were pushed aside — is a Hoover fellow.
Joshua Rauh, one of the Administration economists who presented at the February 24 meeting, has returned to Hoover. Kevin Hassett, who moderated the panel and has been the chairman of the Council of Economic Advisers, is now a Hoover fellow.