They didn’t tell them directly that they should readjust their portfolios. But they sent a very clear message, early on, that needed no further explanation.
As reported by the New York Times, Trump administration officials in late February strongly hinted to the Hoover institute, a conservative think tank that represents, among others, key Republican donors and business interests, that the COVID-19 pandemic in actuality presented a far more dire threat to their economic interests than that being conveyed to the American people at the same time, when the worst public health crisis this country has experienced in over a century was still a mere blip on every else’s radar.
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.
One day later, Larry Kudlow,Trump’s chief economic advisor, underscored the warning, saying that contrary to the president’s rosy message that the threat was not something Americans need worry about, “[Kudlow] asserted that the virus was “contained in the U.S., to date, but now we just don’t know,” according to a document describing the sessions obtained by The New York Times.”
The message, articulated by multiple administration officials in a private meeting with Hoover Institute members, and recorded in a memo by a hedge fund consultant present at the meeting, was clearly understood:
The consultant’s assessment quickly spread through parts of the investment world. U.S. stocks were already spiraling because of a warning from a federal public health official that the virus was likely to spread, but traders spotted the immediate significance: 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.
(Emphasis supplied).
The reaction among the financial community to the administration’s private warnings was as immediate as it was predictable. Told of the dire impact of the looming pandemic, and given frank assessments of the administration’s ability—or willingness-- to combat it, market managers did what they are supposed to do: they shorted the market, to the advantage of their investors.
Those investors in turn passed the information to their own contacts, ultimately delivering aspects of the readout to at least seven investors in at least four money-management firms around the country within 24 hours. By late afternoon on Feb. 26, the day the email bounced from Appaloosa to other trading firms, U.S. stock markets had fallen close to 300 points from their high the previous week.
This was who they cared about. Not you, not me, not the millions of Americans who would be fed their incessant misrepresentations and lies about the seriousness of what was occurring over the next few months, but the people who controlled the flow of capital, specifically the ones who could be counted on to donate to the Republican Party.