Tweets, Stock Prices and Donald Trump
President Donald Trump's tweets often set off big gyrations in stock prices. Anyone who knows of the tweets in advance could make a fortune, though not legally.
Who knows of the tweets in advance? Trump knows, and there's growing speculation that he might be showing tweets in the making to select others in his inner circle. Such suspicions have been bubbling since Election Day 2016, when Trump started attacking specific corporations, causing their stock prices to tank. An investor can make money off a falling stock price as well as a rising one.
NBC's Howard Fineman opened the floodgates on this troubling discussion with a tweet of his own. "My twitter feed is asking a legitimate question: are @realDonaldTrump's businesses and family profiting from insider knowledge of his pending -- market-moving -- tweets, comments and bargaining stands?" he asked. "My guess would be yes."
Fineman then posed the question on the minds of many: "who is doing it for him and how?"
Consider the recent theatrics surrounding the tariff threat on Mexico. After the U.S. stock markets closed on May 30, Trump tweeted that "the United States will impose a 5% Tariff on all goods coming into our Country from Mexico, until such time as illegal migrants coming through Mexico, and into our Country, STOP." Furthermore, the tax could have risen as high as 35 percent.
The Dow Jones Industrial Average fell 354 points the following day, a Friday. Prices for corn, soybeans and other farm commodities swooned.
To most of the business community, the idea of a new accelerated trade war with Mexico was deeply disturbing. It's still being buffeted over the ongoing trade war with China. By the way, after Trump tweet-threatened to impose a 25 percent tariff on more exports from China last month, the Dow plunged 540 points over the next two trading days.
On June 7, he tweeted, "I am pleased to inform you that The United States of America has reached a signed agreement with Mexico." Stock prices rose in the following session, but they had already been climbing after June 5, when he tweeted, "Progress is being made" -- and Republican senators almost unanimously vowed to stop the tariff nonsense.
As far as we can tell, the deal with Mexico requires the country to take steps it had already agreed to take. (Similarly, the new NAFTA is pretty much same as the old NAFTA.)
We know the plot. The president manufactures a crisis, plays pretend hardball and then backs down, declaring a pretend victory.
That's the political side of it. But let's again consider the possibility that Trump has expanded the fun to making quick windfalls by trading on the stocks affected by his tweets.
Insider trading usually involves corporate leaders who buy or sell a stock while possessing material information not disclosed to the public. In an example, an executive might know about the impending loss of a key contract and sell his shares before the investing public knows about it and sends the price down.
The Securities and Exchange Commission can come down hard on violators. Insider trading can draw a maximum prison sentence of 20 years. Insiders try to hide their tracks by setting up buyers and sellers among relatives and other acquaintances.
As of now, there's no proof that Trump and family have engaged in insider trading. Other presidents have made announcements that move markets, but it's hard to come up with a single name, other than Trump, that one would suspect of doing it for personal gain. Given the Trumpian history of financial manipulation -- and the phony nature of these tweet-driven dramas -- one wouldn't place such activity beyond the realm of possibility. Bets are being taken.
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