As Coronavirus Spread, Reports of Trump Administration’s Private Briefings Fueled Stock Sell-Off

On the afternoon of Feb. 24, President Trump declared on Twitter that the coronavirus was “very much under control” within the United States, one of quite a few rosy statements that he and his advisers made on the time concerning the worsening epidemic. He even added an commentary for buyers: “Stock market starting to look very good to me!”

But hours earlier, senior members of the president’s financial staff, privately addressing board members of the conservative Hoover Institution, have been much less assured. Tomas J. Philipson, a senior financial adviser to the president, instructed the group he couldn’t but estimate the results of the virus on the American economic system. To some within the group, the implication was that an outbreak might show worse than Mr. Philipson and different Trump administration advisers have been signaling in public on the time.

The subsequent day, board members — many of them Republican donors — acquired one other style of authorities uncertainty from Larry Kudlow, the director of the National Economic Council. Hours after he had boasted on CNBC that the virus was contained within the United States and “it’s pretty close to airtight,” Mr. Kudlow delivered a extra ambiguous non-public message. He asserted that the virus was “contained in the U.S., to date, but now we just don’t know,” in response to a doc describing the classes obtained by The New York Times.

The doc, written by a hedge fund advisor who attended the three-day gathering of Hoover’s board, was stark. “What struck me,” the advisor wrote, was that just about each official he heard from raised the virus “as a point of concern, totally unprovoked.”

The advisor’s evaluation shortly unfold by means of components of the funding world. U.S. shares have been already spiraling as a result of of a warning from a federal public well being official that the virus was prone to unfold, however merchants noticed the instant significance: The president’s aides seemed to be giving rich social gathering donors an early warning of a probably impactful contagion at a time when Mr. Trump was publicly insisting that the menace was nonexistent.

Interviews with eight individuals who both acquired copies of the memo or have been briefed on points of it because it unfold amongst buyers in New York and elsewhere present a glimpse of how elite merchants had entry to data from the administration that helped them achieve monetary benefit throughout a chaotic three days when international markets have been teetering.

The memo was often breathless and inchoate. It seems to have overstated the gravity of some administration officers’ warnings to the group and included dire projections from the Centers for Disease Control and Prevention, with out clear attribution, that don’t seem to have come from the gathering. The Times is publishing solely the passages from the memo whose accuracy it has independently confirmed.

But the memo’s overarching message — devastating virus outbreak within the United States was more and more prone to happen, and that authorities officers have been extra conscious of the menace than they have been letting on publicly — proved correct.

To many of the buyers who acquired or heard concerning the memo, it was the primary important signal of skepticism amongst Trump administration officers about their means to comprise the virus. It additionally offered a touch of the fallout that was to come back, mentioned one main investor who was briefed on it: the upending of each day life for your complete nation.

“Short everything,” was the response of the investor, utilizing the Wall Street time period for betting on the concept the inventory costs of firms would quickly fall.

That investor, and a second who was briefed on the Hoover conferences, mentioned that points of the readout from Washington knowledgeable their buying and selling that week, in a single case including to present quick positions in a means that amplified his income. Other buyers, upon studying or listening to concerning the memo, stocked up on rest room paper and different family necessities.

The memo was written by William Callanan, a hedge fund veteran and member of the Hoover board. A research institution at Stanford University that studies the economy, national security and other issues, Hoover has been directed since September by Condoleezza Rice, the secretary of state under President George W. Bush. Its board includes the media mogul Rupert Murdoch and the venture capitalist Mary Meeker, neither of whom attended the meetings in February, which were a series of informal, off-the-record discussions with Trump administration officials and Republican lawmakers.

Mr. Callanan described the Hoover briefings in a lengthy email he wrote to David Tepper, the founder of the well-known hedge fund Appaloosa Management, and one of his senior lieutenants about the level of concern among American officials over the spread of the virus domestically. In the email, he also touched on how ill-prepared health agencies appeared to be to combat a pandemic.

Inside Appaloosa, the email circulated among employees, who in turn briefed at least two outside investors on the more worrisome parts of Mr. Callanan’s email, according to people who received those briefings.

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.

Mr. Tepper, who is also the owner of the N.F.L. team the Carolina Panthers, was one of the first prominent money managers to signal concern over Covid-19 in the United States.

During an interview at a Super Bowl event in Miami on Feb. 1, Mr. Tepper described the virus as a possible “game changer,” saying that investors needed to be “cautious” until more was known about its reach. Many investors regarded his remarks, broadcast on CNBC on Feb. 3, as bearish — reason to either sell investment positions or short the overall market.

Three weeks later, Mr. Callanan’s readout seemed to validate Mr. Tepper’s warning.

“I just left D.C. and wanted to reply to your question ASAP,” Mr. Callanan wrote to Mr. Tepper and one of his senior lieutenants in an email on Feb. 25. “If you can keep the comments below confidential, I would be grateful.”

From there, Mr. Callanan reported that numerous Trump administration officials — Mr. Kudlow, Secretary of State Mike Pompeo and economists at the Council of Economic Advisers, who had given the presentation at the White House on Feb. 24 — expressed a greater degree of alarm about the coronavirus than the administration was saying publicly. He also said he had a meeting with a Democratic senator, although it is unclear which lawmaker he met.

At about the same time, Mr. Callanan also informed at least one of his clients, a wealthy private investor, of the more notable aspects of the Hoover briefing, including that Mr. Kudlow signaled more fear over the effect of the virus in the United States to the Hoover group than he had earlier on CNBC.

In a statement, Mr. Callanan said his email to Mr. Tepper contained “personal and professional views based on extensive research and publicly available information,” showing his “concern on the global pandemic that was emerging.” The email was shared with others without his knowledge or consent, he said, adding that a copy of it provided to him by The Times to answer questions about it was “materially different” from its original form. He declined to explain how.

He noted that the email was a combination of his observations from a visit to Washington and his own analysis, and that the C.D.C. outbreak projections were drawn from estimates already circulating in the public domain. The request for confidentiality, he added, was necessary because the email’s recipients were not bound to client restrictions intended to protect his intellectual property.

At midday on Feb. 25, a top official from the C.D.C. gave the first public glimpse of internal government assessments about the potential spread of the virus, and it was bracing.

“It’s not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen,” Dr. Nancy Messonnier told reporters.

Shortly after, Mr. Kudlow made his “airtight” comments on CNBC, adding that the virus would not be “an economic tragedy.” Two hours after that, however, his Hoover presentation struck Mr. Callanan as backpedaling.

Mr. Kudlow “revised his statement about the virus being contained,” Mr. Callanan wrote to Mr. Tepper, saying “we just don’t know” whether it was at the time — even as Mr. Kudlow continued to downplay its consequences to the private audience. Mr. Kudlow “did add that he has recommended to the president a period of ‘tariff tranquillity,’ as markets don’t need more uncertainty now.”

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *