PEOTUS Trump is now no better than CNBC/FBN/Bloomberg stock touts, whose ranks have given us the ‘bagger party as well as Cramer-clones. High-frequency Trading or just high. Darn that asymmetric information. How many crony millionaires could be created with the tweet that resulted in a $4 Billion loss for Lockheed-Martin.
But one thing seems certain. Anyone who knows the contents of the President’s tweet before it becomes public may be in possession of market-moving information on which they might be tempted to trade.
Would that trade be legal? It certainly would be legal if one were to apply the traditional insider trading rule that bans a public company insider from receiving a benefit from market-moving inside information.
Kleptocracy Watch: crony capitalists in the post-truth era – GOPutin
Twitter is not the only source of market moving words from Trump. On December 7, Time posted the transcript of an interview with Trump in which he said, “I’m going to bring down drug prices. I don’t like what’s happened with drug prices.”
That day, biotech stocks plunged. According to Bloomberg, on December 7, “the Nasdaq Biotechnology Index was down as much as 4.6% — the biggest intraday loss since June 24 and the lowest since the election.” One trader viewed this as a head fake and bought Pfizer on the dip, according to CNBC.
… Donald Trump is taking a different, more activist approach, tweeting his plans to reward and punish individual companies, and while he has yet to include tickers or price targets in his tweets, investors have started to notice:
Efrem Hoffman, founder of a market analysis firm called Running Alpha, said Trump’s tweets represent a new source of market information for those willing to study them and identify patterns.
“An algorithm could have easily gotten the direction of the trade wrong today. However, given Trump’s penchants for simple language and negative statements, it wouldn’t surprise me if someone were able to develop an accurate predictive algorithm.”
Yeah it does not seem all that difficult? Like, if you find a company name in a tweet, and the tweet ends with “Sad!” or “Bad!” or frankly just an exclamation point, you can probably go ahead and sell it for a quick profit. We live in fascinating times for markets, and technology, and politics.
What if Trump shorted (or bought) a stock, and then tweeted his plans to punish (or reward) that company to move markets and make himself a quick profit? Would that be insider trading?