Dem
47
GOP
53
Several Democrats and others have noticed something odd about the stock market. On April 2, what Donald Trump called "Liberation Day," the Dow Jones index closed at 42,225. After trading hours, Trump announced his crazy tariffs, including on uninhabited islands populated only by penguins. On April 8, it closed at 37,646, a loss of 11%. The S&P index dropped even more (12%). Then on April 9, Trump announced a pause on the tariffs and the Dow jumped up 2,962 in one day. Here's the odd thing: A chart showing the volume of call options on the S&P 500 for April 9:
These options gave the buyer the right to buy an S&P 500 index ETF for $509, even though it opened at $496, and the option expired that day. Anyone who bought that option contract was betting on an unexpected sharp rise in the S&P 500 that one day, even though the general market outlook was very gloomy and expectations for a recession were high. Then, when Trump announced the pause in the tariffs, the Dow jumped 2,962 (8.1%) and the S&P 500 jumped 474 (8.7%). Anyone who bought a call on either one (for about $2 per contract, given the high strike price and short expiration date) would have made a real killing.
Given the large volume in very specific calls, that seemed like a stupid bet in the morning. Some people are wondering if the initial tariffs were intended to drive the market down in order for Trump and his cronies to buy call options just before he released an announcement that they knew would send it skyward. This would explain why the initial tariffs on penguins and others were crazy: They were designed to cause a panic to allow selected individuals to make a fortune when they were undone. This would be market manipulation on a historical scale. Any Democratic president who got caught doing this would be impeached by the House the next day and removed from office by the Senate the day after that.
What made this worse is that Trump admitted that two of his friends made out like bandits. One made $2½ billion and another made $900 million. Not bad for 5 minutes' work on a computer. The $3.4 billion question is: Did Trump tip them off? If so, it would probably be considered insider trading. And did Trump also buy calls? Note that buying calls was safer than buying stock outright since it was possible that the market would have continued downward despite the pause. With calls, the worst case was losing the $2 paid for each contract.
The long and the short of it is this: Did Trump intentionally drive the markets down, causing trillions in losses for ordinary people so his billionaire friends (and maybe he himself) could reap a fortune? Just askin'. Mind you, we don't know if any of this is true. It's all circumstantial evidence right now. As we alluded to over the weekend, we'd ask William of Ockham, but he's been dead for over 600 years. But we guess he would have some thoughts on the matter.
Some Democratic senators, including Ruben Gallego (AZ), Mark Kelly (AZ), Adam Schiff (CA), Elizabeth Warren (MA), and Ron Wyden (OR) are requesting that Trump's hand-picked SEC Chairman Paul Atkins investigate whether Trump or those around him "engaged in insider trading, market manipulation, or other securities laws violations." They are barking up the wrong tree. Atkins will never conduct a serious investigation.
All those folks should have immediately gotten on the phone with New York AG Letitia James, whose jurisdiction most definitely includes crimes committed on Wall Street, such as market manipulation. She has a long history of going after insider trading and similar crimes. For example, in 2022, she made CBS pay $31 million as a fine for covering up a budding scandal that eventually sent the stock down. James has the inclination, the authority, and the resources to issue subpoenas to find out who bought SPY call option contracts on April 9, at what time, and how many. Of course, James knows exactly what her job is and may not need any prodding from a bunch of misguided senators. She generally plays her cards close to the vest and tends not to talk about what she is doing until she has something to announce.
We doubt James would indict a sitting president and put him on trial now, but she could certainly indict any of Trump's billionaire friends who violated NYS laws and turn the screws on them, getting testimony on tape for later use in return for a lighter charge and a promise of a fine rather than prison time. (V)