No Mercy / No Malice

The Insiders

Trump Casino: When Markets Become the House Game

In the war between Trump & Musk, I’m rooting for the bullets. However, the whole thing is (again) a distraction from the significant damage being levied on the country. It’s tempting to believe America will emerge from the Trump chaos unscathed. It won’t.

The defining features of this presidency are cruelty and chaos — but chaos with a purpose. Share prices plunge following tariff threats, only to rally when he backs down. The White House attempts to bar Harvard from enrolling international students, then gets blocked by the courts. Trump calls for Fed Chairman Jerome Powell to be fired, then insists days later he has “no intention” of terminating him. Even if most of his promises go unfulfilled, the long-term damage will be severe.

TACO

If Trump were a poker player, he’d swagger to the table talking shit, go all in, then fold before his opponents respond. It’s easy to dismiss this behavior as crazy or incompetent. But it raises a troubling question: Is this a deliberate effort — straight out of an autocrat’s playbook — to create volatility that the autocrat and his acolytes can exploit? What if this isn’t incompetence, but a strategy?

Financial Times columnist Robert Armstrong coined the perfect term: the TACO trade — Trump Always Chickens Out. But Armstrong told us on Prof G Markets that chaos may be the point: Trump and his team have such contempt for the system, they don’t see any downside risk in burning the village to save it.

These policy gyrations have created an association of “toxic uncertainty” with brand USA. Announcing more than 50 new or revised tariff policies in a matter of months makes no sense, until it does. Trump’s market manipulation operates like a carnival game — it’s rigged. The house always wins, as it knows when the music is about to stop.

The Numbers

Trump’s ability to trigger wild swings in stock prices has created an environment ripe for insider trading, undermining trust in U.S. markets and eroding a pillar of American prosperity — the rule of fair play. When Trump shocks the market and then retreats, it gives his inner circle, both in Washington and on Wall Street, an opportunity to place trades with asymmetric upside. They have information the other players (whether they’re buying or selling) don’t possess.

Trump’s tariff proclamations have created some of the most extreme market volatility in decades:

• April 2–3, aka Liberation Day: The markets posted their worst day since June 2020, during the Covid-19 pandemic. The S&P 500 dropped 4.8%. The Dow tumbled about 4%. And the Nasdaq fell 6%. Three days of losses wiped out about $10 trillion in wealth — equivalent to roughly 10% of global GDP.
• April 9–10, Trump Blinks: In a stunning U-turn, the president walked back some tariffs, triggering a historic market rally. The S&P soared 9.5% in one day — its biggest gain since 2008, while European markets staged their biggest jump in more than three years.

Multi-trillion-dollar swings happening within hours of his statements aren’t market forces — they’re signs of manipulation with a presidential seal. The markets are essentially reacting in real time to his policy announcements and reversals, creating unprecedented uncertainty for investors … and opportunity for those who are inside.

Inside Job

A string of incredibly prescient trades has sparked concern that Trump’s allies may be trading on material nonpublic information. ProPublica reported that more than a dozen high-ranking officials made well-timed trades following Trump’s inauguration — most selling stock before markets tanked.

Attorney General Pam Bondi sold $1 million to $5 million in Trump Media stock on April 2, the same day the president announced his Liberation Day tariffs. The timing of her trades that day is unclear. But think about that: The nation’s top cop is selling stocks the day an announcement by the president ignites a crash in prices. Trump Media slipped 13% in the following days, before recovering.

Wow. What. Luck.

Most damaging: On April 9, Trump posted a message to followers on Truth Social: “THIS IS A GREAT TIME TO BUY!!! DJT.” Less than four hours later, he announced a tariff pause, sending stocks soaring. Billionaires tracked by Bloomberg enjoyed their best day ever, adding more than $300 billion to their combined net worth.

Maxine Waters, the California Democrat, zeroed in on suspicious call option trading in the 10 minutes before Trump’s announcement. “No rational investor would have purchased these options unless they had prior knowledge of the president’s impending reversal on tariff policy,” she and her House colleagues wrote in an April 10 letter to Securities and Exchange Commission Chair Paul Atkins requesting an investigation.

Damage Control

Less than two weeks later, Treasury Secretary Scott Bessent, speaking at a closed-door investor summit hosted by JPMorgan Chase, said he expected a “de-escalation” in Trump’s trade war with China. Stocks, which had already started recovering after a sharp drop the previous day, soared after Bessent’s comments were reported.

Elizabeth Warren demanded an explanation. The Massachusetts senator argued in a letter to Bessent that Trump’s opaque tariff decisions and “frequent, seemingly random changes of course have created a scenario where wealthy investors and well-connected corporations can get special treatment, receiving inside information they can use to time the market, or obtaining tariff exemptions that are worth billions of dollars — while Main Street, small businesses, and America’s families are left to clean up the damage.”

In late May, stocks dropped again after Trump threatened to raise tariffs to 50% on goods from the EU. But when the president subsequently said those tariffs would be delayed until July, his comments triggered a global rally over the next two days.

The White House has announced a flurry of new and revised tariff policies since Inauguration Day in January. But I’m willing to bet that very little will change over the next year or two when it comes to trade policy. I also predict that Trump will fail to follow through on most of his threats, on everything from tariffs to Harvard, as he backpedals or gets stymied by the courts.

Bad Cop

The country’s top securities cop will get to the bottom of it … at least, that’s how it’s supposed to work. But at a time when suspicious trading activity is mounting, the SEC is being defanged. Trump earlier this year signed an executive order to “rein in” independent regulators, including the SEC, and make them accountable to the administration. The order forces the agency to report to the White House for approval.

At the same time, thanks to buyout and retirement programs offered by the administration, the SEC workforce is being slashed. SEC divisions reportedly lost up to 19% of their staff over a period of just several weeks. The fox isn’t just in the henhouse — now he is the farmer.

And don’t expect a strongly worded letter from Senators Chuck Schumer and Elizabeth Warren to light a fire under Atkins, the pro-business crypto enthusiast Trump picked to head the SEC. You can bet Atkins will take a lighter regulatory approach than his predecessor, Gary Gensler.

Golden Age of Insider Trading

Insider trading has long been a scourge. James B. Stewart chronicled the 1980s insider trading scandals in his book Den of Thieves. Sheelah Kolhatkar’s 2017 book, Black Edge, tells the story of billionaire hedge fund investor Steven A. Cohen, his former firm, SAC Capital Advisors, and the largest insider trading investigation in history. SAC pleaded guilty in 2013 to fraud charges and agreed to pay a record $1.2 billion penalty. While Cohen wasn’t charged, he agreed to a two-year ban on managing outside money. In 2014, his firm was reborn as Point72. Six years later, he bought the New York Mets.

But the conditions today threaten to usher in a golden age of insider trading, inviting well-connected investors to cheat. I predict that the next set of results from the nation’s hedge fund managers will show that some of them have made a killing, raising questions about whether they’ve capitalized on insider information to achieve those gains.

The Real Cost

The collateral damage happens to the people on the other side of these trades. They are losing fortunes. As Pulitzer Prize winner Anne Applebaum argues, American policy is “being transformed, not to benefit Americans but to benefit the president, his family, and his friends.”

In our conversation last month, she said that fighting corruption depends on connecting it to ordinary people’s lives, showing “they are poor because the Trump family is rich.” She noted that Alexei Navalny, the Russian opposition leader who stood up to Putin and died in a remote prison above the Arctic Circle, successfully linked Russia’s kleptocracy to bad roads and poor healthcare.

Ensuring America has a fair playing field is key to its success — that’s why we have five times Europe’s risk capital for startups. It’s why our companies garner $26 in value for every $1 dollar in profit. Russia is a kleptocracy. The total value of its stock market is around $80b, vs. $52t for the U.S. The erosion of faith has disastrous consequences. Corruption is contagious. It starts with one infected trade, spreads to cabinet members, then metastasizes through Congress and the donor class. America under Trump hasn’t just caught the disease — it’s becoming a superspreader event that will infect global capitalism.

Mean girls breaking up makes for good reality TV, but it’s a misdirect from the grift that will reduce our prosperity and limit our ability to protect others at home and abroad.

Life is so rich,

P.S. I’m sitting down with Microsoft’s chief scientist, Jaime Teevan, to discuss the topic on everyone’s minds: AI’s impact on our jobs. RSVP to AI and the Future of Work for free. Hosted by Section.