Alex Krainer
With regards to Donald Trump’s
announcement yesterday that, “very good and productive conversations”
took place with unnamed Iranian official previous two days toward a
“complete and total resolution of hostilities,” interesting new insights
emerged.
Sayed Mohammad Marandi, professor of English Literature and Orientalism at University of Tehran made an interesting observation about the timing of Trump’s announcement and a 5-day pause in bombing of Iran’s energy infrastructure. In an x-post yesterday, he stated that,
Every
week, when markets open, Trump makes these kinds of statements to drive
down oil prices. Even his five-day deadline aligns with the closure of
the energy market. But in reality, there are no negotiations underway,
nor does Trump have the capability to reopen the Strait of Hormuz.
Iran's firm threat has once again forced Trump to back down.
It’s
one of those statements, once you read it, there’s no unreading it. In a
way, it shouldn’t be a surprise: the greatest and most important battle
Trump faces today is the political battle at home, and if the markets
punish him for the current Iran misadventure, the voters will likely
punish him during mid-term elections this fall. A prolonged conflict in
the Middle East would be all but certain to raise the price of oil to
new all-time-highs, along with interest rates, and probably also crash
the stock markets.
From that point of view, it would be
understandable that he’d rethink escalating the war into an oil market
rally, and crashing equity valuations and bond prices. That’s easy to
see, but it’s a lousy way to run his foreign policy strategy, especially
one that’s hyperactive and aggressive as Trump has been pursuing of
late. Wars are unpredictable enough. Making decisions around market
outcomes only complicates things further, probably setting the U.S. at
an additional disadvantage against Iran which doesn’t have to worry
about their stock markets or oil prices.
To be sure, none of this
excuses President Trump; he now owns the Iran war and he and his
advisors should have foreseen all these complications, before pulling
the trigger. They probably did, but for some reason were dismissed. But
another, much more troubling view emerged yesterday.
Making news, frontrunning markets?
An X account called Bark@barkmeta (they have nearly 300k followers") posted an extremely serious allegation, pointing out the following:
“5
minutes before the President announced a halt to attacks on Iran…
someone placed a $1.5 BILLION bet on stocks going up and dumped $192
million in oil. These trades were 4 to 6 times larger than anything else
in the entire market. Whoever did this wasn’t guessing. You don’t risk
$1.5 billion on a hunch.
There was zero public
indication this announcement was coming. No leaks. No press. Nothing.
The only people who knew were in the room when the decision was made. …
And within minutes they made more money than most Americans will earn in
a thousand lifetimes. In a single trade. On a war that cost you $4+ a
gallon gas and $16 billion in tax dollars.
… This is
not the first time. Every major announcement from this administration
has had massive suspicious trades right before it dropped. Tariff
reversals. Policy shifts. War decisions. This is the most blatant
insider trading operation in the history of American politics. It’s not
even close. And it’s happening over and over in broad daylight. …”
Another
few market-focused accounts made similar allegations suggesting that
there may be real fire where that smoke comes from. The facts should be
easy enough for a serious investigation to establish beyond any doubt.
If they turn out to be true, their implications would be extremely
troubling. I don’t expect that the President is cynically making trades,
then announcing news to enrich himself and/or his family members.
More likely, some members of his administration who are part of the circle of deciders
could be passing the information to their friends in the markets, or
the administration’s deliberations and communications are completely
compromised, or both. Absent a thorough investigation of these claims
(I’d start by asking Howard Lutnick some
questions), any explanation about the way members of the administration,
their family members, or friends might be profiting from this war could
be as plausible as the next one, including those implicating the
President himself.
Burgeoning doubts
Even
if these allegations turn out to be unfounded, their seriousness and
their impact should not be dismissed. They may not be discussed by
Bloomberg or MSNBC, but they’ve triggered viral discussions in social
media. In less than 24 hours, Bark@barkmeta’s X-post has been reposted over 50,000 times, received 123,000 likes, and was viewed 8.2 million times.
Another market-focused account, “unusual_whales”
has posted similar allegations. They have 3.1 million followers -
probaby more than Bloomberg’s and MSNBC’s viewership combined. The
impact of these allegations could be impossible to judge, but they will
almost certainly seep into what we call “market fundamentals.” It may
not even be openly declared, but if a large segment of the public comes
to suspect the Trump administration as unscrupulous war profiteers, this
could undermine the markets’ confidence in the “faith and credit” of
the United States.
It could also undermine the people’s
confidence in their government and in President Trump. Any policy
decision on the part of the administration could be interpreted as more
of the same: more war profiteering on an industrial scale. In all this,
Trump’s promiscuous relationship with truth and facts doesn’t help
things. How might the markets treat these burgeoning doubts? I’m afraid
that would be impossible to predict, but it might become an increasingly
significant factor affecting the markets.
On the ground, the war continues
Trump’s
international partners are already disbelieving the administration.
Israeli Prime Minister Netanyahu has already distanced himself from
Trump’s “pause,” stating that it doesn’t affect Israel’s war plans. The
Iranians have denied that any talks are going on (all discussions about
this or that Iranian official being the negotiating partner and future
leader of Iran are almost certainly psyops, contrived to preserve the
administration’s credibility).
This suggests that we might not
get a significant “relief” correction in energy markets and that a
wholesale destruction of energy assets and infrastructure in the Middle
East is still a possibility. The risk, in energy markets, but also in
interest rates remains on the upside.