An undercurrent of amusement has been detectable in some of the news coverage of Donald Trump's recent market-moving tweets, as though it serves big companies right to have a few billions stripped off their market values because the president-elect is holding them to account.
But it's no laughing matter. Trump's tweets directed at specific companies are a looming disaster — for investors, citizens, his incoming administration and his own credibility. The risk that they lead at some point to a huge financial scandal at the White House is high. It's time he knocked it off.
To recap, three times in the last two weeks Trump has issued early-morning or late-afternoon tweets aimed at two specific companies. The tweets were negative, and the shares of the targeted companies promptly slumped.
First up was Boeing. At 8:52 a.m. EST Dec. 6, Trump took to Twitter with a blast at the company. "Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!"
The company's shares lost almost 1% at the opening of trading a few hours later on the New York Stock Exchange, though they recovered during the day to end at $152.24, 8 cents above its previous-day close. During the day, Boeing executives explained that they were involved at the moment only in a $170-million early-development phase of the contract. The Air Force reported that it had budgeted $3.2 billion not for one but two planes to serve as Air Force One, entering service in 2024.
The problem there was that Trump didn't evince much knowledge about the contract, and certainly not about the nature of Air Force One, which has to be specially built to carry, you know, the president of the United States. Its special features, the Washington Post reported, include "missile detection and avoidance systems, electromagnetic shielding, midair refueling mechanisms and confidential communications systems" and packed with communications equipment that you don't see on a conventional 747 or even the Trump Express. The Government Accountability Office observed in March that the planes have to be the equivalent of flying White Houses.
Trump's real agenda, he acknowledged later, was to strike back at Boeing CEO Dennis Muilenburg, whose comments critical of Trump's international trade policies had been reported by the Chicago Tribune only minutes before the tweet.
Then Lockheed Martin landed in Trump's Twitter crosshairs. At 8:26 a.m. on Dec. 12, Trump tweeted that the cost of the F-35 fighter jet program, on which the company is the prime contractor, is "out of control." He pledged to save "billions of dollars" on this and other procurement programs after his inauguration.
Lockheed shares took an instant hit, falling as much as $13.60, or more than 5%, to as low as $247.10 in pre-market trading. They eventually recovered and closed Monday afternoon at $253.11, a loss of nearly 2.5% from the Friday before.
A couple of things are especially interesting about this action. One is that although the F-35 program is indeed wildly over budget, that's been known for years. The movement in Lockheed's shares was entirely Trump's doing.
The other is that the pre-market trading in Lockheed looked a bit suspicious. Software engineer and market maven Christopher Bouzy identified a large sale of shares just minutes before Trump's tweet and asked if it signaled inside information. Upon close examination, that may be a dubious conclusion. Pre-market trading tends to be light, so a largish trade can move the market sharply; the transaction Bouzy noticed was for 669 shares at $260, a $174,000 deal that would probably coast below the radar of most professional traders. Also, it was followed by a long string of transactions smaller than 100 shares.
Lockheed Martin shares took another enormous hit late Thursday, when Trump intimated by tweet that he might replace the F-35 program by expanding the fleet of outdated Boeing-built F-18 Super Hornets.
What motivated the tweet is unknown, but military experts say its logic is nonexistent—the F-18 lacks stealth capabilities and other features designed into the F-35. They're not comparable weapons. Nor is there any evidence that Trump based his commentary on anything resembling reasoned procurement advice; he certainly didn't cite any rationale for what seems to be a seat-of-the-pants outburst. That didn't keep the tweet from paring $6.36, or 2.5,% from Lockheed's shares in trading after Thursday's bell. Lockheed shares recovered somewhat during Friday's trading, but closed at $249.59, a loss of $3.21 or 1.27% from Thursday's close.
As Kevin Drum observes at Mother Jones, Trump's activities are deeply disquieting. He asks: "Do we really want the president of the United States calling out individual corporations and affecting their stock prices?"
Of course the answer is no. Inevitably, pronouncements about anything by a president have an outsized effect. Sometimes that's appropriate, but the power to move markets, like the power to deploy armies, is something to be used very sparingly, because people can get hurt by a stray remark or a stray artillery shell. The early action in Lockheed Martin stock on Dec. 12 cut $3.8 billion from its market value, followed by a loss of $1.8 billion after the close of trading Thursday. Neither hit is a joke to investors holding the stock.
That's why presidents, if they're serious about their jobs, are extremely circumspect about what they say in public about anything. Every word is parsed to the nth degree, every thought magnified to global significance, no matter how casual or careless. It's not unusual for presidents to jawbone industries or even individual companies in public; but it's very unusual for a president to settle personal scores with one in a way that craters its stock.
Just as disturbing is the prospect that Trump's tweet-borne logorrhea could be put to dishonest use by someone in his inner circle. This is the point Bouzy raised, and it's a legitimate one even if it turns out to be not applicable in the Lockheed case.
No one outside Trump's inner circle — and maybe not many of them — knows who he talks to before tweeting or how many hands a tweet goes through before landing in public. If he's sharing their content in advance, the chance exists that someone will eventually find the temptation irresistible to score a few easy thousands by trading ahead of the tweet. The result will be a scandal that won't be at all hard to explain to the voters. And that's leaving aside the possibility that Trump himself might profit from a market-moving tweet. (Trump's spokespeople say he sold all his stocks earlier this year, but they've provided no documentation.)
It's not enough to say that Trump's tweets thus far have had only a limited and temporary effect on stock prices. Even that much is a gift to professional traders, who can profit handsomely from short-term moves, even more so if they reflect a knee-jerk overreaction and are promptly reversed. Some are reportedly setting up algorithms to alert them when an actionable Trumptweet arrives, though figuring out how to trade them may turn out to be more an art than a science.
But someone will try to profit here, make no mistake. In the long run, Trump's tweeting can yield no profits, only losses.