Is Trump rigging the markets?

0:00Okay, caller one wins cord-side seats to tonight's game. What? I won floor seats? You did. I've been calling for 13 months. Wait, Chris? Yes, I finally did it. What are you gonna wear? Men's warehouse. They've got today's looks for any occasion, and I need to look like a celebrity. Don't want to stick out. Exactly. They've got chill flecks by Kenneth Cole, Joseph Abboud, and a tailor at every store for the perfect fit. Congrats. You can stop calling now. It's not a chance. Hit any look for every occasion at Men's Warehouse. Love the way you look. This is a CBC podcast. Hi, everyone. I'm Jamie Puston. Depending on when you're listening to this on Monday, the big financial markets may not be open. But regardless, it's likely that investors across the world are monitoring Donald Trump's social feeds. That is because many experts say the Trump administration

1:01is engaging in market manipulations, surrounding but not limited to the Iran War. They've accused him of timing military announcements, for example, around market open and closed times. Last Monday, a spike of highly suspicious and extremely lucrative oil futures trades took place minutes before Trump posted about the war winding down. There are also enormous prediction market bets that many say look to be made by people with insider information. And there are similar examples around terror policy and the attack on Venezuela. Today, we're going to parse these accusations of market manipulation and insider trading with Mike Bird, the Wall Street editor of the Economist and co-host of the Economist Money Talks podcast. What does he see happening here? And how different is it from stuff that we've seen before? Mike, it's great to have you on the show. Thank you very much for having me.

2:01Good to be here. There are a number of questions being asked right now, as I mentioned about both market manipulation on the president's part, as well as possible insider trading by those close to him and also the betting stuff. But let's start with the accusations of market manipulation first. This became a huge story last week after Trump sent out this post last Monday morning, rising on tree socials Trump said he was pleased to report that the US and Iran over two days had had in depth detailed and constructive conversations. Iran later denied this and this post actually came after a bunch of Trump comments over the weekend about escalating things. And so what did you make of that post last week and the timing? Yeah, so it's that move in oil futures very shortly before the post that I think got people most agitated. Trading volume remained low until about 6.49 a.m. Eastern when over just a few minutes, trading volume jumped almost 10 fold.

3:01That spike went back down until about 15 minutes later when President Trump announced he was post-poning strikes on Iranian power plants and energy infrastructure and that caused a surge in the oil markets. Gotta be careful in what we can say and what we cannot say about those sort of things what we can say is that that was an enormously fortunate moment for someone to make a very, very large position in all futures market. The oil price move that came after that announcement was roughly 12% fall which is enormous, absolutely huge. We've seen a lot of volatility but that really is a very, very large move you usually don't see anything like that in oil markets. So there was the potential to make a huge amount of money. We don't know who made the trade. It's certainly a pattern that would suggest that maybe someone was either very confident about something about to happen or was actually informed that something was about to happen. I think what it speaks to

4:01is this fascinating and dangerous area where politics and financial investment and these new investment potential these new speculation potentials around prediction markets all intersect with one another. Because the prediction markets are very new that's adding in a new element to it but I think that the main thing that comes across from the Trump administration and all of the news around this is both the administration is making a lot of decisions that are enormously market moving. We saw this with Iran, we saw it with Venezuela, we saw it with the tariffs, and you also have an administration that has lots of people in and around it, whose financial interests are very, very deeply tied up with things that the administration has a huge amount of influence on, whether it's crypto, whether it's prediction markets, whether it's all manner of other business interests. This is a really sort of new thing in the US. It's really not similar to any administration in modern history.

5:01And I think that's where a lot of the speculation and the concern about potential market manipulation comes from. On that oil futures trade, the really big one that you were talking about, why do we not know who would have made that trade? Can anybody investigate that considering so many people think it's so suspicious? Paul Krugman, the Nobel-winning economist called it potentially treason, right? Yeah, treason in the futures markets I think was what Paul called it. The honest answer is the twofold. The first is that it's not the responsibility of a futures exchange to say whether a given trade is particularly suspicious or certainly not the whole responsibility. Those trades are not completely public. If you once trade in all futures or I once trade in all futures, I don't necessarily want people to know what I'm trading. So it's not open information.

6:01And unless they have a reason, a really, really good reason to reveal who's making certain trades, I think the general practice would not be to do it. Unless there's a sort of legal order or a subpoena, something like that, which currently we have nothing like that. And the second part of the answer is that these are large global commodities markets. People operate through dealers and brokerages and intermediaries. And even in that case, it's not always obvious who's directly responsible. Even if you were a party to that trade, it wouldn't necessarily be obvious who you were making the exchange with. So you might hear about these things and think maybe there's some authority, some individual company, or agency that has responsibility over these things. The answer is that it's always going to be muddier, a little bit more unclear, and a lot more private than people would think. On Trump's part,

7:02these announcements that he's making sort of time to the opening and closing of markets, I saw a post that you wrote where you said, I think the fact that military action and major announcements now seem to be coordinating around market, open and close times, is going to be one of the most fascinating and most important things that we're going to do. And I think that's one of the most important things in close times is going to be one of the most fascinating and telling tidbits about this era, slash administration, and just tell me more about what you meant there. Yeah, I think it's to get back to the fact that there are so many unusual financial interests segmented into big market moving events. Let's start with the fact that the Trump administration seems to be quite sensitive to market movements. We saw this during the tariff announcement last April. We saw a very sharp decline in stock markets, in a number of other markets as well, in the value of the dollar,

8:03and we saw reversal about a week later. And this gave rise the idea of the TACO trade Trump always check its out. Oh, and then I check it out. I've never heard that. So this idea, the Trump is quite sensitive to market movements and the administration is quite sensitive, is informing things here. Then again, with the extraction of President Maduro Venezuela, you saw this happen over the weekend. And lots of people talk to the time about the fact that it was interesting that it seemed to be timed around the fact that financial markets were closed at the time, even most futures markets were closed. And then since the attack on Iran, you've seen a number of instances in which announcements are either made immediately before, immediately after market closes. There seemed to be quieter events during the week and things seem to sort of peak around the beginning and the end of the weekend when futures markets are just about opening and just about closing. Again, we don't have administration officials saying we're deliberately timing this around market events, but it doesn't seem to be particularly random,

9:03especially when these are really big market moving things. Is there a more charitable explanation for why they're doing this than what a lot of people are jumping towards, which is personal enrichment? The charitable explanation, and it depends on the individual event that we're talking about, the charitable interpretation for some of them. For example, the extraction of Maduro would be, if you can get it all done during the weekend, you don't cause any market disruption. Market disruption is not good. The volatility causes all sorts of spillover effects. If you can do this while markets aren't trading, it's probably better to do it where markets aren't trading. With what's been happening in the last few weeks, that becomes very, very difficult to assemble as a sort of explanation, as an excuse. But that would be the most sort of strongman way of thinking of this. It strikes me that Iran is like a much different beast here than the Trump tariff announcements and even Venezuela. It just seems like the administration had more control

10:05over those events than their current event, because it takes two to be able to do this, right? Absolutely. I'm thinking about Muhammad Gallybeth, Iran Speaker of Parliament last week, who just responded to that post by Trump saying that they were in talks by being like, no, we're not in talks. This is fake news intended to manipulate financial and oil markets and to escape the quagmire in which America and Israel are trapped, right? Yeah, yeah. I think that's absolutely right. And I think both in the case that Venezuela was a military operation that was effectively over in a matter of hours. And in the case of the tariffs, because the administration announced tariffs and most countries didn't retaliate, it was really a sort of single-player game. What Donald Trump decides and what the administration decides matters and what anyone else decided was sort of irrelevant. So you could simply say, this is on, this is off,

11:06markets move very dramatically in either direction. But it's extremely telling that the very announcement we're talking about, whether it was the suspicious looking oil futures bet, immediately beforehand. Or hand, all prices dropped by 12, 13% that day. By the end of the week, all prices had come back to exactly where they started the week, right? So the impact of that sort of immediate announcement sort of fades over time. You can't keep having the same effect if you keep making these announcements again because there's multiple players here and because Donald Trump is the only person who gets to decide whether things are being resolved by negotiations. There is, by definition, another partner involved it. Let's be completely honest. Are you happy with your job? The fact is, a huge number of people can't say yes to that. Too many of us are stuck in a job we've outgrown

12:06or one we never really wanted in the first place. But we stick it out and we give reasons like, what if the next move is worse? I've put years into this place. And maybe the most common one. Isn't everyone miserable at work? But there's a difference between reasons for staying and excuses for not leaving. It's time to get unstuck. It's time for strawberry.me. They match you with a certified career coach who helps you get from where you are to where you want to be. Either at your existing job or by helping you find a new one. Your coach helps clarify your goals, creates a plan, and keeps you accountable along the way. Go to strawberry.me slash career and get 50% off your first coaching session. That's strawberry.me slash career. Hi, Steve Patterson here, host of the debaters. Part stand up, part quiz show, part comedy competition. We answer the questions you've never asked like our trees overrated. If you're pining for Canada's best comedians to throw shade at each other, listen wherever you get your podcasts. So now let's dig into the predictive markets.

13:07A little bit more here. The Guardian on Monday reported that there were a series of bets made last weekend by eight newly made polymarket accounts in favor of a U.S. or on ceasefire before there was any sign of one on the horizon indicating possible insider knowledge. Eight new accounts on the crypto betting platform polymarkets placed similar bets totaling about $70,000 on a U.S. around ceasefire within 10 days. If successful, does bets could bring in around $820,000? On top of that bubble maps of blockchain analytics firm as reported by CNN's Marshall Cohen, found that one trader on polymarket has made almost a million dollars on the platform since 2024. On a collection of well-timed five bigger bets, mostly on U.S. military actions before they were announced with a win rate of 93%. And just, I know that you kind of address this a little bit already, but like, talk to me more about how these prediction markets present a whole new profiteering opportunity for those with privileged information.

14:09Yeah, so think of it this way. If I'm trying to make a bet on something happening in oil markets and I'm thinking about that from the perspective of what the U.S. government might announce, there are a million things that influence oil markets. There are any number of things that could be them at any given time. What prediction markets offer is extreme precision where you can narrow down exactly what you're betting on. You can narrow it down to an extreme sort of binary yes or no outcome, which makes it extremely valuable if you know what that outcome is already. It's wildly useful for that. It means there's a proliferation of the number of things that you can bet on. Again, instead of thinking about it through the perspective of the normal asset market, whether it's a few things that you might wager on, there are thousands and thousands of different questions. You can even start to make your own market in these things. Establish your own question and take a side in it. It's extremely useful for that reason. It's also extremely useful

15:09because this stuff is very, very rapidly growing and it's not regulated in the way that mainstream vanilla financial markets would be. It's partly because, for example, if you're trading in securities, you will come under the supervision of the Securities Exchange Commission in the U.S. Most prediction markets would not be classed as securities. Even the commodity futures trading commission, which does have most of the regulatory responsibility of prediction markets, is sort of playing catch-up because these things have been booming and it's not been a big area of focus for them. There's a lag. There's a huge lag between regulation here and the activity that's actually happening, which is uniquely useful to people who are informed what you might call insiders legally. It's not clear that they are insiders because, again, that really just applies to securities law but who are informed traders who know what's going to happen.

16:09So the opportunities for sort of avarice and making money on this with privileged information are enormous. Do you get the sense that regulators are trying to catch up here? I think the American regulators, whatever you think of the current administration, none of them want to look at sort of poorly functioning winner-takes-all asset markets or any kind of market that is becoming sort of distrusted and aggressively speculated on. I don't think they do. Maybe that's naive of me to say. But I think for the most part, this is a combination of things. It's the speed of a growing industry. It's the fact that because America has multiple financial regulators, the emergence of any new asset class, any new market begins this bon fight between them over who exactly is in charge of them. Now, we've already had Paul Atkins ahead of the SEC saying that, hey, actually some prediction markets

17:10will come under our jurisdiction. Prediction markets are exactly one thing that where there's overlapping jurisdiction potentially and you write it's mostly, at least currently on the CFTC side, but we need to be harmonized in the way we're addressing this market. In the same way that stock futures, for example, come under the partial jurisdiction, they say, if you've got a prediction market, for example, where it's saying, I bet the S&P 500 will be above or below this level, that's essentially a future's contract, and they probably will once have some involvement in this. I think most of it is just lethargy. It's just these are slow moving regulatory institutions and it's tough for them to be across everything all the time. I think I will say that the Trump administration's regulatory cast of characters have a very, very naturally more sympathetic line to the idea of allowing financial innovation, even if it means letting regulation fall behind a little bit,

18:11the very, very pro financial innovation, the people I know these regulators would not want to slow down the development of prediction markets by, in their view, over regulating them. So they're happier playing catch-up than they are trying to sort of get ahead of things. In some cases, which when you have problems like these, I think, yeah, it can exacerbate. The White House, of course, says that they don't tolerate any administration official illegally profiting off of insider knowledge. But I also want to talk about the Trump family's own ventures in prediction markets, right? So I mean, you have people in these positions that have kind of really an ideological view of regulation, but like Dawn Jr. is a strategic advisor to both calcium and polymarket and an investor in polymarket.

19:12And just what kind of concerns have those connections raised? Well, I think those connections are honestly just one of a number of extremely concerning business, sort of political nexus links. The New York Times reported on March 13th that Jared Kushner is trying to raise $5 billion from governments in the Middle East for his own private ex-eventures. He's the president's son-in-law. He's also peace envoy. He meets foreign dignitaries on behalf of the president. The same, more or less, is true of Steve Whitkoff, who's another peace envoy who co-founder of World Liberty Financial, which is the Trump family partially owned crypto company. It's the issuer of the USD1 stablecoin. It also took a $500 million investment from an Emirati royal. You know, there are enormous, completely conflicted financial interests at the very highest levels of the administration. And prediction markets are one of them now.

20:15And there really is no historical comparison. I would say for any of this, at least in modern history, you know, there's the long-running joke about the fact that Jimmy Carter was made to give up his peanut farm. Like, it feels like a very, very long time ago that that sort of concern about financial impropriety was so common at the highest levels of the US government. Yeah. And just like, some of these bets on January 2nd, a trader made $400,000 off a $32,000 bet that Maduro would be taken by the US the night before it actually happened, right? February at account trading under the username, mega, my man made a half a million bucks placing bets on polymarket about Iran and its supreme leader just before Israel killed him. Everyone gets better at spotting suspicious bets. Also, couldn't America's enemies do so as well? Yeah, absolutely. I mean, okay.

21:15So to go to one of the original arguments around insider trading, there's always been an argument from people who have a really free market orientation that it's better to have insider information traded on because it means there's a more informed market price, right? So if you have the CFO company buying stock in a company because he happens to know the results that'll be released in two weeks are really, really good, then that's better because it allows for more efficient market pricing, reflecting the reality of things. Now, the last thing you want if you're a national security official is for the pricing on prediction markets related to US military action to reflect the reality of things. The reality of things is exactly what it is your job to disguise before they happen. So I think this will be another big element here that there is a serious, there is a serious incentive on the behalf of the US government, especially in and around diplomacy, national security defense, to crack down on employees doing this.

22:15I think the main question is if it's not done at a sort of central level, how do you monitor the fact that your employees aren't doing this at any given time, right? I think probably treating it as serious the years you would treat, making sure that people know that you telling your brother, oh, you should put a polymarket bet on the US attacking Iran, is the same as you like leaking classified information through high profile cases. Maybe that will help. We've had this in Israel recently. Yes, I was just going to say, yeah. Yeah, and Israeli reservist officer is suspected of using classified information and trading on polymarket in relation to the attacks on Iran last summer. And this is going through a court in Tel Aviv. Now, maybe that sort of thing will make people think, oh, actually, what I'm doing is flagrantly illegal. And I wouldn't leak government information. I wouldn't sell state secrets. So it shouldn't be doing this. Maybe that will improve things. But it's so easy to do this that I think it's very, very hard to crack down on.

23:31I wanted to ask you about this bill that's going to Congress that would ban members of Congress, the president, executive level government employees and their spouses and dependents from betting on political events. There's also a Senate bill that goes even further, seeks to ban prediction market bets on election sports, government actions, and military moves. I mean, with the Trump family's close ties to the industry and the people who are in positions around regulation, like how likely is it that Republican lawmakers will actually back it on mass? I think it's difficult to imagine a very large majority of US lawmakers signing off on something that they themselves want to do. So I think when it comes to, for example, war-related prediction market betting, you could quite possibly get a very large majority of lawmakers to say, yes, absolutely. You know, nobody should be doing these things. Because the vast majority of US legislators, I presume, are not directly corrupt and do not want trade on national security secrets

24:33to make money. When it comes to stuff that's a little bit more vague, like stock trading in general, where it could be on information that they've gained in a privileged way, I'd be a lot more skeptical of the willingness of lots of legislators to engage in that. There are a lot of legislators that trade in stocks very actively. There are lots of legislators that have become significantly more wealthy during their time in office and have made extremely good financial decisions around their stock trading. I think there's going to be a lot more resistance to passing anything that seriously limits that. You know, we had the stock act, which has passed in 2012, which was designed to stop this to make clear that Congress is subject to insider trading rules, right, that privileged political information does apply here. I think in reality, again, it's so, so difficult to say that the privileged information that a Congress person comes across, for example, is, you know, informing their trading, right?

25:33It's so varied. There's so much difference. It's not usually piece of information like the price of X stock is going to go up 20% tomorrow. It's vague stuff about the regulation of certain sectors or the deregulation of certain sectors that they might hear ahead of time and be able to trade on. And it's very difficult to draw a complete through line. You have, I think, a lot of public distrust in this area already. You have ETFs, exchange traded funds, that tries to replicate the trades of Republican and Democrat Congress people. I think that stuff is politically poisonous, right? But as long as, as long as those people are allowed to trade, there will be people who want to replicate what they're doing. I follow one account that just basically replicates everything Nancy Pelosi does. It's interesting that Trump, just last month, pushed for a Congressional stock trading ban. He shouted out Nancy Pelosi,

26:33the Democratic Congresswoman. And, like, how are you sort of thinking about the ways Republicans and Trumps have recently thrown their support behind banning lawmakers from trading stocks? And give it everything that we are talking about today. Yeah, I think it's a, it's pretty cynical, right? In the sense that, you know, if it applies to legislators, but not to people in the White House, it's like, you know, that's a pretty easy one to pull. I think there's probably a lot of political thinking here. And you've seen this to some extent from the other side as well, you know, Democrat lawmakers, concerned as they should be about the potential of Congress people, including some of their own Congress people, trading on privileged political information in their own stock portfolios who are now very, very upset about what's happening in the administration. There are differences of scale here. It's important to acknowledge that. But you're going to see a lot of back and forth based on where people think the political damage

27:34is going to land. And I think the administration supporting bans on stock trading among Congress people is a judgment on their part that they think most of the damage is going to fall on Democrat lawmakers. I would interpret that, yeah, pretty cynically. Mike, this is really interesting. Thank you so much. Thank you very much for having me, Milton. All right, that's all for today. I'm Jamie Poisson. Thanks so much for listening. Talk to you tomorrow. For more CBC podcasts, go to cbc.ca slash podcasts.