Something weird happened in the markets earlier this week. About 60 seconds before the November Consumer Price Index data was released, there was a sudden surge in trading of stock futures and Treasury futures–both of which inevitably would be affected by the report that the CPI for November was a bit lower than what economists had forecast. You can see the spike in trading in the chart above, published by Bloomberg in its story about the trading that occurred only moments before the release of the report.
It’s good news, of course, that the November CPI report indicates that inflation appears to be cooling, and we should all hope that trend continues. But the jump in trading activity in the minute before the CPI report was released is obviously suspicious, and suggests that someone who received the report prior to the release tried to profit from the good news. (In fact, the activity sounds vaguely like the plot of the movie Trading Places, where the Duke brothers tried to make a killing from getting an early copy of a government report, only to be foiled by the Dan Ackroyd and Eddie Murphy characters. In this case, however, Dan and Eddie weren’t around, and neither was the guy in the gorilla suit.)
The Biden Administration denied that the White House leaked the report, and downplayed the trading data as “minor market movements”–when, as the Bloomberg article linked above points out, it clearly was nothing of the sort. The Bloomberg article notes: “over a 60-second span before the data went out, over 13,000 March 10-year futures traded hands (during a period when activity is usually nonexistent) as the contract was bid up.” And even if we accept that the White House didn’t leak the report, it’s obvious that something happened that requires an investigation, to see who was making those trades, and why.
Under these circumstances, in fact, I would argue that an investigation is mandatory. Trust in the markets is a delicate thing, and an insider trading scandal coming on top of the stories about the inner workings of now-collapsed FTX doesn’t exactly instill confidence in the integrity of the markets. If there is no investigation or prosecution, it will go down as just another example of the fundamental difference between insiders who get to profit from a sure thing and the average Joes who must accept the ups and downs in the accounts that hold their hard-earned retirement savings.