The New York Times - USA (2020-10-15)

A6 Y THE NEW YORK TIMES, THURSDAY, OCTOBER 15, 2020

Tracking an OutbreakThe Administration

included dire projections from the
Centers for Disease Control and
Prevention, without clear attribu-
tion, that do not appear to have
come from the gathering. The
Times is publishing only the pas-
sages from the memo whose accu-
racy it has independently con-
firmed.
But the memo’s overarching
message — that a devastating vi-
rus outbreak in the United States
was increasingly likely to occur,
and that government officials
were more aware of the threat
than they were letting on publicly
— proved accurate.
To many of the investors who
received or heard about the
memo, it was the first significant
sign of skepticism among Trump
administration officials about
their ability to contain the virus. It
also provided a hint of the fallout
that was to come, said one major
investor who was briefed on it: the
upending of daily life for the entire
country.
“Short everything,” was the re-
action of the investor, using the
Wall Street term for betting on the
idea that the stock prices of com-
panies would soon fall.
That investor, and a second who
was briefed on the Hoover meet-
ings, said that aspects of the read-
out from Washington informed
their trading that week, in one
case adding to existing short posi-
tions in a way that amplified his
profits. Other investors, upon
reading or hearing about the
memo, stocked up on toilet paper
and other household essentials.
The memo was written by
William Callanan, a hedge fund
veteran and member of the Hoo-
ver board. A research institution
at Stanford University that stud-
ies the economy, national security
and other issues, Hoover has been
directed since September by Con-
doleezza Rice, the secretary of
state under President George W.
Bush. Its board includes the me-
dia mogul Rupert Murdoch and
the venture capitalist Mary
Meeker, neither of whom attended
the meetings in February, which
were a series of informal, off-the-
record discussions with Trump
administration officials and Re-
publican lawmakers.
Mr. Callanan described the
Hoover briefings in a lengthy
email he wrote to David Tepper,
the founder of the well-known
hedge fund Appaloosa Manage-
ment, and one of his senior lieu-
tenants about the level of concern
among American officials over
the spread of the virus domesti-
cally. In the email, he also touched

on how ill-prepared health agen-
cies appeared to be to combat a
pandemic.
Inside Appaloosa, the email cir-
culated among employees, who in
turn briefed at least two outside
investors on the more worrisome
parts of Mr. Callanan’s email, ac-
cording to people who received
those briefings.
Those investors in turn passed
the information to their own con-
tacts, ultimately delivering as-
pects of the readout to at least sev-
en investors in at least four
money-management firms
around the country within 24
hours. By late afternoon on Feb.
26, the day the email bounced
from Appaloosa to other trading
firms, U.S. stock markets had fall-
en close to 300 points from their
high the previous week.
Mr. Tepper, who is also the
owner of the N.F.L. team the Car-
olina Panthers, was one of the first
prominent money managers to
signal concern over Covid-19 in
the United States.
During an interview at a Super
Bowl event in Miami on Feb. 1, Mr.
Tepper described the virus as a
possible “game changer,” saying
that investors needed to be “cau-
tious” until more was known
about its reach. Many investors
regarded his remarks, broadcast
on CNBC on Feb. 3, as bearish —
reason to either sell investment
positions or short the overall mar-
ket.
Three weeks later, Mr.
Callanan’s readout seemed to val-
idate Mr. Tepper’s warning.
“I just left D.C. and wanted to re-
ply to your question ASAP,” Mr.
Callanan wrote to Mr. Tepper and
one of his senior lieutenants in an
email on Feb. 25. “If you can keep
the comments below confidential,
I would be grateful.”
From there, Mr. Callanan re-
ported that numerous Trump ad-
ministration officials — Mr. Kud-
low, Secretary of State Mike Pom-
peo and economists at the Council
of Economic Advisers, who had

given the presentation at the

White House on Feb. 24 — ex-

pressed a greater degree of alarm

about the coronavirus than the ad-

ministration was saying publicly.

He also said he had a meeting with

a Democratic senator, although it

is unclear which lawmaker he

met.

At about the same time, Mr.

Callanan also informed at least

one of his clients, a wealthy pri-

vate investor, of the more notable

aspects of the Hoover briefing, in-

cluding that Mr. Kudlow signaled

more fear over the effect of the vi-

rus in the United States to the

Hoover group than he had earlier

on CNBC.

In a statement, Mr. Callanan

said his email to Mr. Tepper con-

tained “personal and professional

views based on extensive re-

search and publicly available in-

formation,” showing his “concern

on the global pandemic that was

emerging.” The email was shared

with others without his knowl-

edge or consent, he said, adding

that a copy of it provided to him by

The Times to answer questions

about it was “materially different”

from its original form. He declined

to explain how.

He noted that the email was a

combination of his observations

from a visit to Washington and his

own analysis, and that the C.D.C.

outbreak projections were drawn

from estimates already circulat-

ing in the public domain. The re-

quest for confidentiality, he added,

was necessary because the

email’s recipients were not bound

to client restrictions intended to

protect his intellectual property.

Mr. Tepper initially denied re-

ceiving Mr. Callanan’s message,

then acknowledged in a later in-

terview that he most likely re-

ceived the email but that it was not

memorable.

“We were in the information

flow on Covid at that point,” Mr.

Tepper said of late February. “Be-

cause we were so public about this

warning, people were calling us at

this time.” He said that Appaloosa

already had its bearish position in

place on Feb. 23, when the Hoover

gathering began.

By then, some top Trump ad-

ministration officials were al-

ready predicting an impending

disaster. On Feb. 23, Peter

Navarro, one of the president’s

economic advisers, distributed a

memorandum predicting that the

virus could affect as many as 100

million Americans and kill up to 2

million of them.

He warned that the country was

unprepared for a pandemic, argu-

ing that an emergency funding re-

quest to Congress for personal

protective equipment and other

measures to mitigate the spread

of the virus were needed.

In a book published last month,

the journalist Bob Woodward re-

vealed that Mr. Trump told him on

Feb. 7 that the novel coronavirus

“goes through the air” and is

“more deadly than even your

strenuous flus” — the opposite of

what the president was saying

publicly.

On Feb. 24, the White House

asked lawmakers for $2.5 billion

in additional funding. That after-

noon, the Hoover group traveled

to the White House grounds for a

panel discussion with members of

the Council of Economic Advisers.

That talk struck some audience

members as worrying for the

economy, according to Mr.

Callanan’s memo and interviews

with three people who were there.

Of particular note, one of the peo-

ple said, was the reluctance of Mr.

Philipson, the council’s acting

chair, to estimate the potential ef-

fect of the virus on American eco-

nomic growth for the year, given

that the situation was still unfold-

ing.

Mr. Philipson confirmed that he

had conveyed a message to that

effect, though he could not recall

specifics. That morning, he had

told the National Association for

Business Economics in a public

gathering that the Trump admin-

istration was taking a “wait-and-

see approach” to the virus and

noted that manufacturing shut-

downs in China were likely to af-

fect the American economy. He

said that the potential economic

effects, however, had “been exag-

gerated.”

At midday on Feb. 25, a top offi-

cial from the C.D.C. gave the first

public glimpse of internal govern-

ment assessments about the po-

tential spread of the virus, and it

was bracing.

“It’s not so much a question of if

this will happen anymore, but

rather more a question of exactly

when this will happen,” Dr. Nancy

Messonnier told reporters.

Shortly after, Mr. Kudlow made

his “airtight” comments on CNBC,

adding that the virus would not be

“an economic tragedy.” Two hours

after that, however, his Hoover

presentation struck Mr. Callanan

as backpedaling.

Mr. Kudlow “revised his state-

ment about the virus being con-

tained,” Mr. Callanan wrote to Mr.

Tepper, saying “we just don’t

know” whether it was at the time

— even as Mr. Kudlow continued

to downplay its consequences to

the private audience. Mr. Kudlow

“did add that he has recom-

mended to the president a period

of ‘tariff tranquillity,’ as markets

don’t need more uncertainty now.”

Mr. Kudlow confirmed making

both assertions at the Hoover

meeting, adding that in his mind,

they were essentially the same as

his remarks on CNBC. “There was

never any intent on my part to

misinform,” he said, noting that

the number of diagnosed Covid-

cases in the United States at the

time was no more than 20, and

that he had expected travel re-

strictions to limit further spread.

The national case count at the

time was 17, according to a Times

database; in addition, more than

three dozen American cruise ship

passengers had confirmed infec-

tions.

The Hoover Institution has

close relations with the Trump ad-

ministration, and the White

House has pulled from its ranks to

fill top positions. Joshua D. Rauh,

one of the White House econo-

mists addressing the Hoover

crowd on Feb. 24, has returned to

the institution, where he worked

previously. Kevin Hassett, who

moderated the panel and has

served as the chairman of the

White House Council of Economic

Advisers, is now a Hoover Institu-

tion fellow.

Dr. Scott W. Atlas, a Hoover fel-

low and Stanford professor known

for his unorthodox positions on

encouraging “herd immunity,”

was named to Mr. Trump’s corona-

virus task force in August.

Mr. Callanan spoke to Dr. Atlas

one-on-one at the Hoover gather-

ing in February, said a person who

attended the meetings. According

to Mr. Callanan’s message to Ap-

paloosa, a Hoover health care fel-

low and former official of Stan-

ford’s medical school informed

him that San Francisco’s decision

to declare a state of emergency

when thousands of people were

self-quarantining in the Bay Area

was a sign that the government

there foresaw a serious crisis. The

person at the meetings identified

Dr. Atlas as Mr. Callanan’s source.

Dr. Atlas did not respond to re-

quests for comment.

The government is investigat-

ing financial transactions made in

early February — before the mar-

ket spiraled — by Senator Richard

Burr, Republican of North Car-

olina, who was forced to step aside

as the chairman of the Senate In-

telligence Committee in May over

the inquiry.

Mr. Burr sold stock after he re-

ceived government briefings

about the looming health and eco-

nomic crisis from the pandemic.

The senator has denied wrongdo-

ing.

But legal experts say the brief-

ings by administration officials

are a very different situation, and

it is not apparent that any of the

communications about the Hoo-

ver briefings violated securities

laws. The Justice Department and

the Securities and Exchange

Commission would have several

hurdles to clear before establish-

ing that Appaloosa or other funds

that received insights from Mr.

Callanan, either directly or

through intermediaries, acted im-

properly.

WALL STREET

Kitty Bennett contributed re-
search.

Trump’s Aides Tipped Donors to Economic Impact

From Page A

ANNA MONEYMAKER/THE NEW YORK TIMES

TOMAS J. PHILIPSONA sen-

ior economic adviser to the

president, Mr. Philipson

told a conservative think

tank on Feb. 24 that he

could not yet estimate the

virus’s financial impact.

MELISSA LYTTLE/BLOOMBERG

DAVID TEPPERThe founder

of Appaloosa Manage-

ment was one of the first

prominent money manag-

ers to signal concern over

the coronavirus in the

United States.

CHUCK BURTON/ASSOCIATED PRESS

WHAT HE SAID PUBLICLYOn Feb. 25, Larry Kudlow, director of

the National Economic Council, told CNBC the virus was con-

tained in the United States, saying “it’s pretty close to airtight.”

WHAT HE SAID PRIVATELYHours later, Mr. Kudlow delivered a

more ambiguous private message, asserting that the virus was

“contained in the U.S., to date, but now we just don’t know.”

DR. SCOTT W. ATLASAn

advocate of the “herd

immunity” theory in fight-

ing the pandemic, Dr.

Atlas was named to Presi-

dent Trump’s coronavirus

task force in August.

ANNA MONEYMAKER FOR THE NEW YORK TIMES

MARKETSThe New York Stock Exchange on Feb. 25. By the next

day, stocks had fallen nearly 300 points from the previous week.

SCOTT HEINS/GETTY IMAGES

For traders, the first

hint of doubt about

containing the virus.

WASHINGTON — Barron

Trump, the president’s youngest

son, tested positive for the corona-

virus after his parents did earlier

this month, Melania Trump, the

first lady, revealed on Wednesday,

adding that he has since tested

negative.

President Trump announced

early on Oct. 2 that he and his wife

had tested positive, and the White

House had said Barron, 14, had

tested negative. But Mrs. Trump

said in a statement Wednesday

that “my fear came true when he

was tested again and it came up

positive.”

“Luckily, he is a strong teenager

and exhibited no symptoms,” she

said. Mr. Trump, speaking briefly

to reporters as he left the White

House for a rally in Des Moines,

said Barron was doing “fine.”

Mrs. Trump did not say when

Barron tested positive, and White

House officials did not say why

they did not reveal it at the time.

But the president and first lady

have generally tried to shield Bar-

ron from news media coverage.

A White House official said Bar-

ron had not been in contact with

anyone outside his family and the

residence staff since his positive

test. St. Andrew’s Episcopal, the

school in Maryland he attends,

has been all virtual.

Several studies have suggested

that children under 10 are about

half as likely as adults to be in-

fected. But teenagers may be just

as likely as adults to become in-

fected and to transmit the virus to

others.

Public health experts have criti-

cized the example the White

House has set in taking few pre-

cautions against the spread of the

coronavirus and the number of

staff members who have tested

positive as a result.

Mr. Trump has frequently re-

fused to wear a mask and mocked

his Democratic opponent, Joseph

R. Biden Jr., when he did, and

many staff members, including

Mark Meadows, the chief of staff,

have followed his example.

Returning last week from four

days and three nights at Walter

Reed National Military Medical

Center, where he received treat-

ment for the virus, the president

made a show of removing his

mask before entering the White

House.

Mr. Trump also hosted a large

gathering in the Rose Garden for

his Supreme Court nominee,

Judge Amy Coney Barrett, where

at least eight people, including the

president, may have become in-

fected. The White House has cho-

sen not to trace the contacts of

guests and staff members from

that event.

Mrs. Trump has generally tak-

en a more cautious approach than

her husband to the virus and has

not minimized its effects the way

her husband has.

Mr. Trump has downplayed his

symptoms, including a shortness

of breath, and focused only on try-

ing to demonstrate that he has re-

covered. Mrs. Trump, on the other

hand, described the “roller coast-

er” symptoms she experienced in

a statement on Wednesday titled

“My Personal Experience With

Covid-19,” her first extensive up-

date on her health since the an-

nouncement that she had tested

positive.

“I experienced body aches, a

cough and headaches, and felt ex-

tremely tired most of the time,”

she said.

Mrs. Trump, who had not been

seen or heard from since the pos-

itive test announcement, said that

she had spent her recovery “re-

flecting on my family,” and that

she hoped “to resume my duties

as soon as I can.”

She added, “I also thought

about the hundreds of thousands

of people across our country who

have been impacted by this illness

that infects people with no dis-

crimination.”

And unlike Mr. Trump, who has

been promoting an experimental

drug as a “cure” for Covid-19, she

said she “chose to go a more natu-

ral route in terms of medicine, opt-

ing more for vitamins and healthy

food.”

There are no fully effective, fed-

erally approved treatments for

Covid-19. Some have promoted vi-

tamins and supplements as im-

munity-bolstering additions to the

diet, but there is not yet evidence

that this can specifically coronavi-

rus patients.

Mrs. Trump encouraged Ameri-

cans to try to stay healthy, noting

that “a balanced diet, fresh air, and

vitamins really are vital to keep

our bodies healthy.”

THE WHITE HOUSE

First Lady

Confirms

Teenage Son

Was Infected

By ANNIE KARNI

Apoorva Mandavilli contributed

reporting.