Back in the dinosaur days of the internet, I was a financial reporter based in San Francisco. I had a loose assignment to cover media companies, which meant everything from the legacy broadcast TV companies to the fledgling Netflix and other Silicon Valley entertainment startups. And CNBC was on at my desk the entire day.
I learned a lot watching the network, which serves as the essential house organ for Wall Street. CNBC's coverage is oriented towards investors, although its definition of investors is more "large firms that handle consumer accounts" than the actual individual consumer. Because the network is so influential in the investing world, its best-known anchors and analysts have developed a bit of a Stockholm Syndrome relationship with CEOs and high-profile investment bankers.
Both sides need each other and it doesn't take long to realize that you can learn a lot from their on-air dance. The trick is to pay attention to what they don't say and the nuances they use when describing the state of the markets. You will rarely hear direct criticism of anyone. It's all couched in a carefully measured passive-aggressive approach that can be difficult to follow without a giant whiteboard and a handful of colored markers.
It's been a number of years since I watched CNBC throughout the day. But I decided to wade back in over the past week following the exciting launch of the tariff-based "Liberation Day." Here are five things I learned as a result of the experience:
1) No one wants to mention Donald Trump by name
In the months leading up to November's election, Donald Trump was a frequent topic of discussion and several of the network's longtime anchors such as longtime Squawk Box co-host Joe Kernen were positively giddy about the prospects of a Trump presidency. They lauded his business acumen and repeated their belief he would be good for Wall Street and was certain to cut taxes.
Not surprisingly, their enthusiasm for the presidency of Donald Trump took a beating over the past week and it was fascinating to see Kernen go through the various emotional steps necessary as he processed the ongoing chaos. But even as various CNBC anchors and guests talked about the impact of the tariffs, I realized that no one actually mentioned Donald Trump's name. It was like watching a financial news version of "Beetlejuice." It was "this President," "the administration," "the White House." At times, it was almost hilarious to watch.
2) Everyone is watching the bond market
Earlier this week, an analyst noted that the stock market is like the kid's table and the bond market is the table for adults. And what this means is that while the stock market is important, what happens in the bond market will have the biggest impact on the American economy. In fact, while the Trump White House seemed willing to watch the stock market crater this week, the president backed off the high across-the-board tariffs after the bond market began to collapse.
Here's what you need to know about this (and yes, this is a VERY simplistic explanation). The yield rate on government bonds has been trending up for a week. That is essentially the interest rate the government guarantees to pay over the length of the bond. A higher rate means the government had to raise the rate it would pay before it could find enough buyers for the bonds. Which scares Wall Street, because that means that there are fewer people interested in the bonds. And given that about half of the current federal debt comes from interest payments on bonds, the higher the bond yield, the bigger the overall government debt will be.
3) Which brings us to the bond market nuclear option
The two largest holders of U.S. treasury notes are Japan ($1.1 trillion) and China ($890 billion). This week's pause on the largest worldwide tariffs reportedly happened after Japanese government officials quietly informed the Trump Administration it would not buy any more bonds moving forward and then threatened to begin selling some of its current bond holdings. That would spark a collapse of the bond markets on a global scale.
The big fear from many money managers and bond market experts is that if China feels enough pressure, it could begin divesting itself of U.S. Treasury bonds and send the American economy into a meltdown. And there is nothing the Administration could do to stop them.
4) There Are A Lot Of Suspicions About Insider Trading This Week Ahead Of The Tariff Announcement
One of the third rail topics on CNBC is the idea that some group of connected politicians or businessmen with advanced knowledge of political decisions that affect the stock market might be trading on inside information. That possibility speaks to the transparency of the stock market and could damage its reputation for decades.
But not long after President Trump made the announcement on Wednesday that he was slashing the global tariff to 10% (with a couple of exceptions), the stock market exploded and the S&P 500 had its biggest gain since 2008. And it wasn't long before analysts noticed that someone (or some people) seemed to have had advance notice of the decision.
Right before the S&P 500 suddenly spiked, someone bought a large amount of a very specific type of call options. These zero-day options are a bet that the S&P 500 will end the day at a much higher price. They're called zero-day options because they expire at the end of the day. Those options are generally pretty cheap, because they are worthless after that day's market close. But for some reason, an investor seems to have spent $100,000 on the options just moments before the decision was announced. At the end of trading, they walked away with an estimated $21 million.
That move - and the rumors that there were other similar moves that had yet to be uncovered - was indirectly referenced on CNBC all week. There seemed to be a feeling that insider trading likely took place on some level. But I didn't hear anyone offer up the thought that it would be investigated.
5) There are a lot of people on Wall Street who continue to be delusional when it comes to Donald Trump
I heard a stat referenced today on CNBC that just floored me. According to a market analyst, a survey of top hedge fund managers and major market investors found that 80% of them weren't worried about the economy in the medium or long term because they believed the Trump tariffs would be gone within 90 days, which would open up chances for another large tax cut.
Which certainly is *a* possibility. But this is also coming from the same people who didn't believe Donald Trump would impose massive tariffs in the first place.
The scary thing about this is that these are the people making massive bets on where the economy is headed. And if they have some economic normalcy bias that prevents them from accepting the likely chaotic way this is going to play out, then we're all screwed.
