Senators sold stock in January after briefings on coronavirus

Four U.S. Senators were found to have sold some of their stocks after receiving a briefing on the coronavirus in January. Yahoo Finance’s Jess Smith joins Alexis Christoforous, Brian Sozzi, Heidi Chung, Sibile Marcellus and David Nelson, Belpointe Asset Management Chief Strategist, to discuss the details.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome back to "Yahoo Finance Live" as we all come to you from our homes during this pandemic. We have got a rally, a modest rally at that, happening on Wall Street this Friday, and we're going to bring you a disturbing story right now. Some US Senators, a couple of US senators, who sold their stock, about $1.7 million worth of stock, after being briefed about the coronavirus at the very same time they were telling the public that this country was prepared for such a situation. We want to get the lowdown from Jessica Smith. Jess--

JESS SMITH: Hey there. Yeah. Two senators are really in the hot seat over this, saying that they dumped millions worth of stock as the coronavirus situation was just starting to become known. They were getting private briefings, as senators, about the virus as they made these transactions. The first is Senator Richard Burr. He is the chairman of the Intel Committee, and ProPublica reports that he-- he sold between $628,000 and $1.7 million worth of his holdings in 33 separate transactions on February 13, so before the market started tanking. As chair of the Intel Committee, he was getting daily briefings on the situation with the virus.

According to Reuters, ProPublica looked back at his other reports-- because senators do have to report their financial disclosures pretty regularly-- and they found his past reports were a mix of sales and purchases, but this one was only sales. And some of the stocks that he sold were stocks that could be affected by the virus like Wyndham, an extended stay. Burr did put out a statement through his spokesperson to ProPublica, and it did not really offer much clarity. He said that they filed a financial disclosure form, but as the situation continues to evolve daily, he has been deeply concerned by the steep and sudden toll of this pandemic is taking on our economy. So still a lot of questions even after that statement from his spokesperson.

The second senator who is being talked about here is Kelly Loeffler, the newest senator, she sold seven figures worth of stocks in the days and weeks after that private briefing. She made her first sale on the very day that there was an all senators private briefing on the coronavirus. All but two of the transactions were sales, but one of the purchases that she made was a tech company that offered teleworking software, so one that could have done well during this coronavirus outbreak, as people are working from home.

She called this a ridiculous and baseless attack on Twitter. She says that third party advisors are making her investment decisions without her involvement, without her husband's involvement. She said that she didn't know about the transactions until weeks later. But now, we are starting to see calls for these senators to resign. I did reach out to the Senate-- Senate's Ethics Committee to see if they had anything to say about this. We have not heard back yet, but I'll let you know if we do hear anything from them.

ALEXIS CHRISTOFOROUS: David, I want you to jump in here-- David Nelson, of Belpointe Management-- because-- what's your take on this, given what you do for a living, and also do you buy Senator Loeffler's excuse saying that, you know, we didn't even know that this sale was going on?

DAVID NELSON: It's conceivable, but as far as for Senator Burr. I don't know about him. Some of these people are going to need Secret Service protection. The Americans are incensed by this. I couldn't believe the outrage I saw on, on social-- social media, and rightly so. This is insider trading for sure. The dates are, in particular, February 13th was a few days before the top of the market. And it's insider trading no matter, no matter how you look at it. I would think that there will probably be a couple of resignations over this. There'll certainly be calls for impeachment, but as an investor, I was outraged.

ALEXIS CHRISTOFOROUS: Sibile, what do you have to add to the conversation?

SIBILE MARCELLUS: Well, yeah. I'm just shaking my head. I mean, seeing these two senators-- actually four in total-- actually try to make millions of dollars. Meanwhile, President Trump was downplaying the coronavirus outbreak, telling Americans that it's similar to the flu, nothing to worry about. And we're seeing clearly, that's not the case. Many Americans' lives have been turned upside down because the coronavirus. In California, 40 million people are supposed to stay at home. I mean, that's what they're required to do. Maybe if we had taken measures back when these senators had this sensitive information, maybe we wouldn't be where we are right now. Maybe there would be less coronavirus cases and deaths in the US.

ALEXIS CHRISTOFOROUS: Jessica, I believe you have a new statement from Senator Burr.

JESS SMITH: Yeah. Just in the past couple minutes. He released a statement on Twitter saying that he relied solely on public news reports to guide his decision regarding the sale of stocks--

DAVID NELSON: Nonsense.

JESS SMITH: on February 13. He also went on to say that he had asked the chairman of the Senate Ethics Committee to do a complete review of the matter with full transparency. So that is a more detailed statement that we're getting from Burr's office just in the past couple of minutes.

ALEXIS CHRISTOFOROUS: David, did I hear you just say nonsense?

DAVID NELSON: Yeah. It is nonsense. He sold after a classified briefing that none of us had access to. It was either the greatest market timing event of all time or about six days before the absolute top of the market. I'm not buying it.

ALEXIS CHRISTOFOROUS: Brian, do you have something to add?

BRIAN SOZZI: Yeah. No, I'm just echoing what they were saying. This is complete BS, and they should be held accountable. And David, I'm curious your thoughts on-- do you think lawmakers should be allowed to even stock to begin with?

DAVID NELSON: Probably not. You know, I know for a lot of firms are moving to even portfolio managers not being able to trade, trade individual stocks because of the possibility of front running. It's actually mandated at some of our largest mutual fund companies right now. It's a very, very heavily regulated industry. If I wanted to buy stock for myself, I've got to put in forms, I've got to inform people, I've got to make sure I'm not front running. This is front running, no matter how you look at it.

ALEXIS CHRISTOFOROUS: Yeah. We need a more level playing field, I think is what you're saying here, David. I want to switch to the markets because as we're all talking about this, it looks like stocks have come back. All three major indexes are up better than 1%, and in particular, David we've got the NASDAQ stronger for the second straight day. Up now better than 2%, up 163 points. Why all the buying in tech stocks right now? Is it just because they got beaten down so much people cannot, cannot pass them up?

DAVID NELSON: I think there's a fundamental reason for it. I think if you look at most of these companies, the level of cash that they have, most of these companies are net cash. Even if they have debt, they have more cash than they have-- they have debt. A lot of the rest of the financial community, a lot of other sectors, have a tremendous amount of debt. Even in consumer staples, you look at some of these companies, they're in some cases, two times levered. A company like Conagra, fairly safe food company, has been hit pretty hard, but a tremendous amount of debt. And if things got worse, it's going to be companies like a Conagra that would struggle, whereas an Apple, Microsoft, and some of these other companies, they've got plenty of cash to weather almost any storm.

ALEXIS CHRISTOFOROUS: I have to mention this. Zoom, up 100% right now, Brian Sozzi. And you've got your eye on CrowdStrike as well?

BRIAN SOZZI: Yeah. Alexis, we just talked about Zoom about 10 minutes ago. It was up 51%, now surging 100%. Again, another work from home stock working well. Also, CrowdStrike is up about 18%, after earnings last night. Very strong quarter from CrowdStrike. Despite everything that's going on in the world, no impact to their recurring revenue stream because of people working from home.

ALEXIS CHRISTOFOROUS: All right.

BRIAN SOZZI: That's still working well.

ALEXIS CHRISTOFOROUS: All right. Thanks for the update, Brian.