On "Forbes Newsroom," Spencer Hakimian, founder and chief investment officer of hedge fund Tolou Capital Management, spoke about the likelihood of a recession in the US.
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00:00Some of that other evidence you were talking earlier today online about jobless claims, they came in a little higher than expected. And then you also reposted a story noting that 24% of Americans are scrapping plans to make a major purchase like a home or a car due to tariffs. So what does this all lead to, potentially?
00:23At the end of the day, the economy is interconnected, right? I spend, which is somebody else's income, which lets them hire employees, which lets those employees then spend back in my business, which becomes my income, which lets me hire employees, which lets the whole cycle going.
00:46What people I think should really understand, because it's been a really long time since we've had a proper quote unquote recession, is that these things become self-fulfilling and it's a snowball effect, right?
01:01It's the person that forgoes buying a car because it's 20% higher. Well, then, you know, the car dealership starts laying off people. And then the people that are at the car dealership that, you know, every Sunday, like they like to go with their family on a family dinner.
01:18They stop going to that dinner now because their income fell in half because one person in the family got laid off. And then that restaurant owner, all of a sudden, his or her sales fell. So he lays off a chef. And then because he lays off the chef, the chef's landlord doesn't get paid rent.
01:35So these things tend to compound and they tend to compound very quickly. So what I am really looking for right now are the forward looking data points or the more localized immediate data points that are showing some things.
01:51And unfortunately, I'm seeing it a little bit in jobless claims. It's it's going up. It's evidently going up in this continuing claims is also going up. And then in things like construction spending, right, that fell negative 0.5% month over month on an annualized basis, construction spending is down 6%. Why do you think that is? Well, 25% of Americans are going to delay buying a home, who's going to build a house and get stuck with inventory?
02:20So the signs are there, if you ask me.
02:25So what is the likelihood the U.S. tips into a recession this year, if you were to put a percentage chance on it?
02:31So, again, again, as I've been saying on the shows a few times now, this is really still all contingent on whether we course correct, right?
02:42You know, unlike, let's say, the COVID pandemic, where we needed a vaccine to be produced, or in 2008, where it was, it took years to rebuild bank balance sheets and household balance sheets that are lost in homes.
02:56This is a unique crisis in the sense that one person at any point in time can stop it. It's it could be stopped right now. But with that being said, when we spoke for the first time a month ago, none of the effects of these tariffs were in place.
03:14So at that point, the likelihood of recession was much lower. Now that it's been 30 days since Liberation Day or 29 days, right, we have cargo that has simply not come from overseas that had to come here.
03:29We already have jobless claims going up. We already have construction spending going up. So some damage is inevitable. If you were to ask me, I frankly do not see how we avoid a recession at this point.
03:42At this point, what becomes the more interesting question, if you were to ask me, is how severe does this have to get? And again, it's the same idea. One person at any point in time can choose to stop this.
03:56And we will halt the severity here. Right. There's going to be problems. Spring looks like it's going to be very tough with inventory. Memorial Day doesn't look so good.
04:07Back to school doesn't look like it's going to be so good for all the retailers. But maybe at least we can save Christmas at this point. Right. So at this point, we're just talking about how severe.
04:16I don't think it's a question anymore of will the economy slow down? I don't think anyone in good faith can argue it's not.
04:22The data is already showing it. So I don't see how we cannot. But we can still mitigate the severity of it, which I hope we do. But I'm frankly losing confidence by the day.