Wake Up, The US Recession is Already Here

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[00:00:04] Doug McIntyre: So Lee, I’m looking at GDP. they expected, the consensus was up 0.3. You got down 0.3. as the normal definition of a recession is to down GDP quarters. I think there’s a good chance that we’re already in the midst of a downturn. Oh, absolutely. Quarter. So that means you’ve got two quarters in a row and classic definition of recession.

[00:00:34] Doug McIntyre: You’re going to be an announced as a recession. Now, I’ll ask you this, how deep,

[00:00:40] Lee Jackson: well, again, that, that’s the million dollar question, and I think you’re right. Remember we had a recession in 2022, but somehow it wasn’t called one, which I thought was kind of funny back then, but maybe it just was the nature of the, who was in power and all that stuff.

[00:00:59] Lee Jackson: Yeah, [00:01:00] I, I think that this quarter will be negative as well, and it, it’ll be a mild recession, if it’s down 0.03, down 0.04, it’ll be a mild recession, which I think it could go by very fast because again, the tariffs are the big wild card here. And it looks as though, even, even they said today that China’s willing to talk and get this sorted out because China can’t have the entire continent over there shutting down business because they don’t have any orders.

[00:01:34] Doug McIntyre: I agree with you about, China and I think that Japan and Europe will, I think, I don’t think those are long, negotiations. No, I don’t think we’re waiting two or three months for those things to happen. But you’re still looking at China and the US and asking who’s gonna blink first because.

[00:01:58] Doug McIntyre: In some ways, the [00:02:00] first blinker has set a precedent for them being the weaker of the two parties economically for as much as a decade. Whereas if, you’re the first guy who caves, alright, you, you’ve, you’ve basically admitted that it’s more important to your economy than it is to the other economy.

[00:02:18] Doug McIntyre: You’re right. And, and to me that means that the boot is on the neck. I think that the Trump people have convinced themselves across a lot of subjects, not just this, that the American public will wait things out if they think that they are important long term. I don’t know whether that’s true. I think that that’s the impression the Trump administration has about where we stand now.

[00:02:44] Doug McIntyre: So I’m gonna say to you, I think this recession is deeper than you do. I think it depends very much on what, I think it has a lot to do with what Powell does. I think it has a lot to do with Powell’s reaction [00:03:00] if there are high tariffs because as the Fed still has a very big steering wheel depending on, what they want to do.

[00:03:11] Doug McIntyre: and then the other thing is, it’s just how worried do CEOs get? I mean, if you look at the consumer content levels, both from the conference board and the University of Michigan, they’re very, very weak. Particularly the numbers that show people looking forward, either six to 12 months. consumer spending is still two thirds of GDP.

[00:03:33] Doug McIntyre: Yes, it always will be. You have to ask yourself this question, how long are people gonna be worried? Because how long people are worried is what’s gonna drive GDP.

[00:03:45] Lee Jackson: Yeah. And one thing I saw an interesting thing recently where a, a Chinese expert was discussing a. XII ping’s. He has to be very careful about what he says in terms of throwing out [00:04:00] positive commentary or commentary where they may be willing to do stuff.

[00:04:04] Lee Jackson: Because apparently, in, in the Chinese Communist party that goes over very negative, they wanna see zero, zero weakness, and they want to be from a position of power. So while he may be somewhat more belligerent on camera, I would suspect that, they gotta get something done because it hurts them a lot worse than it hurts us.

[00:04:24] Doug McIntyre: I just saw that they’re trying to make a deal on Fentanyl. I don’t know exactly what you do if you’re China to say, well, we’re not gonna, you’re not gonna get as much. Fentanyl. It seems to me that that’s probably a smuggled product, but maybe I, maybe I’m missing something about that.

[00:04:42] Lee Jackson: Well, the, the Chinese ship out the base chemicals that go into a Fentanyl compound and they send that to Mexico and then some drug cartel symbols, the finished product I guess there in South America or wherever.

[00:04:56] Lee Jackson: But yeah, I mean, I think that would be a good start. But [00:05:00] a, again, I don’t think she can show any weakness. So all the discussion has to be really back channel. I, I would suspect,

[00:05:09] Doug McIntyre: I think it’s that. The other thing is what does China get, let’s say it’s sort of an even, trade, right? Apple’s (NASDAQ: AAPL) already moved out.

[00:05:21] Doug McIntyre: I mean, they basically said yesterday on their conference call that alm no matter what happens, we’re in Vietnam and India.

[00:05:28] Lee Jackson: Yep.

[00:05:29] Doug McIntyre: That’s a big piece of business for. China. That’s a huge

[00:05:32] Lee Jackson: piece of business. Yeah.

[00:05:33] Doug McIntyre: It isn’t just that, it’s a, it’s a signature piece of business. Okay. It’s like Apple builds their iPhones and everything else in China.

[00:05:42] Doug McIntyre: The minute that India can say Apple builds its iPhones and other consumer electronics in India, if I’m the guys running India, I want that almost under, any circumstance. Absolutely.

[00:05:55] Lee Jackson: Absolutely. And plus the, again, and it’s not like a automobile [00:06:00] plant, where, where you need to build a huge, massive plant.

[00:06:04] Lee Jackson: a lot of these phones and stuff are assembled either not by hand, but very limited. It’s not like it’s put together by a factory line.

[00:06:13] Doug McIntyre: No, you’ve got that in, I think another wild card here is, is that the Chinese are going to want us to drop the tariffs on Chinese EVs. Not to zero, but they’re gonna want to have ’em come down.

[00:06:28] Doug McIntyre: And as the guy who runs Ford (NYSE: F) said, Jim Farley, that is an existential problem for them if it’s if the government makes, if the, if part of the quid pro quo is a drop in that tariff, the auto industry in the United States has changed permanently. Yeah. UAW is one of the largest unions in the United States.

[00:06:55] Doug McIntyre: This circles back to our earlier conversation about [00:07:00] unemployment. it’s an unintended, consequence, but it’s, it’s a consequence nevertheless,

[00:07:05] Lee Jackson: Absolutely.

[00:07:07] Doug McIntyre: I think that the nature of the trade-offs is going to affect employment in the United States,

[00:07:14] Lee Jackson: Yeah, I think you’re right.

[00:07:15] Lee Jackson: And everything they’re doing to reshore industry and manufacturing. It’s something we should have done, years ago, and like we’ve discussed in the not too recent past, Ross Perot said all of this would come to fruition, and he said it over 30 years ago, and he was a hundred percent correct.

[00:07:32] Lee Jackson: So that will take some time, but ultimately that will be a positive. There’s no question about it.

[00:07:39] Doug McIntyre: Well, look, somebody’s talking about the trade deficit with Vietnam. You want a trade deficit with Vietnam. Sure. They’re not gonna buy our stuff. Okay? They’re not gonna buy Cadillacs. They’re not gonna buy the stuff that we have here.

[00:07:53] Doug McIntyre: Rolexes, we want them to make our Nikes. There’s a, yeah. [00:08:00] If you say this whole thing about the trade deficit is. It’s sort of a, well, who’s the boogeyman? And the fact of the matter is, is that Japan? Yes. Parts of Europe. Yes, China, absolutely. But you have to say to yourself, you can’t treat all 198 countries in the world identically.

[00:08:21] Doug McIntyre: You can’t. No, no. Everybody pays 125% tariff. That’s another thing that worries me quite a bit about GDP is, is that you end up having a tax on some important goods and you don’t end up having tax on

[00:08:35] Lee Jackson: others. Yeah. And they’ve made some, I mean, China’s made some concessions on like some semiconductor parts.

[00:08:42] Lee Jackson: They’ve made some concessions on, other items. But, it’ll be interesting to see how this plays out, but you gotta believe that that throwing huge numbers up is probably the best way to get dialogue really going fast. Huge tariff numbers.

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