Tananbaum on Tariffs, Risks of Recession

Do you expect high tariffs might produce a bad economy that might yield at a very good time for people to buy credit investments at distressed prices? It's developing. So, you will get that bad economy. Right now the market, and we've gotten some news about a temporary reprieve on certain other countries that were originally had higher tariffs, and we'll see when we get more detail what that means. Take something like a leisure. You take something like a gaming. You take some theme parks, you look at oil, which has dropped to almost $15 in the last few weeks. The energy companies, the oil services, they're anticipating a lot. Then there are companies like in telecom, where for the most part, they shouldn't be materially different, with or without tariffs, yet because for liquidity reasons, those bonds are down a lot, and their equity prices are down a lot. And that provides an opportunity. As you look at the global economy today, what do you think the biggest risks are? So, when I think of in the U.S., the biggest risk I see are two. First is that the growth in nominal income is actually less than the growth in our deficit, which means we're going to have a debt problem in the U.S. If we can't grow our way out of our debt, that's going to be a problem. The second is inequality. If we just extrapolate the inequality that's occurred in the U.S., and it continues, and particularly if the bottom half doesn't do materially better, that's going to be an issue. So those are the two areas I worry about. All right, so what about the general economy? Today, some people are saying, because of the tariff threats, that we might be heading into the R word, a recession. You think we might be heading into a recession? It's certainly possible. This has only been in effect for one week. If you look at Trump 1's legacy, he was good economically, he did a good job of creating an environment where income inequality got better from the bottom going higher, and he was somewhat of a crowd pleaser. So if you take the tariff at its face value, it's going to be very problematic. It's gotten off to a tough start, and confidence has been weakened.