Hidden Forces: "Are We About to Enter the First White-Collar Recession?"

Guest: James van Geelen (Citrini Research Founder)
Host: Demetri Kofinas
Date: April 7, 2025

Overview

This episode of Hidden Forces explores the possibility of a forthcoming “white-collar recession” and what it means for investors, workers, and the economy. Host Demetri Kofinas welcomes James van Geelen, founder of Citrini Research, for an in-depth discussion touching on Trump’s sweeping new tariffs, the role of narrative in financial markets, the reflexive relationship between wealth, equity markets, and consumer spending, and the disruptive impact of AI on the workforce. The conversation blends timely analysis of policy moves with broader trends—offering listeners both big-picture context and actionable insights.

James van Geelen’s Background & Citrini Research (04:00–09:20)

• James van Geelen shares his unconventional path into finance: starting in medicine, working in emergency services, dropping out, selling a business, and then diving into trading during 2017–2018.
  • “I had the worst thing that can possibly happen to you as a trader happen, which is a string of early wins.” (06:10, James)
• He embraced a “beginner’s mentality,” leading to a focus on macroeconomic trends and behavioral finance.
• Citrini Research is positioned as a top-tier provider of thematic equity research, especially focused on identifying and analyzing market-driving narratives.
  • “The mission is to make the number go up…by being aware of these narratives that drive markets.” (09:36, James)
• Their approach is to concentrate on stories and themes, not just spreadsheets, because “markets are an expression of people making decisions.”

The Power of Narrative & Thematic Investing (09:20–11:25)

• Narratives drive markets as never before due to media and social connectivity; not only in bull markets, but “in a bear market, narratives get even more important.” (09:36, James)
• Historically, a handful of trend-setting companies have generated a huge share of all market returns, reinforcing the importance of narrative-driven thematic investing.

Trump’s Tariffs and a New Global Trade Paradigm (11:25–25:33)

What Happened? (12:26)

• On April 3, Trump announced:
  • A 10% universal tariff on all imports from all countries, effective April 5.
  • Additional reciprocal tariffs (matching tariffs imposed by other countries).
  • Tariffs calculated based on the size of relative trade deficits, suggesting very high rates (e.g., effective 56% tariff on Chinese goods).
• Initial market reaction was confusion, as details suggested a much deeper restructuring than expected.
  • “Probably the most significant disruption or restructuring of global trade since Smoot-Hawley in the 1930s.” (14:39, James)

Consequences and Scenarios (16:15)

• Tariffs are inflationary: not only do direct prices rise, but domestic producers are incentivized to raise prices since their competition is hampered.
• Compound effects: Tariffs drive up input costs and create complex supply chain disruptions, which can lead to further price hikes and, potentially, supply shortages.
  • “Supply chains are complex…tariffs cascade through supply chains in nonlinear ways and as they go they create multiplier effects.” (17:38, James)

Economic Possibilities:

1. “Vanilla” slow-down: Standard recession with falling rates, negative growth, disinflation/deflation.
2. Stagflation: Negative growth with rising prices, reminiscent of the 1970s, but today’s context is crucially different—lower energy intensity, less organized labor, less wage-push inflation power.
   • “Is this like the 1970s? Today’s workforce has a lot less ability to demand compensating wage increases…either you have a normal recession, you have stagflation, or, like you said, maybe it just works.” (23:25, James)
3. Policy “Success”: Trump’s tariffs rebalance trade and help domestic industry—but uncertainty and the need for businesses to adapt means risk is high.

The Role of Uncertainty (24:07–25:26)

• Business owners face “uncertainty shock,” requiring them to become global trade policy experts; prolonged uncertainty alone can powerfully slow growth.
  • “The economy is not like a speedboat… uncertainty… is much more difficult to model. And uncertainty does tend to drive slowdowns in the economy.” (24:57, James)

US Leadership, Global Capital Confidence, and Macroeconomic Chains (25:33–32:51)

• Discussion shifts to the risk of loss of confidence in US capital markets and the dollar’s role as a reserve currency.
• Trump uses trade deficits as a policy focus, not recognizing systemic reasons why the US “must” run deficits (Triffin Dilemma).
• Application of Marco Papic’s “constraints-based” approach: Trump currently faces few constraints, so is likely to push dramatic policies quickly.
  • “He has a lot of political capital and he has a lot of things that he wants to get done.” (31:36, James)
• Investors must listen carefully to administration rhetoric: when policy becomes key driver (as it did with the Fed in 2022), market reactions are highly sensitive.

Industrial Policy and the Future of Production (32:51–36:39)

• Tariffs alone are “blunt”; the effect changes drastically when combined with targeted industrial policy (e.g., CHIPS Act, IRA).
• Trump’s focus so far: Foreign and trade policy over concrete industrial plans, but “populist” elements suggest support could be more focused on the MAGA base (e.g., no taxes on tips, potential targeted tax shifts).
• The US may cut domestic government spending even as it pushes other states (e.g., Europe) for more defense outlays.
  • Investment strategies can be built around these themes, as Citrini did in 2024.

Unique Character of the Coming (White-Collar) Recession (36:39–42:03)

• Drawing from Citrini’s piece “The Haves and Have Nots,” James and Demetri discuss how recession dynamics are not monolithic; each downturn’s “primary drivers” matter for market (in this case, equity) behavior.
• “All happy families are alike; each unhappy family is unhappy in its own way.” (36:21, Demetri quoting Tolstoy)

Key Thesis:

• Wealth effects and equity market concentration: The top 10% now account for more than half of all spending, with much of their wealth tied up in equities.
• “So much wealth is concentrated in the stock market… not just because of price increases, but because of allocation.” (39:17, James)
• If market declines hit, spending can fall sharply, creating a reflexive “ouroboros” effect (the market/economy eating its own tail).

The Generational Wealth Transfer & Support Mechanisms (42:03–49:53)

• A surprising share of Millennials and Gen Z receive direct or indirect financial support from Boomer parents, often in the form of bill payment, rent, or lifestyle subsidies.
  • “There’s a great article about this in the New Yorker… it’s pretty common that the children of wealthy parents, they’ll have their parents’ credit card tied into their Uber account… that effect doesn’t show up in the official income statistics but it does drive consumer behavior.” (45:19, James)
• The result: market declines can instantly restrain consumer activity, especially impacting white-collar sectors.
• This effect is seldom captured in formal economic statistics, but its spillover is real and visible.
• The lack of “Trump put”: In a more populist, less market-dependent Trump 2.0, policies may not be supportive of equity markets to the same degree as before.

The Double Impact: AI Acceleration and Structural Unemployment (49:53–50:47)

• James and Demetri brainstorm how a wealth-driven, market-led recession could be uniquely intertwined with the widespread adoption of AI:
  • Many white-collar workers could face permanent job loss as businesses, under margin pressure, adopt large language models and automation.
  • This dynamic could permanently reshape the white-collar workforce, and the changes may not be initially obvious to those affected.

What’s Next? Issues for Deeper (Premium) Discussion (50:47–53:27)

The episode preview closes with a glimpse of topics planned for the second hour:

• How wealth-driven dynamics will affect the business and credit cycles.
• The rotation out of US equities into Europe, and national security ramifications.
• The political realignment risk for Democrats if a white-collar recession hits their base, possibly birthing new policies or leaders (“Democratic Party 2.0”—perhaps involving UBI or other radical measures).
• China’s actual AI and tech progress, and whether US perceptions are misaligned.

Notable Quotes & Memorable Moments

• “Probably the most significant disruption or restructuring of global trade since Smoot-Hawley in the 1930s.” (14:39, James)
• “A normal recession, you have stagflation, or, like you said, maybe it just works.” (23:25, James)
• “The economy is not like a speedboat… Uncertainty… tends to drive slowdowns in the economy.” (24:57, James)
• “So much wealth is concentrated in the stock market…if stock prices go down, consumer spending drops reflexively.” (39:17, James)
• “Is there a large language model-shaped sword of Damocles hanging over the white-collar employee? I don’t think that’s a controversial statement.” (49:53, James)
• “There is no Trump put for the stock market [anymore].” (41:41, James)

Key Timestamps

| Section | Timestamp | |---------------------------------------|------------| | Intro & Guest Background | 03:00–09:20| | The Role of Narrative | 09:20–11:25| | Trump Tariff Announcement | 11:25–15:36| | Macro Scenarios: Slowdown/Stagflation | 16:15–24:06| | Uncertainty’s Economic Impact | 24:07–25:26| | U.S. Leadership & Dollar Risks | 25:33–32:51| | Industrial/Trade Policy | 32:51–36:39| | White-Collar Recession Dynamics | 36:39–42:03| | Wealth Transfer & Consumption | 42:03–49:53| | AI & Workforce Transformation | 49:53–50:47| | Topics for Part 2 | 50:47–53:27|

Final Thoughts

This episode provides an essential roadmap to several converging economic megatrends—from disruptive trade policy to generational wealth transfer, from the new macro of “narrative investing” to the unsettling prospects for the white-collar workforce under the twin pressures of market reflexivity and AI. Demetri and James combine wide-ranging macro rigor with a candid, conversational tone, peppered with memorable metaphors and sharp on-the-ground observations, making this essential listening (or reading) for anyone trying to stay ahead of what could become a transformational period for markets and the broader economy.