• A recession threatens to pummel households, businesses, and the stock market.
• Piper Sandler's Nancy Lazar warned of tighter credit and the full fallout from the Fed's rate rises.
• Unemployment has jumped in 19 states, making a national recession almost inevitable, Lazar said.

Get ready for a recession that hammers consumers, squeezes companies, and drags down stocks, a veteran economist warned.

"There is a very high probability of a recession," Nancy Lazar, Piper Sandler's chief global economist, told WealthTrack in a recent interview.

Lazar, the cofounder of Cornerstone Macro and ISI, cited the delayed impacts of the Federal Reserve's interest-rate rises, and credit drying up, as two likely drivers of a downturn.

"We just think this is a very risky economic environment," she said. "When banks are tightening lending standards and you clearly have higher interest rates, you've never had a soft landing. You've always had a hard landing."

Recessions strike an average of 10 quarters after the Fed begins a rate-hike cycle, but have arrived up to 16 quarters later in the past, Lazar said. The first hike of this cycle was in March 2022, meaning eight quarters have already elapsed.

Lazar highlighted several signs of economic trouble. She noted that 19 US states — accounting for 40% of national GDP — have recorded at least a 0.5 percentage point increase in their average unemployment, measured over three months.

Whenever that many states have recorded significant increases in joblessness in the past, there's been a nationwide recession, she noted.

Government figures show unemployment rose in 30 states in the 12 months through April. The national unemployment rate was 3.9%, up from 3.4% in April 2023.

Several parts of the economy are "really, really struggling," Lazar continued. She pointed to the NFIB survey of small business sentiment, saying it was "very deep in recession territory" and worse now than in the 1990 and 2001 recessions.

Meanwhile, lower-income consumers are dealing with slowing wage gains and inflated prices, Lazar said. Their credit card balances are "through the roof," and subprime auto delinquencies recently hit a record high, underscoring their financial woes.

'Tipping point'

In stark contrast, wealthy people are sitting pretty with the value of their stock portfolios and homes near record highs. They've been able to retain their cheap mortgages and largely escape steeper rates as they have few high-interest loans, Lazar said.

"We have a very bifurcated economy,  unstable economy," she added.

As for middle-income consumers, they're "at the tipping point" because if unemployment climbs above 4%, they could find themselves jobless with huge amounts of credit-card debt, Lazar said.

Given those warning signs, she predicted corporate revenues would weaken by the last three months of this year as consumers pull back and interest rates bite, fueling layoffs and smacking middle-income households.

Stash of cash

Lazar also cautioned that an economic slump would batter stocks.

"If we have a recession, inflation will slow," she said. "And if inflation slows, you're going to squeeze profit margins. And that creates risks for the stock market."

If inflation proves stubborn and the Fed is forced to keep rates high, that could exacerbate the rise in joblessness and worsen the economic pain, Lazar said.

"A little stash of cash may not be a bad idea right now," she said. "I'm not sure in my 40-year career I've ever really said that."

• Red Lobster has filed for Chapter 11 bankruptcy.
• The troubled chain said its restaurants will remain open and operating during the process.
• The bankruptcy comes after losses piled up due to a $20 endless shrimp promotion.

Red Lobster has filed for Chapter 11 bankruptcy, the seafood restaurant chain announced in a statement on Sunday.

It comes after last week's decision to close more than 50 locations. However, Red Lobster added its remaining restaurants will "remain open and operating as usual during the Chapter 11 process." It has about 550 outlets in 44 states, per the filing.

CEO Jonathan Tibus said in the Chapter 11 documents the number of customers had fallen by 30% since 2019, and had "only marginally improved from pandemic levels."

Red Lobster has often run an all-you-can-eat shrimp promotion. To try to increase footfall last year it started offering the $20 deal every day, rather than once a week. The move backfired, however, adding to its losses.

In an earnings call last November, the finance chief of the chain's owner, Thai Union Group, told investors the promotion was "one of the key reasons for the losses we generated" in the third quarter of 2023.

Filing for Chapter 11 bankruptcy allows a company to stay in business while it restructures its assets.

Red Lobster, which has debts of $1 billion, said it will use the process to reduce its number of locations and "pursue a sale of all its assets as a going concern."

The firm said it had received a $100 million debtor-in-possession agreement from its existing lenders, which will now take control of Red Lobster.

"This restructuring is the best path forward for Red Lobster," Tibus said. "The support we've received from our lenders and vendors will help ensure that we can complete the sale process quickly and efficiently while remaining focused on our employees and guests," he added.

• Iranian President Ebrahim Raisi died in a helicopter crash in northwest Iran on Sunday.
• The crash involved a US-manufactured Bell 212 helicopter, which stopped being made in 1998.
• Iran's former foreign minister said US aircraft sanctions against Iran could be to blame.

Iranian President Ebrahim Raisi died in a helicopter crash on Sunday — and the country's former foreign minister believes US sanctions were partly to blame.

Raisi, 63, and other senior officials were killed after the helicopter they were traveling in was forced to make a "hard landing" over northwest Iran, Ahmad Vahidi, the country's interior minister, told IRNA.

State TV said the helicopter crashed into a mountain. While there is no official statement on the cause, images of the crash site captured by ISNA, Iran's state students' news agency, showed heavy fog lingering over the area.

Multiple outlets, including Reuters, said the helicopter was a US-manufactured Bell 212, a model that first entered service in 1968 and stopped being made in 1998.

Iran's former foreign minister, Mohammad Javad Zarif, said the US sanctions — which prohibit Iran from purchasing US-built planes — could be partly to blame.

In a phone interview with state TV on Monday, Zarif said the sanctions prevent Iran from having good aviation facilities.

According to part of an interview cited by Iran International and ISNA News Agency, he said the crash that killed Raisi would be "recorded in the black list of American crimes against the Iranian nation."

The US has imposed various sanctions against Iran since the seizure of the US Embassy in Tehran in 1979. Economic sanctions, including those targeting the aviation industry, were reinstated in 2018 after the US withdrew from its nuclear deal.

Iranian airlines are prohibited from purchasing planes that contain more than 10% US parts, according to US think-tank The Washington Institute.

This is likely to complicate the process of updating or repairing US-manufactured planes that the country purchased before the sanctions took effect.

Farzin Nadimi, a research fellow at The Washington Institute and an expert on Iran's security and defense, said that around half of Iranian planes were grounded in 2019 due to a lack of spare parts. At the time, an estimated 8% of fleets were expected to go out of service each year.

Iranian airlines operate some of the world's oldest aircraft, according to Bloomberg, which estimated the average fleet age to be over 25 years.

According to US military training documents cited by Reuters, the Bell 212 was developed for the Canadian military in the late 1960s and first used by Canada and the US in 1971.

There have been multiple crashes involving a Bell 212 through the years, including a 1997 crash in Louisiana where eight people died, according to First Post.

In 2009, a Bell 212 operated by Cougar Helicopters crashed off the coast of Newfoundland in Canada. The incident, which killed 17 of the 18 people on board, was a result of an emergency landing after the aircraft lost oil pressure in one of its engines, First Post said.

The most recent fatal crash involving a Bell 212 took place in September when a private aircraft crashed off the coast of the United Arab Emirates, according to the nonprofit Flight Safety Foundation, cited by Reuters. It is not known how many passengers were on board.

Iran's Ministry of Foreign Affairs did not immediately respond to a request for comment.

• Palmer Luckey's startup Anduril is producing futuristic weapons of war. 
• But the billionaire founder has his own James Bond-esque collection of military vehicles.
• Luckey gave Bloomberg an inside peek at his 1980s-designed home and private collection of "boys toys."

The defense tech startup Anduril is making some of the most futuristic autonomous weapons on the market as it tries to reinvent the military's wheelhouse.

But the company's forward-thinking vision hasn't stopped founder Palmer Luckey from amassing his own collection of older military-grade vehicles and boy's toys.

The billionaire's collection includes a boat bought from the US Navy, six helicopters, and a 1985 ex-Marine Corps Humveefighter, he revealed in the latest episode of Bloomberg's "The Circuit."

That's land, sea, and air covered.

Luckey's Mark V special operations craft, which he purchased from the Navy, is the fastest boat ever built by the force with a little over 5,000 horsepower, he told reporter Emily Chang as he took her for a ride on the vessel around Newport Beach.

"It was designed specifically for Navy seal insertion and extraction missions. It runs really fast, and it's a lot of fun."

He still has the real M2 heavy-barreled 50 BMG machine gun that came with the boat but keeps fake ones fitted "most of the time."

"Most of my neighbors like it, and a handful hate it."

Luckey first made his name when he founded virtual reality company Oculus in 2012. Two years later, he sold the company to Facebook, now known as Meta, for $2 billion in cash and stock. 

In 2017, one year after he was fired from Facebook, Luckey founded Anduril. It's since risen to the top of Silicon Valley's defense tech boom.

But his passion for the military started when he was young, Luckey told The Circuit.

"I grew up watching the Marine Corps practice right offshore in their helicopters. Watching Navy ships do exercises gets in your brain, and it doesn't leave."

He's now the proud owner of six helicopters, including a UH-60 Blackhawk.

In addition to military-grade vehicles, Luckey owns a 1967 Disneyland Autopia, a toy car used in Disney theme parks, designed by legendary park designer Bob Gurr and Walt Disney himself.

"As far as I know, mine is the only complete Autopia that is outside of the parks. Mine has the original mechanicals, original gear boxes, original wheels, the whole deal," Luckey told Chang.

The small vehicle, typically seen tearing up Disneyland race tracks, suffered a minor breakdown mid-interview and had to be fixed with a flathead screwdriver.

The founder also took cameras into his 1980s-designed home in LA. Fitted with a two-inch thick teal shag carpet and a 6,500-gallon aquarium, Luckey's home has "some good Miami Vice vibes," he told Chang.

The coffee table is fitted with a map of his Dungeons and Dragons campaign, where he plays as a "chaotic neutral wizard named Nilrim V."

As the billionaire founder himself admits, "I am a little bit of a caricature."

But where to keep the world's largest collection of video games?

"I put that in one of my missile bases. 200 feet underground," Luckey told Chang.