A very different analysis of the COVID-19 pandemic

By Whitney Tilson

Wednesday, July 15, 2020

Over the weekend, Adam Patinkin of David Capital Partners – a Chicago-based hedge fund manager – sent me his latest investor letter which included a 20-page appendix with his analysis of the COVID-19 pandemic.

I think it’s a super-interesting, well-researched, and well-articulated argument – and, if Adam is right, it has powerful medical, economic, political, and investment implications.

I asked Adam if I could share his missive with my daily e-mail list, and he graciously agreed – I’ve linked to it here. I urge you to read it. (If you want to read some of the questions and feedback Adam has received, and his responses, I’ll be sharing it shortly with my coronavirus e-mail list – to join it, simply send a blank e-mail to: [email protected])

Here’s his high-level thesis:

We are optimistic the economy and asset prices are poised for a strong recovery.

Our thesis is in two parts. First, we believe the spread of C19 has likely peaked and is now in sustained decline. Second, we think governments and central banks will err on the side of doing “too much” rather than “too little” as they deliver record-setting stimulus, leading to robust economic growth as society re-opens.

He went on to discuss a key epidemiological distinction that may explain why COVID-19 peaked in many geographies well short of the dire scenarios predicted by the most-publicized forecasting models:

Many believe the only two paths out of the pandemic are either (1) a vaccine or (2) “herd immunity.”

We see this as a false choice. In fact, we believe the most likely outcome is a third and different path: that C19 has reached its “disease break point” in the U.S./Europe such that population-level spread is now in inexorable decline…

In practice, spread of a given disease collapses far before a population ever reaches herd immunity…

So how do we explain this?

The answer: there is not one, but two levels of population “immunity” to consider.

First, herd immunity: the level of specific resistance in a population required for a disease to fully disappear.

Second, the disease break point: the level of specific resistance in a population at which spread of a disease collapses. The disease break point is generally one-third or less the threshold required for herd immunity…

For COVID-19, the implications are powerful. If C19’s R0 is 2.5-3.0 and its herd immunity threshold is 60-65%, then the disease break point would be only 15-20% specific resistance (a population’s precise disease break point likely varies somewhat due to differences in susceptibility and social graphs).

Our research indicates Europe and the U.S. reached this disease break point in March and April, respectively. We believe spread of COVID-19 in these geographies has peaked and is now in irrevocable, sustained decline.

I spoke with Adam and exchanged a number of e-mails with him, and he suggested that I rethink some of what I wrote in my most recent e-mail to my coronavirus list that I sent around on Saturday.

He pointed out that while positive tests are rising, actual infections may not be – but rather are due to increased testing, data issues, and double-counting. For example, he noted many states count by test, not by person – so one COVID-19 hospital patient who was tested each day for two weeks would equal 14 positive tests in the data.

Similarly, Adam cautioned that the rise in COVID-19 fatalities over the last week was driven by the reporting of deaths that occurred one to two months ago – and contrasted this with the Centers for Disease Control and Prevention’s (“CDC”) all-cause mortality data, which reports by incident-date and continues to show COVID-19 fatalities in decline (for more on this, see this Twitter post).

Most controversially, Adam contended the data indicate that general lockdowns have proven to be a flawed strategy during the COVID-19 pandemic. It’s a view he believes is supported by 100 years of epidemiological studies and research as well as by CDC and World Health Organization (“WHO”) pre-pandemic planning guidance. He writes:

Once a disease is widespread (beyond the CDC’s 1% threshold), however, the sole course of action is disease mitigation. Halting the outbreak is impossible – it’s like trying to catch the wind. Some policy actions are sensible such as isolating the sick, promoting hygiene and respiratory etiquette, aggressively monitoring and protecting vulnerable sub-populations, and scaling testing to support early identification and treatment of infections. But for policies like contact tracing and lockdowns, the scientific literature is clear. They simply do not work.

To be clear: just because I’m sharing Adam’s analysis does not mean I’m fully endorsing every aspect of it. I’m still thinking about it – and would welcome feedback (which I’ll send on to Adam as well).

But his argument got me thinking… and has me re-evaluating some of my core assumptions and beliefs, which is why I’m sharing it.

Thank you, Adam!

Best regards,


Whitney Tilson
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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to nearly $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor’s degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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