Mark Spiegel is bearish on the economy, the stock market, and especially Tesla; A Recession Is Coming (Eventually). Here's Where You'll See It First; A Peculiarly Dutch Summer Rite

By Whitney Tilson

Monday, August 5, 2019

1) Mark Spiegel of hedge fund Stanphyl Capital lays out in his July letter why he is bearish on the economy, the stock market, and especially Tesla (TSLA). I think he’s right on Tesla. As for the economy and stock market, I’m far less certain… Excerpt:

The fund remains very net short, as I continue to believe we’re about to enter a bear market for U.S. stocks as the U.S. economic slowdown worsens. Here are some charts explaining why:…

Anticipated 2019 Fed rate cuts of 50-75bp (starting with today’s 25bp) will do little to prevent this slowdown; here’s how things look now relative to the peak of the last bull market, in September 2007 when the Fed did a 50bp cut:…

We remain short stock and call options in Tesla, Inc. (TSLA), which I consider to be the biggest single stock bubble in this whole bubble market. The core points of our Tesla short thesis are:

1) Tesla has no “moat” of any kind; i.e., nothing meaningfully proprietary in terms of electric car design or technology, while existing automakers – unlike Tesla – have a decades-long “experience moat” of knowing how to mass-produce, distribute and service high-quality cars consistently and profitably.

2) Tesla is losing a ton of money and has a terrible balance sheet.

3) Tesla is now a “busted growth story”; demand for its existing models is only being maintained via continual price reductions, and it will have to raise billions of dollars to produce new models in a market soon to be saturated with enormous competition.

4) Elon Musk is extremely untrustworthy.

2) This article captures why I don’t have a strong feeling about whether a recession is imminent – the best economic indicators are giving very mixed signals… A Recession Is Coming (Eventually). Here’s Where You’ll See It First. Excerpt:

Economists don’t know when the decade-long expansion, now the longest in American history, will end. But here are the indicators they will be watching to figure it out.

Last week’s report on second-quarter gross domestic product showed that the economy slowed last spring. It also came exactly 10 years since the Great Recession ended, making this officially the longest expansion in American history. (Well, probably. More on that in a second.) So perhaps it’s no surprise that forecasters, investors and ordinary people are increasingly asking when the next downturn will arrive.

Economists often say that “expansions don’t die of old age.” That is, recessions are like coin flips – just because you get heads five times in a row doesn’t mean your next flip is more likely to come up tails.

Still, another recession will come eventually. Fortunately, economic expansions, unlike coin-flip streaks, usually provide some hints about when they are nearing their end – if you know where to look. Below is a guide to some of the indicators that have historically done the best job of sounding the alarm.

3) I’m going to have to take the 23andMe genetic test again, as it must have missed my inner Dutchman – I love this! A Peculiarly Dutch Summer Rite: Children Let Loose in the Night Woods. Excerpt:

This is the Dutch scouting tradition known as a “dropping,” in which groups of children, generally pre-teenagers, are deposited in a forest and expected to find their way back to base. It is meant to be challenging, and they often stagger in at 2 or 3 in the morning.

In some variations of the challenge, loosely based on military exercises, adults trail the teams of children, but refuse to guide them, although they may leave cryptic notes as clues. To make it more difficult, adult organizers may even blindfold the children on their way to the dropping, or drive in loop-de-loops to scramble their sense of direction.

Sometimes, they hide in the underbrush and make noises like a wild boar.

If this sounds a little crazy to you, it is because you are not Dutch.

The Dutch – it is fair to say – do childhood differently. Children are taught not to depend too much on adults; adults are taught to allow children to solve their own problems. “Droppings” distill these principles into extreme form, banking on the idea that even for children who are tired, hungry and disoriented, there is a compensatory thrill to being in charge.

… Droppings are such a normal part of Dutch childhood that many there are surprised to be asked about it, assuming it is common to every country. But Pia de Jong, a Dutch novelist who has raised her children in New Jersey, said it reflected something particular about the Dutch philosophy of parenting.

“You just drop your kids into the world,” she said. “Of course, you make sure they don’t die, but other than that, they have to find their own way.”

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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