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Whitney Tilson’s email to investors discussing why talk about inflation?; shoppers surprise retailers; spending on Visa credit cards back to normal; rising coronavirus cases; social distancing is on the wane; America fails the marshmallow test.

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Q1 2020 hedge fund letters, conferences and more

Why Talk About Inflation?

1) Despite our economy suffering its worst downturn since the Great Depression, some economists are warning about the dangers of looming inflation.

I remember they were saying the same thing as we were emerging from the depths of the global financial crisis… and they’re just as wrong today as they were then, as economist Claudia Sahm – director of macroeconomic policy at the Washington Center for Equitable Growth – explains in this blog post: Why talk about inflation? Excerpt:

Prices will not spike in the United States for years, maybe decades. In fact, they are falling at record pace. So why talk about inflation? Why risk an economic depression and a painfully slow recovery over the improbable?

The obsession with inflation is here again. Some members of Congress, market analysts, and economists are forcing the debate. Pure politics. They did not learn from the Great Recession. They did not learn from the Great Depression. They do not admit their past errors, and they will sink us again…

Shoppers Surprise Retailers

2) Here’s a related article in the New York Times, which argues that inflation should actually be seen as a sign of success: Should We Fear Post-Pandemic Inflation?

Spending On Visa Credit Cards Back To Normal

3) What makes this market so hard to figure out is the constant, conflicting data. On the plus side: Shoppers Surprise Retailers by Returning to Stores.

And credit-card giant Visa’s (V) data show that overall spending is rebounding strongly. In an 8-K filing, the company disclosed that U.S. payments volume, after being down 18% in April, rebounded to being down only 5% in May… and by the end of the month, it was flat. Take a look at the chart from the filing:

marshmallow test

Rising Coronavirus Cases

4) Offsetting some good economic news are many signs of rising coronavirus cases:

This is surprising and disappointing, given that peer countries (mostly in Europe) – including many who got hit much harder than we did – are reopening without a resurgence in cases. Here’s a WSJ article about it: As Countries Reopen, Many Avoid a Second Wave of COVID-19 Cases – So Far

Social Distancing Is On The Wane

5) What could explain this?

In simple terms, we’re (collectively) not behaving ourselves. As we end lockdowns, too many Americans are failing to wear masks, observe social distancing, etc.

Here are two articles about this:

New Evidence Social Distancing Is on the Wane, Bloomberg

And here’s NYT columnist Paul Krugman (random trivia: I was one of the roughly 600 kids that was tested as part of the famed Marshmallow Experiment in 1972 when I was six years old): America Fails the Marshmallow Test.

Best regards,


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