Mark Spiegel’s firm, Staph Infection Capital, has released their Q4 2019 update letter. It looks like things aren’t going so hot:

For December 2019 the fund was down 11.4% net of all fees and expenses. By way of comparison, the S&P 500 was up 3.0% while the Russell 2000 was up 2.9%. For all of 2019 the fund was down 6.5% while the S&P 500 was up 31.5% and the Russell 2000 was up 25.5%. Since inception on June 1, 2011 the fund is up 53.7% net while the S&P 500 is up 187.5% and the Russell 2000 is up 121.8%. Since inception the fund has compounded at 5.1% net annually vs. 13.1% for the S&P 500 and 9.7% for the Russell 2000.

Mark Spiegel, Staph Infection Capital

Spiegel starts off the update by giving some numbers on his fund’s performance compared to benchmark’s like the S&P 500. Unsurprisingly, if you had just purchased an ETF like VOO (Vanguard’s S&P 500 index, which simply purchases the top 500 public companies weighted by market cap), you would have seen dramatically higher returns than if you had given your money to Mark Spiegel to invest. Why would anyone in their right mind let Mark BS manage their money?

If you had invested $10,000 with Mark Spiegel on December 1, by now you would have lost $1,140. By comparison, if you had invested in the S&P 500 you would have made $300.

As those of you in the fund know via previous correspondence, faced with yet another down year (our unacceptable third in a row!), in late December I decided to take the fund back to its successful roots and focus primarily on finding deep-value microcap/nanocap long positions

Mark Spiegel, Staph Infection Capital

This marks the third year in a row that Mark has lost money. The fund is doing so bad, the famed short-seller is now trying to find long positions to dive into.

I cut the Tesla equity short position down to approximately 10% of the fund (it had most recently been 20% and was often higher in the past) and—barring unexpected positive developments for the company— will maintain it at around 10% going forward. Unlike our other equity shorts which were “just bubbles,” there’s major league fraud involved here and all the Fed printing in the world won’t ameliorate that; I thus want to have some meaningful equity participation in addition to our short call position, which we’re also maintaining.

Mark Spiegel, Staph Infection Capital

There you have it: The reason the fund has been doing so bad. Over 20% of the fund was invested in a Tesla short position. We know that Mark had invested in a “very large position” of January 2020 $200 puts. That means that about 20% of the fund was spent on acquiring contracts that would allow Mark to sell Tesla shares for $200 before they expire in January 2020.

If Tesla shares were $100, Mark would have made a killing buying shares for $100 each and selling them via his put option contract for $200. But as Tesla shares are currently trading around $430, the option to sell shares for $200 is completely worthless. As Mark would say, his short position ended up being “a zero”.

Unfortunately, it doesn’t look like Mark is tired of losing money yet: Though he reduced his short position from 20% of the fund, he still expects 10% of the fund will be dedicated to shorting Tesla. Essentially Mark took a beating and said: “please sir can I have some more?”

Good luck to Mark as he and his Staph Infection shareholders continue to get destroyed in 2020!

Mark Spiegel is cutting his Tesla short position in half after his fund got obliterated in Q4 2019. Read the update letter here: @elonmusk @tesla

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Read the full Staph Infection Capital Q4 2019 Update Letter