More thoughts, conversations, and debates about the coronavirus

By Whitney Tilson

Wednesday, March 11, 2020

1) I wasn’t surprised that my e-mails on Monday and yesterday, in which I wrote that “I think the current panic over the coronavirus is one of the most irrational things I’ve ever seen,” generated a lot of responses. Overall, there were roughly equal numbers of folks agreeing and disagreeing – sometimes heatedly – with me.

To be clear, I don’t think anyone should be complacent. The coronavirus pandemic should be treated seriously, and our government needs to take strong measures to make sure that it doesn’t spread here the way it did in China and Italy – which resulted in the near-total shutdown of those countries.

Obvious first steps would be for Congress to appropriate funding so that any American with any symptoms or risk factors can immediately get tested, free of charge, and to step up health and temperature screening for certain flights.

Last week, Vice President Mike Pence pledged that “all passengers on all direct flights from all airports in Italy or South Korea are being screened multiple times before they board any of these airlines.” I question whether this is actually happening, however, after a friend forwarded me this e-mail a friend of his sent him yesterday:

My son just got through customs at JFK with no issues. No one tested him or took his temperature. He’s pissed because he feels he should have been tested. He’s sniffly and spent two-plus weeks in very populous places in Italy.

My wife and I have both reached out to the CDC for protocols, but aren’t getting much more than “wash your hands and avoid the general public.”

He really wants to get tested because he’s quite concerned about infecting my father-in-law. We’ve checked in with our primary care docs and insurer here in Maine, and they’ve told us to avoid bringing him in unless he’s truly sick. Odd times.

In light of the lack of widespread testing to date, nobody knows the true situation today in the U.S. While officially there are only 1,016 confirmed cases, it’s possible (though I think unlikely) that the virus has already spread widely.

So what should we do? Clearly, those who live near known “hotspots” or have risk factors such as old age or poor health should take strong precautions.

But the broader question is whether we, as individuals, should be shutting down our lives (canceling travel and all gatherings any larger than a few friends, not going to work or restaurants, etc.) and whether we, as a country, should be shutting down our society (flights, railroads, subways, hotels, schools, etc.) to prevent the possible spread of the coronavirus, even in the absence of a single infected person?

My answer is no. For example, I think my alma mater, Harvard, as well as more than 50 other colleges and universities, are making an incorrect, a**-covering decision to cancel all in-person classes for the rest of the school year, despite zero coronavirus cases on their campuses.

And I totally disagree with the trade groups representing nursing and assisted-living homes, that are telling family and friends not to visit their elderly loved ones. I’m well aware that old folks are most vulnerable to the coronavirus, and more than half of the deaths in the U.S. so far are from one nursing home in Kirkland, Washington, but I think individuals and their families should be allowed to make this decision for themselves.

My response to my friends who think that the only way to stop the virus is to shut down human interaction (as this article in The Atlantic advocates: Cancel Everything), is: you are focused on the POSSIBLE costs of under-reaction (which I acknowledge is a risk), but I am balancing this with the CERTAIN costs of over-reaction.

Have you considered how many businesses might go bankrupt and how many people might lose their jobs if we pretty much shut down the country? Have you thought about how many people might lose their jobs – and how many people might die as a result? This study showed a 63% increase in the mortality rate among Americans who lost their jobs. And this one showed that unemployment increased the risk of suicide by 20% to 30% in the 63 countries studied.

This “cure” is likely worse than the disease.

I think this woman, who has been living since childhood with a liver disorder, gives wise advice in this opinion piece in the New York Times: Afraid of Coronavirus? I Know What That Fear Is Like. Excerpt:

My coronavirus advice, I should say, is also my greater life advice.

Years ago, when my doctor told me I might need to be put on the organ list for a third transplant, I responded by leaving town the next day for a summer internship in New York. I was not being reckless. I did this only after scheduling a visit to meet a local doctor who could take care of me, if the need should arise. In the days of the coronavirus, I take the subway to and home from work, but I also diligently wash my hands afterward. Don’t alter your life in dramatic ways, but do make sure that the risks you take are calculated ones. Be social, but don’t hang around sick people. Get your haircut, but don’t touch your face. Go out to dinner, but don’t share food.

Throughout an average day in New York, I share space with hundreds of other people, all of whom I have no control over. Should a friend come to my apartment, should I go on a date that ends with a kiss, should I see Billie Eilish perform when she comes to town, I will lack control over my exposure to the virus. To respond to this reality, l do what I normally do: make my calculations and ensure that my risks are minimal, and then let it be. Because here’s the thing: the life that I’m working so hard to protect is not really a life at all if it is consumed by fear.

I’m not saying I’m not afraid or that you shouldn’t be. My fear is my constant companion, but I can manage it alongside my desire to live a full life.

As for my family and I, we’re taking precautions like washing our hands more frequently… but otherwise, we’re living our lives as usual.

The five of us have, collectively, taken nine flights in the past week all over the U.S. and to London and back. My middle daughter and I rode the gondola at Jackson Hole, Wyoming with strangers many times yesterday, and had lunch and dinner in crowded restaurants, while my oldest daughter went to work in New Jersey and my wife went to a Broadway show in New York City. I’m taking the train on Monday to Baltimore and back the next day, as I do most weeks, and my family and I are flying to Chicago a week from Friday to attend a family friend’s son’s bar mitzvah.

If you think we’re being reckless and would make different choices for yourself and your family, I respect your opinion. Some people are more risk-averse than others. But neither you nor the government should try to impose your (overly conservative, in my opinion) views on me, unless there’s very strong evidence that it’s necessary for public safety.

2) I just did some research on the H1N1 (swine flu) pandemic. It was first detected in April 2009 in a 10-year-old girl in California, was declared a global pandemic in June 2009 by the World Health Organization, and was finally over in August 2010.

The U.S. Centers for Disease Control and Prevention estimates that swine flu infected nearly 61 million people in the U.S. While the mortality rate was much lower than the coronavirus, it still caused 12,469 deaths. Worldwide, up to 575,400 people died from it.

The Obama administration declared it a public health emergency six weeks before it was declared a pandemic, before any deaths had yet been recorded in the U.S. Six months after that initial declaration – after H1N1 had spread and killed more than 1,000 Americans – Obama declared it a national emergency.

So this a was super serious and super deadly pandemic – with deaths more than 100 times what we’ve seen to date with the coronavirus – yet universities didn’t close, entire countries weren’t put on lockdown, and stock markets didn’t crash. And today, H1N1 is considered a normal variant of the seasonal flu.

In light of this, I’m genuinely puzzled by the vastly different reactions to the two pandemics. I think major reasons are how much more interconnected we all are today, how the media is covering the crisis today (after all, fear equals engagement), and how much less confidence people around the world have in their governments.

3) I’d like to share three e-mail exchanges I had yesterday with friends (all active short sellers, interestingly enough – coincidence?)…

My friend Gabriel Grego of Quintessential Capital Management, who is from Italy (though now lives in New York), wrote:

I was reflecting on the coronavirus situation and studying the data. I have changed my mind. I now think that there is a high likelihood that the virus in this country will blow up as it did in Italy. This article outlines it well: Italy’s coronavirus crisis could be America’s.

If you do nothing, the spread is mathematically guaranteed to continue at a rate comparable to the rate exhibited by all western, temperate-climate countries except Japan and Korea (which reacted strongly right away).

Look at this chart:

The curve is very similar across all countries that did not take measures. The increase is about 32% per day. I think they will react similarly to Italy (though I hope someone proves me wrong).

Because 10% of sick people require intensive care units and 5% require ventilation, at some point – quite early – these patients will overwhelm the system: it’s pure mathematics as ICU places are limited. If that happens, the panic/stress/social pressure that will follow (see Italy) will force the extreme measures you see happening in Italy right now (school/business closures, lock downs, quarantines, etc.).

If we don’t act now, the final outcome (lock down) will be the same, only the chances of success will be lower and the measures will have to be more extreme since the number of infected people will be much higher.

Don’t forget I am the guy who loves to buy stocks during extreme panics. I bought aggressively at the peak of the fear in 2008, again in 2011, and again in December 2018. Valuations today are pretty good, so I’ve been doing some buying. But they might get better in about 10 days when the number of infected patients needing ICU [care] will start to overwhelm the system.

If I’m wrong (and I hope I am), it will likely be because the Federal government puts in place measures sooner than expected, an effective treatment is found (perhaps by Gilead (GILD)?) that limits ICU need, or warm weather lowers the transmission rate.

PS—This article in The Lancet is the best analysis I’ve read so far: How will country-based mitigation measures influence the course of the COVID-19 epidemic?

I replied:

And what makes you think that we’re doomed to go the way of Italy? Why won’t we go the way of every other European country?

I think odds are high that you’re falling into the classic mental mistake of overweighting recent/vivid evidence.

As for your chart, it shows the growth rate of detected cases, which of course are going up fast as testing ramps up.

But what I care about is the growth rate of infected people which, I suspect, is much lower.

To see what I mean, consider the case study in the article you cite above (Italy’s coronavirus crisis could be America’s). It notes that there are 179 confirmed coronavirus cases in the state of Washington, the site of America’s largest outbreak. Yet the article also notes that “Covid-19 may have been spreading in Seattle since at least mid-January, long before any spread was officially confirmed there… As of March 10, he and his colleagues estimated, there were as many as 1,100 cases in Seattle alone.”

At first glance, it may seem like bad news that the number of infected people is likely much higher than what’s reported. But it’s still a very small number – and it’s a positive that the virus has only infected 1,100 people in two full months, despite no testing, precautions, or treatment.

It’s very easy to look at preliminary (and, in this case, I believe, highly misleading) data on growth rates and then extrapolate this to arrive at terrifying numbers within a matter of weeks.

But this isn’t at all what happened in the first two countries hit hardest by the coronavirus, China and South Korea. Once the governments and citizens woke up to the danger, the number of new cases quickly plunged.

4) Friend 2 writes:

The data is poor and will be for some time, which I’d argue is reason for caution rather than dismissal. Africa, South America, and parts of Asia are more likely to look like Wuhan – if not worse.

Further, we know very little about the pathogen: how long can it survive on dry surfaces, whether the amount of viral load at exposure makes a difference in outcomes, its ability to mutate (I’ve read there are two identified lines), potential for reinfection, transmissibility rates by asymptomatic people, whether pets can be transmission vectors, risks posed by public restrooms, whether patients exhibiting recovery are still infectious, how weather affects the pathogen, etc.

We do know that we have little (or no) immunity.

Many of us believe (and most non-believers probably worry) that major governments are being led by less-than-competent people: US, UK, and Japan. By the way, the U.S. government has muzzled the CDC, and the WHO seems to be going out of its way to not offend China. So what do they suspect or believe that we’re not being told?

Given the known unknowns – to say nothing of the unknown unknowns – slowing this down until we have better understanding – and actual planning – seems to me the prudent course of action.

I’ll never kick myself for being too careful. It’s when you’re too aggressive / risk-seeking that you make the big mistakes. And I’m no shrinking violet.

Here’s hoping you’re right & I’m wrong!

I replied:

Until this becomes more than 1% of the seasonal flu, I’m not panicking…

He replied:

I get it, but I wouldn’t characterize caution as “panicking”. I think I’m rational about this, and am assessing risk differently from you. I think it’s incorrect to label such risk assessment as panic.

I replied:

Every year, 12,000 to 61,000 Americans die from the flu. We could reduce that number significantly by ceasing visits to our grandparents in nursing homes (the latest news this morning), canceling classes (Harvard has now joined the list of cover-your-a** colleges), canceling high school prom (my friend’s son’s school – that will never be recovered) – basically halting most human contact.

As a nation, we’ve correctly decided the costs aren’t worth it.

And now we’re losing our minds, imposing the certainty of HUGE costs, due to a few thousand coronavirus cases and 31 deaths?


5) Lastly, Friend 3 writes:

You don’t have the tools on this particular topic. Here’s my background: I’m an M.D. I read the journals. In high school I literally won a national contest for interpreting biological lab data (plus a perfect math, science, and reading comp on the ACT, and a perfect MCAT reading comp). I am flat out telling you that you are wrong.

Case fatality rate isn’t exactly flu. It’s somewhere between 1x and 6x flu (and yes, I’m adjusting for underdiagnosis). You can’t just let that run wild through an immuno-naive population. Incidence would be 3x-10x flu. So multiply (1 to 6) times (3 to 10) and then there’s your total deaths relative to flu if we choose to do nothing.

If we all “continue to live our lives normally,” which thank goodness is not happening, then I would agree with the Hopkins chief epidemiologist who predicts that 50-80% of the population will be infected over two years, with a death rate of something like 0.4%. So maybe 720,000 dead.

But worse, if we take no precautions, all of the cases will hit in a very condensed period of time, hospitals will be overwhelmed, people will die from all sorts of preventable things, and there will likely be violence and looting.

Viral suppression, at the severe expense of hospitality, tourism, and transportation industries, is the only answer. The economy either takes a significant hit if we do the right thing now, or a catastrophic hit if we follow the advice of someone who pretends this isn’t real.

I replied:

We should treat it seriously but not lose our minds. There are huge possible costs to underreacting, but also HUGE AND CERTAIN COSTS to overreacting.

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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