My best chart EVER on how the coronavirus developed in China and the implications for us; What happens after big first-quarter declines?; Luckin Coffee collapses; My day at the emergency field hospital yesterday

By Whitney Tilson

Friday, April 3, 2020


The chart below, which shows how the coronavirus developed in China, may be the best, most important one I’ve ever shared…

As you know, the virus follows a fairly predictable pattern that can last for more than a month. First, a certain number of people get infected. Then, over many days, some of them begin to show symptoms. Then, subsequent days later, some need to be hospitalized. Finally, often weeks later, patients either recover (albeit some with long-term issues like lung damage) or die. There’s a lag effect – like a pig in a python. It’s critical to understand this… but most people don’t.

In this chart, for each person who tested positive, there are three dates: When they said they first started feeling sick (the blue line shows the total number of such people in China each day), when they tested positive (red line), and when a small fraction of them died (green line). Each data point is a three-day average. Take a look…

Source: JAMA (symptoms) (original source here); Worldometers (tests and deaths).

For each metric, you can see a surge and then rapid decline, but at different times.

The number of new people showing symptoms peaked on January 26, but the peak in the number of new cases per day wasn’t until 11 days later on February 6.

This reflects two things: first, most people don’t rush to get tested the day they first start having symptoms like a mild sore throat, cough, and fever. Most probably figure it’s just a regular cold, so they don’t seek treatment – much less get tested – until they’re really feeling lousy a week or two later. Then, compounding the delay, there were testing delays in China, just like we’re seeing here.

And the peak in deaths wasn’t for another eight days on February 14.

Look at what happened in China (mostly the city of Wuhan): the number of infected people rose rapidly, about 10 times, from 190 to 2,008 (trailing three-day average) – in only nine days from January 14 to January 23. That’s when the Chinese government did an about-face and implemented an extreme lockdown of the entire province, shown by the purple vertical line in the chart above.

And it worked – almost immediately! As you can see, the number of newly infected people only rose slightly the next three days, peaking at 2,717, and then, in less than three weeks, steadily dropped to almost zero!

But here’s the key: nobody could see this.

Instead, people could only see the number of reported new cases – the red line. Looking at the data, one would no doubt be convinced (wrongly!) that the lockdown wasn’t working because reported new cases were skyrocketing.

To repeat: whereas the actual number of new cases peaked almost immediately after the lockdown, the peak in the reported number of new cases didn’t occur for another 14 days!

In summary, as soon as China locked down Hubei province, the growth of actual new cases plateaued and started to fall within days, dropping to almost zero within three weeks. Yet reported new cases soared for another two weeks as testing caught up with what was really happening.

And deaths – which is what really generates headlines and panic – didn’t peak until eight days after that.

I’m cautiously optimistic that the same phenomenon is playing out right now in the U.S.

I can’t prove it, though. It’s an educated guess, nothing more.

The reality is, until there is more widespread testing and we get another week or two of data, we’re all flying blind. Nobody knows how many people are actually infected here in the U.S. right now, where they are, and how rapidly that number is growing.

Because we can’t answer these questions, those who are making the most extreme predictions are getting the most attention – and nobody can prove them wrong.

But what I do know is, because of the lag effect, even if the measures we’ve taken in the past couple weeks are working well (as I believe they are), bringing the virus’s replication rate well below 1.0, we won’t know it.

As a result, the number of new cases, hospitalizations, and deaths will almost certainly continue to go up for at least a couple of weeks, almost certainly leading to universally bad headlines in the U.S. and Europe during this period.

So, fasten your seatbelt – it’s going to be a wild ride.

But don’t panic and don’t lose hope!

2) Here’s some more evidence that it’s time to buy, even with the terrible headlines and uncertainty (if you want to wait for a clear outlook, stocks will be 30% higher!)… Ryan Detrick at LPL Financial looked at the returns for the S&P 500 Index after big declines in the first quarter:

3) China’s Luckin Coffee (LK) collapsed by 76% yesterday to $6.40 after the company admitted that it’s investigating “fabricated sales” that could total more than $300 million, and said its prior guidance and sales figures from the second quarter of 2019 to the fourth quarter of 2019 are no longer reliable.

I trust none of my readers got caught in this debacle – and maybe some even profited on the short side – because in my February 11 e-mail, with the stock at $38.15, I warned my readers about it. As I said:

Speaking of stocks to avoid, investors have fallen hard for the growth story surrounding China’s Luckin Coffee (LK)… awarding the company a $9.3 billion market cap, which is equal to a nosebleed 19.5 times trailing revenues. I saw Luckin’s presentation at the ICR Conference last month and have to admit that I was impressed.

But as with so many other Chinese companies (it remains the Wild West over there), Luckin may not be all that it claims to be, as MarketWatch highlights: Luckin Coffee stock sinks after anonymous report alleges fraud.

For more color on this, I e-mailed my friend, famed short-seller Carson Block of Muddy Waters Research, who released the report on behalf of the author (who wishes to remain anonymous for good reason: China has been known to harass and even imprison those who publish negative articles about companies, no matter how accurate the information).

Carson e-mailed me the full 89-page report and said I could share it, so I’ve posted it here. He added:

I know who wrote it, so when I Tweeted it, I wrote “unattributed” as opposed to “anonymous.” He’s a serious, smart money guy.

Here’s the Executive Summary:

When Luckin Coffee (Nasdaq: LK) (“Luckin” or the “Company”) went public in May 2019, it was a fundamentally broken business that was attempting to instill the culture of drinking coffee into Chinese consumers through cut-throat discounts and free giveaway coffee. Right after its $645 million IPO, the Company had evolved into a fraud by fabricating financial and operating numbers starting in third quarter 2019. It delivered a set of results that showcased a dramatic business inflection point and sent its stock price up over 160% in a little over two months. Not surprisingly, it wasted no time to successfully raise another $1.1 billion (including secondary placement) in January 2020. Luckin knows exactly what investors are looking for, how to position itself as a growth stock with a fantastic story, and what key metrics to manipulate to maximize investor confidence. This report consists of two parts: the fraud and the fundamentally broken business, where we separately demonstrate how Luckin faked its numbers and why its business model is inherently flawed.

I haven’t done any research on Luckin, but after reading the report, I think it’s very well done.

Luckin stockholders, beware!

4) Please accept my apologies if I haven’t replied to an e-mail you’ve sent me this week. I’ve been volunteering since Sunday from roughly 9 a.m. to 8 p.m. every day (without a break) helping set up the emergency field hospital across the street from my apartment building – plus I still have my regular workload writing these daily missives – so I’m hundreds of e-mails behind!

My days there are getting shorter and shorter, however… Yesterday, I was only there for 10 hours and 45 minutes (the prior three days were 13, 12, and 11 hours)! 

If you haven’t had a chance to watch it yet, I’ve posted a new version of my video about my exhausting, emotional, and energizing experiences here, which has pictures interspersed.

It’s super raw: I just sat down, turned on my video camera, and spilled my guts, unscripted, for 27 minutes. I go between ranting and getting choked up… This doesn’t happen very often!

In the video, I thank my new brothers and sisters at Samaritan’s Purse, describe what I’ve been doing to support their good work, address the organization’s anti-LGBTQ controversy, rebut some Internet rumors, and share my thoughts on why I’m optimistic that we’ll soon contain and then defeat this terrible virus.

If you don’t have time to watch the full 27 minutes, a) speed it up to double-speed… b) skip to the three-minute summary at the end, starting at 24:24… or c) watch my thoughts on “the elephant in the room” about the anti-LGBTQ statements by Franklin Graham – the founder of Samaritan’s Purse – starting at 10:35 and continuing at 26:06.

It was a full day yesterday. The most interesting part was the last hour, when one of the chaplains and I engaged in a very spirited and deep discussion about homosexuality and gay marriage. You won’t be surprised to hear that he and I had quite different viewpoints (though, to my surprise, his views weren’t as extreme as I thought). I think we both enjoyed and learned a lot from the discussion. I now have a much better understanding of the “other side’s” arguments and where they come from. I don’t have time to write more about this now, but will in a future e-mail, I promise.

Normally I’m a healthy eater, but when I’m climbing mountains like the Matterhorn and Eiger, rock faces like the El Capitan, and running 12- and 24-hour Tough Mudder endurance obstacle races (click here to see the 468 pages – seriously! – of my write-ups about my 16 biggest adventures), I inhale high-sugar and high-calorie food and drinks like peanut M&Ms, Gatorade, and Coke. Guess what I’ve been doing this week? Despite this, I’m working so hard that I’ve lost five pounds (going from roughly 168 to 163) – that’s how intense this week has been!

Below is my daily write-up with pictures:

I’ve really been a jack-of-all-trades this week, doing just about everything imaginable, other than treating patients! (Speaking of which, the PPE-restricted area where patients are is fenced off and surrounded by mesh and tarp walls to protect their privacy, so I can’t see how many there are, but I heard 10 yesterday, going to 23 tomorrow, and soon up to the capacity of 68 critical care patients.)

My dad is very handy and a good mechanic, so I grew up helping him fix all sorts of things. Those ancient skills have come in handy this week, as I’ve tied knots, pounded stakes and nails, etc.

My first job yesterday was helping set up the food tent, which, among other things, involved hanging two lights and crawling around behind one of the tables, plugging in the refrigerator, three microwaves, and two coffee pots. I’m surprised I didn’t electrocute myself!

Then, I joined two guys from Samaritan’s Purse Disaster Assistance Response Team (“DART”), Andrew and Scott, and we drove in their big rented pickup to buy hard goods at Staples and then Costco (two printers, printer paper, folding plastic tables and chairs, and a small ladder). I figured while I was at Costco again, this time with a big truck, I might as well go crazy, as I did yesterday… so I dropped another $1,400 filling four huge shopping carts with the same drinks and sugary and salty snacks as yesterday, plus paper towels, bananas, apples, mandarin oranges (a bit of healthy food at last!). Again, I got all sorts of funny looks…

When we got back to the hospital, my friend Anna Nikolayevsky and her friends, Anastasia Wahl and Caroline Ritter, helped me unload the truck and haul the goodies to the food tent:

Then Katharine came over and joined the ladies carrying plywood and 4-by-4s from one end of the site to the guys building tables, etc. at the other end:

My buddy Alistair duPont (who was the person who originally invited me to come help out on Sunday afternoon), showed off his manliness by carrying the big, heavy pieces of plywood by himself (I could have carried three myself, but didn’t want to show up the young, single guy in front of the ladies… ):

Can you believe we all used to pay for workout classes? This is so much better – and it’s free – LOL!

Meanwhile, Dave, a local guy who always shows up to help when needed (after 9/11, Hurrincane Sandy, etc.), was running a high-output carpentry shop, ably assisted by Nick “the Now-Master Carpenter” Jekogian and Alistair:

Nick was leading a pipe-building crew with two new volunteers, Debra Baum, and Richard Habersham (whom I later learned is running for Congress – in my district, no less!):

I kept myself busy carrying metal barriers (I discovered a good technique for carrying two at a time):

I found a couple of minutes to check my texts:

Here’s DART member (and SUNY Binghamton student), Derek Meier, in full PPE (personal protective equipment):

Samaritan’s Purse has a fleet of trucks it sends to every disaster area in the U.S. (and even a DC-8 plane to transport equipment overseas!). Here are the trucks lined up on Fifth Avenue:

The fleet even has a laundry truck!

Katharine took this picture of the gorgeous sunset. I think religious folks would look at that and say that God may finally be smiling on us…

Here are (from left to right) Katharine, Debra, Alistair, Nick, me, and Richard across Fifth Avenue, on our way home. Thank you for all of your great work, volunteers!

I’m back again today (though with only a few volunteers, as the hospital is now pretty much set up)!

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.

Click here for the full bio.