Executive Summary

Right now 2 million Americans are infected with the coronavirus. The total U.S. death toll by April 15th will be more than 20,000. We estimate that 80 thousand of the 2 million infected Americans will be hospitalized over the next 2 weeks. That’s why we are short-term bullish on hospital stocks.

Thesis:

Everything I said about the Coronavirus COVID-19 in February happened, Now I’m telling you this:

Since my last few newsletters to you, I have updated our models, done more research and we now have better estimates.

Three parameter estimates are needed to predict the number of infections and number of deaths over the next 3 weeks: infection fatality rate, infection growth rate, and the number of days between initial infection and resolution (either death or recovery) of the infection.

1. We now estimate that the coronavirus’s fatality rate is ~0.8%. This means 1 out of every 125 infected people will die. We know that almost all countries had problems with testing and identifying all infected people. There are two exceptions to this: South Korea and Japan’s Princess Diamond cruise ship.

South Korea tested more than 320,000 people and identified 8652 infections. The total number of deaths was 94. This means South Korea’s case fatality rate is 1.09%. We believe there are still a considerable number of South Koreans who were asymptomatic and weren't tested. So, we estimate that the actual fatality rate is anywhere from 0.5% and 1%.

In early February the Princess Diamond cruise ship was quarantined in Japan after one of the passengers tested positive. This was a bad idea for passengers as a total of 712 passengers were eventually infected and 7 of these people died. As far as I know all 3000+ passengers of this cruise ship were tested, so we have a reliable dataset with pretty accurate number of infections and number of deaths. The case fatality rate on Princess Diamond is 0.983%. We know that the fatality rate is higher among older people. Assuming that the median age of passengers on Princess Diamond is greater than America’s, which is 39, we can estimate that the new coronavirus’ fatality rate will be around 0.8% in America (maybe a little lower, but this is a nice round number).

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2. This paper estimates that an infection takes around 23-24 days to resolve. The first 5-6 days the patient doesn’t show any symptoms. It takes an average of 5 days between the onset of symptoms and hospitalization. Finally it takes about 2 weeks between hospitalization and death (about 10 days in ICU).

3. There is no accurate direct way of calculating the infection growth rate because there is a huge variation in the number of people we are testing. [We were testing only a few people a couple of weeks ago, so we identified only a small number of infections. In recent days we started testing a large number of people (especially in New York) and now our case count is growing at alarming rates.] However, we can assume that the death rate is constant and we use the change in deaths to estimate the infection growth rate. There is a 23-24 day lag between an infection and the resolution of that infection. This means the growth rate in the number of deaths today is a very good estimate of the infection growth rate 23-24 days ago.

On March 19th, the U.S. reported a total of 205 deaths. That figure was 85 on March 16th and 47 on March 13th. This means the number of deaths doubles about every 3 days. This also means that the number of infections were doubling every 3 days on February 25th (the people who are dying today were infected on February 25th).

So, here is my simple mathematical model.

For the sake of argument, I am going to assume that all 205 American deaths occurred on March 19th and all of these people were infected on February 25th (this assumption simplifies calculations, we don’t need a complex model to have a thorough understanding of what is going on).

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