The Fuzzy Math Behind COVID-19: Part I

Fear is the most powerful weapon in war. Hitler deployed buzz bombs against London in an attempt to destroy resolve and heighten fear during World War II. It nearly worked, if not for the even greater resolve of the British people and their leader, Winston Churchill. 

Fear is such a powerful weapon that nations will go to great lengths in war to manipulate the news reaching the people. During World War I, only Spain had a reliable free press reporting the deadly flu ravaging troops and populations. No army wanted the world to know they were taking heavy causalities from what would later be called the Spanish Flu. Yet every nation, on the battlefield and at home, were taking a hard hit from the disease. The U.S. was particularly hard hit. But when the absence of daily news on the deadly flu was only to be found in Spain, it was felt it the virus originating there. The truth was far from it.

Today we are facing a similar, though less deadly, threat, and the disinformation machine is in high gear. This time the media seems to want fear cranked to the highest level.


Washing your hands with soapy water for 20 seconds or longer is the most effective way to prevent the spread of the flu virus, even better than hand sanitizers.


Since I have no formal medical training I will leave the medical advice to those qualified to give it. What I can do, as an accountant, is reveal the truth behind the never-ending statistics and how they have been manipulated to scare us at the highest level. COVID-19 is a serious health issue without a doubt. It spreads easy and fast with a heightened risk of death. These simple facts make it easy to scare people into clearing their savings account to stock up on toilet paper and other essentials. 

The level of fear has filled my email box from clients and readers worried about the state of affairs and how it will affect their finances. I have worked hard on social media to provide a steady voice in the whirlwind of conflicting data. It is time I issued a formalized response here to the elevated levels of fear people are experiencing and the risks people face with their investments and personal finances.

Understand, this post is not about specific advice: buy this, sell that. Rather, my goal is to help you control your emotions and control your response to fear mongering and market unrest. That is where real wealth creation finds a home. Buying the right investment does no good if you panic sell before value has been realized. Buying high to sell at a panic low is the surest path to poverty. With new feeds bloated with coronavirus articles it is easy to start thinking the world is about to end. I will show you below, nothing is further from the truth. This has happened before and we know how it ends. (SPOILER ALERT: It will pass and most people will be unharmed. Even the economic damage will be less than expected and will return to normal in a matter of time. It will later be determined that fear caused more damage than COVID-19 did.)


A Short History of Pandemics

Human history is filled with pandemics. Until modern times, diseases ran their course with little effective intervention from doctors. Illnesses ran their course and eventually died out. 

The common cold, flu and similar illnesses are also common throughout history. The 1918-19 Spanish Flu was a particularly nasty one. As many as 50 million people died. 

Things were different in 1918-19. World War I was coming to an end. Governments involved in The War to End All Wars kept the flu numbers a secret so as not to encourage the enemy or demoralize their soldiers in the field and the folks back home. Only the free press in Spain reported on the people getting sick and the number dying. That is why some thought it started in Spain, hence the Spanish Flu designation. (It didn’t. It probably started in northern China in 1917.) 

Pandemics of the past, even those from less than 100 years ago, had less economic impact than today. Supply chains now span the globe. Never before have businesses been so integrated and international in scope. Pandemics of the past killed and sickened people; COVID-19 is also wrecking havoc on the world economy.

Until recently, a nasty flu season was the only way anyone knew something was afoot. Modern medicine gives us a jump start on what to expect. We knew COVID-19 was headed our way because China alerted the world to the pending virus. SARS, the Swine Flu and the H1N1 variety of flu in 2009 are modern examples of pandemic scares. Most of these viruses never circumnavigated the globe, dying somewhere along the way.

And we come back to the Spanish Flu. Somewhere between 20 – 50 million people died from that flu. It came in three waves with the second being the worst. Then it just disappeared. Nobody knows exactly what happened, but the flu virus probably mutated again to a less deadly form. Doctors didn’t discover a cure, social distancing wasn’t a thing and unless you were sick in a hospital it was unlikely you were even quarantined.

The Spanish Flu did have one nasty trait that put it into the history books. Normally the seasonal flu kills the old, very young and those with a compromised immune system. The Spanish Flu killed adults in their prime; the people who usually get sick for a week or so at worst during flu season, but almost always recover. 

And that is the first problem with the fear surrounding COVID-19: it generally kills older people, similar to the normal seasonal flu. The very young are spared with only a few healthy adults susceptible. Those over age 60 are at most risk.


Unfounded Fears?

COVID-19 is a nasty flu bug for sure. It spreads very easy and has managed to circle the globe rather quickly. It also makes people very sick that normally only get mildly sick from the flu. Older people face a very high risk of death if they contract COVID-19.

The fears are not unfounded, but are exaggerated. The response has been way overblown compared to the risk profile of the disease. Let’s place this into perspective:

As of this writing, 7,158 have died with COVID-19. Read that last sentence very closely as it will be important in a bit. Here are the current numbers

No one is advocating clearing the roads due to the risks of driving. Many still smoke tobacco and eat an unhealthy diet that increases the risk of cancer, heart disease and stroke. Yet, one of the smallest risks of dying to-date is causing a panic.

HIV/AIDS caused fear, but no panic. All the mortality risks listed above are a concern, but not at a level that should be disruptive. So what is causing COVID-19 to create such disruptive panic?

First, when the seasonal flu is with us every year and tens of thousand die from it we adjust to the risk as a normal part of life. COVID-19 is new, novel. Novel in this case means people do not have a natural immunity to the virus yet. 

Second, COVID-19 spreads fast and very easy. People have not had time to adjust.

Third, people who normally do not die from the flu are. Not like the Spanish Flu, but an elevated percentage of healthy middle age people are dying from COVID-19. 

All three combined has caused rampant fear. New, fast and potentially deadly to people who normally do not fear the flu has generated panic. Then people extrapolate the numbers to the entire world population and get dizzy. Except it is a massive misrepresentation of the facts.


Misleading Numbers

News reports and press releases from world health organizations are very careful how they word their press releases. Mortality rates are extrapolated by the public from the fancy representation of the numbers, but the extrapolations are far from truth. 

People dying with COVID-19 are reportedly as high as 3.84%. When people read this they think it is the mortality rate. It isn’t.

Not everyone is tested for the virus. Those most ill are more likely to be tested and all people who are reported to have died with COVOD-19 have been tested. (Otherwise how would they know they died with the virus?) This leads to a misrepresentation. If only sick, or potentially sick, people are tested, the number that die from the virus is pulled from a population likely to have contracted the disease. That is like using a test from people likely to have cancer as a representation of the entire population’s cancer mortality risk. The mortality rate for COVID-19 is likely under 1% and even lower for the population at large. Only time will give us an exact, or close to exact, number. Using the data available, COVID-19 is more deadly that the seasonal flu most years, but not anywhere near as deadly as the Spanish Flu.

Another misleading statistic comes from the wording in news reports and press releases from health organizations. They are careful to say someone has died “with” COVID-19 rather than “from” or “because of” COVID-19. This is a serious reporting issue.

Think of it this way. If someone is healthy and contracts COVID-19 they might have mild or no symptoms. But if they die in a car accident before the virus is cleared from their body they died “with” COVID-19. The virus had nothing to do with the death, but is recorded as a disease that the person had when they died. 

It is not uncommon for someone to have several contributing factors to their death. Rarely, if ever, do we medically say someone dies of old age. Instead, we list a variety of ailments that contribute to the final cause of death. Cancer and pneumonia  are common causes of death in people over 80. The flu is also a big contributor. Somehow we can’t bring ourselves to say they just got old and died. We need a reason. And that can lead to problems at times like these.

This counting of every death where COVID-19 is present misrepresents the full facts. The patient may have died from other causes at the same relative time anyway. This happens when people get old, and COVID-19 strikes hard at the old, as do many flu strains. This misrepresentation allows for an inflation of the COVID-19 numbers which heightens public fears.


Emotions in Check

People at risk need to take precautions. Because young people can carry COVID-19 without getting seriously ill, it is important to take steps to prevent the virus from infecting older family members inadvertently. That is the real risk with COVID-19; the unknown causing fear.

It is proper to take a break from all but necessary gatherings. The economy will take a short-term hit. It is scary, but not as bad as the media would have us believe. Social media blows it up even worse that the traditional press. Shame on us!

In the modern world this means supply chains will be disrupted. Business will slow and some industries will be very hard hit. The stock market is predicting a doomsday scenario.  It isn’t that bad! For those who are patient and control their emotions, now and in the near future is a good time to increase equity holdings. Keep adding to your retirement plan at work. Dollar cost averaging only works if you keep the regular investments going when the market is down, too.

I know it looks bad right now. Not everyone will contract COVID-19. Most who do will only experience mild illness. The older you are the more important it is to seek medical attention as your mortality risk increases rapidly with age. 

The way the numbers are playing out the number of deaths from COVID-19 will be somewhat higher than a normal flu season. However, the fear it induces will keep more people at home and off the road. It is possible the fewer number of people who die in road accidents as a result may be more than all the deaths attributable to COVID-19. 

That would make this the first flu strain to reduce the number of deaths by a greater number from other causes than those who die from the virus. Technically, a negative death rate. Again, technically, all factors combined, it could be the least deadly flu strain since the invention of the automobile.

It’s all a matter of perspective.




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  1. Matt on March 16, 2020 at 9:47 pm

    Well written article. Unfortunately common sense is lacking more than ever.

    • Keith Taxguy on March 17, 2020 at 6:37 am

      Thank you, Matt. Emotions are running high at the moment so it is nice when someone stops to acknowledge my efforts to calm the crowds. Hopefully my efforts inject a bit more common sense than currently in the media and on social media.

  2. Jason on March 16, 2020 at 10:18 pm

    IMO, not a great article and way too simplistic an argument to make that can potentially give people the wrong impression of how to treat the serious nature of this virus. If the sole purpose of your article was to point out that some fuzzy math is going on then well done. Fuzzy math happens in almost all areas of life for a variety of reasons. As to the effect and potential effect this virus has had and will continue to have on the world and its economy, I would say the tone of your article demonstrates a lack of true understanding of what we are going through. It would have been more interesting to cover and evaluate the numbers dealing with the “serious complications rate” of the virus and why that is the real boogyman in this story. If you have a true understanding of those numbers, and why they have such a significant impact on our whole system beyond just medical, then you would understand why the powers that be are really freaking out and why we should be doing everything we can to prevent the spread.

    • Keith Taxguy on March 17, 2020 at 6:35 am

      I’m sorry you didn’t enjoy the article, Jason. My arguments are simple so everyone can pull perspective from the facts. You can read the other replies to comments for my opinion. I just can’t see the value in panicking, regardless the dire nature of the situation. We should, as I mentioned in the article, take measures to prevent the spread of COVID-19. What we should not do is waste time screaming and running around it panic. That never solved anything.

      • Jason on March 17, 2020 at 9:50 am

        I do agree with your points on panic but like I said, your math argument blunts the seriousness of the situation and focuses on the wrong math to pay attention to. More people would seriously practice social distancing to squash this bug sooner if they understood how explonential growth rates work and the serious complication rate of this virus and it’s implications.

        A good post written about the math can be found here:

  3. SMJ on March 16, 2020 at 10:48 pm

    Hi Keith,
    Thanks for bringing attention to this issue. I’ve studied the scientific literature on this virus and while definitely not as deadly as the Spanish flu, the real problem is the fact that the data shows that >12% of the cases of infections ended up with severe pneumonia, a portion of whom died. This was across the board age-wise (with the exception of children under age 14).
    The severe pneumonia part is the problem because it’s an illness that takes upwards of 6 weeks to recover from, requiring hospitalization. The strain on the hospital systems globally would be enormous. The system is not setup to handle the potential numbers of patients the virus would yield due to its ease transmission from host to host.

    • Keith Taxguy on March 17, 2020 at 6:31 am

      SMJ, COVID-19 is a serious disease and I am not making light of it, just putting it into perspective. I refuse to add to hysteria or panic. Even if on a plane with engine trouble and likely to crash I would rather assess my surroundings and make the best decisions I can in a very bad situations. Screaming hysterically will not help. The odds are not good in the plane analogy, but you still have to do the best with what you have. Blowing up all the negative points without also looking at the positive ones is something I never subscribed to. I might die, but I will die fully aware of my situation and in control of my emotions, making the best decisions I can with the time and circumstances allowed.

    • Mick on March 19, 2020 at 6:44 am

      From what I have heard, we really can’t talk about xx percent of cases because we do not have an accurate count for the denominator to that equation. In Wuhan they are saying maybe 6 out of 7 cases went unreported because they were so mild it completely asymptomatic.
      One problem is this asymptomatic carriers were still contagious (although less contagious than severe cases) but since they did not know they were carriers, they were not taking precautions.

      You can’t extrapolate the statistics across entire populations if we don’t really have accurate statistics.

      What would your 15 % be if you consider it as 15% if 1/7th if the population?

      And I’m not saying that is the right model either, my point is that one must be careful when applying simple statistical models across populations, especially when so little is known about this virus

  4. MB on March 16, 2020 at 11:26 pm

    Great article bringing up some new perspectives. I particularly like your point about not everyone that gets COVID gets tested. I for one probably just got over it but not rushing out to get tested. Self-confining to reduce spread but not excited about becoming another statistic.

    Guessing you are going to get a lot of “hot” discussion on this one. Mostly people letting fear rule them. Keep up the good fight.

    • Keith Taxguy on March 17, 2020 at 6:26 am

      MB, my goal is to help people stop and think clearly about this. The medical portion might be beyond you or me, but if we stop and think we are likely to make better choices over reacting in panic. If I get a “hot” discussion it means people have stopped to think about the actual facts and put them into perspective.

  5. Mark on March 16, 2020 at 11:34 pm

    This was such a great post had to share on Facebook. Nice to have a reality check.

    • Keith Taxguy on March 17, 2020 at 6:23 am

      I appreciate it, Mark. I love it when readers help me get the word out.

  6. Bear on March 17, 2020 at 4:25 am

    One thing not addressed in this is that one of the side effects of COVID-19 is scarring in the lungs, leading to *permanent* reduced lung capacity.

    • Keith Taxguy on March 17, 2020 at 6:22 am

      This is a phenomena called “broken glass”, Bear. This is where patches of pneumonia on lung x-ray’s show areas of damage. I didn’t mention every detail because that would require a multi-hundred page report from the CDC. So I linked to those sources instead. The CDC is also going to get the medical details right, whereas a lowly backwoods accountant takes a serious risk of getting it wrong. This post is about controlling emotions and reducing panic, not medical advice.

  7. James on March 17, 2020 at 4:55 am

    Was there a reason you left out the part of this where hospitals are strained to the breaking point and become overwhelmed from lack of ICU beds and ventilators and what results at that point?

    People can panic, panic should be avoided, but it’s also fairly irresponsible to suggest this is overblown in any way. If anything, the media, apart from Fox News, has acted shockingly responsible. I don’t understand where people, like yourself, who are complaining about media hype are getting their information.

    • Keith Taxguy on March 17, 2020 at 6:17 am

      Yes, there is, James. I recently published elsewhere an analogy about this. Suppose you travel to a northern American city in the U.S. You order an Uber ride to get to the hotel. In route, your driver hits a patch of black ice. here are the options your driver has:

      A.) Start screaming hysterically as he throws his hands in the air and covers his face, or
      B.) He lets out a short expletive as he works the wheel to the best of his abilities.

      Of course we all hope the driver chooses B. Choice A means you go over the cliff; choice B means you still have an accident, but a less serious one.

      There is never a guarantee holding your emotions in check will save you, but it increases your odds by a large margin. I didn’t add to the hysteria because even as you complained I didn’t mention a statistic that would add to the more panic you mention a news outlet you think is acting responsibly. You can’t have it both ways.

      • James on March 18, 2020 at 3:23 am

        Keith, what is your evidence people are panicking? The run on grocery stores? There’s 300 million people in this country, so you can find people acting every possible way about every news event. Personally, I’m not seeing it, everyone I know is taking this seriously with an appropriate amount of concern. Maybe it’s different where you live.

        I also think responsible government officials are mostly choosing B, but I live in Ohio where our governor (who I don’t align with politically, in general) has handled this extremely well.

        This is serious. It’s appropriate to have a concern about serious things. I’d also appreciate you not misrepresenting my words, as I did not complain about a lack of statistic – I pointed out that you completely ignored why coronavirus is an issue. People largely are not concerned because they fear they will die – you must understand that, so I don’t understand why you play coy.

        • James on March 18, 2020 at 3:26 am

          I’ll add, I think I understand what you are trying to do here. It’s not a bad thing to be a steadying presence and attempt to relieve anxiety, but you’ve done a poor job here by ignoring the hospital utilization issue. I believe if you educated yourself on ventilators and ICU bed availability you’d realize how poorly this article reads.

          • Keith Taxguy on March 18, 2020 at 9:30 am

            James, I understand your concerns. No matter what anyone says there will be some who over-react and/or panic. You are correct in my goal being to calm people during this pandemic.

            You make the assumption I don’t understand the ICU and ventilators. Actually, three clients who work in one of the largest hospitals in my area came in for taxes and as we talked built this blog post. At least from their perspective, my analogies are correct and they wish more people would heed them. Some of the items in this post were their idea.

            There is panic according to my clients working in medicine. Some, not all, people think every cough or sneeze is a deadly virus that needs immediate attention. That is the real disruption hospitals and doctors have no time to deal with. According to my medical clients, testing kits are their biggest problem at this time, not the ICU or ventilators.

            I define panic as disruptive illogical behavior that can lead to harm in self or others. Hoarding fits the description in my book. Others are welcome to disagree.

            Not everyone is panicking, however. Some are taking this too lightly. (Some clients insist on shaking hands. That is unnecessary at times like this.) I agree with shutting things down for a while to slow the spread of the virus so hospitals can better manage the flow of the ill.

            A brief history of pandemics and the impact on the economy and stock market leads me to believe the markets are where the bulk of the panic exists. I provided links in the post so as not to go off on a tangent. Check the link on the Spanish Flu. You can see market reaction in a pandemic that killed up to 50 million. You can’t even find it in the market action. Or the economic numbers.

            Finally, I have had a lot of assumptions made about me and this post. For example, I was accused of not understanding what it is like in China so I have no idea what is about to hit us. (A form of panic, I think.). It is true I never traveled to China, but my oldest daughter has spent considerable time there teaching English as a second language. She currently has nearly daily contact with several families in China she has worked with. My personal knowledge might be limited, but I have not pulled things out of thin air.

            What amuses me is the TP hoarding. We had it here for a while. Now, the manufacturers made more and there is plenty in stores. This is a pandemic; not the zombie apocalypse or nuclear war. There is no reason for anyone to hoard anything! Stuff is still being made. And as for the stock market, we will get a recession, but this is not a systemic break; it is a societal agreement to slow down for a few months. Once the state of emergency passes the economy will do well. Very well, actually, considering how much cheap money they’re pumping into it.

            Now the oil price decline might do a bit more lasting economic damage. But that is another story.

          • James on March 19, 2020 at 11:57 am

            Agree with you 100% on the hoarding, so we do have some common ground here. I appreciate the site and the work you do – don’t want to end it on a negative note.

  8. Carolyn on March 17, 2020 at 6:37 am

    Since we have never been in this situation in our lifetime, you can not foresee what is going to happen. Stick to what you actually know, please. People that panic jump off buildings. No one here is really panicking.

    • Keith Taxguy on March 17, 2020 at 6:51 am

      Investors are panicking, Carolyn. The stock market is pricing in some apocalyptic event. A minor reading of the business web pages like CNBC actually say it. Not everyone who panics jumps off buildings. Some hoard instead. That is a selfish act that can lead to harm, financially to self and medically to others. People hoarding hand sanitizer to sell at unreasonable prices on Amazon and eBay put lives at risk when many later have no access to sanitizers. People paying over $100 for said bottle of sanitizer when the CDC has said washing your hands with soap for 20 seconds is more effective is also a form of panic.

      What you are unaware of, Carolyn, is the 20-30 calls my office is getting every day (and even more emails) from people in sheer panic. I have to talk them down they are so hysterical. And I really need to get tax returns done! I am an accountant! Some have even mentioned suicide as a preferable way to die over the potential risks of COVID-19. I have published daily on social media, helping people make better decisions when it comes to their investments. People have stated they welcome the daily pep talk as it helps them through the day. It is why I choose to publish something on this blog. I hope it brings you value as well, Carolyn.

  9. Level Headed in FW on March 17, 2020 at 6:56 am

    People can panic – true statement. Should people panic? No. That’s the point of this article, panic is a super effective tool to make us act irresponsibly and that we are, right now.

    When I listen to the news it is apparent the news media wants to incite the public (over many issues, not just the Corona virus), rarely have I heard them say that people will live through this pandemic. Never have I heard them report on the numbers of people that have recovered – and those numbers would be larger than the number of deaths from this disease. I don’t watch the news 24/7 but have seen only one reporting of an elderly couple who stated they both had COVID-19 and survived and they reassured the camera that you can live through this.

    The media, if you really listen, is the irresponsible party to most of this panic. They say they report events, yes, I agree they report events then they drop the mike and move on to the next event. There seems to be little to no real reporting where they give fair and balanced information. For the longest time the media just reported the number of deaths of this disease but never stated what we can do to help prevent from getting it. Irresponsible!!!

    And then we have the federal reserve dropping interest rates – over a disease? It’s no wonder the world is imploding, people are acting foolish and making irresponsible decisions. America, get a grip!

    • Keith Taxguy on March 17, 2020 at 8:50 am

      I think you are on the right path, Level Header. There is a difference between being scared and panicking. Media has made this a far more fearful event than worse events from a century ago. Fear solves nothing. Keeping a Level Head will take you a lot further than any other action you can take. Good comment.

    • Nik on March 17, 2020 at 8:57 am

      Yes! Nailed it with this comment.

      It makes zero sense to me that the federal reserve is slashing rates. It’s easy to start thinking up conspiracy theories with how all the parties at play are behaving.

  10. Nik on March 17, 2020 at 8:54 am

    I appreciate this perspective, Keith. I agree with previous commenters that it is simplistic, but I kind of like that. Makes it easy to digest and add to the “collection” of knowledge in my head that I’m gathering regarding this virus.

    I live in Washington state. Sh*t is going crazy here. People are absolutely panicking and hoarding supplies, which is infuriating and frustrating all at the same time. Most grocery stores have bare shelves (except the alcohol and candy aisles, who knew those wouldn’t be the hot commodities??). Looks like a Russian grocery store from 1988!

    Personally, I am not worried about contracting the virus. However, my work offered the option of telecommuting to work, which I went ahead and accepted. I am 8 months pregnant and figured, why not? I prefer to take logical steps to reduce my risk instead of panicking. Washing my hands well and often with just soap and water, working from home, and avoiding crowds seems easy and logical to me, so that’s the route I’m going!

    Now, if only I had more cash laying around to throw into the stock market…. 🙂

    • Keith Taxguy on March 17, 2020 at 8:59 am

      I feel your last comment as well, Nik. I am investing my liquid funds rapidly.

      Funny thing, even in states with no cases the store shelves are bare. A lot of illogical behavior it seems to me.

      I kept it simple for the reason you mentioned. Make it more complex than I have to and nobody will even read the post.

  11. HS on March 17, 2020 at 9:02 am

    Good article. The sky isn’t falling, contrary to popular belief.

  12. ol1970 on March 17, 2020 at 4:16 pm

    Keith, how much time have you spent in China over the years? Personally I don’t think there is panic so much as preparation. If we did absolutely nothing and let this burn through our country over the course of a couple years upwards of 160 million could catch the virus. That’s only half of us but let’s say that’s high and only 100 million get it. We know that 15% require hospitalization (15 million) and roughly 10% of those require intubation (1.5M) for up to 6 weeks. The USA currently has 200,000 intubation beds, which are not just empty waiting for Covid19 patients to show up. Say they have 50% capacity. We know the death rate goes up without this level of intervention. That’s what the fuss is all about.

    Now keep in mind that China put an entire Provence on absolute draconian lock down at the point they had 440 cases. The USA had 4500 when we implemented mild “recommendation” for social distancing. In China they went door to door and took temperatures and immediately removed you if you had a fever, no let me get a bag, they dragged you out and stuffed you in a van to go to a quarantine center. They welded doors shut of apartment buildings with high infection rates and built hospitals overnight. They went all out at 440 and it still was a huge deal, in the USA we have kids on the beach and factories full of workers in areas that likely have thousands of cases. Do you honestly think the USA will go to those lengths to stop the spread? Is there a chance that China might not have given us all the real numbers? Do you believe Iran only has 900 deaths as of today?

    I agree I’m not worried for me, nor about my investments. I have held, and thankfully have a lot of cash that I’m deploying into the market. I sincerely hope that you are right but after seeing first hand what the Chinese are capable of I am a little more cautious in my optimism. Life will go on, but it seems really selfish to think that we are all overacting and it is affecting my investments when there are doctors in Italy trying to choose between which 40 year old lives and dies by his odds of survival. It can happen here too, I pray it doesn’t.

    • Keith Taxguy on March 17, 2020 at 4:24 pm

      ol1970, I have never been to China personally (I hate traveling which has finally come in handy for a while), but my oldest daughter has spent a lot of time there and has taught English as a second language there for several years now. She also has a family she stays with while in China she talks with almost daily. I am fully aware of the China issues surrounding COVID-19, including how the government handled the issue.

      • ol1970 on March 20, 2020 at 6:57 am

        I appreciate you sticking your neck out and actually writing your opinion on this matter, it is good to have different points of view and open discussion. The point about China is that unless you’ve seen firsthand how that government can operate it is hard to grasp as Midwest American (which I’m in that category). Do a quick YouTube search of the lock down in Wuhan and the police welding doors to lock people in their homes. It puts in context the level that a communist regime can and did go to. While you are at it check at some videos from Italy, the region hardest hit is very affluent, their NYC/LA. The flu doesn’t swamp hospitals, spread with as fast or kill as many of its infected.

        The markets are always forward looking, this is a concept I know you understand. Everyone sort of thought the markets were a little frothy at their highs but you ride the wave up. Prices have just adjusted back to something more historically in line with P/E valuations. They might be a little overvalued even after this drop considering the Covid19 virus will cause a recession. (I’m not using the D word, but it’s not beyond the realm of possibility). Again I sincerely hope you get the opportunity to write a follow up post saying “See I told you so”. But for now let’s all just do our part to get over this as soon as possible, stay healthy!

  13. Chris on March 18, 2020 at 3:15 pm

    It’s a well written post. I would have written it myself with the information available when it was published.

    The issue with COVID-19 isn’t the number of potential deaths. That was my comparison as well until earlier this week.

    It’s the potentially exponential infection growth coupled with lengthy hospital stays for up to 20% of the infected people. Hospital systems – US and worldwide – can’t handle those kinds of patient counts. Based on various statistically models that I’ve seen, COVID-19 will quickly overwhelm any country that’s been infected. Due to the older population, Italy is already experiencing medical shortages and doctors are already rationing care to conserver resources. It’s why China is throwing up hospital tents overnight. The only questions are how fast COVID019 spreads and how many patients require critical care intervention to survive.

    At the lowest end of the probability models, perhaps 20% of people get infected over 18 months. The United States currently has about 800,000 hospital beds plus additional ICU beds and can handle that additional load on top of the typical medical care needs. It can’t handle anything greater. In the event of greater infections rates (40% or higher) or a shorter time window (6 – 12 months), hospitals will be overtaxed handling COVID-19 patients which dramatically limits treatment available for everyone else – elective surgeries, accidents, life threatening illnesses. You’re probably already hearing about urgent care clinics postponing elective and non-elective emergencies and visits. At the higher end of the models, the hospital systems need 8x more beds to handle the additional patients. Obviously, available hospital beds are only a proxy for trained medical staff, ventilators, drugs and other medical resources which will also be unavailable.

    Here’s a lovely wonky set of charts that clearly illustrates the basic problem:

    If the model’s assumption that 1 of 5 COVID-19 patients requires hospitalization for an average of 12 days is even vaguely accurate, we are all in serious trouble. After you and I and our family members get infected and recover without any problems, we’ll then have to worry about dying in the ICU waiting for treatment after a serious auto accident or anything else that requires immediate medical attention. Since there’s no possible way this country to can handle up to 18 months of staying locked in – socially, financially, emotionally – it’s anyone’s guess what the next few months look like. Medical care for *everyone* could be significantly impacted.

    Panic never helps, but those models were built by epidemiologists using real-world data and shouldn’t be simply dismissed as fear mongering rhetoric.

  14. Social Capitalist on March 18, 2020 at 9:38 pm

    TWA I look forward to the common sense in your articles and appreciate some of the thoughts which I share such as possible negative death rates and economic effects.

    Still, I find it disheartening that yet another person takes a shot at the media. 1. Without them, just like with the Spanish Flu, we would know little or nothing, so I say thank you to the Media and not those who decry a disease as a liberal hoax.
    2. And far more importantly, Italy provides the backdrop of a nation overwhelmed by disease, not panic. If we added hundreds of thousands of sick people and tens of thousands of deaths to a system even less well equipped than theirs – see ABC 20/20 – we will have Covid-19 deaths, heart disease deaths, cancer deaths, hell deaths from broken arms, from an overwhelmed system. Talk about Death Panels.

    You have your view, I have mine -that’s okay. I don’t know if shutting everything down is better than doing nothing. Hopefully, in a month a lot more folks will be around to criticize.

    Oh, and Spanish Flu just as likely came from Kansas. Like you said, came and went…”this too shall pass”.

    • Keith Taxguy on March 19, 2020 at 8:16 am

      This is certainly a hot topic for discussion now, SC. I agree the media should cover it. However, I do not agree in comparing to the worst situation on the planet, Italy. If we want to pick something to compare to, either be an optimist and choose Japan or South Korea and if you want to be honest, take the mean.

      I do like articles like I saw yesterday which expanded on my thesis. That article said the reduction in pollution is noticeable even from space. The number of lives potentially saved from lung and other diseases due to the short-term reduction in pollution could equal or exceed the number of people dying from COVID-19.

      I also like the Tom Hanks story. He is 61 and dealing with the virus the way we all should.

      • Social Capitalist on March 19, 2020 at 9:25 pm

        Impressive – your response to most comments. Clearly something you have both a passion for and understanding of the need for people to hear from you.
        Means are dangerous in that we could be worse than Italy, too. Given our response, and the trend lines we clearly favor Italy over S.
        Korea and Germany. Moreover, we don’t know about the means for N. Korea and most other disinformation states. Hopefully, change in weather will help.
        Reductions in pollution are great and I have seen the fish in Venice but the reductions are usually more than offset in any recovery.
        The line is quite precarious – shutting down an economy with attendant risks or risk the failure of our healthcare system. Given that our current President would do anything to avoid a recession, it is clear the threat is far greater than what the government is saying.
        Panic is a psychological response to loss of control. Yes, I want the person who says Shit! and fights through the situation over Jesus Take the Wheel methodology. I argue that only the House has provided the former; even if the measures are not liked.
        It is an interesting case study in human psych and sociology. After the Spanish Flu we suffered a depression and great social unrest ( really a bunch of white folk in many citie attacked and killed blacks).. Most economists tend to blame it on post war reduction in govt. spending. Wonder if more of it is related to the Flu just as the French Revolution was related to crop failures?

        • Keith Taxguy on March 20, 2020 at 2:12 am

          SC, I want to point out the recession after the Spanish Flu was a result of the end of WWI, not the pandemic. People were not made aware of the pandemic problem because of WWI and therefore did not have anything to fire their fears or cause a panic. It was nearly a year after the last Spanish Flu outbreak in the U.S. before the economy dipped into recession. That was coupled with a massive deflationary wave when the war ended that did result in economic decline.

          Ironically, it was Herbert Hoover, as Secretary of Commerce under President Harding, who was tasked with handling the 1920-21 recession. Hoover’s efforts led to the Roaring 20s. Unfortunately, Hoover was unable to handle the economic tsunami that destroyed his presidency. Ironically again, many of FDR’s New Deal ideas had roots in Hoover’s efforts. Hoover never forgave FDR for not giving him credit for having the ideas that ended The Great Depression. History may not exactly repeat, but is does have a rhythm and does tend to rhyme.

  15. Nordland on March 18, 2020 at 11:48 pm


    Appreciate the post. However, I feel like the economic damage in your article is underestimated. We’re nearing something unseen from the times of the Great Depression. Many people lost their jobs already (restaurants etc) and many will loose very soon. You, as an accountant, are probably more aware than anybody else that a lot of businesses are running on a very thin safety net of cash flows and disruptions for even 2 weeks is going to delivery nearly deadly blow for the owners and employees.
    Now look at what happened: restaurants and service industry is shut down, travel – almost non existing, auto industry is closing plants, Boeing needs a bail out to meet ends, oil industry is in turmoil too because of the demand drop and price wars. There is no safe haven in industries anymore, people will stop buying groceries and limit to only bare necessities very soon. As soon as they realize they don’t have paychecks coming to meet ends. How many unemployed did US economy add over last week? Millions?
    Same is happening in Europe with even more unprecedented scale of shutdown. The decision to shut down the economy is the worst ever made, and we will see it soon in the hindsight. It almost like everyone is competing in doing as much damage as possible to economy.

    Now, on the other hand, the FED and the government is trying to bail the failed companies and people individually handing out an equivalent of UBI. This will be equivalent to the drug addiction among general population, because once you start doing it they will demand more and more. And politicians won’t stop handing it over. With production down and free money handouts we’re heading toward Weimar Republic monetary and societal collapse. Once there is no jobs, no money and limited supply of essential goods it can be very Venezuelian even in what used to be called “1st world countries”. I hope the time proves me wrong, but I don’t see a good outcome here, I hope we won’t end up with civil unrest and riots all over the country by the end of the year.

    • Keith Taxguy on March 19, 2020 at 8:18 am

      Nordland, the future is always unclear. I get asked my opinion on the effects the virus will have on the economy I decided to write this post. Come back in a year and we will see who was closest to the actual mark. Winner buys a round of drinks since the bars will be back open by then.

  16. Mick on March 19, 2020 at 6:56 am

    Great article Kieth. I look at the markets and it should not surprise me. Just like in 2008/2009.
    I think worst case scenario-i know we’ll get through this, I know we’ll figure it out, I know business will come back, just think of all the pent up demand when this is over.
    I know markets hate uncertainty and always over react to bad news. But I look at what I am doing and I can’t help but wonder: do they know something I don’t? What an I missing? But then I know this is the madness of the market. So l stand fast with my but and hold. I hope to look back in 10-20 years when I may need the money and see the wisdom in this approach.

    I also look to my Christian faith and know that money is not where my true riches are stored. And this is the time to try and help others wherever I can. Whatever your beliefs, try to reach out and help those who will have a difficult time with this.

    • Keith Taxguy on March 19, 2020 at 8:26 am

      Mick, you hit two very important points I also hold dear. The unknown (uncertainty) is what is causing the most fear. If this were just a bad flu season it would go almost unnoticed.

      I also look to my Christian faith. It provides great comfort. This is a time where many need to re-look at faith as something to spend time on.

      Excellent attitude, Mick.

  17. Joe on March 19, 2020 at 12:53 pm

    Hi Keith, thanks for the article. I have a couple of counterpoints. The number of deaths due to traffic accidents or smoking or cancer do not grow exponentially and double every two days like COVID-19. It wouldn’t take long to surpass those numbers. And we can somewhat mitigate those situations by driving safely, not smoking, etc.

    You also suggest we could end up more like S. Korea rather than Italy. Unfortunately, we have not taken COVID-19 as seriously as S. Korea, Taiwan, Singapore, Hong Kong. Our actions thus far have been more like Italy, and in some respects such as testing we have fallen short of Italy. There are other differences between Italy and US such as median age and number of hospital beds per capita, but given our actions thus far, I think odds are higher that we end up like Italy rather than S. Korea.

  18. Social Capitalist on March 20, 2020 at 11:03 am

    Agreed on both points – but FDR left his name on the dam. Really, not much of a choice as he was a politician; FDR credits Hoover and he loses votes; especially amongst the socialists in his party- my history does rhyme!
    It is very true that winding down the war effort caused problems but when there are large numbers of deaths and illness there is also economic displacement that ripples through the economy taking time to rest upon the shores. I am not solely arguing a Depression because of Spanish Flu – I am stating that the impact has not been studied enough to know. It is interesting that the first SARS pandemic, limited as it was, occurred at the same time as the Great Recession; again I believe we underestimate a pandemics’ abilities to disrupt economies, especially ones in transition.
    Now, this turn is self imposed and hopefully the consequences are short lived but as wave after wave of virus hits the shores impacts will be felt.

    Again, thanks for the conversation. I enjoyed the article and hope that this improves quickly, but I doubt our government has done enough, and certainly not quickly enough, besides hope for spring.
    I read a lot of comments on multiple sites and you do seem to have a larger number of folks defending the “panickers”. Lastly, I know you devote this site mostly to taxes now but a lot of us still appreciate your insights into other topics. After all, I wouldn’t have a well stocked chest freezer of o hadn’t read this site.

  19. Ben on March 20, 2020 at 10:20 pm

    I truly appreciate your candor and ability to hold and host a civil discussion. It is refreshing to read respectful posts in and not in agreement with you. I know you have your thoughts on this and many I agree with. I disagree on the magnitude of this. America is honestly half assed this 15 day time frame on distancing. Finally California and New York are doing the right thing. Chicago following suite. It’s a pure numbers game and I believe we are not being strict enough. This will be a long fight and will leave many sick and dead. The economic impacted will be unprecedented. I guess we shall see. Regardless, these are scary times and wether or not the media is hyping it up, I feel there will be over 1 million deaths and multi month business shut downs. You just need to check the cdc website for daily updates. Let’s hope your right and I’m wrong.

    • Keith Taxguy on March 21, 2020 at 8:48 am

      Ben, I may have a reality check as I look back in time as a future me someday. I am a strong advocate of a free discussion; my opinion is no more valid than another’s. Fear is high at this time. I’d rather work to reduce fear even if the outcomes is truly frightening. And for those who do get and ill and die, it will not matter what the statistics say. That weighs on me constantly.

  20. Scott on March 25, 2020 at 4:42 pm

    Hi Keith. I think your analysis might be missing an important discussion about the numerator when we are talking about the death rate. Deaths will lag reported cases by a fairly large amount of time. I can’t say it any better than jacob @ ERE so I will simply copy and paste here:

    “It takes a median time of 5 days before symptoms appear. Those needing hospitalization will need around 5 days before the disease has advanced far enough to require it. If they move into an ICU, they will spend 5 days there on a ventilator. And if they get terminal, it will take 2 days to die as the virus attacks the heart. That’s 17 days between infection and death. Those who die today are thus on average those who were infected 17 days ago—around March 8th. The doubling time in deaths is 3 or 4 days using a policy of social distancing that is half-assedly followed. The harsher the policy, the longer the doubling time.

    Therefore, for each person, who dies today, there are 2^(17/4)=19 persons who will die 17 days from now. On April 10th.

    It is these 19 deaths that PRESENT measures are intended to prevent. Not the person who just died.

    Therefore everything will seem like an overreaction until you shift from anecdotal/present-mode thinking into future-mode thinking. Fundamentally, humans are just terribly bad at comprehending exponential feedback, especially if it comes with a delay. In particular, if only half measures are taken in the present, a linear-thinking mind might conclude that we’ve solved half the problem. That it’s all proportional and we can do some kind of trade off. However, given the exponential relation, it has only delayed the problem by a short time.

    In FIRE circles, it’s generally understood, that a dollar saved today will throw off way more interest than a dollar saved 30 years from now. Therefore it’s better to start now! With an epidemic, it’s the same except the timescale is not 30 years but 30 days. Being early is better than being extreme, but since people and their leaders can’t/couldn’t figure out how to be early, then extreme it is.”

  21. Ramani on April 4, 2020 at 2:19 am

    Eating your words here yet? Clients pissed off at all? Just wait till the market dips even lower….

    • Keith Taxguy on April 4, 2020 at 7:39 am

      Ramani, the response was quite good. I don’t think anyone expected me to make an accurate call on the market. Neither I, nor you, know where the market will go. My gut tells me there is more stock market pain to come, but I would never trade on that. Been wrong on that too often.

      Maybe a better proxy, Ramani is to come back in a year and in two years to see how things have progressed. It would be an interesting exercise. My ego can take it.

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