The Current Situation

Memos and updates regarding market conditions in a pandemic age. 

We said in our year-end letter, sent to investors in late-January, the populus was underestimating the risk of pandemic (brought to our attention in this note)


Most have mistakenly presumed pandemics were a problem only for medical and healthcare professionals. This is true in terms of treatment and vaccination. But the compounding rate of spread with lagging data was inherently a mathematical question. Further, the possible harm (given so many unknowns) was a complex math problem requiring advanced understanding of probability and cascading effects in complex, emergent, non-linear (non-normally distributed) systems. Few respected the warnings of mathematicians, including epidemiologists and virologists. 


So many have been reluctant to accept the reality, relying on the comfort provided by "confirmed cases." Clearly COVID-19 cases have been increasing at a factor of 4-5x per week (as of early-March 2020). Testing in the U.S. has lagged by 2-4 weeks conservatively. Hence, actual cases in a given city or for the country as a whole are roughly (confirmed cases)*x^n weeks. For example, 10 currently confirmed cases today would imply actual cases are at least (10)4^2 = 160

Below are links to four recent memos sent to investors on the rapidly escalating pandemic and market impact. We have also included other important resources we believe any serious market participant will want to fully understand. 


If you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder and you deserve the mediocre result you’re going to get.

— Charlie Munger