Catherine Zeng

On the State of COVID-19 and the Stock Market

I have spent a significant amount of time these past few days messaging people I care about information I’ve gathered about the COVID-19 outbreak and stocks. Some people have expressed to me that they really appreciate the information I’ve been sharing, so I figured I’d gather it in one place. Most of this is information I copy-and-pasted from messages I’ve sent to people.

Also I decided to not be a perfectionist and just post things. So there will be mistakes and lack of citations, but consider these as notes that may encourage you to do your own research.


My situation

MIT has forced its students to go home. I am currently with Zack and his parents in Connecticut. We are safe, and Zack and I have not shown any symptoms. I was very worried about my friends and their families, and also about potentially being carriers of the virus since Boston is a large city and college students are in close contact with each other. This means that if there were community spread, I could be a carrier and not know it. Fortunately, this doesn’t seem to be the case so far.

Who is Affected

Here are links if you guys want to know more information about how COVID-19 works from a biology perspective. I was particularly interested in potential cures / vaccines, so these following articles are cherry-picked for that.


Really great New York Times article with cool pictures:


The takeaway is that the coronavirus binds to ACE-2 receptors, down-regulates them, and reduces their expression. That means certain conditions & people are more susceptible to it. For example, children have high levels of ACE-2 expression so they’re practically immune. People’s ACE-2 expression levels decrease as they get older. Also certain drugs increase your risk for coronavirus effects, i.e. ones that lower ACE-2 expression levels related to treating hypertension. Finally men have almost double chance of dying than women for unclear reasons (I read that it’s maybe related to women having estrogen or something to do with XX chromosomes).

Why Coronavirus is serious.

Our hospitals actually cant support the number of people that would need to be in ICU units if the virus spreads. We should be very careful. Here is a good website describing how:

My mom told me in Wuhan, many people actually died in their homes because they were unable to secure a spot in a hospital. Italy’s mortality rate is around 8% right now for the similar reason that their hospitals cannot handle the influx of sick patients.

For young people operating under the attitude of: “This is just like the flu. I won’t die from it, therefore, I don’t care if I have it.”, even if the goal isn’t to minimize the number of people that need to go to the hospital (assumming self-interest), apparently studies in China have shown that the virus can cause lung damage so that even if you get sick and survive, it can stay with you for a long time.

(Sorry I read a lot of stuff on my phone and lost the citations. Now I’m too lazy to find them.)

#flattenthecurve ( Also washing your hands is the best way to kill the virus. Hand sanitizer is actually not as effective as soap! Viruses are held together by a lipid coating. If the lipid coating is destroyed, the virus collapses.

Where it’s affected

It does appear the virus has a hard time surviving under higher temperatures and humidity (this is shared among viruses in general), at least its half-life is reduced. My mom says there are studies in china that say coronavirus survives significantly worse in higher temperatures (but no source, sorry). So I think that Boston / New York / anything on that latitude will get hit really hard, but it will leave and other parts of the country won’t be affected nearly as badly. Also good chance virus will dwindle in the summer. I am optimistic the virus will pass.

That being said, this is now a few days late, but the situation in Boston wrt COVID-19 is more dangerous than it seems. The situation in Massachusetts is the way Italy was two weeks ago. There have been around 15 cases where authorities cannot track where the virus came from. This means the virus is going through a phase called “community spread”: people who show no symptoms are spreading it. In situations like this, experts predict that actually 1% of people in a population have the virus.

New York will go through a rough time. It already has more than 600 cases and community spread is so common that authorities don’t even track viral sources anymore. I expect the situation to become significantly worse in the next few weeks.

The Stock Market

The stock market has been extremely strange as people are panicking. Some interesting news are:

  • The Fed injected $1.5T into the repo market
  • The interest rate was lowered to 0%
  • Potentially payroll taxes will be returned (I think this didn’t pass?)
  • Student debt interest is waived

Warning: I am not your financial advisor so take everything with a grain of salt. My thoughts on how to ride this out is to dump your indices (passive investment vehicles) and buy small-cap stock that are unduly punished. Dollar average small-cap stock if worried about timing.

Indices are overvalued

If you have money in indices in the stock market, you should be careful because there was a passive investment bubble before coronavirus happened and there will most likely be a correction (aka it’ll drop, but not recover).

Before coronavirus there was a “passive index bubble”. See here:


This link is also very good for explaining why the passive index bubble is a problem:


Small cap stocks

On the contrary, lots of small-cap stocks are undervalued right now.

Case Study: TLRD

Tailored Brands (TLRD) had a market cap that was lower than the amount of cash it owned (since it just acquired >$100M in cash from the sale of Joseph Abboud). This is ridiculous to me and akin to buying a cup with a $20 bill in it for $18 - it doesn’t matter how much the cup is worth.

My concern with TLRD is that they have ~$1B debt. But it doesn’t appear that this debt will be due anytime soon.

One year ago, tlrd was given acquisition offer of $10/share but they rejected because management believed stock was worth more than that. I believe the fundamental business of TLRD shouldn’t change too much, and even if sales decline in the future, that they are being unduly punished by the market.