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Biotech / Medical : Biotech Valuation

CRSP 56.87

-2.3%

Dec 5 9:30 AM EST

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To: Biomaven who wrote (3449)	4/18/2001 1:14:28 PM
From: IRWIN JAMES FRANKEL	of 52153

Hi Peter, I agree with your comments. Discretionary business spending (capital and other) had fallen off a cliff. Confidence was shot. The Fed needed to act and was behind the curve. That said there are limits to how fast they can respond (cut rates) once they start. On that score they have done a good job - just started too late. "I'm somewhat concerned that the long bonds (initially at least)reacted negatively to the move." This is just a reflection of the fact that the prior cuts are starting to take effect. The steepening of the yield curve is a sign of the economy responding to the cuts. The restoring of needed liquidity is well on its way to turning the economy around, with the normal lags still taking effect. I do think that we will see a decline in real (not nominal) GDP for 1Q when the figures come out on the 27th. But with this latest cut I feel a second quarter of decline is less likely. While I would like to see fed funds rates come down further, the steepening of the YC suggest to me that we will not see the 3% to 3.5% that Bill Gross of Pimco had suggested would be the bottom. 4% seems more like it to me. ij

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