Jason and Don, some of the money to buy biotechs is coming out of the stocks that are being sold, which is most stocks, as Jason's article noted. In the big picture, the money is coming from an increase in money supply, created by the Treasury and/or Federal Reserve Board, and from investors in other countries with declining currencies and economies.
The "stealth bear market" thesis has been current for a year and half. As investors have come to enjoy 35%+ annual gains, they have come to expect such gains. So they rotate their money into stocks that give what they expect. Thus, they pile into Cisco and Qualcomm and so forth.
In the last few months, investors have seen that biotechnology may be a new horizon in which huge growth will take place. Gains may look outsized right now, but they follow a protracted period of decline, that has largely coincided with the term of President Clinton. In those seven years, MaBs have finally become approved treatments, reverse transciptase and protease inhibitors have made HIV a treatable condition, structure-based design is a reality, combichem is everywhere, lab functions can be done on microchips, and the Human Genome Project is nearing completion. Disease is much better understood on a bio-molecular level. Best of all, each advance, in tools, genomics, biology, etc. amplifies all the other advances as each technology is applied to other areas of study.
And with all this progress on so many fronts, AMEX Biotech Index is only 150% higher than it was seven years ago on the day of Clinton's first inauguration. Sand dunes look tall until you see the Rockies! |
