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Biotech / Medical : Biotech Valuation

CRSP 52.51

+2.7%

Nov 14 9:30 AM EST

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To: Ian@SI who wrote (9915)	1/5/2004 4:04:15 PM
From: Biomaven	Read Replies (2) of 52153

Time for a look at some macro-economic trends: The dollar's fall continues, so far without roiling the financial markets as much as the doomsters had predicted. Should help pharma a little as well as biotechs with products sold in Europe. My play here as been a European bond fund (BEGBX) which has done nicely this last year. Hard to tell if the party is nearing its end, though. Broad money supply numbers are currently falling fast. Not sure anyone (certainly not me) understands why or what the implications are, but it can't be good for equities. So presumably the play here would be to short the broad market. The housing boom and attendant mortgage refinance boom look like they are reaching an end. This is what's been holding up the economy in the last year or two, although my sense is that more recently there's been something of a transition to business spending as the driver. I would guess the plays here are short homebuilders (although they are cheap on a current earnings basis) and perhaps short retail (something like Home Depot or Sears perhaps?) Short-term rates look like they will stay low for a while longer. Eventually the weaker dollar and the recovery must start having some effect on inflation (although there has been little indication of it as of yet), at which point the Fed will likely be forced to raise rates some. (But how these very low interest rates co-exist with a declining money supply is something I'm quite confused about). Overall I can't see this coming year as being too good for equities overall. I'd be happy to be proved wrong, though. Thoughts and comments welcome. Peter

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