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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

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

To: Biomaven who wrote (3449)	4/18/2001 2:26:08 PM
From: aknahow	Read Replies (1) \| Respond to of 52153

Continued Fed fund cuts are many times seen as bearish for the long bond. Great for shorter term instruments. Beyond a certain point lower short term rates beget worries about inflation. None of the previous means that rising short term rates are good for long term bond but there is a point where a serious increase by the fed can be seen as good news for long term bond buyers as it means the fed is serious about stopping inflation. <g> Not that it matters but I agree with you about everything in the last paragraph. Biotechs have to invest on the short end and these rate cuts mean serious reductions of interest income. So serious that it may serve as an incentive for those that were going to buy another company or partner with cash milestones to move a bit faster. IMO it also means that the window on new financing is not shut that tightly as very low rates on safe investments lead to increased willingness to accept risk.