Biotech Values

[bladerunner1717]

I respectfully disagree with the premise. An economically irrational valuation—e.g. bond prices so high that they generate a negative yield—constitutes a bubble, IMO, regardless of the accompanying emotions.

The problem with your thinking here, Dew, IMO, is that your notion of economically irrational valuation is highly subjective. One man's rationality is another man's irrationality.

You want to argue from the standpoint of rational actors in a more or less rationally efficient Market, which contradicts what you say at the bottom of many of your posts, BTW. But behavorial economics would take those "accompanying emotions" as part of a fundamental analysis of underlying conditions of the Market. Hence, your rather casual dismissal of the "accompanying emotions" ignores a fundamental component of all Markets.

And besides the arguments about the role of investor psychology in the Market, I think there are solid fundamental economic reasons that justify the low bonds yields we see today. And if Gary Shilling is right about the state of the Japanese economy--see his 5-part series last week on Japan--then we could see a flight out of the yen into U.S Treasuries, driving yields down even further. And then there is always the possibility of QE3.

I agree with the PIMCO boys, Gross and El-Erian, that low-yields are here to stay for a long while.


Bladerunner