Biotech Values

[Rocky3]

“This time is different!”, which is an assertion that has accompanied every financial bubble in recorded history.

Not sure that I agree, since I too am not sure that the current rates are "too low." Most of us have lived in a high rate environment. Prior to the early '50s, bond rates were always less than dividend rates, due to the higher risk of the dividend payments. That theory was over-turned by the common expectation that long term rate of growth was better with stocks and that "total-return" investing justified buying stocks that did not pay significant dividends. That expectation is now in question given the last 12 year total returns.

It is very possible that the equity "bubble" that started in the 50s is just being burst. Having invested in the 70s (and reading a lot of the history of the market prior to that), p/e's in the double digits seem quite high to me. The "bubble" of the 90s clearly has distorted the recent historical numbers relating to p/e's. I see no reason that stocks growing at 6-7% (double the GNP growth rate over any long term period) should have a p/e over 8. Historical they have not (at least not 'til the late 80s).

Banks, insurance companies, manufacturers, etc. should not have premium valuations.

JMO.