Replies to post #161199 on Biotech Values

[biomaven0]

Jbog is trying to argue that the risk-free interest rate is artificially low and shouldn’t be used in your valuation model.

The rate is what it is. If someone thinks it will pop in the future, then the right combo is long MRK (or the blue chip of your choice) and short the long bond.

I think the correct comparison is perhaps the delta between the earnings yield and the blue chip long bond yields. Be interesting to see that over time - I suspect that there has not been a bubble when that delta is positive.

Peter