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Top Articles - Inflation and the Stock Market: Does Anyone Remember the Seventies?
I remember having a conversation in the late 70's, the heyday of commodity price booms, with a Bear Stearns broker. I said, "Do you know what moves markets these days?" He said "inflation." Back then it was the obvious answer. Today it might be the extremely high level of corporate profits that keeps the stock market afloat. But can
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
you imagine unemployment above 10%, sharply escalating prices for just about everything, and interest rates going sky high? I recall 27 years ago walking into a branch of a major New York City bank and being offered 19% interest on one year commercial paper. Can you imagine getting 19% today on a one year CD? Can you imagine paying 1
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
% on a home mortgage? The reason why I bring all this up is that now economically we have it great compared to the seventies. Many people do not realize how good it is now. It is almost scary how good it is.
We can attribute this satisfaction to the triumph of and eventual adherence to the principles of fre
We can attribute this satisfaction to the triumph of and eventual adherence to the principles of fre
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
e market capitalism (major interference in the economy can have large unintended effects), free trade, and an enlightened Federal Reserve. On the other hand, when things look most rosy and optimistic, should that condition becomes a mania, a bubble in society, then it is most prone to serious and lasting reversal. At the peak of the
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
970's and early 1980's inflationary spiral, the gold price eclipsed $800 in a mania, and there was no shortage of doom and gloom regarding stocks. Twenty seven years later, gold is only now recovering. However stocks were cheap back during these inflationary times. Price earnings ratios, a common measure of value in equities, had con
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
tracted dramatically. Stocks were on the bargain table. Few analysts were aware of the long term potential of equities at that time.
Of course, today we experience comparatively rich prices for equities, with price earnings ratios that are much greater than the distant past of the 1970's. The bull market in commodities in the 1970'
Of course, today we experience comparatively rich prices for equities, with price earnings ratios that are much greater than the distant past of the 1970's. The bull market in commodities in the 1970'
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
occurred simultaneously as the difficulties in equities. Contrarian style thinking, thinking against the crowd, finding value, is always good bedrock to successful investing. I have written about the contrarian style of investing in another article, titled Stock Market Investing and the Power of Contrary Opinion.
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
There was also a mania for Internet stocks during the late 1990's. The reason, in my opinion, why the economy and the stock market did not fall into more desperate economic straits than they did after the stock market technology bubble burst in 2000 – was Alan Greenspan's policy of lowering interest rates dramatically and pumping mo
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ey into the system from his position as Federal Reserve Chairman. The Fed also became worried for a while that the economy might sink into deflation. Had we not had a Federal Reserve Chairman with the experience and knowledge as Alan Greenspan, the result after the bubble burst in 2000 could have been dire. As during other recessions
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
and crises, providing liquidity and monetary stimulation, with a time lag, brought the economy and the stock market out of a possible deflationary condition. In other words, once again, as happens in recessions, Federal Reserve easy money saved the day.
But what about now? I think the fact that the market has done so we
But what about now? I think the fact that the market has done so we
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
l in the face of an inflationary like oil commodity boom (though oil has come down some lately), could be an indicator that this commodity based inflation scare could be over, that the stock market could sail on. Nothing would please me more! Of course in the meantime we have been trea
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ed to an oil and oil service company stock price boom, just as happened when the oil price was escalating during the late 1970's.
What about this inflation scare and the market now? Taking the other side of the market that we are going down the path to greater inflation, I say this: sometimes one needs to turn a chart on its head. J
What about this inflation scare and the market now? Taking the other side of the market that we are going down the path to greater inflation, I say this: sometimes one needs to turn a chart on its head. J
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ust as when the gold charts (a measure of reflation) at $300-$400 an ounce "looked bad" because they were showing an extended time of depressed prices for the yellow metal, it really meant that the gold price has been going through a long process of becoming undervalued for years. In other words, it became a relative intermediate te
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
m bargain. It did not really "look bad" (gold is now over $600 per ounce).
The fact that, until very recently, inflation has been very low, may indicate in some manner that the psychology of inflation is suppressed in our economy today and that as a result we are susceptible psychologically to inflationary surprises. Inflationary ex
The fact that, until very recently, inflation has been very low, may indicate in some manner that the psychology of inflation is suppressed in our economy today and that as a result we are susceptible psychologically to inflationary surprises. Inflationary ex
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
pectations are a psychological condition in consumers and companies, whereby an inflationary momentum builds in the economy because the participants see that prices are increasing, and they have the belief, even the expectation, that prices will continue to increase. Thus, prices are marked up and a cycle of increasing prices begins
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
hat is very difficult for the Federal Reserve to stop.
The end of disinflation in a substantial sense down the road would put a lid on stock prices for a while. Remember that the stock market was in a trading range between 1966-1982 during the inflation that began and built during those years. At the beginning of an inflationary eco
The end of disinflation in a substantial sense down the road would put a lid on stock prices for a while. Remember that the stock market was in a trading range between 1966-1982 during the inflation that began and built during those years. At the beginning of an inflationary eco
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
nomy, people have extra money in their pockets due to asset inflation. Their balance sheets improve, due to the excess increase in the value of their homes, etc. They become good consumers at this time, shopping at the malls with this extra money and propping up the economy. Things may look good. Prices will not have started to escal
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
te rapidly. We may be at that point now. Whether inflationary expectations take hold and build into a spiral remains to be seen.
On the other side of the spectrum, I think the current Federal Reserve Chairman, a student of the Great Depression, is savvy enough to avoid a serious deflation of assets, where most assets decline in valu
On the other side of the spectrum, I think the current Federal Reserve Chairman, a student of the Great Depression, is savvy enough to avoid a serious deflation of assets, where most assets decline in valu
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
e, including both real estate, commodities, and equities.
Given that, what is the prospect for stocks during 2007? The third year of the President's term in office is usually positive for the stock market. You cannot ignore this. It also pays to be a student of the Federal Reserve movements. Rate increases, especially discount rate
Given that, what is the prospect for stocks during 2007? The third year of the President's term in office is usually positive for the stock market. You cannot ignore this. It also pays to be a student of the Federal Reserve movements. Rate increases, especially discount rate
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ncreases, are bad for the market, and discount rate decreases are generally good for stocks. But in line with the philosophy and method I describe in my eBook, A Way to Wealth – the Art of Investing in Common Stocks, a long term view is best, with the emphasis on individual stock selection and long term mutual fund ownership
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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