If you’re in any biotech or pharmaceutical stock, Democrat leaning CNBC reported today that black swan Trump just tanked your position.
Unfortunately, CNBC is tied to NBC, which is tied to the Democrat party. Etrade recently dropped CNBC in favor of Bloomberg. If CNBC isn’t careful, more people will go elsewhere to get their financial news. But back on the subject of the sell-off in biotech.
Here is the part of President Trump’s speech that we were told was responsible for tanking biotech and pharmaceutical stocks today:
I can prove the sell-off in biotechs had nothing to do with President Trump’s State of the Union speech and if you watch the weekly Saturday Show, you already know this.
See the red downward line? That’s the market prediction path drawn from last Saturday’s show! The market is performing exactly in-line with seasonal expectations. Notice the inverted hammer candlestick on Monday, January 29, 2018. The market prediction path and the inverted hammer candlestick all happened days before President Trump’s speech. What is happening in biotech stocks is just normal seasonal trading.
As traders, we know from a seasonality study as well as from reading candlesticks on the chart that the pullback in biotech was already underway before the President’s speech.
Mainstream financial media groups like CNBC are sneaky about their biases. This is why if you aren’t careful, they’ll fool you into believing wrong things about reality and its impact on the stock market.
Never accept what CNBC or any mainstream financial media group has to say about “why” the market or certain sectors have pulled back. Always check the chart and see if the reason they give for “why” is correct or not.
President Trump’s Comments Are Actually Bullish For Biotechs and Pharmaceutical Companies
I challenge that the President’s comments about drug prices are actually bullish for biotech and pharmaceutical companies and here is why.
What can President Trump really do about bringing down drug prices? If he nationalized the healthcare system under Medicare he could then control the price Medicare would pay for drugs. But wait. He just eliminated ObamaCare which nationalized the healthcare system. There’s no way he’s going to bring in a socialistic healthcare system because it’s opposite of what he and his party believe is good for a free market economy. What else could he do? Would he order the Department of Justice to invade private businesses and seize their equipment and records and hunt for price gouging and maybe collusion? That would be a communist type economy and again is against what he stands for. He wants to reduce the size of government and reduce regulations, not create some vast government bureaucracy with the power to attack biotech and pharmaceutical companies at will. Again, what can the President do to bring down drug prices?
The truth is we already sort of know what he’s going to do because he’s already started doing it.
The President wants drug prices to come down so he calls in biotech and pharmaceutical business leaders and asks, “How can we get the price of drugs to come down?” The business leaders tell him what they need to lower drug prices such as quicker FDA approvals and less red-tape. President Trump puts in a new head of the FDA and tells him let’s eliminate time causing procedures and loop holes and let’s get FDA approvals out at a faster pace. This means that now is a great time to buy biotech stocks because FDA approvals or denials are going to really speed up. If costs are lowered, profit margins can still expand as drug prices come down.
It takes 12 years, on average, for a drug to go through clinical trials to your kitchen cabinet. If the President listens to business leaders and can cut that time in half, down to 6 years, drug prices could drastically fall. Think about it. A company has to dilute its shares as it waits years for a drug to progress through clinical trials and then FDA approval. The company goes in massive debt over this time to both lenders and shareholders. When it finally gets approval, it needs to make up for those 12 years of accrued costs. Cut that down to half the time, 6 years, and the cost of drugs will drastically come down and still preserve profit margins.
That’s just FDA approvals. Consider all the other ideas business leaders are giving the President for what they need to lower the price of drugs. These companies have the President’s ear and the President is behind them and wants to reduce their costs so they can sell drugs cheaper while preserving profit margins and shareholder value. That’s incredible. When was the last time we had a President asking biotech companies what he can do to help them lower their costs? Try NEVER. When you think about it from this perspective, an argument could be made that biotech and pharmaceutical stocks are really a screaming buy right now.