Why Biotech Stock Prices Ultimately Depend On Low Inflation

Published: May 23, 2017

Ever notice how whenever government subsidizes an area of the economy, cost skyrockets? We have been seeing it with education, funded by government student loans. We saw it (and are seeing it again) with housing, funded by government-sponsored enterprises like Fannie Mae (FNMA) that bought all mortgages. We see it with health insurance, which even before Obamacare the government tax setup virtually mandated that employers provide their employees.

And we see it with drug prices, as government programs like Medicare and Medicaid cover prescription drug costs. Is it any wonder that when the government pays the bill, costs rise? Seen this way, investing in big pharma stocks, or ETFs like the iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB), is simply a way of getting some of your taxes back by being on the receiving end of Medicare and Medicaid.

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