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More election risk


HOW long do I have to wait for a resolution to this?


In an online Barron's piece discussing Thursday's rally, Morgan Stanley analyst Jami Rubin echoes some of the same themes I wrote about on Friday. Ms. Rubin focuses on foreign importation, which I addressed, and a removal of the prohibition on government's ability to negotiate drug prices, which I did not because I don't think it is as significant a risk to the sector even if it is one of the more likely changes under a Democratic administration.

When the market feels ill, we usually get a rotation into drug stocks. I read several stories over the last few weeks quoting people who were surprised at the lack of rotation into this group. Election risk is the likely reason rotational dollars are going elsewhere.

Ms. Rubin concludes by recommending Pfizer (PFE:NASD) and Wyeth (WYE:NASD). We're about education and not recommendation here at Minyanville. Furthermore, I'll be the first to admit I understand trading dynamics of dev-stage biotechs much better than I do trading dynamics for big pharma. But, I'd be remiss if I didn't point out the issue of election risk throws a big wildcard into any growth forecasts for pharma sales. Caveat emptor.

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