To OTC Journal Members: 
 

A New Idea: A New Direction

If you want some background on the potential for Alternative Energy companies to become the next Big Bubble, read today's edition.

Stand by. This weekend's new idea is in the Alternative Energy space. I believe Alternative Energy will be the next bubble, and it's time to look at some off the radar companies before the valuations get unreasonable.

You have to be willing to shed the pain of this ongoing Bear Market and US recession, and recognize it's time to move on to some new strategies where the money is flowing.

I doubt companies like this weekend's idea will spend much time off the Wall Street Radar screen. Money will be flowing in this direction, and it will flow to companies with 100% growth rates and 400% earnings growth. I've found it, and no one knows about it- yet.  Watch the video after the close on Friday by going to www.otcjournal.com, and read the report I will publish on Saturday morning.
 

The Next Big Bubble: Alternative Energy

According to author Eric Janszen, a financial bubble may be defined as a "market abberation manufactured by government, finance, and industry. It's a shared speculative hallucination, followed by a crash, and a depression". Beautifully put Eric.

There have been many bubbles throughout history. In today's world, they are forming and popping much faster than in early generations. Going back in history, the first "bubble" of the modern era formed post World War I. Manufacturers were marketing products developed for the War- the radio and refrigerators were two big consumer durables of the time. The rising middle class had the income, but not the upfront money to buy. To meet the need, the banking system delivered a new product- the Installment Loan was created, and it fueled a decade of prosperity- until 1929.

It would take World War II to get us back on track. Armed with the a new economic philosophy authored by John Maynard Keynes, it was thought the government must increase spending and cut taxes and interest rates to re invigorate the economy. The 50's started us off, but the 60's was a decade of prosperity thanks to the Keynsian philosophy.

However, this reflation led to inflation when President Richard Nixon dumped the Gold standard and in essence defaulted on the asset backing the US dollar. This led to a decade of really nasty inflation. Commodity costs, including oil, skyrocketed around the world, and the Federal Reserve was forced to peg interest rates in double digits- lines were seen at the gas pumps, and the 70's were tough decade.

Prosperity returned in the 80's, fueled by a new mega bubble which is still inflating as a backdrop to all other bubbles. Deficit Spending was invented out of our negative balance of trade. Oil producing and manufacturing nations (then Japan, now China) were on the receiving end of billions from our trade deficit, and repatrioted the capital by buying our government bonds and fueling our ever growing deficit. This bubble is still growing in the background, and offers an ominous potential crisis years from now.

Enter the 1990's- the years of the growth of the Internet and major technology transformations. The PC, wireless communications, and the internet all exploded simultaneously. The IPO revolving loop- buy the IPO, sell the stock- buy the next IPO, created a monster bubble, pushing the NASDAQ COMP to over 5,000-  a level not likely to be regained for another 5 or 10 years. Who could forget Henry Blodgett, Merrill Lynch's post boy for the internet. Merrill Lynch had the worst record of any underwriter in internet stocks.

The NASDAQ's hyperinflation had a few windfalls for the geniuses in Washington. Tax revenue and prosperity were strong. The Clinton Administration, absent a war, committed little capital to Defense, allowing for a budget surplus - deficit spending was not required. Investment bankers were making gazzilions and funneling funds to politicians through campaign contributions.

Here comes year 2000. Y2k was over without the computers shutting down Planet Earth. The NASDAQ blew up to the absurdly high level of 5,000 plus, and all the dot coms that were priced on Eyeballs Per Share were repriced in nine months based on Earnings Per Share. Of course, there were no EPS, so values cratered to reflect reality.

The religious zealots of the Dot Com era abandoned their religion as quickly as they adopted it, and a blood bath in the markets ensued. Before the bleeding could stop, the American investor was hit with 911 (7 years ago today), which threw the economy into a tailspin.

Shortly after 911, the regulators started learning there were other excesses fueled by the magnificent market of the 90's- fraudulent accounting by a series of larger companies came to light, led by the Enron debacle. The Enron collapse started a chain of investigations, and a number of smoke and mirrors companies went down the tubes. The politicians who gladly accepted massive contributions hunkered down and created a terrible piece of legislation in typical knee jerk fashion- Sarbanes Oxley was created out Enronitis, and today it generates more wasted expense at public companies than you can possibly imagine.

The American investor, shell shocked by the dot com demise, 911, and Enronitis, turned back to hearth and home as a safe haven for hard earned investable dollars. Real estate was back in vogue.

Over the course of 2001 to 2002, Greenspan's FED lowered the discount rate from 6% to 1.24% to stimulate economic activity. Guess what- it worked on residential housing. Over the course of 2 years, the monthly payment on a $250,000 mortgage become the same payment a home owner could make on a $500,000 mortgage. The housing bubble was born.

There was more credit than housing, and builders stepped in to create massive amounts of supply. As the housing bubble grew between 2002 and 2007, mortgage finance became more and more creative and competitive, leading to the securitization of mortgage pools. Of course, Wall Street stepped up and pounced on these new products, and generated billions in fees before the mortgage/housing bubble burst.

The bursting of the mortgage bubble killed venerable Bear Stearns, and now Lehman Brothers (NYSE: LEH) is flopping around like a newly hooked fish in the bottom of the boat. If Lehman is lucky enough to get thrown back in the water before becoming too oxygen starved, it will survive. It could also die in the fish well, along with a number of other smaller institutions yet to be named. Financials will trade poorly for sometime.

The most current Bubble which has recently burst was fueled by International commodity demand. Gold and Oil were the poster boys for this latest bubble, with all sorts of commodity names joining the party.

I love looking at this chart of oil and fondly remembering a CNBC interview when oil eclipsed $140 per barrel. The talking heads on CNBC trotted out this bozo who had dozens of well thought out statistics projecting oil was a slam dunk for $200, all based on pure supply/demand dynamics. Talk about a shared speculative hallucination.

What he forgot was common sense. Every parablolic rise like the one you see on this chart comes to an end. It is simply unsustainable. A wise old commodity trader once told me the best cure for high prices is high prices. When the price of anything rises high enough, eventually demand subsides. For oil, demand is subsiding on a global basis right now, and the price of oil is plummeting. It might go to $200 someday, but not anytime soon.

Oil and gold are getting clobbered, and the dollar is firming. Our dollars buy more stuff internationally, which is good for us, but maybe not so good temporarily for the behemoth multi nationals. The Euro broke the $140 support level yesterday- look for further strength in the dollar. Buy UUP if you want to own the dollar. Take a look at that chart.

A lot of money can be made by identifying the next bubble, and being positioned in good growth companies ahead of the crowd. Here are some of the common characteristics of a bubble:

• Wall Street must have an appetite for financing trillions in new securities for these companies
• The sector of the economy must have young companies that have been formed and are growing as the last bubble deflates (see residential real estate, mortgages, and commodities)
• Legislation guaranteeing favorable tax status must come out of Washington
• The industry needs to be a media darling- it must be familiar to everyone watching TV and reading print and internet

Gore now works for Kleiner Perkins, the legendary VC fund who financed Amazon and Google. Energy security will be a huge issue in the coming Presidential election.

McCain and Pallin are promising new energy sources through drilling, geothermal, renewable, and solar. Obama is promising to deliver 5 million"Green Collar" jobs over the next 10 years.

I believe Alternative Energy companies are the next big bubble, which is just starting to inflate.

It's a new era in the market. Time to turn the page. We're still in a Bear Market, especially for US Based companies. Older ideas who depend on US consumers to grow and proper will continue to struggle a bit longer- perhaps the market will be ready to start pricing in the end of the recession in October- the Bear Killer month.

I'm trying to get out in front of the next big bubble- Alternative Energy. In the early stages of a new bubble, valuations are reasonable and offer a lot of upside.

This weekend's new idea operates outside the US where there's no recession. They've been around since 1995, but their business has simply exploded over the last two years as rising energy costs have driven demand. It looks like 110% revenue growth is attainable this year, with much higher profits- that's right- real EPS.

Here's how this will work. After the market closes on Friday, simply go to www.otcjournal.com and watch a 12 minute video. Make the decision to invest 12 minutes of your time with an open mind.

If you like the presentation, read my comprehensive profile on Saturday, and decide for yourself. I know the last 9 months has been very hard on some of our older ideas. We're in a recession and a bear market.

I'm making the adjustment and you need to as well. If you can cast off the baggage of the last miserable nine months, you might just make a lot of money. Check out the content, and decide for yourself.

Home Page : www.otcjournal.com
Email Questions or Comments To: editor@otcjournal.com