The End of the Nano Stock Selloff and How Solar Shows Nano the Way

When I started writing Nanotech Fortunes: Make Yours in the Boom; Winning Strategies in September 2003, two months before the President signed the National Nanotech Initiative, I thought the selloff in small tech stocks would not abate until sometime between mid 2006 and the end of 2008. When I finished writing in May of 2005, I had seen nothing to change my mind.

Today, whether you use the Lux Index or the Merrill Lynch Index (or even the soon to be "king of them all", the developing Nanotechnology.com International Small Tech Index) you can see the clear top in December 2004 followed by a choppy, downward trend through yesterday. I STILL don't see the end in sight until psychology and the natural market cycles climax in the mid 2006 to late 2008 timeframe.

Somewhere in there, I still contend we will begin a major bull move.

People ask me all the time (even some of the same people who asked me the same thing in 2001, 2002 and, again in 2003), "Why, Darrell, with all you know about the markets and your incredible long-term optimism about nanotechnology are you so 'bearish'?" My answer remains the same: "Too much misplaced optimism; too much "crying wolf"; too much money blown; too little return/too much delayed; too many deals mismanaged; too many companies NEEDING NEEDING NEEDING . . . In my professional experience, (which sad to say includes the pre - and post 1974 period, the horror show of 1981/82, the '87 crash and multiple, rolling bull and bear markets in tech, mining, oil and gas, biotech, etc. over more than 3 decades) these things take a long time to wash out. Enthusiasm dies hard, and we are just in the 3rd or 4th inning of this death." - to mix metaphors and confound grammarians.

Sad, but true: A lot of weak deals have to go "bye bye" and a lot of investment has to go to money heaven.

The September 19th Barron's has a cool article by the usually very interesting Eric Savitz on the coming commercialization of solar energy. The article is interesting to us for two reasons: First - in a section called "The Next Generation" Savitz lists private, small tech standouts, Konarka, Nanosolar, Miasole, COLED Tech and CSG Solar AG in a sampling of VC funded solar deals. Second, and more importantly, he points out that BP, Sharp, Shell, and GE, among other GIANT companies, have divisions that are the major players in solar. How and whether these divisions are spun out by the majors to play the solar card and increase shareholder value will hold tremendous predictive value in determining how and whether this will play out in nanotech.

Will IBM, GE, Chevron, Intel, et al. spin out subs and divisions that are nano, microfluidic or MEMs-focused today in the future? Watch how this goes in solar very carefully. If it happens successfully in solar over the next 1-3 years, count on it for the small tech divisions in 2-6 years.