The Last "Small Tech Prospector" Farewell Newsletter
Dear Subscribers and All Nanotechnology.com Members,
In my opinion, a VERY interesting and informative letter follows.
Important Housekeeping First – Please Read
This is the last issue of The Prospector. This is very energy consuming and we are going to focus our team on our core competency, which is taking extraordinary, early-stage small & advanced technology (and precious metals mining per my 20+ years experience) companies public on the Toronto Venture Exchange. We are staying in contact, via special Insight letters with all Nanotechnology.com members who inform me that they’ve read our first four letters and specifically WANT to receive these insights focused on small & advanced technology INVESTING. (IMPORTANT NOTES: Please visit BlogNano at the bottom left of our homepage at www.Nanotechnology.com and read the October 7th posting thru the November 19th posting to see if you want to join us. If you have already let me know by email to darrell@nanotechnology.com, you do not need to let me know again; if you have not, you need to do so right away. This is the last time you will be reminded about this offer to explore working with or utilizing our team, the executives and Scientific Advisory Board of The Nanotech Company, LLC. Gold Members who are due partial reimbursement for subscriptions will be mailed them over the next month. From now on, the ENTIRE SITE at Nanotechnology.com is FREE, including the Archive of The Small Tech Prospector and our Sci/Tech Commentary)
Overview of the Stock Market and Nanotechnology and Small Tech Stocks
We see the stock market (as defined by the SPY) as trapped in a wide, multi-month trading-range between 140.65 and 157.55. Until the SPY has two consecutive closes above or below those numbers the market is likely to do very little. Once the two consecutive closes occur, look for fireworks. If the market climbs the wall of worry out the top we’ll likely see 167.50+ fast. If, on the other hand, the downward water-drop torture that began in mid-October continues and we break to the downside of the range, a true Bear Market will take the bottom down below 126. Watch those exact, defining trading-range numbers closely; given how they were generated (with my most important, proprietary topping and bottoming patterns invoked), they are as close to a sure thing as you get in the markets.
Small & advanced tech stocks are more inclined to decline in 2008 or rise less than the typical stock. A look at a chart of The Nanotechnology.com Small Tech Index TM or any other shows these are clearly weaker than the SPY (the 60 week chart is a good one to use for this).
As you may know, we follow 136 international stocks that meet our criteria. 30 of these stocks are in our Index. Another, additional 45 stocks are followed, tick by tick, at Nanotechnology.com and can be quoted and charted next to and below the “Get Quotes” button at http://www.nanotechnology.com/stocks/?ticker=index. These 75 stocks are “real”, interesting enough and have large enough market caps and trading volumes to be considered the core of this space from time to time.
As of today, we can put all 136 stocks into 4 categories for 2008:
78 we determined to be “STAY AWAY” stocks. - These are companies that run from scams, to “science projects”, to decent companies with too illiquid stock trading, stock promotions to companies in long-term downtrends.
18 we determined to be “SELLS”. – These are stocks that we would likely sell or sell short in 2008. A good (but very general) way to describe them would be: “Give me their high price for 2008 and I will be VERY happy at their low price in 2009/10”. No reason to offend any company that may become our client by naming them, (hint: they are the higher cap stocks in the 75 we quote that are not mentioned as “buys” or “no opinion” below).
On 8, we have “NO CURRENT OPINION”. We believe these stocks are at critical technical or fundamental junctures and we cannot “call” at this time. They include: ACCL, COHR, ELN, NNPP, PCOP, TSRA, ULU and VITA.
32 make our 2008 “BUY” list. A good (but very general) way to describe them would be: “Give me their low price for 2008 and I will be VERY happy at their high price in 2009/10”. The list includes: A, AATI, ABI, ABII, ACTL, ADI, AFFX, ALNY, AMAG, ANSS, BNT, BPAX, CCMP, CPHD, CYMI, FEIC, FORM, GBT, IPGP, ILMN, ISIS, IVGN, KOPN, LUNA, MTSC, NVEC, PANL, RSTI, SPIR, SRDX, TMO and XLNX. (I found it interesting/strange that about a third of them begin with the letter “A”.)
The Track Record Results February 28, 2006 to Today
There is one open position left in the Track Record
We are long 1500 BNT at 12.69 carrying a sell stop loss at 11.99 STP GTC. Raise the stop immediately to 12.39 STP GTC and again to 12.49 STP GTC on any trade at 12.86 and again to 12.59 on 13.01. Once BNT trades at 13.24, carry a $0.25 trailing, protective stop until stopped-out.
For all closed positions, the Track Record is UP $4,051.
While not a tremendous amount of money and we spent far too much time trading too much, we are very proud that we achieved this result in such a choppy, sideways to down market.
In the final analysis, these profits were made while investing a daily average of less than $30,000 and with less than $1,000 at risk on a daily basis due to our stop loss orders. On a risk-adjusted to market risk basis, our profit is extraordinary.
Again: 7 Reasons Why Our Return is EVEN better than it looks!
- Risk-Adjusted returns are more important than just knowing the profit numbers and percentages. On that basis, I believe our returns were/are exceptional.
- We had NO POSITIONS in the market from time to time. For those days the risk to our capital was ZERO. Everyday with zero risk is “better” than a day with ANY risk, much less with “market risk”.
- We had total positions totaling less than our $100,000 notional invested funds on MOST days. On those days our risk was lower than having $100,000 invested in any nanotech index.
- Stop Loss Orders occasionally reduce profits (as when one is “stopped out” and the stock then soars to a profit or then declines sharply as with a short sale), BUT they ALWAYS help LIMIT RISK. An investment in “the overall market” or simply taking a continuous, passive position in a nanotech index does NOT have this protection. We ALWAYS had stop loss orders for our Track Record Trades at ALL TIMES.
- Short Positions were a significant part of our approach and gave us HEDGE features, which all professional investors and economists agree lowers aggregate risk as compared to a long-only strategy.
- Nanotech Indices (including are own) were DOWN an average of 20% during the timeframe. ANY profit in these shares was a coup.
- Most of our non-Track Record recommendations made profits or saved money (often lots of money) for our subscribers – and we didn’t even count them!
The Outlier Predictions for 2008
Every December/January we predict economic or market events that are so far off the radar that no one else is even talking about them. By the end of the year they seem oddly “conventional” and reflect the then consensus opinion.
Last December, as the market was booming along with no end in sight we said:
“The odds that the top will be made between now and July 15, 2007 are 75%. So, there is a 90% chance that that very important top has been or is about to be made in the not too distant future.”
And
“Remember, there has not been a 10%+ decline in the stock market (SPY) since early 2003. There is usually one EVERY YEAR!”
Result: the mid-July high at 155.53 on the SPY was only very slightly below the 156.50 closing high for the SPY for the entire year, and we found 140.66 on the SPY in November, almost exactly 10% lower (the Dow did drop 10%).
Then we had 3 other predictions last December:
“Here are 3 for 2007:
Housing – Despite what you are hearing recently on TV, you have seen NOWHERE NEAR THE WORST OF IT! Although there will be no general nationwide “crash”, for Miami, Phoenix, Las Vegas, San Diego and 10 or 20 other places - - especially condos . . . watch out below! “You ain’t seen nothing yet”. The rest of the country will be mostly down 5-15% more from here over the next 1 to 3 years.”
We could not have been more “right”.
“China – No room for upside surprise means a top is in place. Look, China is going to seem like it’s booming for decades, but . . . Look for this story to catch on big within 18 months, as cracks in their banking system, market transparency, corruption and speculative excess take center stage for a couple years.”
It took until late October for these stories to gain traction, and it took the absurd valuation of Petro China to catch the limelight, but the “cat is out of the bag” – “the bloom is off the rose”, and any number of other clichés. Chinese stocks are not going to be the place to be for some time to come, but they will be great long-term investments again in a couple years.
“The US Economy – still at risk for a mild recession to start in first half of 2007. Assuming it avoids that harsher environment, still look for the slowdown in growth to actually accelerate. Everything important, that an economist measures, will be worse or trending even lower than now by September 30, 2007 and be clear to all but the most starry-eyed observer.”
Again, hit the nail on the head! It’s actually hard to remember that this wasn’t just a minority view in December 2006, it was a view held by less than 5% of investment professionals and economists.
Our 2008 Predictions
#1 – The leading market sector will be junior precious metals mining shares. Historically, mining stocks continue in bull markets for 2 to 4 years AFTER a top in the metals. Given the very recent highs made in gold and silver, we expect 2008 to be a great year for these speculations with rallies topping in March-May and again near the end of the year. I believe they are going up, HUGE. Almost all are traded on the Toronto Venture Exchange (Americans can buy them easily through Schwab, E-Trade, et al.), and 4 that I own and like a lot are Animas Resources, Rare Element Resources, Freegold Ventures and Pediment Exploration. We would accumulate them in the seasonally weak December timeframe at current levels.
#2 – Unfortunately for us all, the housing sector is going to get MUCH WORSE THAN EVEN THE PESSIMISTS BELIEVE. Sub-prime doesn’t begin it. High end houses will collapse, too. (You don’t think someone who could only afford a $3.6 million home in 2004 stretched and bought a $5.2 million house with less money down and an adjustable mortgage? . . . tens of thousands did that. Hundreds of thousands bought $1.2 million dollar homes on the same terms when they could only “afford” $875,000 places.) Resets, foreclosures, resistant buyers and lenders and empty homes can literally AVALANCHE values downward. This is not going to be pretty, and we do not buy the “down 4-8% in 2008” consensus, at all. Do you live somewhere like Tennessee, Missouri or Wisconsin and think you’re immune? Think again. In 1987 a very nice, 3500 sq ft, $575K home in California (or Greenwhich, CT or Potomac, MD or similar), on a great lot, in a great neighborhood, with great schools and a great view cost $200K for the equivalent in Springfield, MO or similar. In 1997, the same house was $750K in CA and $450 in MO. Today, asking prices on the house in CA would be $1.3 in CA (way down from the 2005 top) . . . but $1M in MO . . .see the trends? Remember: The whole world wants to live on the beach in southern California. Any individual may not, but that doesn’t make it less true. Question: when the house in CA is $950K and the house in MO is $850K which will “win”? And that’s why the whole country is sunk (for a few years). FL, AZ, NV and CA are not going to get less desirable . . . in fact, they are going to get more desirable, as their prices appear to be bargains to the rest of the U.S. in the 2008 to 2010 timeframe.
#3 – The U.S. dollar will do VERY LITTLE. This is an outlier prediction for currencies, as some are looking for downside acceleration to a crash, while others believe the dollar has bottomed and 2008 will be a strong year. Despite substantial interest rate cuts in December 2007 to at least June 2008 (which will accelerate faster to the downside outside the U.S. in 2009 and 2010), further declines in the dollar will be tempered by parity issues (while large differences can be sustained for quite a long time, a nice dinner for 2 in London for $300, begins to make no sense at all if the same dinner in NYC can be had for $125!), the fact that the bear market has been going on for MORE THAN SEVEN YEARS, and the slowdown of the world economy. The upside for the dollar will be equally limited by surging gold, commodity and oil prices, set to resume trends in 2008 and weekly chart trends which fully support the bullish case for other currencies, while allowing a “breather” (general weakness) right here, that could easily last 6 months or more. Look for the dollar to pretty much stay in a very tight 5-9% trading range against the major currencies for the entire year.
So, folks, I hope you’ve enjoyed it, but this ride is over.
Do send me a direct email to my personal address if you want to stay in touch on “small” and advanced technology investments and investing, and my insights into what is right and what is wrong with how this game is traditionally played (incorrectly) and how our firm is blazing a trail to the most efficient model for all participants in nanotech and other advanced tech finance.
Best regards and Happy Prospecting!
Darrell
Darrell Brookstein
Managing Director
The Nanotech Company, LLC
Nanotechnology.com
3525 Del Mar Heights Rd. #345
San Diego, CA 92130
858 794 0848
(IMPORTANT NOTES: Please visit BlogNano at the bottom left of our homepage at www.Nanotechnology.com and read the October 7th posting thru the November 19th posting to see if you want to join us. If you have already let me know by email to darrell@nanotechnology.com, you do not need to let me know again; if you have not, you need to do so right away. This is the last time you will be reminded about this offer to explore working with or utilizing our team, the executives and Scientific Advisory Board of The Nanotech Company, LLC. Gold Members who are due partial reimbursement for subscriptions will be mailed them over the next month. From now on, the ENTIRE SITE at Nanotechnology.com is FREE, including the Archive of The Small Tech Prospector and our Sci/Tech Commentary)
GENERAL TERMS*
No investment opinion or other advice is being rendered on any stock or company. The employees of The Nanotech Company, LLC will not trade in the shares of any company recommended, long or short, for at least 48 hours before and 48 hours after any buy or sell recommendation is made in such shares. You may wish to pro-rate our recommended share amounts to the actual size of your account. All of the trading stocks we recommend should be considered highly speculative; you can lose some or all of your money.
We assume an investor is using a $300,000 speculative, cash trading account for purchases, short sales and options. We do not take into account commissions or tax consequences in making our track record recommendations. Our track record of every trade will be carried in every issue; it is hypothetical as there is no account that will actually carry every trade as posted. We will employ our professional opinion to establish entry and exit prices for the track record based on actual time and sales of stocks on exchanges or over-the-counter. This letter is focused on sharing trading and investment ideas generated by Darrell Brookstein's proprietary technical, pattern recognition methodology, combined with his interpretation of inputs garnered from nanoscientist consultants to The Nanotech Company, LLC . No investment opinion is being rendered on any stock or company. Please be responsible for understanding the terms and vocabulary of stock market investing. This methodology uses Stop Orders and Stop with Limit orders extensively. Here is an unaffiliated glossary site that may be useful: http://www.traders.com/Documentation/RESource_docs/Glossary/glossary.html
(See the Disclaimer for more.)
Disclaimer
The Nanotech Company, LLC is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. The Nanotech Company, LLC does not purport to tell, or suggest to, readers which investment securities they should buy or sell for themselves. Readers should always conduct their own research and due diligence and obtain professional advice before making any investment decision. The Nanotech Company, LLC will not be liable for any loss or damage caused by a reader's reliance on information obtained in any of our newsletters, special reports or on our web site. Our readers are solely responsible for their own investment decisions.
The information contained herein does not constitute a representation by the publisher or a solicitation for the purchase or sale of securities. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in our newsletters or on our web site should be independently verified with the companies mentioned. The editor and publisher are not responsible for typographical or other errors or omissions.
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