This was the early method of performing a lobotomy. And just 50 years ago, they were carried out not only on severely mentally ill people, but also on moody teenagers, or housewives who’d lost their enthusiasm for domestic work. Seriously. Over 40,000 Americans were lobotomized, often with catastrophic results.

Thankfully, they’re a thing of the past. But it made me think about how medicine has changed over the years and what practices were once acceptable. Just a few hundred years ago, for example, you wouldn’t have questioned the “doctor” for putting leeches on you any more than you do today for prescribing an antibiotic.

What other common medical practices will be outdated in the years to come – and more importantly what will replace them? As someone who follows the health care sector, I believe I have the answer to the next big thing in health care: Immunotherapy and regenerative medicine…

How Immunotherapy is Changing the Playing Field

Immunotherapy has been around for decades in the forms of vaccines, allergy shots, etc. It involves introducing something into the body to create an immune response. For example, when you receive a flu shot, you’re essentially training your body’s immune system to respond to specific infectious agents.

And then there are more serious diseases – like cancer.

Over the past few years, we’ve seen new cancer medicines receive approval, with even more in development.

With greater technology and intensive ongoing research, we may one day look back at chemotherapy (the equivalent of carpet-bombing your body in order to kill cancer) as barbaric as we do lobotomies.

And with regard to immunotherapy drugs, the body’s immune system specifically targets the cancer, typically resulting in fewer side effects than chemotherapy.

Several well-known cancer drugs already employ this technique – for example, Genentech’s Avastin and Herceptin and Bristol-Myers Squibb (NYSE: BMY) and ImClone’s (now Eli-Lilly) joint-partnership with Erbitux. All three have become blockbuster drugs for these companies.

Three Small-Cap Firms That Could Cash in on Immunotherapy

But there are also many small-cap health care companies engaged in immunotherapy research, which stand to make piles of money for shareholders if they develop a successful drug. Here are some names to look into…

• Dendreon Corp. (Nasdaq: DNDN): Prostate cancer is the most common cancer among American men and is the second-highest cause of cancer deaths. Dendreon’s leading drug candidate for prostate cancer, Provenge, could be approved in 2010.
• Cel-Sci Corp. (AMEX: CVM): The company’s Multikine drug, which treats head and neck cancer has completed Phase II trials and its scientists are currently working on an H1N1 flu drug, too.
• Northwest Biotherapeutics (OTC BB: NWBO): The firm has several drugs in various phases of clinical trials for brain, prostate and lung cancers, including DCVax-Brain, DCVax-Prostate and DCVax-LB for non-small cell lung cancer. It also has DCVax-Direct, which treats ovarian, head and neck cancer.

Three “Regenerators” for Your Health Care Sector Watchlist

In addition to immunotherapy drugs, the field of regenerative medicine is also flourishing and holds some excellent growth potential, as we’re still in the early stages of understanding the power of stem and other regenerative cells. Here are a few names to kick off your research…

• Cytori Therapeutics (Nasdaq: CYTX): The company already has a product approved in Europe (Celution 800/CRS) and Asia (Celution 900/MB) for breast reconstruction following a partial mastectomy. The firm is currently running clinical trials in several cardiac areas, too.
• StemCells Inc. (Nasdaq: STEM): The company currently has clinical trials in progress for drugs that treat diseases of the central nervous system and liver.
• Geron (Nasdaq: GERN): It’s involved in both immunotherapy research for cancer and stem cell investigation in spinal cord injuries.

Keep in mind that most of these stocks are very small, so their trading can be volatile. In addition, they may need to raise funds to aid research and development, so do your due diligence.

However, I’m confident that over the coming years, firms like these will be at the forefront of new, more effective and safer ways to treat some of the world’s worst diseases.

Hoping your longs go up and your shorts go down,

Marc Lichtenfeld

Source: How to Profit from Immunotherapy & Regenerative Medicine

While that may sound like a very specific prediction for a market that’s been anything but predictable this year, thanks to our newest investing tool we’ve got a little bit of added insight into where the market’s headed in the short term.

A few weeks back, I wrote to you about the Small-Cap Recovery Index that Penny Stock Fortunes editors Greg Guenthner, Jim Nelson and I have been working on here at Agora Financial HQ.  The index was designed to use the predictive power of small-cap stocks and leading economic indicators to give us some clues as to when we might get our first glimpse at economic recovery.

That’s because historically, small-caps lead the way out of recessions. When big stocks are still in the throws of economic trouble, the smallest, most nimble companies are already climbing into prosperity. And as we gather data, we’re on the road to seeing just how well our index will be able to use that knowledge to our advantage.

Here’s the first look at our index so far:

For the last few months, our database has been compiling market and economic data daily, and establishing the baseline that we’ll be using to analyze the market at large. It’s exciting stuff, and just two weeks ago it became even more interesting…

In addition to predicting where the economy is going, we’ve been experimenting with the predictive ability of our Small-Cap Recovery Index on other parts of the stock market.

To that end, we’ve recently been taking a look at the Small-Cap Recovery Index Oscillator. The oscillator, which is based on the index itself, measures the divergence between the performance of the Small-Cap Recovery Index and the S&P 500.

While that sounds pretty complicated, it’s actually a very simple concept. The rationale is that the S&P 500, which is a pretty good indicator of the market itself, shouldn’t move significantly more or less than our Small-Cap Recovery Index. And because fundamental data that move ahead of the market — like sales and unemployment — are factored into our index, our index should set the direction of market movements first.

When things are stable, the oscillator should sit around 0 – meaning that there isn’t a major difference between our index and the S&P. But when it moves very high or low, it sends a signal that the S&P, which doesn’t have fundamental economic data to keep it grounded, should move back in a direction to push the oscillator back down. And thus far, our expectations have been met:

Here’s where things get interesting… We’ve actually come up with a math-based methodology to place bets on the market using the data that the oscillator spits out.

And while the specifics are too rigorous – and boring – to detail here, we’ve determined that if you had used those rules to invest in the ProProShares Ultra S&P500 ETF (NYSE: SSO) or the ProShares UltraShort S&P500 ETF (NYSE: SDS) depending on the buy or sell signal, you would have made 36.03% in just six weeks.

That’s an annualized gain of 312.52%!

And right now, with the oscillator (the blue line in the graph above) high, it suggests that the market’s buying frenzy is coming to an end. That’s not to say that the oscillator can’t be wrong – we’re still in the early stages of collecting data and testing its accuracy.

So far, though, the Small-Cap Recovery Index Oscillator has been incredibly precise with its buy and sell signals. If it’s right again, it’s time to get back into shares of SDS.

Cheers,
Jonas Elmerraji

Source: Scoring 36% Gains in Six Weeks with Our Favorite Small-Cap Tool

When I was in my early 20s, I had one friend who was always on the prowl for Mrs. Right (or at least Mrs. Right Now) whenever we went out.

The evening would kick off with him boasting about how he would end up with the most beautiful girl in the bar. As the night wore on, though, he gradually lowered his standards. By the end of the evening, fueled by desperation (and perhaps a little alcohol), he was willing to leave with any woman who had a pulse.

The health care M&A picture right now reminds me of that situation – with one exception. Some Big Pharma companies have become even more desperate than my buddy. And that means big profits for biotech stock investors.

With patents expiring and pipelines empty, the biggest biotechs need to add some in-house research and development, stat. That’s why you’re seeing firms like Glaxo pay premiums of 80% to acquire their object of affection.

Even that sky-high amount wasn’t the highest. Last week, Intercell paid a whopping 126% premium to acquire Iomai. With small firms able to garner such high prices, it puts virtually every small-cap biotech in play.

Biotech Stocks Shrug Off the Market Woes

As top-quality biotech stocks plunged to bargain-basement levels for much of the first quarter of 2009, the biotech sector did little more than shrug.

It’s not that biotech stocks weren’t immune to the pain. But the biggest players had large piles of cash and consistent income coming in from drugs produced over the last decade.

Then the news broke that Pfizer would shell out $68 billion to buy Wyeth. It triggered a trio of big buyouts in the sector, and more importantly, it gave investors a clue to just how much money these pharmaceutical behemoths had. They had financing, and they were ready to spend.

Over the past couple of weeks, we’ve seen:

• Merck announce that it will acquire Schering-Plough for $48 billion.
• While Roche finally concluded protracted negotiations to buy the biotech superpower Genentech for $47 billion.

Total value of done deals: $163 billion. It goes to show you that in a market where access to capital has supposedly dried up, money is clearly available for the right deals.

• In order to finance its acquisition of Genentech, Roche issued nearly $33 billion in notes.
• Pfizer received over $22 billion in loan commitments from various banks to complete its transaction.
• And similarly, JP Morgan slapped down $8.5 billion so Merck could fund its deal with Schering-Plough.

And this has all happened during one of the most fear and panic-ridden periods in stock market history. My point is that it’s not necessarily all doom-and-gloom (as some would like you to believe). In fact, things are looking up in the biotech sector.

And those deals are just the start. I think more biotech acquisitions are imminent…

The Beginning of the Biotech Stock Boom

I think we are at the very beginning of a wave of consolidation and a biotech stock boom. That’s because small-cap biotech names are so cheap right now. It will be tough for Big Pharma to resist these low valuations and “cheap” product pipelines.

To bring a drug to market today takes years, and companies must keep a consistent pipeline of new drugs in developement. A company’s “pipeline” represents all of the products they have in various stages of testing and FDA approval.

A company may have literally hundreds of versions or compounds of a drug to find one that works well enough to be tested. Many drugs will fall short of their goals and be pulled from development. This process is time consuming and expensive. But it only takes one blockbuster drug to pay for the development of hundreds.

It’s also why it’s much easier to purchase a company with a credible pipeline. And that means consolidation is something that companies of every size do in the biotech field.

So while Pfizer, Merck and Roche have plugged some holes in their businesses and created massive biopharma companies with their acquisitions, there are just as many mid-sized pharmaceutical companies that desperately need to upgrade their product pipelines.

The Biggest Biotech Stocks & Merger Possibilities

The largest biotech company after Genentech is Amgen which boasts a market cap of $48 billion. Then we have Gilead Sciences, which just announced a $1.4 billion takeover of CV Therapeutics at $40 billion. But the field is packed with mid-sized biotechs, as well as merger possibilities.

Of the biotech companies remaining, only three companies have market caps over $10 billion. Then we have 11 other companies with market caps of $1 billion or more. That’s a lot of potential deals.

For example, Merck could buy Biogen and Genzyme for less than it cost the firm to buy Schering-Plough.

In fact, pharmaceutical companies wouldn’t even need to raise capital to buy a BioMarin or Medivation – and many others like them.

The point is: Even though the biotech sector has outperformed the S&P 500 during our current bear market, many biotech stocks are still incredibly cheap.

And we may see a rush by other big pharma firms, eager to fill their pipelines with products from inexpensive biotech companies. This could lead to rapid increases in prices, and a frenzy of activity as companies rush to grab anything they can.

There are a number of companies that have “targets” painted on them for their size, their relative ease of acquiring and promising pipelines. Stick with these traits when you look for your next 126% gain. It could be closer than you think.

Source: Biotech Stocks: The One Sector Outperforming The S&P 500

“I think we can break the back of this thing,” said Ben Bernanke yesterday, as much of a Braveheart-style battle cry as he could muster. If the Fed and U.S. government take “strong and aggressive action,” he assured us, “we will begin to see improvements in 2009.”

That was the height of Mr. Bernanke’s optimism yesterday… here are the forecast highlights from his speech at the National Press Club and the latest FOMC minutes.

• Unemployment will reach 9% by the end of the year, and will stay above 5% until 2012
• The economy will contract between 0.5-1.3% this year. That’s worse than the
• Fed’s previous forecast of a 0.2-1.1% decline
• FOMC participants “generally expected that strains in financial markets would ebb only slowly, and hence that the pace of recovery in 2010 would be damped”
• Inflation should remain tame, around 1.5-2% over the next couple years. (As you know, we think this is a gross underestimation… proof below.)

The stock market reacted nervously to all the Federal Reserve hubbub . We showed you yesterday that the Dow was at a critical crossroads… well, it seems traders agreed, as the index crossed its break-even point 50 times Wednesday before coming to rest with a mere 3 point gain.

So we’re still at the precipice of new credit crisis lows. Today looks like we might step back from the cliff’s edge… with the help of better-than-expected earnings from CVS, Whole Foods and Sprint Nextel, the Dow opened up 50 points. Ironically, the only Dow component to report earnings was HP, which slashed its 2009 outlook after reporting a 13% drop in profits.

“For individual investors with a small-cap focus,” notes our small cap analyst Greg Guenthner, with a helpful list in hand, “there are ways to play the recession and come out on top:

“1) You need to think cheap. No, we’re not talking about fundamentals (although it’s always good to take a look at price to sales, debt and other important metrics before buying a stock). In this case, we mean cheap goods sold by discount retailers. When consumers are stretched thin, cheap stuff rules the roost. Don’t believe me? Just look at Tuesday’s drop. As of 4:00 p.m., only one Dow component had posted a gain: Wal-Mart. For the small-capper, screen for retailers with market caps less than $1.5 billion and you should find some interesting plays related to this idea. And for this screen, avoid specialty retailers and stores that primarily sell big-ticket items.

“2) During tough times, sin wins… Sin stocks are the comfort food of troubled times. A consumer who recently lost his job probably isn’t going to go out and buy a new car. But by the same logic, he isn’t going to give up his beer and cigarettes, either. In fact, the best-performing stocks during past recessions have been tobacco and alcoholic beverages.

“3) Find the necessities. We’ve already talked about the top two recession gainers from the chart above. But what about household products? Yes, families are cutting back. But we seriously doubt they’ll stop buying toilet paper and bleach just because they’re stretched thin. There are plenty of items every family can’t live without. Companies that make the goods should do just fine.”

If you want Gunner to do the legwork for you, check out Bulletin Board Elite.

This week’s commodity trade seems to be on pause today. Gold remains near its recently lofty high, around $980 an ounce. And oil remains suppressed, at $35 barrel.

“Lots of commodities look cheap these days,” notes Chris Mayer, “compared with what prices were before the meltdown started in full swing. Gold may not come to mind as a cheap commodity, because unlike oil or copper, it’s not wallowing near yearly lows.

“Yet on an inflation-adjusted basis, gold is nowhere near its all-time high of $850 per ounce reached on Jan. 21, 1980. To get there, gold would have to rise to $2,306 per ounce. All of which is to say we’ve got a long way to go in this bull market for gold.

“Perhaps the best chart I’ve seen on this is from Casey Research. The folks at Casey note: ‘Last month, the price for a single ounce of gold surpassed the S&P 500 index for the first time in 18 years. Following the last such inflection point that occurred in 1973, gold surged ahead over 600%.’

“There are other reasons for liking gold stocks in 2009,” Chris continues. “The first is the gold miners will enjoy a windfall from falling energy prices. Largely because of lower energy costs, mining costs will fall in 2009. Then there is the currency effect. In many gold-producing countries, the local currency collapsed against the dollar.”

Naturally, Chris found a gold stock for his Special Situations readers with both these assets. Get the ticker here.

Here’s what our colleague Dan Denning says is “the most disturbing story of the day.” Credit spreads and bond pricing in Europe hint of looming defaults and credit downgrades for practically half the continent.

For starters, the market is currently betting on credit downgrades for Hungary, Poland and the Czech Republic. Investors are demanding higher yields for these countries than other nations with the same credit rating.

“Investors are getting nervous about governments in Spain, Ireland, Greece, Portugal and Italy, too,” says Dan. “The spread between 10-year government bonds in these countries and 10-year German bonds is widening.

“What’s more, the credit default swap markets now appear to be factoring in the possibility that certain national governments in Europe may simply default on their debt. Take, for example, Ireland. According to The Times of London, the pledges made by the Irish government to support its banking sector amount to 220% of the country’s GDP.

“The Irish government has promised to bail out its banks. But who’s going to bail out the Irish government? That’s what everyone’s starting to wonder. And that’s why — in addition to the billions in loans made by Western European banks to Eastern Europe — the euro is looking shakier by the day.”

That’s also why “the mighty U.S. dollar is still rolling on!” proclaims our currency man Bill Jenkins. Do we detect… sarcasm?

“I’m looking for more dollar strength in the near term, not because the dollar is stronger, but only because of its relative strength against other major currencies. With the unthinkable drop in GDP by Tokyo, it looks like the USD is challenging all opponents! In the end, what will in the short run appear to be the cure for the dollar (short-term stimulus) will be its fatal death blow (longer-term massive inflation).”

The dollar index roared up as high as 88 yesterday, about half a point below its credit crisis high. Closer to 87 now, we’re seeing some profit taking this morning, especially after this number hit the tape:

Wholesale inflation shot up 0.8% in January, beating the Street’s estimate nearly threefold. The government reports today that its producer price index broke its five-month losing streak last month, led by a 15% boom in gasoline price inflation. Even the core PPI — which the Fed used throughout early 2008 to quell inflation fears — popped up 0.4%.

But we suspect deflation will remain the fear du jour. The Labor Dept. reports wholesale inflation fell 0.9% in all of 2008, the first year of wholesale deflation since 2001.

Elsewhere in the data patch, the number of Americans filing for unemployment benefits has attained a new record high. “Continuing claims” climbed to 4.98 million strong last week, the most since at least 1967, when the Labor Dept. started keeping track. Initial claims — people seeking unemployment benefits for the first time — matched last week’s count of 672,000. That’s just shy of a 26-year high.

But fear not, lowly American, Barack Obama is coming to the rescue. Mr. President unveiled the details of his new housing rescue package yesterday. What was described as a $50 billion program early this week has already morphed into a $275 billion beast.

Essentially, $75 billion goes toward “encouraging” lenders to lower monthly payments or extend the length of loan agreements. The other $200 billion goes straight to Fannie and Freddie, who will refinance loans on their books (also conveniently keeping the two GSEs on life-support).

The mission of the program will be to reduce all American monthly mortgage payments to no more that 31% of the owner’s monthly income. Those who are already in a home they can afford, well, they get reassurance of knowing they did the right thing… and the bill.

Aside from plenty of other concerns, we wonder… what happens five, 10, 20 years from now when the bailed-out homeowners sell their homes? If they’re worth more than the price today, who gets to keep the profits?

And look at this… enterprising homeowners around the country are finding their own ways to stall foreclosure. Here’s our favorite: Just ask to see the original mortgage paperwork.

“During the real estate frenzy of the past decade,” explains the AP, “mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.”

We can only imagine the paper trail cluster%*#$ emanating from boom-to-bust mortgage villains like Countrywide and IndyMac. Oy… sadly, this sounds like a decent strategy.

“I guess it didn’t occur to Alan Greenspan and Lindsey Graham,” writes a reader referring to yesterday’s “nationalization” buzz , “that it would have been much less expensive to ‘assume temporary control’ over some banks by letting them go bankrupt, rather than bailing them out? Sheesh… our government at work.”

The 5: Ugh… don’t get us started.

“Your reader slamming the comments about our way-too-expensive military budget sounds slightly insane,” writes another. “Nobody said the military should be abolished. Just that they get too much money and have too much influence. I don’t care how good it is at helping teach people to be leaders. Our economy simply can’t support the combined total of all other countries’ military spending, which is what our military budget represents. It’s a simple fact. That doesn’t mean we should get rid of the military all together, as your overly excited reader seems to think was proposed. I mean, after all, it was a former general, Eisenhower, who coined the term ‘military-industrial complex’ and warned of its power and influence. And I’m sure he knew the value of the system.”

“If not for the military,” writes the last reader, “Uncle Sam wouldn’t be able to execute these stimulus programs and other wealth-redistribution programs. The military is the ‘teeth’ that the government needs to carry out all of its evil deeds, both foreign and domestic. As for speaking German and Japanese, get real! Common military doctrine teaches that to conquer an enemy the invaders need to outnumber the defenders 3-to-1. Let’s say only 100 million Americans owned a rifle. You’re talking about an invading force as large as the current population of the U.S. Sorry if I don’t get misty-eyed about you heroes splattering your guts for Leviathan. To defend a country, a volunteer militia is sufficient. Note the meaning ‘volunteer’ means it is done for free, without leeching off of the taxpayers.”

Source:Small Cap Wisdom, Bernanke’s Forecasts, Gold Stocks, the Foreclosure Mess and More!

The engine of the great American Economy is, and always will be, the consumer. You and your neighbors and all of your buying power will determine how well the market performs. Right now, it seems as though everyone is hurting — so it’s the right time to capitalize on the pain with solid small-cap plays.

It all begins with the struggling consumer: your neighbor. His home is worth 20% less than it was just a couple of years ago and he’s upside down on his mortgage. He was laid off from a good job back in November when everyone started to fear the worst—and was forced to take a job that pays much less.

During better times, your neighbor would pay lip service to the idea of saving money — without actually following through, of course… But the situation has now become far more serious. It’s time to save some dough and pay those bills on time… or risk losing it all.

But where to cut back? Here is a list of the average household’s top expenses, in order:

1. Social Security taxes
2. Mortgage
3. Car payment(s)
4. Groceries
5. Restaurant meals

Your neighbor can’t cut back on payroll taxes. And he has to pay the mortgage to keep a roof over his family’s head. He also needs to keep his car so he can make the drive to his job every morning. But he can always cut back on food… the easiest and most effective way to balance any family’s ailing budget.

Buying cheaper groceries is a start. But cutting back on restaurant food is crucial. As far as we’re concerned, there are three kinds of restaurant food: fine dining, casual dining, and take-out.

As you’ve probably already guessed, fine dining stocks are getting crushed right now. Morton’s Restaurant Group Inc. (NYSE: MRT) — the folks who brought us the posh Morton’s Steakhouse restaurants — have seen shares plummet more than 80% since September.

The other end of the dining spectrum is where we can make our money. As revenues at casual and fine dining establishments sag, cheap take-out and fast food joints will continue to attract cash-strapped customers. After all, a sack of burgers can sometimes be a cheaper alternative to buying groceries and cooking at home.

The ultimate in cheap food is pizza. You can’t go anywhere else and buy so much food for such a small amount of money. Your down-on-his-luck neighbor can even swing by a pizza chain on his way home from work and pick up dinner for his entire family for $10 to $15.

That’s why we’re turning to pizza’s fast food roots — Domino’s Pizza Inc. (NYSE: DPZ). This stock was $13 in September. Now, at about $7 per share, Domino’s is trading at seven times earnings and less than half sales.

Domino’s competitor Papa John’s Inc. (NASDAQ: PZZA) — also a small-cap—has seen share rise more than 50% since November. With a more reasonable multiple approaching more reasonable levels, Papa John’s has managed to sustain revenue throughout the 2008 fiscal year.

Be sure to add these names to your short list of recession-resistant plays. Both stocks warrant additional research.

Source: Recession-Resistant Restaurant Stocks

This from Investor’s Daily Edge:

In early June, CNN Radio called and asked me about gas prices and autos. The first question was more like a statement. The radio host said that people were forsaking big cars and flocking to smaller models. And wasn’t that great? He added that the American consumer should be congratulated for being so willing to save on energy.

He couldn’t see me shaking my head in disagreement. I told him we haven’t turned into a nation of tree-huggers yet. And congratulations are a little early. Consumers are simply responding to price. When gas goes up, smaller cars look more attractive.

I told him it works in the other direction too. When gas goes down, bigger cars start looking better.

Since then, gas prices have fallen by more than half in most parts of the country. So what has happened?

People have begun buying pickups and SUVs again. You couldn’t give them away earlier in the year. See more of my thoughts on this in the IDE issue from December 9, “Can It Really Get Worse Than This?”.

The economics of buying a hybrid no longer makes sense. You’d have to keep your car for about 10 years to make up the extra money you spent on the car.

The ones buying these cars now are really tree-huggers.

So should auto companies spend tens of millions of dollars on R&D for cars that nobody is buying right now? Or should they keep making the bigger cars that Americans seem to love?

First off, it’s not a question of doing one or the other. It’s more a question of how fast U.S. auto makers should reduce their reliance on bigger vehicles.

A so-called “car-Tsar” would quicken the process.

Putting a “car-Tsar” in charge of the auto industry would put the government in the driver’s seat. The auto industry would be effectively nationalized. Say good-bye to the free market. It’s road kill.

But the triumph of the government didn’t happen overnight. The current auto crisis may have cemented the government’s victory. But the government has been telling the auto industry what to do for a long time.

Safety regulations date back decades. As do the Corporate Average Fuel Economy (CAFE) regulations.

CAFE regulations are already forcing auto makers to make more fuel-efficient cars. They call for auto companies to make vehicles that get at least 35 mpg by 2020. And every couple of years between now and then, U.S. auto makers will have to produce cars with better mileage.

So by 2018, for example, to reach 35 mpg will only require a small jump.

Will the American consumer want more fuel-efficient cars or not? It doesn’t matter. They don’t get to decide. The decision has already been made for them.

A nationalized auto industry may not be good for the economy. It may not be good for the auto industry. But it’s a gift from the government to you as an investor.

Markets are hard to predict. Government policy isn’t. Government policy is literally an open book.  You want to know what the government is thinking? Go look it up.

As investors, what more can you ask for?

So this is what I can say about the future of the auto industry with complete confidence…

• Cars are on the fast track to going hybrid
• By 2020 nearly all cars will be hybrids
• The dominant hybrid technology will be lithium-ion batteries.

Why lithium-ion? They have two times the capacity of the currently used nickel-cadmium batteries. They have half the weight. And, unlike nickel-cadmium batteries, they perform superbly in very hot or cold weather.

The problem is nobody is making them. And companies that are planning to make them will need at least two years to achieve full-scale production.

But, actually, there is one company making them right now. They are already supplying a European car maker with these batteries under a $70 million contract.

The company I’m talking about is Ener1 (AMEX:HEV). And while the S&P 500 lost almost 20 percent over the past year, Ener1 gained 40 percent.

It’s a small company. Its market cap is $750 million. Once finished, its facilities could generate revenue of over $300 million.

Ener1 is talking to about 30 car companies interested in their battery technology. The company has an awesome future. And it’s practically guaranteed by the U.S. government. That is why HEV is my top stock pick for 2009.

Source: The Future of the Auto Industry Is Already Written

Karen Chandler opened her bag and took out a chunky strip of copper and placed it on the table. Next to it she put a slim ribbon of something else I didn’t recognise at all. The second had been made by depositing layers of substances that I had never heard of – such as Lanthanum Zirconate and Yttrium – onto a base of textured nickel tape.

The finished item is a High Temperature Semiconductor (HTS) and is apparently a ceramic rather than a metal. The important thing about it is that it can deliver one hundred times the power density of copper wire, while being much lighter and more compact.

A 100-year old discovery, but with a very bright future

Superconductive materials are not new – they were discovered almost a century ago. But despite their advantages, they have never superseded copper due to the difficulty of producing large quantities of consistent quality.

But, in an era of innovation in energy technology and climate protection, AIM-listed Zenergy Power Plc (LON:ZEN) could be on to something big. I went along to meet the company’s chief financial officer, Karen Chandler, to find out some more.

Zenergy arose from a series of mergers. It has operations in Germany, California and Australia. But however hard it must be to manage such a diverse operation, Zenergy has become a world leader in a select field that includes US companies, SuperPower and American Super Conductor and Japan’s Sumitomo.

Things are starting to move. Zenergy has identified some specific applications for HTS. It has supplied its first product, an HTS Induction Heater, to the German aluminium extruder Weseralu.

Induction heaters are used in the metal forming industry. They heat metals until they are in a malleable state. They require a huge amount of electric power and with conventional heaters much of this is wasted. But by making the electromagnetic coil out of HTS rather than copper, much less energy is required and much less is wasted.

Now that one of these is up and running at Weseralu, Zenergy has been able to measure the benefits. For the same €1.2m cost, the HTS heater will cut roughly €230,000 per year off the electricity bill and deliver productivity savings worth up to €2m annually.

Attractive cost savings are attracting enquiries

These are attractive numbers. Added to the fact that the HTS Heater is quick to install, the product should find a ready market. Karen told me that Zenergy was following up forty enquiries from September’s Aluminium 2008 Trade Fair. About nineteen hundred induction heaters are sold each year. Of the €1.2m price – which is split with its partner, Bültmann of Germany – Zenergy receives about €300,000.

Zenergy is also working on an HTS Fault Current Limiter. This absorbs the unwanted and damaging electrical power common in grid failures, without having to interrupt the steady supply of power to downstream grid users. So it can be used to avoid blackouts.

Zenergy is about to deliver one of these devices into the US power grid in a deal partly funded by the Californian Energy Commission. Zenergy has also been commissioned by the US Department of Homeland Security to work on a project named ‘Hydra’ that aims to develop power grids that can keep running, even in the event of severe weather, accidents or terrorist attacks.

A big opportunity in wind generation

The market for these firewalls for power grids is, at €5bn, more than double that for Induction Heaters. Meanwhile, another major market opportunity is for electricity generators. Here, Zenergy is working with Converteam for next generation wind and hydro generators, and is already supplying the first HTS generator to E.On for a hydro electric plant.

The bigger opportunity, though, could lie with wind generators. These large wind mills suffer from a serious technical drawback in that the generator must sit at the top of the mast. They weigh 450 tons, of which more than half is accounted for by copper. That means these wind mills need a sturdy and expensive mast. By replacing copper with HTS, the weight of the generators can be reduced to just 80 tons. HTS generators are capable of reducing by 25% the cost of wind power generation.

Zenergy seems close to cracking some large markets. It also claims to be the first manufacturer to have perfected a low cost method of volume production. Profits though, are still some way off and broker Edison believes that Zenergy may have to raise more capital before it can become self-financing. So it is no great surprise that the share price has been sliding this year.

But this is certainly a company in which I will be taking an interest in. It’s one I’ll be keeping on my watch list.

Source: Playing a Part in the Future of Energy

This is one area where you absolutely want to be the first guy in the door, so you can be in the best position to grab the most money once the dance floor fills up.

For months now, I’ve perched myself up on my soapbox, trying to analyze the current market conditions. It’s often been a pretty lonely place. You see, while my analysis is on the mark most of the time, I often show up early to the party. So early, in fact, that the invitations haven’t even been sent yet!

But you know what? That just means more profits while the others catch up. Let me give you some examples – and show you the next best place for profits…

CEO Spends $4.58 Million On Massive Insider Buy

It could be the greatest tip off of all time. The CEO of a small, fast-growing company dipped into his own wallet to buy $4.58 million of his company’s shares… and not in some secret insider deal… but at the market. Wow! What set off the spending spree? This CEO’s company is in a brand new federally funded sector… one that didn’t exist seven years ago. Huge amounts of dollars are flowing in. And get this. He paid $15 a share, but the recent market swoon means you could pay a little as $12.50. This is a pure double up-situation.

Here’s how…

Jump In Early And Get The Pick Of The Profits

While every investor dreams about uncovering “the next Microsoft,” investing in it very early, and riding it all the way to the bank for millions, it doesn’t happen often. But many times, it’s not just a case of identifying hot stocks. It’s about spotting hot trends.

For example, in late 2005, we jumped on board a fast-growing technology company called Immersion (Nasdaq: IMMR) – a leader in the “haptics” and force-feedback field. We’ve since written about it here before – in February 2007 and May 2007.

May 2006, I wrote about the increasing shift towards the ethanol industry and the investments within it. I then made a specific recommendation for Xcelerated Profits Report subscribers on a “stealth” ethanol play (in order to reduce our risk in what was, and still is, a young and volatile area), which we cashed out of for a 35% gain.

In October 2006, I sounded the alarm bells about an impending real estate collapse and then followed it up with more advice in June 2007.

We also grabbed 54% gains in August 2007 on the ultimate contrarian play at the time: Downside in the Chinese market (via the iShares FTSE/Xinhua China 25 Index – FXI). Believe me, very few people were calling for a China decline back then – and you should have seen the baffled enquiries I received from some colleagues when I recommended the play!

So how about the current market? What opportunities do we have now?

Rookies Sell In Fear… Smart Guys Grab Bargains: This Confidence-Starved Market Presents Major Buying Opportunities

While you’ll find many commentators labeling the current crisis as one of liquidity, I look at it differently. I’m adamant that it’s more of a crisis of confidence, not liquidity. After all, while fear and greed are the two primary forces that drive the stock market, if investors don’t have confidence, then there’s a problem.

Here’s what many rookies don’t understand, though: The huge dips that we’ve seen in the market – especially in some of the financial sector stocks – have presented great opportunities to buy, not sell.

Here’s why I take this contrarian stand on financials, housing, China, and the U.S. dollar: Because of my experience and the knowledge that the system is rigged in favor of the opportunistic investor.

And here’s one area with some major moneymaking opportunities…

Five Reasons Why Small-Caps Suffer More Than Others

If you’ve looked at the small-cap sector recently, you’ll know that it’s suffered a serious pummeling over the past six months.

By definition, small-cap stocks are those with a market cap of less than $2 billion. But many have endured declines between 30% and 60%. This is much worse than their large-cap peers and the major stock indexes. But this isn’t surprising. Here’s why:

1. Small-Caps Are Less Liquid: When investors stop buying and start selling, small-caps do not have the kind of institutional support to avoid huge price movements, or set a floor under the price. Consider that when a large-cap like Lehman Brothers can fall 40% in a day, only to rise 30% the next, the small-cap market is exhibiting “normal” volatility.
2. Economic Slowdowns Affect Small-Caps More: By their very nature, small-caps are companies that are just beginning to grow. Any dent in the economy will dent their efforts.
3. Small-Caps Move Higher During Bull Markets: This being the case, it makes small-caps attractive targets to sell on the way down because they have more built-in profits.
4. Small-Cap Investors Are The Market’s Biggest Gamblers: They buy on the way up, margin at the top and sell at the bottom.
5. The Small-Cap Market Is Awash With Rumors And Crooked Players: This is the nature of the small-cap game. When share prices fall, market makers and short-sellers step in and exacerbate it. Consider the Bear Stearns fiasco. If “they” can take the Bear down to $2, they can certainly take Small-Cap Stock XYZ down, too – and with a lot less effort. The market is not efficient… you can bet (or lose) your bottom-dollar on that.

Four Ways To Pick Out Big Opportunities From Small-Caps

I know… it’s sounds totally backwards and ultra-contrarian. But when small-cap stocks collapse en masse – as they are doing right now – it gives you some huge opportunities.

You see, while you can still buy big caps and make money, if you really want to smash the ball out of the park a few times, there are no better bets right now than some select small-cap stocks. Here are four factors to look for when separating the great from the grisly:

1. No Fundamental Change In The Business: While there might be a slight slowdown for a couple of quarters, if the main business model stays intact, this is usually just part of the process. Companies to consider: Healthcare firms and medical device makers.
2. Strong Balance Sheet & Lots Of Cash: Quite simply, not only does this mean a small-cap firm is better-equipped to weather a financial storm, it also means that it will have plenty more opportunities when the economy picks up. Companies to consider: Certain small-cap technology firms.
3. Innovators In The Field: Firms that offer added value to bigger companies competing for market share are a major attraction. Companies to consider: Specialized technology firms and those with patented ideas.
4. Takeover Targets: Small-cap companies that enjoyed healthy sales growth before the crisis and were providing services, technology, or even drug partnerships to bigger players make for tasty takeover targets. Sometimes, it’s cheaper to buy your supplier when the price is right. Companies to consider: Ones that boast strong technology platforms, or medical successes

This Crisis Will Pass… Pick Up Some Small-Cap Bargains While You Have The Chance

The bottom line is this: While the current crisis is significant, it will be solved given time. However, it’s during that time that you can either take the opportunity to make money, or just temporarily sit on the sidelines and watch.

And yes, it may be stressful at times. But like I said, I often hit the stock market parties early, so I won’t blame you if you watch! That’s because while some opportunities are very exciting, I often take the elevator down a few floors before zipping higher to the penthouse.

And believe me… small-caps are on sale right now. Pick your targets carefully and count on history and the business cycle to guide you to profits in the months and years ahead.

In a market like this, you have to have staying power – and selling into weakness will damage your portfolio. When you feel that queasy feeling that only small-cap investing can produce, dig deeper… it may be time to buy.

Until next time…

Karim