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[TTHQ Staff]

Gene Inger's Daily Briefing. . . . for Thursday, April 12, 2007: Good evening; Crossroads . . . intersecting all the discussions about markets and economics, were in our view rather evident in recent days. As a matter of fact the S&P is retreating shy of the previous high, which itself never replicated what the Dow Industrials did, with respect to an 'all-time' high. To us; it was an 'unconfirmed high' by that Average only. So, even before the Fed Minutes or other issues (including why certain commodities, which one might 'think' reflect growth, but don't necessarily, as we'll chat a bit about in our audio-video remarks) gelled a bit more; it was clear to us that the 'risk-reward ratio' in essence didn't warrant taking the kind of gamble so many managers believe are risky only in small-cap stocks. In a sense it is for that reason we were surprised to hear money managers address a perceived 'small-cap' risk (though we don't deny that in a bear trend they take all kind of cross-sections of stocks), while decrying the 'safety' of big-cap portfolios. Maybe in another situation I'd concur; but here, with this perspective of slowing growth, foreign demand for commodities, and evident geopolitical risks; the opposite might be closer to being realistic. Daily action . . . accordingly referred to the 'crisis' some called it over a month ago in more affectionate terms. We called it a 'preview of coming attractions' or (considering the then-ensuing hostage crisis) a 'shot across the bow' of the big-cap enthusiasts as they perceived 'liquidity' as an end-all solution to protecting against market correction. We are big-cap enthusiasts; but when the overvalued prices have contracted; not on the cusp of a real correction that isn't ever assured, but seems quite likely. Just that it is anticipated more recently by many investors (though commonly not by 'the Street'), doesn't mean it won't happen. Our point has been that we never got weekly / monthly oversold at all during the expected February / March breakdown, and that was not by any stretch (in our thinking anyway) the main event. We realize others proclaimed the 'crisis' over, and everything hunky-dory. Fine; but we think independently. It wasn't over, as well as isn't over. We did believe that the 'liquidity injections' would restore a modicum of momentum temporarily (let's call it an A-B-C rebound after an A-B-C first-phase decline, as we labeled it, though we're the first to say this isn't an exact science and linear market approaches rarely if ever work with respect to market analysis on an ongoing basis); before the next drop. MarketCast (Daily Briefing & intraday audio and/or video comments) . . . remarks did suggest this overall structure, and the fleeting quality of the rebound. We even noted (just in the prior days during the reference to the market as at a 'crossroads' with the signs sufficiently confusing to disorient and hence stop the buying or bidding-up type processes) that the non-participation of the Banks and brokers was a bit ominous; as they had recommended the other (sometimes each other) recently, and that seemed to fall on deaf ears (if you were or are truly bullish you'd be looking for financials to be firm, not faltering; which we thought a bit of a precursor to what happened as outlined at these crossroads). Obviously we played it properly each day this week, by virtue of only short-sales, and then on the bounces as available within harmony of the forecast for down-up-down (erratic, with some intraday squaring; but basically that) sessions. We began Monday with a caveat of 'be careful what investors wish for' to reiterate the implications of a climate of 'perceived' strong growth and never-ending liquidity. I thought those would tend once more to rekindled interpretations of 'new paradigm' globalist or Goldilocks perceptions, emphasizing ideas that 'this time will be different' for world markets. We directly and emphatically opposed that common predilection. Equity interest on our part remains buying big-cap tech (or even financials if cheaper, enough) when suppressed, but clearly not yet, for reasons ingerletter.com members are well aware of. Meanwhile, we continue small-cap speculations here-and-there, to the pleasant stability of some, and even decent gains here and there (nothing terribly exciting, but that can evolve). We have diversified our speculative interest in 'bet' type stocks a bit, so as to not be over-concentrated in one area, though we're the first one to say that when playing with a deck; some will fold and some are worth continuing to hold. If one has a 'sprinkling' of such bets; if one or two out of say five, do well over a period of time, then that is what counts. Unfortunately, it's also why we can't focus on 'just one' small-cap, because of the need to have appropriate spreading of the game. (It is a game; as we've always said; and here and there one may be a homerun, as of course was the case for Ionatron in the early days, and currently might be for quite a different stock; so since these are often developmental not evolving big companies, it makes little sense to presume one can leave them alone for years; though some do and sometimes that works. Clearly most exciting disruptive firms were once small. In this case we've diversified between defense, laser including medical and commercial, disruptive travel, and now a fairly 'green' early-stage speculation on 'global warming'.) If you can burn coal without emissions; if you could reduce or eliminate greenhouse gases (like CO2) by certain combustion procedures; if you could clean-up not only the polluted bodies of water, but also purify waste procedures and enhance local aquifers and water supplies, not to mention potentially improving refinery emissions; would the resulting activities find support not only among the 'green' crowd, but even within the halls of the existing energy suppliers worried about their share of the 'cleaner' future? That will be a subject we'll touch on tonight, with our first 'vegas bet' small-cap play in this area, that joins a handful of speculative stocks in areas of fairly unique potential. In summary: recent upside moves contained lots of sizzle but little substance as it continued, based on better economic prospects perceived likely than realizable, plus of course a plethora of 'private equity' deals; even a few IPO's. Suggesting celebrants would soon remove their hats (to wipe sweat from their brow), that left the market open to prospects of another shoe dropping. All week we projected it would occur. In fact we suggested it might occur related to the Fed Minutes release; but combined the Chinese failure to cooperate, and geopolitical risks, to get basically a risk-reward threshold that's exactly appealing for a majority of players in the very biggest stocks. Now the latest Daily Briefing nightly audio-video MarketCast 'chart' comments: Daily Briefing audio/video (members see full-screen video; nightly & intraday samples available at ingerletter.com) Bits & Bytes . . . provide investors ideas in a few stocks, often special-situations, but also covers an assortment of technology issues (needed for assessment of general factors in tech overall, or as compelling developments call for) that are key movers in the NDX, SOX or S&P, plus ideas ingerletter.com thinks might merit further reflection. Apple (AAPL); Level 3 (LVLT); Intel (INTC); Texas Instruments (TXN), Microsoft (MSFT); Motorola (MOT); QPC Lasers (QPCI); LightPath (LPTH); Intel (INTC); PURE Bioscience (PURE); InkSure (INKS); Ionatron (IOTN), Northrop (NOC) and recently a new (tiny for now) speculative play; Triton Distribution Systems (TTDS). Including additions to this group they're monitored or commented on via audio/video, a MarketCast inclusion with virtually all ingerletter.com nightly Daily Briefing reports. Scrubbing 'Smokestack' Stocks One of the most important 'focus areas' for the Nation (and world) these days, relates of course to 'clean water', 'clean energy', and the limitations of CO2 discharges (or as converts to carbon dioxide), which relates to the risks for increased 'global warming'. One of the least desired approaches here, despite our clean renewable energy goals, is to chase big-cap stocks in related industries, or 'gamble' on small-cap 'bb' stocks in early-stage development. Some believe we have enough 'vegas plays' on board now; and we don't dispute that or disagree with the concept of focusing on big stocks while realizing that many are still 'pending' reasonable corrections to restore attractiveness; or for that matter already within corrective phases somewhat masked by the Senior Averages, that continue to 'hold-up', at least superficially, due to liquidity injections, or perceptions of a big-cap growth environment that may be giving way to new focus on domestic-centric stocks, with potential to contribute gain for the 'greater good' as well. The idea is to contain or limit proportions of speculative 'bets', while suspecting that a few (not all) will work-out, and some will implode or possibly languish for periods that can't really be determined (because of trading characteristics or fundamental news or both, are fluid and sometimes not even entirely grasped by their managements). It is thus that we tend to approach small-caps by distributing amounts of money across a sufficiently wide-front, and preferably not entirely in the same field; so that if any are indeed successful, it may mitigate risks of others acting mediocre or not working at all for that matter. In this way even one 'home run' (should it occur) 'score' offsets other experiences. Obviously one would like all to be 'winners', but life rarely works thusly. However, while lamenting adding yet-another speculative issue to our little 'vegas bet' list; we will do so, in a stock we've mentioned once or twice over the past year or two, to keep an eye on (don't recall dates, but related to initial efforts with New York City). But let me caution in advance; they don't get much smaller. However, has patents, on top of promise; it's recently started moving from conceptual award-winning theory, to developmental, and maybe to an operating basis (as New York City comes online). It's highly speculative but rock-bottom if pans-out. Most companies with infrastructure projects start in small communities and grow from there if recognized. This company, must actually believe they have something, because if you succeed in New York you can make it anywhere (the saying goes); but if you fail in New York, everyone knows about it. So if there is such a thing as a 'waste removal' Broadway showcase, it would be New York City. (We'll reserve the name in fairness to ingerletter.com members, as it was just mentioned formally for the first time, coincidentally, in today's report. Later, after members who may wish to nibble at light speculative holdings have time gently to probe the action, we'll address it more publicly. To do otherwise wouldn't be fair.) Let's sum this up: the core business (reserved) is design, fabrication and operation of renewable energy or power generation facilities based on the Company-patented proprietary technologies. These include a Process, to convert municipal / industrial wastewaters into high-energy biofuel; an Ammonia Recovery Process to remove ammonia from wastewater, converting it into ammonium sulfate (a commercial grade fertilizer), and the (reserved) process that they say is a new method of converting fossil fuels, including oil, natural gas or coal and most biomass into energy with zero air emissions. Is that exaggerating? Their view; awards affirm; but time will tell. Among other things; (reserved) converts sewage sludge to a renewable high-energy fuel, essentially enabling conversion of coal or various hydrocarbon fuels into energy with nearly-zero air emissions (per reviews). It's gas-to-liquid steam-hydroscrubbing. From dead fish to toxic algae blooms or even to blue babies; ammonia from sewage treatment and livestock feeding operations affects large cities and rural communities alike. A 1996 survey showed that 40% of the U.S. rivers and waterways surveyed are contaminated by excess nutrients like ammonia (or oxidation product nitrate) creating conditions unsafe for human health or the environment. In response, aggressive new state and federal regulations have been implemented severely restricting the amount of ammonia wastewater plants can discharge into local waterways. This has created increasing demand for ammonia removal technologies. It's a growing global problem. (Corporate) strategies to capture significant shares of this largely untapped market is based on (business model discussion). The reason prospective clients embrace this business model is ammonia bearing waste streams usually represents only a small fraction of their facilities overall volume; but can represent more of their regulatory problems. From what we gather, the concept is (the company) will come in, finance, build and operate an ammonia removal facility; charging them essentially 'per pound' of ammonia removed. The customer thus solves a regulatory problem (or potential problems) without affecting their balance sheets, or requiring Bond issues or taxes. Strategy: none defined (for us as investors) as yet (much too soon). Speculative low level holdings may or may not be retained, increased, or decreased, depending likely a bit less on price action, but possibly on some evidence that the interestingly-poised Company is able to execute on their short-range and longer-range plans. For now it's a 'vegas bet' in another 'bb' stock, which alone is always a speculative caveat. (more) ``` In summary . . events continue reminding us of risks Allied fighting forces face, given continued attacks on free peoples, by elements including organized terrorist forces in various countries. A world addressing terror threats continues, as domestic issues absorb us less as we focus on the Middle East crisis and World War III avoidance. (And) volatility as an accompanying long-term chart shows for a number of years, has the possibility of settling down a bit more; but clearly we've had nothing resembling at least the rhetoric of those saying we've had a 'National crisis' survived in the markets. At this point there has been no crisis; no major event; and definitely no catastrophe. It is not assured such will be forthcoming, but if there's a 'genuine' correction in big-cap stocks going to occur at all, it's almost assuredly in early stages, rather than behind. That's the point of saying what happened a few weeks ago was a 'warning sign', not the main-event in-and-of itself, in our opinion. But let's all stay tuned going forward. McClellan Oscillator finds NYSE 'Mac' shuffling with intervening bull-bear fights that more recently are at +3 for the NYSE and -4 on NASDAQ. These are both reversals. Issues continue including oil, terror; China, Pakistan, all the Middle East, Korea, and economics. As assessed for a couple weeks, extended rebounds were showing just exhaustion syndromes, and now without interpretation or forecast, increasingly negative action. Throughout; dubious confidence about liquidity and momentum. Bottom line irrespective of any bias: good luck with 'top-line' earnings growth for now, as what matters is what lies ahead vs. rearview-mirror based wishful estimate calls, or pollyannaish views about 'peace in our time' in the wake of the hostage settlement. That's also why it was ludicrous to hear managers say they should be 'paid more' for preceding earnings. That's not how the stock market works in my view. The market's not going to lament what it could have, should have or might have done; it looks only forward; so in this case is reflecting concerns about slower growth and higher prices (not stock prices; but consumer prices and burdens in coping under further pressure; I think the downgrade by the Real Estate group is by one more contrition to reality). Enjoy the evening, Gene Gene Inger, Publisher ~Gene Inger’s Daily Briefing™ (The Inger Letter daily analysis on www.ingerletter.com) ~Gene Inger’s MarketCast™ (Intraday audio updates emphasizing S&P futures and market action)