Market Insights™

The NASDAQ Composite index and the S&P 500 Composite index both set all time high closes on March 24 of 2000 (4963 and 1527, respectively) then sold off violently into May. Both indices struggled back over the next four months, the S&P 500 forming a double top and the NASDAQ achieving a 60 percent retracement of its losses. On August 28, Barron's published our article entitled The Money Effect which warned that the stock market party was over. On September 1, both the NASDAQ and the S&P 500 began the next leg down. The NASDAQ is currently down 37 percent for the year and nearly 50 percent from its record close -- it's worst year ever! The S&P 500 is down about 10 percent on the year and 13 percent from its all time close.

September 1 also marked the record close of the NYSE Composite index. The NYSE is the most broad based indicator of the lot and is now down 3 percent from its September closing high. For the year it is up slightly.

Of all the stock averages mentioned above, only the NASDAQ and the Dow Transports have officially met the generally accepted criteria of a true bear market by selling off more than 20 percent. Nonetheless, we firmly believe that what we are witnessing is a secular bear market that will make the stock market a difficult place to make money for years to come.

We cite three reasons that we believe that a bear market has begun: falling liquidity, rising interest rates, and a negative technical charting pattern. Our belief that this bear market is a nasty secular one, rather than the milder and shorter cyclical variety is based on our long term historical research. We shall cover each of these points one at a time in the following paragraphs.

From a long term (200 year) perspective, the stock market of the past five years qualifies as a mania, or bubble. We posted our latest article entitled Turning Point which covers this topic in greater detail. In a nutshell, the stock market is affected by an 83 year social and technological cycle that produced stock manias in 1835, 1929, and 2000. In the first two instances, the market retrenched in historic fashion, and we see no reason to believe that the current mania will end differently. In fact, we project that most indices will fall back to their 1994 levels.

"But," you say, "today we have the Internet revolution, a really smart Fed chairman, a balanced budget, and the end of the Cold War. How can stocks slide in this environment?" Well the same way they did in those two previous market panics when these same ingredients existed in slightly differing form (see the article for details). "O.K.," you counter "Fed chairman Greenspan surely will begin dropping interest rates next month and we all know that is good for stocks." Usually. Interestingly, the Fed responded to the 1929 bear market (which began the first week of September) by lowering rates in February of 1930. They continued to drop them for two years while equity values declined nearly 90 percent overall.

"Are we headed for (gulp) economic depression?" you nervously ask. Not likely. The Crash of 1929 was followed by the worst depression in U.S. history -- with 25 percent unemployment -- but the Panic of 1837 led to a much milder recession -- 6 to 8 percent unemployment. The primary reason for this is the timing of a phenomenon we call the Demographic Wave (a.k.a., the Spending Wave). It was pointing down in 1929 and up in 1835 and 2000. We will discuss this in more detail next month.

Today's historic market bubble was pricked by falling liquidity as defined by the money variable RPCM2. RPCM2 fell below its seven-year moving average in July of this year. Since then it has moved back above the line. When it falls below its average again, the majority of the stock market decline will follow. We project that this could happen as early as this month (the data for December won't be available for another three weeks). Check out the updated RPCM2 chart by selecting the link at the top of the page.

The S&P 500 Composite index ended its bull market run by forming a large rising wedge which we last updated in October. This formation represents an exhaustion rally that marks the end of a very long uptrend. It projects a fall to the 950 level.

Interest rates always play a role in the correction of stock prices. We have been scratching our heads over the fact that bond yields never triggered a sell signal in our bond-based market model (they would have needed to exceed 6.50% to do that). This bond-based model has accurately called every major pullback in stocks for the last 20 years. Why not now? We dug deeper into the data and finally came up with the answer.

We have two interest rate-based market models in our arsenal. During the inflationary 1960s and 70s, time horizons shortened and the focus was on short-term interest rates. For that period we rely on our discount rate-based model. Our research indicated that it was the inflation rate that determined which model to employ. It turns out that it is real long term interest rates that act as the trigger. When they are above their 130 year average of around 4%, the bond-based model applies. Below this average the discount-rate model applies.

In the year 2000, real long term interest rates fell below 3.00% for the first time since 1981. Employing the discount rate-based model results in a sell signal in May of this year. This model also works effectively in calling the 1929 stock market peak when inflation was zero and real long term interest rates were around 3.00%.

That said, here is a caveat. We use long term historical market analysis as a road map. Like any road map, it is a snapshot of history and may or may not reflect today's real world. Just because your map points to a bridge crossing doesn't mean that you drive into the river once it becomes clear that the bridge has been washed away by flooding waters. That is why we also keep our finger on the pulse of the market with our shorter term models and technical analysis.

What we expect in the near term is that investors who have been moving money out of technology and smaller stocks as measured by the NASDAQ and into large cap stocks as measured by the Dow, S&P 500, and the NYSE Composite will soon reverse their positions. In fact we believe it will come just in time for the January Effect. The January Effect is the tendency for small cap stocks to outperform large cap stocks in the month of January.

If we are reading the charts correctly, the year-end rally has just about run its course. We see considerable overhead resistance for the S&P 500 between 1336 and 1357 (it was as high as 1336 today). The NYSE has the same problem between 660 and 680 (closed at 660 today) and the Dow between 10915 and 11150 (it hit 10901 today). Meanwhile, the NASDAQ Composite appears to be putting in an intermediate bottom. Watch the S&P 500 closely to see where the large cap indices are heading. Should it close above 1357 on above average volume, then our reading is wrong and we could be in store for a solid rally on expectations of a Fed rate cut.

Our short term model is currently recommending a SHORT postion in anticipation of continued weakness in the S&P 500 index. On December 13 we moved both our intermediate and long term portfolios further away from stocks. The long term model is now recommending a maximum of 70 percent stocks, the intermediate a maximum of 20 percent stocks. These maximums are for more aggressive investors and should be modified by the results of our proprietary HIPPO program. The HIPPO program will be offered completely FREE to all of our visitors beginning in January 2001.

Over the next month we also plan a major change to the Market Insights newsletter. Beginning January 14, the fuel cell update section of Market Insights will become a stand alone FREE newsletter we call Fuelcell Watch. The Market Insights newsletter will continue to bring you the same valuable long and intermediate term perspectives on the markets absolutely FREE. Those who desire more frequent analysis of the markets, however, will be able to get weekly updates with our new Weekly Insights newsletter. This will be offered on a subscription basis for only $49.95 every six months beginning on February 3. Subscribers will also receive email updates as market conditions warrant.

Market Statistics
DJIA 10868.76	S&P500 1334.22
DJTA 2891.45	NASDAQ 2557.76
DJUA 414.43	30 YR BOND 5.44%

FUEL CELL UPDATE

We recommend that you allocate no more than 12 percent of your portfolio to the fuel cell industry, and no more than 2 percent to any single fuel cell company. In general, fuel cell stocks appear to be at or near a bottom.

Pure play fuel cell manufacturers

Ballard Power Systems [BLDP] -- last trade 67 3/8
If you followed our recommendaiton, you were stopped out of Ballard at just under 67. A close above 70 on strong volume (a million shares would do) would mean it's time to get back in.

Fuel Cell Energy [FCEL] -- last trade 77 7/8
With California's electric power crunch in the news, Motley Fool recommended FCEL as a long term play with high potential. They report that FCEL has a "fuel cell stack/turbine hybrid that promises to increase generator efficiency from 35% for conventional gas-fired turbines to 73%. More importantly, the fuel cell produces energy without combustion, eliminating the air pollution issue. That will make it a popular choice in California." We agree.
FCEL's share price is going strong. Move your sell stop to 55.

HPower [HPOW] -- last trade 7 15/16
Hasn't put in a solid base yet.

Manhattan Scientifics [MHTX.OB] -- last trade 1 7/8
MHTX has entered into an agreement with Aprilia, S.p.A., one of Europe's largest manufacturers of motor scooters and motorcycles, to develop a fuel cell powered concept bicycle. The bicycle, a version of Manhattan Scientifics' Hydrocycle(TM) bicycle, was powered by a 670 W fuel cell and was unveiled at the Bologna Motor Show in Italy.
You should have been stopped out of MHTX at 2. The stock could be bottoming here.

Plug Power [PLUG] -- last trade 15 13/16
May have put in a bottom with strong buying today.

Larger companies and mutual funds

Daimler-Chrysler [DCX] -- last trade 40

General Electric [GE] -- last trade 48 7/16

International Fuel Cells (United Technologies [UTX]) -- last trade 78 11/16

New Alternatives Fund [NALFX] -- last trade 45.55
If you were stopped out at 40, you may want to get back in and place another sell stop at 40.

28-November-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
55%	20%	25%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

The rally we had been looking for last month was cut short on November 6 when uncertainty over the outcome of the presidential election swamped the positive technicals. By November 22, the NASDAQ Composite was at a 52-week low while the S&P 500 Composite was retesting its October 18 low. With yesterday's rise in most of the averages, it seemed to us that a short term bottom was in place.

One day later, the picture does not look quite so rosy. The NASDAQ penetrated the lows of last week, clearly breaking important support at the 2800 level. It has now erased all the euphoric gains of the bubble top that began just over a year ago and ended abruptly in March of this year. Next stop appears to be 2200.

The S&P 500 is facing a critical test of its November 22 low at around 1322. A violation of that level raises the specter that there will be no holiday cheer in 2000. A close below the October 18 low of 1306 would assure it. If that were to occur, that would confirm in our minds that the second leg down of this bear market began with the November 6 peak. The second leg is often the most violent and should eventually carry us down to our second leg target of 950 (our first leg target was 1250). We have a third leg target as well that will be addressed in our article currently titled "Turning Point" that we expect to post by Christmas time.

We don't delight in relaying our view that the U.S. stock market has enterred into one of those rare configurations known as a secular bear market. Secular bear markets can take years to unwind making fools of most everyone as it does so. A perennially bullish investor would be an obvious victim, but a devout bear can get just as beat up when the bear market breaks into euphoric counter-rallies. Even nimble traders can find themselves on the losing end after being whipsawed by highly volatile and schizophrenic markets.

There are three reasons that we believe this is a secular bear market. One is historical, the second is economic, and the last is technical. From a long term (200 year) perspective, the stock market of the past five years qualifies as a mania, or bubble. Our article "Turning Point" will cover this in greater detail but we have already touched on the subject in a previously posted article, Inventing Booms and Busts. We believe the bubble was pricked in July of this year by falling liquidity as defined by the money variable RPCM2 (please see our article The Money Effect for a tutorial on this important variable). The end of the mania was marked by an exhaustion rally that formed a rising wedge formation as shown in last months weekly S&P 500 index chart.

Sometimes markets don't wait for us analysts to get all our ducks in a row before asserting themselves. So we also try to listen closely to what the markets are telling us in spite of what our indicators may or may not be saying. This market has more often than not since September 1 surprised us (and many, many others) to the downside, bolstering the bear market argument. Cautious by nature, we would feel more comfortable declaring a final top if the 30 year treasury bond were over 6.00% and clearly on its way to the 6.50% level. Additionally, we would like to see the index of bullish minus bearish newsletter writers up around 40 (it rose to 31 in March).

A third missing puzzle piece that we are closely watching for involves RPCM2. After piercing below its seven-year average in July, it moved up in August and September back above its average. In October it turned down again (you can view an updated chart by clicking on the link at the top of this page). Prior history tells us that most of the bear market damage occurs while RPCM2 lingers below the average line. In other words, to confirm a secular bear market this variable would need to fall below the average and stay there throughout the remaining more violent part of the decline.

Our short term model is currently recommending a NEUTRAL postion. Our intermediate and long term models remain at a maximum of 55 percent stocks and 80 percent stocks, respectively. These maximums are for the more aggressive investors (please use our HIPPO program for FREE to determine your appropriate asset allocation). Subscribers to Spider Wizard and Clairvoyant receive email alerts on the day a change in signal occurs.

Market Statistics
DJIA 10507.58	S&P500 1336.09
DJTA 2796.41	NASDAQ 2734.99
DJUA 395.20	30 YR BOND 5.67%

FUEL CELL UPDATE

We are dropping coverage of Avista Corporation and replacing it with newcomer HPower Corporation. HPower, like Ballard, Plug, and Manhattan, produces proton exchange membrane (PEM) fuel cells. We are also adding coverage of International Fuel Cells, a subsidiary of United Technologies [UTX].

Pure play fuel cell manufacturers

We recommend that you allocate no more than 12 percent of your portfolio to the fuel cell industry, and no more than 2 percent to any single fuel cell company. With the addition of H-power, we feel we are now providing coverage of the leading company in each of the following categories:

Ballard Power Systems [BLDP] -- last trade 72 3/8
Ballard unveiled its second generation fuel cell prototype on November 9. The new Direct Methanol Fuel Cell uses traditional PEM technology, but uses methanol as fuel directly without requiring a bulky fuel processor to extract hydrogen from the methanol. The new fuel cell was used to power a small go-cart like demonstration vehicle. Earlier in the month, DaimlerChrysler unveiled the NECAR 5 prototype automobile in Berlin, which also uses methanol as a fuel, but which includes a fuel processor to supply hydrogen to a Ballard Mark 900 fuel cell.
As anticipated, share prices fell reaching a low of 67 on November 22. Some buying has come in since then indicating a bottom may be in, but we suggest placing a stop loss just below 67.

Fuel Cell Energy [FCEL] -- last trade 51 11/16
Still in a correction phase. We recommend a stop loss at 48.

HPower [HPOW] -- last trade 8 1/4
HPower went public on August 9 of this year at an offering price of $27 a share. They make PEM fuel cell systems that focus on two major product areas: (1) On-site stationary power units for residences and small commercial establishments. (2) Portable and mobile power units that can power personal electronic devices (portable) and small specialty vehicles such as golf carts (mobile). The shares currently trade below the initial offering price and look like they could get cheaper still. Patience is advised.

Manhattan Scientifics [MHTX.OB] -- last trade 2 3/32
May be putting in a bottom. We recommend you place a stop loss at 2.

Plug Power [PLUG] -- last trade 14 3/8
Absolutely no sign of any buyers yet. We still recommend staying away from this one due to all the litigation.

Larger companies and mutual funds

Daimler-Chrysler [DCX] -- last trade 39.52
On November 7, in Berlin, DaimlerChrysler demonstrated two fuel cell vehicles: the Mercedes-Benz A-Class based NECAR 5 (New Electric CAR) and the Jeep Commander 2. Both are virtually silent and environmentally friendly and use methanol as fuel. Daimler characterizes the present technical status of the fuel cell car as "fit for practical use." They also reiterated their intention of being the world leader in fuel cell vehicles.

General Electric [GE] -- last trade 49 13/16

International Fuel Cells (United Technologies [UTX]) -- last trade 68 3/8
International Fuel Cells (IFC) is the world leader in fuel cell production. IFC's fuel cell activity began in 1958 and led to the development of the first practical fuel cell application on the Apollo space missions. Since 1966, all of the more than 100 U.S. manned space flights have operated with fuel cells supplied by UTC companies. Recently they have developed technologies for transportation, commercial power, and portable power.

New Alternatives Fund [NALFX] -- last trade 41.24
We recommend a stop loss at 40.

28-October-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
55%	20%	25%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Since our article The Money Effect was published in the August 28 issue of Barron's, the NASDAQ Composite has tumbled 26 percent to an intraday low of 3026 and the S&P 500 has fallen 14 percent to an intraday low of 1306. We were looking for a 13 week inflection point the week of October 13 and it arrived on October 18th as a short term bottom for both the above indices. These inflection points occur every 13 weeks in the months of January, April, July, and October. Although they are usually short term events, they tend to occur at or near intermediate turns in the market. Typically we find that the January and July inflection points play out as market tops while the April and October inflection points are associated with market bottoms.

The controversy surrounding the correct interpretation of the S&P 500 weekly chart has been resolved conclusively. Here is how we interpret the wedge formation in the weekly S&P 500 index chart, using traditional Elliot Wave vernacular. According to Beckman's Elliot Wave Explained, a wedge formation (or diagonal triangle) such as this is "a sign that a major up move is coming to an end and that the early stages of the bear market to come are likely to be extraordinarily violent." He targets the correction that follows all the way down to the base from which the triangle formation began. That would mean to a level of 950 on the S&P 500 index (marked with the letter "C" in the chart), a correction of almost 40 percent from the all time high of 1553 posted in late March.

While we are convinced that all the major indices have now entered a bear market, they seem to have done so without the confirmation of our intermediate model. Our long term model, led by the RPCM2 indicator (please see our article The Money Effect for a tutorial on this important variable), alerted us that we were entering a period that would be unfriendly to the equity markets. In the past, the arrival of these negative periods have been accompanied by important bear market selloffs. We would feel more comfortable declaring a final top, however, if the 30 year treasury bond were over 6.00% and clearly on its way to the 6.50% level. Additionally, we would like to see the index of bullish minus bearish newsletter writers up around 40 (it rose to 31 in March).

That said, we believe the selloff from September 1 to the October 18 low represents the first of three down legs to this bear market -- at least most of the first leg, anyway. We say "most" because we had targeted the 1250 level as a bottom in the S&P while the October 18 low was 1306. Our short term model gave us a BUY signal at this low but we opted to take a neutral stance until we see a confirming volume reversal. A volume reversal occurs when the index moves up on expanding volume and we have yet to see that. The DJIA is currently the strongest major index. If it closes above 10628 (just 38 points above last Friday's close) it will be in a solid uptrend that will likely carry the others along with it.

Once the first leg is completed, it seems reasonable to expect a strong countertrend rally (also known as a bear trap) that could provide a great selling opportunity to those who held on through September and October. It could also possibly fill in the remaining pieces to our puzzle. We can imagine that the rally would be accompanied by substantial euphoric clamorings from the "buy the dips" crowd which could help drive the index of bullish minus bearish newsletter writers to the extreme levels we have been anticipating. It would also give the bond market time to go into a selloff, raising long term yields over the 6.00% threshold.

If we are correct in our speculation, the countertrend rally would be followed by a second leg down, perhaps to the 950 level as projected by the Elliot Wave analysis above. As to where this bear market ultimately ends is anyone's guess. We are currently working on an article that deals with this very topic. In it we will provide an analysis of the stock market going back 200 years to ascertain where this market is likely to end up from an historical viewpoint. That article should be posted on our Mind Stretch page by Christmas time.

Our short term model is currently recommending a SHORT postion and our intermediate model has moved down to 55 percent stocks from 80 percent last month. Subscribers to Spider Wizard and Clairvoyant receive email alerts on the day a change in signal occurs.

Market Statistics
DJIA 10590.62	S&P500 1379.58
DJTA 2528.97	NASDAQ 3278.36
DJUA 382.09	30 YR BOND 5.74%

FUEL CELL UPDATE

"Fuel Cells," a new study from the Freedonia Group, predicts the U.S. market for fuel cells and related products will rise more than fourfold through 2004 to $2.4 billion, of which $1.2 billion will be represented by fuel cell stacks and systems. Explosive growth will continue thereafter, with the market reaching $7 billion by 2009. For information on ordering the study, email pr@freedoniagroup.com.

The following small companies are pure plays in the fuel cell industry. We recommend that you allocate no more than 12 percent of your portfolio to the fuel cell industry, and no more than 2 percent to any single fuel cell company.

Avista [AVA] -- last trade 20 13/16
Nothing of note here other than lawsuits. The price is holding up fairly well all things considered.

Ballard Power Systems [BLDP] -- last trade 101
Here is a press release by IFC (a United Technologies Company): "Secretary of Energy Bill Richardson today announced that International Fuel Cells (IFC), in partnership with the Department of Energy (DOE), has developed for the first time a gasoline-powered fuel cell system powerful enough to operate an automobile. The further development of the highly efficient fuel cell system will eventually allow consumers to fill up fuel cell-powered vehicles at their local gasoline stations, while increasing their gas mileage."

We have been expecting Ballard to retest its all time high of 144 15/16. However, the chart is beginning to look a little top heavy right now. While the trend is still up at this point, a close below 84 would signal that a retest of the May low of 61 is in the cards.

Fuel Cell Energy [FCEL] -- last trade 70 3/4
FCEL is taking a breather after running up more than 500% since April. We think it will find support between 52 and 63. It reached an intraday low of around 61 yesterday before popping up today. Look for buying volume of at least around 2 million shares on an up day to signal the beginning of the next run up.

Manhattan Scientifics [MHTX.OB] -- last trade 2 5/32
Peter Fairly in MIT's Technology Review reported that Polyfuel, a tiny spinoff from Palo Alto, California's SRI International, expects to begin production of a million fuel cells a month by the end of 2001. Polyfuel is targeting the same portable electronics market (cell phones, for example) that Manhattan is going after with their MicroFuel Cell technology. Like Manhattan's, Polyfuel's fuel cell is a proton exchange membrane that runs on methanol. Manhattan claims that they expect to begin commercial production by the end of 2001. Polyfuel claims they will be pounding out a million EACH MONTH by then? Doesn't seem likely, but if it's true this can't be good news for Manhattan unless their patented technology gives them a significant cost advantage. Meanwhile, MHTX share price continues to fall.

Plug Power [PLUG] -- last trade 26 1/2
Talk of litigation and more litigation has clobbered Plug's share price. No sign of any buyers yet.

The following larger companies and mutual funds are well situated to benefit from the coming fuel cell explosion.

Daimler-Chrysler [DCX] -- last trade 43.19
Same story as last month.

General Electric [GE] -- last trade 52 1/4
With the market falling over the past two months, it was only a matter of time before GE's price broke. Having now closed below 55, we believe GE has joined the general market in a bear decline. GE's chairman, Jack Welch, negotiated a deal worth about $42 billion to merge with Honeywell. With GE's share P/E still north of 40, GE will pay 1.055 of its shares for each of Honeywell's 801 million outstanding shares.

New Alternatives Fund [NALFX] -- last trade 44.87
In an article written by Peter Di Teresa for yahoo.com, it was reported that Morningstar gave NALFX the highest bear-market rank of any small-cap blend fund. A high bear-market rank means that the fund performed well during periods when the general market was declining over the past five years. In other words, this could be a good place to park some of your portfolio during a bear market.

28-September-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

We have held our recommended long and intermediate term allocations to a maximum of 80% stocks. The August numbers for money supply and CPI combined to boost RPCM2 back above its seven year moving average so we postponed any additional shifts from stocks to bonds. You can view the latest RPCM2 chart by clicking on the link at the top of this page. For a discussion of RPCM2, please read our article The Money Effect, which we were honored to have published in the August 28 issue of Barron's.

The stock market gave us a head fake on the last trading day in August. The S&P 500 index closed briefly above 1517 as the NASDAQ Composite pushed above the 4100 level, both positive moves in our eyes. Just two days later these indices broke down and headed south. In response, we switched our short term trading model from BUY to NEUTRAL on September 6. The major stock averages are now at a very important crossroads.

The NASDAQ Composite, DJIA, and the S&P 500 index are all resting on or slightly below up trendlines going back to the lows set in the fall of 1998. The Dow and the S&P are also at or slightly below up trendlines going all the way back to the beginning of this bull market that began in December of 1994. The crucial point here is that the next two weeks are extremely important for the longer term direction of the stock market. If it is lower two weeks from now (when the next 13 week inflection point is due), that would convince us that a bear market has begun. If instead the market is higher two weeks from now we believe the S&P 500 and perhaps the Dow will climb to new highs. The NASDAQ Composite we believe is already in a bear market.

Our bias up till now has favored the latter scenario. We believe it could play out as indicated in this weekly S&P 500 index chart which does not include Friday's close in this week's average. In that scenario, the S&P 500 would exceed the 1600 level before reaching a final bull market top. We would anticipate that the market sell-off would be triggered by the 30 year bond yield exceeding 6.50%.

The market action of the past week, however, has given us some pause. We would feel much more comfortable espousing the above position if the S&P were to post a closing high above 1475 on strong volume sometime over the next week. Otherwise, we may be proposing the following interpretation of the weekly S&P 500 index chart which is hinting that the first leg of a bear market has already begun.

Market Statistics
DJIA 10824.06	S&P500 1458.29
DJTA 2572.32	NASDAQ 3778.32
DJUA 396.37	30 YR BOND 5.88%

FUEL CELL UPDATE

We are making a format change to our Fuel Cell Update section this month. We will be listing companies and funds that we believe should be considered in your long term investment mix. Our focus will be to present the latest news on each so that you can better make a decision about which if any you would like to include in your personal portfolio. We will no longer make blanket buy, sell, and hold recommendations that we believe do a disservice to our readers whose investment goals and needs can vary greatly.

The following small companies are pure plays in the fuel cell industry. We recommend that you allocate no more than 12 percent of your portfolio to the fuel cell industry, and no more than 2 percent to any single fuel cell company.

Avista [AVA] -- last trade 22 3/16
Avista is one of two companies on our list that find themselves in litigation this month. A class action suit has been filed against this firm for losing money on derivative contracts. The suit charges that the company claimed they were carrying these instruments to protect themselves against market risk when in fact they were gambling on a price drop in electricity rates (electric rates went up). The share price tanked after the company confessed to problems on June 21. Anyone who purchased AVA shares between April 7, 2000 and June 21, 2000 could be eligible for inclusion in the lawsuit. Our take on this is that lawsuits are a losing proposition no matter which party "wins". We'd stay away from this one for a while.

Ballard Power Systems [BLDP] -- last trade 106 15/16
The Fuel Cells 2000 web site reports that "Ballard Power Systems and XCELLSIS Fuel Cell Engines shipped the first bus powered by the pre-commercial fuel cell engine to the SunLine Transit Agency in Palm Springs, CA. The bus will be the first of 25 expected to operate under the auspices of the California Fuel Cell Project." We were unable to confirm the news at the Ballard web site, however.

Fuel Cell Energy [FCEL] -- last trade 94 3/4 (following a 2:1 split)
That's no misprint...on September 14 Fuel Cell split two for one and still sells at nearly the same price as it did for our last letter. In other words, it doubled in value in just one month and has climbed in value by over 200% since we first recommended it in June. This is one of those parabolic price moves that is ripe for profit taking soon. Of course it could always move up another 100 points before the inevitable hits but we would suggest you tread slowly before adding more of this to your portfolio unless you are employing a mechanical buy program.

Manhattan Scientifics [MHTX.OB] -- last trade 3
After a burst of buying following their unveiling of a fuel cell powered bicycle, Manhattan's stock chart is looking weak once again. This is the most speculative stock on the list and could pay off huge if their technology proves feasible. If.

Plug Power [PLUG] -- last trade 38 7/16
This is the other litigation target, charged in a class action suit with false and misleading statements to shareholders. If you purchased shares between February 14, 2000 and August 2, 2000 you may be eligible for inclusion in the lawsuit. For more details on this one read our August letter below. If the 35 dollar price level holds, this may still be worth hanging on to. But as with Avista, we'd be inclined to let the dust settle before giving this one serious consideration.

The following larger companies and mutual funds are well situated to benefit from the coming fuel cell explosion.

Daimler-Chrysler [DCX] -- last trade 44.30
Still searching for a bottom. The P/E ratio of 7.35 is certainly attractive enough but the American side of the business is dragging the company down due to considerable price competition from the Big Two (Ford and GM). The Mitsubishi scandal over decades-long consumer complaint cover-up isn't helping either.

General Electric [GE] -- last trade 59
Ridiculously high P/E of 50+ but still barreling along. GE will probably go the way of the general market. The recent new high of 60 1/2 is currently being retested. If that fails, a close below 55 would signal serious weakness.

New Alternatives Fund [NALFX] -- last trade 50
This is a new listing for us. This fund, managed by Maurice Shoenwald, specializes in solar power and alternative energy sources (excluding nuclear). As such it is not a pure fuel cell play. However, their top ten holdings include Ballard, Fuel Cell, and Plug Power which comprise over 20 percent of the total mix. If you prefer to have a professional make your stock choices for you, this one's worth considering.

28-August-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
80%	20%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

We have once again changed our recommended long and intermediate term allocations, this time to a maximum of 80% stocks. Those of you who subscribe to the Clairvoyant Portfolio Optimizer, the fifth and final module of the HIPPO portfolio management system, already received an email informing you of the portfolio changes which will automatically show up in your Clairvoyant recommendations.

We are slowly moving money into bonds in response to the recent trend of lower money supply growth in the economy. Not because we believe this is the perfect time to buy bonds (we don't), but because the July numbers for money supply and CPI combined to keep RPCM2 below its seven-year average. If we are correct, it marks the beginning of a new era in stocks, one in which capital gains will be harder to come by. We believe bonds could be a better place to stash part of your portfolio over the next six or seven years. For details, please read our article The Money Effect, which we are honored to report was published in the August 28 issue of Barron's.

In our short term model we switched to the BUY mode in the third week of August, so we are currently recommending 200% stocks for your trading portfolio. The 13 week inflection point of July 17 turned out to be a short term event, much as we expected. We are still of the mind that the S&P 500 index is primed to move higher and that this S&P 500 index chart is the correct interpretation. This wedge formation makes a run to new highs in the 1600 area the most likely outcome before the market tops. And before we could be persuaded that this market was ready to form a top, we would have to see the 30 year bond yield reverse back above 6.50%.

A second interpretation of the S&P 500 index chart would indicate that the S&P 500 will be unable to post new highs above the record 1553 set in March. In either event, the market is at an important point right now. A close below 1500 would be a short term negative in our view, while a break above 1517 would be very positive.

The DJIA seems to have lost some momentum here and we would be surprised to see it break into new record highs. The most likely outcome for the NASDAQ, in our humble view, would be for it to meet upper resistance at 4100, not much higher than its Friday close. We believe any close below 3700 for this index would be a VERY negative event.

Market Statistics
DJIA 11192.63	S&P500 1506.45
DJTA 2790.17	NASDAQ 4042.68
DJUA 355.95	30 YR BOND 5.67%

FUEL CELL UPDATE

On August 2, Plug Power was spanked hard for their surprise announcement that their operating losses will continue beyond 2003, extending their earlier projection of development-stage losses by over two years. They also reported that their revenue for the quarter came in at $2.4 million, well below expectations in the $3.9 million range. On a positive note, the company also said its distribution agreement with GE Fuel Cell Systems has been extended. Nevertheless, share prices skidded 25 percent on the day of the announcement.

The chart was looking quite negative until Friday of last week when it popped 18 percent on strong volume the day after CEO Gary Mittleman resigned without giving a reason. At first the stock fell but by the next day investors had somehow decided that lopping off Gary's head was the right thing to do. There should be considerable overhead resistance at 50 dollars per share so we'll wait till it clears that hurdle before placing it back on our buy list.

Our recommended long-term buys at current prices:
Ballard Power Systems [BLDP] -- 101
Fuel Cell Energy [FCEL] -- 99 3/4
Manhattan Scientifics [MHTX.OB] -- 2 3/4

Our recommended long-term holds at current prices:
Avista [AVA] -- 18 5/8
Plug Power [PLUG] -- 48 3/4

We recommend that you don't allocate any more than 10 percent of your portfolio to the above group of risky small companies, and no more than 2 percent to any single cell fuel company.

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently buys:
Daimler-Chrysler [DCX] -- 54 7/16
General Electric [GE] -- 59 1/4.

Daimler-Chrysler appears to be putting in a bottom at 50, and GE just broke to a new 52 week high on reasonably strong volume.

28-July-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
90%	10%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
90%	10%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Many of you may have noticed that we have changed our recommended long and intermediate term allocations from a maximum of 100% stocks to a maximum of 90% stocks. We are taking money off the table in response to the recent trend of lower money supply growth in the economy. The June numbers for money supply and CPI combined to drive RPCM2 down through its seven-year average. This is an extremely important change that occurs only once every seven years. If we are correct, it marks the begining of a new era in stocks, one in which capital gains will be harder to come by. For details, please read our article The Money Effect .

Our short term model we switched to the NEUTRAL mode the first week of July, so we are currently recommending 100% stocks for your trading portfolio. However, the 13 week inflection point arrived as a market top on July 17. It now becomes a waiting game to see if this is a short term top or something more important. With the precipitous fall since that day the wait may soon be over. The S&P 500 index will likely test the 1400 support next week. A violation of that critical area would accelerate our move to bonds in our long and intermediate portfolios and activate a SELL in our short term portfolio.

We are currently leaning in favor of the view that the July 17 top is a short term one and that this S&P 500 index chart is the correct interpretation. There are a number of reasons for this including improvements in market internals (advance-declines, new highs-new lows, etc.), a neutral index of bullish minus bearish newsletter writers, and the fact that our own intermediate model has not yet flashed a SELL signal.

There is always the chance, of course, that the July top will turn out to be an important one just as it did in 1998 and 1999. In that case, a second interpretation of the S&P 500 index chart would be the correct one and a bear market would clearly be underway with a close below 1400. If that were to happen, then a look back would tell us that a bear market began in the Dow Transports in May 1999, the NYSE Composite in July 1999, the Dow Industrials in January 2000, the Nasdaq and the S&P 500 in March 2000.

The most interesting thing to happen on the fuel cell front this month involved Manhattan Scientifics who, as you may recall, were the first to come out with a micro-fuelcell phone concept. Earlier this month they introduced a hydrogen powered fuel cell bicycle (670 watts) at the "Fuel Cell 2000" conference in Lucerne, Switzerland. That sparked enough investor interest that we moved them up from a long term hold to a buy.

Our recommended long-term buys at current prices:
Plug Power [PLUG] -- 53 5/16
Ballard Power Systems [BLDP] -- 86
Fuel Cell Energy [FCEL] -- 77 1/2
Manhattan Scientifics [MHTX.OB] -- 2 3/4

Our recommended long-term holds at current prices:
Avista [AVA] -- 19

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently holds:
Daimler-Chrysler [DCX] -- 52 7/16
General Electric [GE] -- 50 15/16.

Market Statistics
DJIA 10511.17	S&P500 1419.89
DJTA 2769.53	NASDAQ 3663.00
DJUA 328.26	30 YR BOND 5.78%

28-June-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Reviewing the first half of year 2000, stocks have been trading in a sideways pattern. The NASDAQ Composite is down 5 percent, the DJIA is down 7 percent, and the S&P 500 index is dead even with the year's opening day. Nothing in recent weeks indicates that the market has reconciled this tug-of-war in either direction. To us this still looks like a market without conviction.

Our short term model is still in SELL mode, so we are recommending 100% cash for your trading portfolio. Our intermediate and long term models are still recommending a maximum of 100 percent equities. Market internals such as the advance-decline line and new highs/new lows have shown some improvement over the past month but without a clear buy signal we left our recommendations unchanged.

The weekly S&P 500 index chart has been revised to reflect our new interpretation of the rising wedge. The lower line was redrawn along the most recent low at point D. This interpretation makes it more likely that the S&P 500 will break into new highs at point E before receding into a bear market.

An inflection point is due the second week of July. Whether it will be a short term top or bottom is a tough call at this point. If our new interpretation of the rising wedge is correct, it could very well be a top. Because we are still looking for a BUY signal from our short term model, a bottom could satisfy that. Expect something important to occur the week of July 10 and keep an eye on our short term model.

The CPI was nearly unchanged this month while money supply growth slowed, putting RPCM2 back on track to cross it's seven year average line in August. Once the lines cross, we will be announcing the arrival of a contraction period and recommending a switch from stocks to bonds for about 30 percent of your portfolio. See our article The Money Effect for details.

Some of the fuel cell companies appear to back in favor with investors. This could be the beginning of a very profitable third wave move up for these young companies. We have moved two companies from hold to buy status and have added a new entrant to our fuel cell watch, FuelCell Energy, Inc. Fuel Cell Energy is a developer of electrochemical technologies for electric power generation and has developed a proprietary patented fuel cell known as the Direct FuelCell.

Our recommended long-term buys at current prices:
Plug Power [PLUG] -- 58 1/2
Ballard Power Systems [BLDP] -- 88 1/2
Fuel Cell Energy [FCEL] -- 64 1/2

Our recommended long-term holds at current prices:
Avista [AVA] -- 18 1/16
Manhattan Scientifics [MHTXE.OB] -- 2 1/4

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently holds:
Daimler-Chrysler [DCX] -- 53
General Electric [GE] -- 50 1/2.

Market Statistics
DJIA 10527.79	S&P500 1454.82
DJTA 2719.86	NASDAQ 3940.34
DJUA 319.33	30 YR BOND 5.96%

28-May-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

As we had expected, stocks are making a retest of their April lows. The NASDAQ has already exceeded those lows on the downside and looks terribly weak. We would not be surprised to see the technology-laden index down around 2500 sometime over the next two weeks. That would completely erase all the marvelous gains of the past year and hand many individual investors the first gut check of their investment lives.

Our short term model is still in SELL mode, so we are recommending 100% cash until we get a final capitulation in the S&P 500 index. More than likely that won't come before it sets a new low for the year. Once we get a short term BUY signal we will be recommending a 200% position in stocks for what we anticipate will be a run up to retest the old record highs. Our expectation is that a double top will form sometime in the fall, followed by a bear market. Between now and then we will be revising our view based on the data but our confidence level is quite high that we are very near a major sell-off in stocks.

Much of this confidence comes from the correlation we unveiled last month in our new article The Money Effect. We will be editing the article each month with new data until RPCM2 crosses down through its seven year average line. The reduction in CPI inflation this past month and a stronger than expected increase in money supply worked together to reverse the downtrend and delay the ultimate collision.

Once the lines cross, we will be announcing the arrival of a contraction period and recommending a switch from stocks to bonds for about 30 percent of your portfolio.

This view of the market is bolstered by our Elliot Wave interpretation of the weekly S&P 500 index chart. The weekly data have been forming a rising wedge since the beginning of the year. "This diagonal triangle is a sign that a major up-move is coming to an end and that the early stages of the bear market to follow are likely to be extraordinarily violent" (according to Elliot Wave Explained by Robert C. Beckman). This week's data penetrated the lower end of the wedge, signalling that an A-B-C correction has begun. Ideally, wave A would correct to the 1300 area, wave B would move up to around the 1450 area, and then wave C would take the market to below the October 1998 low (around 950).

The fuel cell companies have been selling off with the rest of the technology companies. Keep in mind that these are verry long term investments. If we are correct in our expectations, the fuel cell's day in the spotlight is still 25 years away. But there will be plenty of money made in these stocks between now and then.

The companies we are tracking are recent IPOs that have completed their first wave run up and are currently in the second wave correction. The third wave move up, once it begins, will be highly profitable indeed. Until that wave begins, we are recommending these stocks as holds. We believe that wave two won't end until Ballard moves down into the 30 to 52 range, Plug to the 16 to 30 range, Manhattan down to 2, and Avista down to the 15 to 20 range.

Our recommended long-term holds at current prices:
Plug Power [PLUG] -- 39 7/16
Avista [AVA] -- 22
Manhattan Scientifics [MHTXE.OB] -- 2 11/16
Ballard Power Systems [BLDP] -- 63 1/4

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently holds:
Daimler-Chrysler [DCX] -- 54 3/8
General Electric [GE] -- 49 9/16 (following a 3 for 1 split).

Market Statistics
DJIA 10299.24	S&P500 1378.02
DJTA 2687.55	NASDAQ 3205.11
DJUA 327.46	30 YR BOND 6.05%

28-April-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Stocks went for a roller coaster ride this month, with technology issues and the NASDAQ a bit worse for the wear. As we had anticipated, the second week in April posted a 13 week inflection point. The market low buying opportunity that historically has presented itself in April occurred on Monday April 14 for the S&P500 index, and April 17 for the NASDAQ and Dow Industrials.

At the low, the NASDAQ was off about 35% from it's all-time high set on March 10. Many .com traders found themselves down a good bit more than that but by and large were unfazed by the decline. Institutions did most of the selling as individual investors patted themselves on the back for not panicking. Our take is that the small investor has been conditioned to "buy the dips" and is being set up to be the proverbial bag-holders when "the big one" arrives.

The question is as always, "is THIS the big one?"

On the positive side, our intermediate and long term models are still recommending a maximum of 100% stocks. As ugly as it appeared, the NASDAQ correction was simply a 50% retracement of the total gain from the October 1998 low to the March 2000 high. The long term uptrend lines for all the averages are still intact. It's quite possible that we could be witnessing new highs in short order.

The negative story is less compelling -- for now. Our short term model is still in SELL mode, so we expect a retest of the recent lows. But with interest rates and inflation as they are at this time we can't make a good case for a major selloff in stocks. Same goes for sentiment indicators with the Bullish minus Bearish newsletter writer index having yet to flash a major sell signal. Market internals such as the NYSE advance-decline line have been screaming for a bear market for some time, though. And since our belief is that we are in a stock mania that is ripe for a panic (see Inventing Booms and Busts), we have been busy looking for scenarios that could lead to trouble.

It turns out that a very realistic scenario does exist that could be devastating to stocks. If the CPI inflation rate stays in the 3.5% neighborhood in April and May (it is currently running at 3.7% for the month of March) and M2 money supply growth continues at its year 2000 growth rate of about 4%, our long term model will switch from "expansion" to "contraction" in May. We have been in expansion mode since early 1994. Expansion and deflation periods are great times to be holding stocks. Contraction and inflation periods are not so kind to stocks. Typically the dawning of one of these periods is accompanied by a bear market. Like the 1973-74 bear market that introduced the inflation of the 1970s (1973-80), and the crash of 1987 that initiated the last contraction period (1987-94). See our new article The Money Effect for details.

Should our long term model signal the arrival of a contraction period, we will be recommending a switch from stocks to bonds for about 30 percent of your portfolio. But that's not all. Should long term interest rates ratchet up over 6.75% (currently around 6.00%), we will reduce stock exposure another 25 percent. Finally, inflation falling from the 3.5% level in May to the 2.5% level would trigger another 25 percent shift away from stocks. In all, our recommended stock holding could fall from 100% all the way down to 20% in a matter of months just by inflation moderating and long term interest rates rising fewer than 100 basis points.

The following fuel cell companies are recommended long-term holds at current prices:
Plug Power [PLUG] -- 80
Avista [AVA] -- 29 1/2
Manhattan Scientifics [MHTXE.OB] -- 4 1/4
Ballard Power Systems [BLDP] -- 80

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently holds:
Daimler-Chrysler [DCX] -- 57 1/2
General Electric [GE] -- 157

Market Statistics
DJIA 10733.91	S&P500 1452.43
DJTA 2850.01	NASDAQ 3860.66
DJUA 317.75	30 YR BOND 5.96%

28-March-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

The picture in stocks improved since our last letter. The NASDAQ continues its impressive climb; the S&P 500 Index and Russell 2000 are setting new highs; the NYSE Composite and DJIA are approaching all-time highs, and the Dow Jones Transports are bouncing off their lows.

We changed our short term model from 100% cash to 100% stocks on February 29. Our position increased to 200% stocks on March 21 where it remains. Our long and intermediate models are both still recommending a maximum of 100% position in stocks. Market internals (advance-decline, new highs vs. new lows) for the NYSE get uglier each month. The longest period of time that the advance-decline line diverged from the NYSE Composite was 19 months before the current record run. We are now in our 23rd month. How much longer can this continue?

The next 13 week inflection point is due the second week of April, or about two weeks from now. Historically April is a good month to buy stocks but this one is shaping up to be at least an intermediate top. Monitor both our short and intermediate term market models for important signal changes.

The following fuel cell companies are recommended long-term buys at current prices:
Manhattan Scientifics [MHTXE.OB] -- 5 5/8
Ballard Power Systems [BLDP] -- 92 1/2

The following fuell cell companies are recommended long-term holds at current prices:
Plug Power [PLUG] -- 91 11/16
Avista [AVA] -- 36

Larger companies that are well situated to benefit from the coming fuel cell explosion are currently holds:
Daimler-Chrysler [DCX] -- 65 3/4
General Electric [GE] -- 156

Market Statistics
DJIA 10936.11	S&P500 1507.73
DJTA 2680.97	NASDAQ 4833.89
DJUA 284.35	30 YR BOND 5.99%

28-February-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Large cap stocks have quietly moved into a significant correction -- the Dow Industrials are currently 16% off their January 14 intraday high, the S&P 500 Index is off 9% from its January 3 high. The NASDAQ Composite, on the other hand, is up a stunning 74% in a little over four months and still appears to be in a powerful uptrend.

We have changed our short term model from 100% stocks to 100% cash. Our long and intermediate models are both still recommending a maximum of 100% position in stocks. Market internals (advance-decline, new highs vs. new lows) continue to deteriorate badly for the NYSE. Also, the Dow Jones Transportation index is now 38% below its high of last May.

The next 13 week inflection point is due the second week of April, or about six weeks from now. Historically April is a good month to buy stocks, implying that the current correction could have a way to go. Monitor both our short and intermediate term market models for important signal changes.

Last month we discussed some companies that are well positioned in the fuel cell industry. We believe that fuel cells are a growth industry that is destined to eventually displace today's thriving growth industry, the computer industry. Fuel cells should be the most important of the coming planet friendly technologies. The four companies we recommended are fuel cell manufacturers and are "pure plays" in this industry. If you didn't jump on Ballard Power Systems last month, you missed a dazzling 70% price increase. The chart still looks positive so we would still recommend it in the 90-100 price range.

Manhattan Scientifics is up a handsome 25% to 7 1/2. Buy this on dips below 6 dollars a share or if the stock breaks out above 8 dollars on strong volume (at least 2 million shares). Bill Gate's favorite, Avista, is still hanging around 30 after its euphoric bounce to 68 following the announcement that the software mogul had purchased 5 percent of the company. Accumulate below 30. Plug Power is still a recommended buy below 100.

Other larger companies that are well situated to benefit from the coming fuell cell explosion include several major automobile companies, especially Daimler-Chrysler and Ford (partnered with Ballard), also GM, Toyota, and Honda. Large companies involved in land based electric power generation using fuel cells are GE and the German company Vaillant (partnered with Plug Power).

Market Statistics
DJIA 10038.65	S&P500 1348.05
DJTA 2361.78	NASDAQ 4577.85
DJUA 288.15	30 YR BOND 6.19%

28-January-2000

Long Term Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Intermediate Model asset allocation:
stocks	bonds	cash	gold stocks
100%

Short Term Model asset allocation:
200% stocks	100% stocks	100% cash	100% short

Stay the course. We are still 100% invested in stocks in our short term model. Our long and intermediate models are both recommending a maximum of 100% position in stocks. We are still on the alert for a market top as the bond market as well as market internals (advance-decline, new highs vs. new lows) continue to deteriorate. Also, the Dow Jones Transportation index is 30% below it's high of last May. A top does not appear to be imminent, however.

We have posted a new article under the Mind Stretch section entitled Inventing Booms and Busts. The article was finished on December 9, 1999. It discusses a pattern of growth industries that has been around at least as long as the beginning of the Industrial Revolution. Growth industries dominate the economy for a period lasting about 55 years. The last four were textiles, railroads, automobiles, and computers.

Growth industries are important because they provide tremendous career and investment opportunities. In my article I discuss that the fuel cell vehicle is a great candidate for the next growth industry to replace the computer. Mind you, the computer will dominate the economy for another two decades. But imagine if you had the opportunity to invest in IBM in the early 1950s.

It turns out that none other than Bill Gates has been sniffing around the fuel cell industry and last week was reported to have purchased a 5 percent interest in Spokane-based Avista Corporation (symbol AVA). Avista is not involved in fuel cell vehicles but are in an area that could be just as interesting. They are in the electric power business and are working on a home fuel cell device. A competitor in the same field is Albany-based Plug Power (symbol PLUG).

Needless to say, when Bill's holdings were revealed, share prices of all the fuel cell companies benefitted. Avista quadrupled in price to 68 but has since come back to earth and looks reasonable at its current 33. Plug Power jumped from about 50 to over 150, and also looks decent at its current price of 100.

Two other fuel cell companies that look interesting right now are Ballard Power Systems (symbol BLDP), the leader in automotive fuel cells, and Manhattan Scientifics (symbol MHTXE.OB) who leads in miniature fuel cells for cell phones and other small appliances. We wouldn't pay over 60 or 6, respectively.

Market Statistics
DJIA 11028.02	S&P500 1398.56
DJTA 2615.27	NASDAQ 4039.56
DJUA 283.01	30 YR BOND 6.53%