Today we are experiencing a major “de-leveraging” of the credit system upon which world economic growth is based. We have never seen anything like it in my 35-year professional career. Already it rivals the mid-1982 deflationary vs. inflationary spiral point of decision, that, fortunately, Volcker navigated successfully.

Around mid-April, all the major nanotech stock indices, including our own, The Nanotechnology.com Small Tech Index, hit five-year lows.

In the 2005 book, Nanotech Fortunes: Make Yours in the Boom; Winning Strategies, we described the importance of four-year lows in all “boom/bust” markets as well as the importance of the mid-2006 to late-2009 timeframe for setting up a premier buying opportunity.

We have been speaking about this and writing about this since 2003. Others, less familiar with the public markets, high-risk investing, or the demands of science and technology (or all three), have been much too early and are paying for it now. They underestimated the FDA process, the time it takes to do good engineering, overcoming or not considering physics problems, packaging issues, taking something from a lab bench to industrial scale-up… etc.

Of equal or greater import, the fact that IBM (NYSE: IBM, Stock Forum), DuPont (NYSE: DD, Stock Forum), Chevron (NYSE: CVX, Stock Forum), Intel (NASDAQ: INTC, Stock Forum), GE (NYSE: GE, Stock Forum), etc. are far more likely to advance their in-house nanotechnology to products than a small company is to overtake them was all but forgotten. In addition, so-called “traditional” technology often trumps the best-laid plans.

Yipes!

Some forgot it wasn’t 2000 anymore; the public would not accept bets on the distant future promise of returns in exchange for the possibility of near-term capital gains.

On the other side, scientists, engineers, and high-tech executives with patents and other intellectual property have welcomed the investor community’s largess with open arms. Who can blame them for creating receptacles for the dollars? They want their labs fully-funded and are more than happy to do their work, push the edges of science, publish and advance their technologies… as long as the livin’ (and money) is easy.

We have a phrase for this in mining and oil & gas venture capital. Many geologists love being “in the bush” and “turning the drill bit to the left”; they are much less concerned than you (the investor) are that they actually “find” anything. They enjoy the activity of their work, and for them that is its own reward (if they are paid to do it, all the better… lol).

This game is over. Actually, it was over in 2002/2003, but the “smartest guys in the room” didn’t grok it, and they led sophisticated institutional investors along with Mom and Pop retail investors astray.

Today, “greentech” and “cleantech” are the catchwords of the moment. They too are having their comeuppance in the throes of the exuberance of too many solutions chasing too many markets that may or may not even exist (note charts of solar and wind stocks over the last few months). Not only are these catchwords just new ones for “nanotechnology,” “small tech,” and “advanced technologies” (think about it, except that they usually don’t include the medical or semiconductor sides of “small tech,” they really are).

As investors and the average folks come to realize how distant some of these markets are, how plentiful oil actually is (nanotechnology is even “finding” more) and, may I say it, how much Gore has changed his “vision” for his pocketbook, this enthusiasm, too, will fade. “Gone with the wind” and wind-farms . . . if you will. (Please don’t write me on this; I’m not saying solar, wind, clean coal, pollution tech, etc., etc. aren’t great things . . . only that the investment enthusiasm is ahead of itself… yet again.)

Opportunity only knocks once, and this is what nanotech investors have been waiting for:

When the bottom in “small technology” (nano, MEMS, microelectronics, and microfluidics) stocks and private companies comes, we expect you’ll find:

Coatings – good

Catalysts – good

Advanced materials – excellent

Lubricants – good

Filtration – good

Insulation – good

Photovoltaic companies – questionable

Since the nanotech tales of woe, detailed in October 2007, there has been more woe (but you’ll see in Part III there is more than room for optimism, now):

From mid 2007, one single, “unlucky” investment bank raised Arrowhead Research Corporation (NASDAQ: ARWR, Stock Forum) $16.5 million at $5.78 per share with ¼ warrants at $7.06 (it’s now $2.02). They raised Nanophase Technologies Corp. (NASDAQ: NANX, Stock Forum) $10.6 million at $5.92 (now $1.95). Oddly (not), they were unable, for whatever reason (amazed neither the company itself nor the underwriter have yet to release details at this late date), to bring private company, Nanodynamics, public on the Dubai Exchange a few months ago.

Consider more woe: Considered by some a superstar, Nanosphere Inc. (NASDAQ: NSPH, Stock Forum), went public only in early November 2007 at $14 – today $8.82.

Sorry, but this continues a pretty darn bad record for nanotech investing and investments, and you know what they say about those who continue repeating the same activities while expecting different results.

As we’ve been saying and writing publicly since 2004, the “VC to IPO or M&A model” (nothing against VCs) is “broken” (it’s the wrong model) for “small” tech investing, largely because it requires more capital than can be efficiently put to use by these type of companies. A merchant banking model (read the Hambrecht & Quist, Petrie/Parkman, or Allen & Co. model) wedded to the public venture capital stock markets and going public early is a better formula for success.

All that said: We are certainly closer to a long-term bottom than at anytime in the last 10 years, and, properly structured for return on investment, nanotechnology and other advanced tech deals, companies, and stocks will prove incredible investments over the next three to seven years.

Especially when the investments are made at pre-public, private placement valuations.

With these nanotech insights, it is my hope that kindred spirits, including accredited investors, VCs, investment bankers, angel investors, analysts, scientists, hedge and private equity fund managers, high-tech entrepreneurs, public and private “small” tech companies, and family office execs will gravitate toward The Nanotech Company, LLC.

Our vision of using the TSX Venture Exchange to finance and create liquidity for “small” and advanced technology companies and our deep expertise in successful employment of Canadian public venture capital markets are unique.

To be clear: Our firm, supported by our eminent Scientific Advisory Board, is going to be building “small” and advanced tech companies via the TSX Venture Exchange. The main reason we are communicating with this relatively small group and fraction of our list of Nanotechnology.com subscribers is that some of the “accrediteds” among you may have the opportunity to participate at a ground-floor stage in these investments and others may assist us in growing this process.

Again, opportunity and history knock only once.

Patience pays off. Valuations are down. Money is tight. Success stories have been few.

This is what we have been waiting for. What a great time to be a nanotech investor.

Now is the time to start investing for the long term in “small” and advanced tech stocks:

If you are not an “accredited investor”, should you begin investing for the long term in “small” and advanced tech stocks, now?
If so, how and in what should one invest?

Unbelievably, for the first time, ever, we say – yes!

We would begin to “dollar cost average” monthly, over the next 20 months. We would divide the total amount we wanted to invest in these type shares over the next few years – let’s say $20,000 – into 20 and invest the same amount monthly on the same day (in this case $1,000), every month for 20 months starting now.

What stocks would we choose and how many shares of each would we buy?

Simply, we would buy The Nanotechnology.com Small Tech Index using the stocks and the ratios we present there. (Remember to use the footnotes at the bottom of the page. They are very important.)

Now some words of caution, especially for the well-heeled, “accredited investor”-types with which we work closely:

A few months ago, 60 Minutes did a very interesting take on nanoparticles used in cancer therapeutics: a technology with which our team is quite familiar. You can view it now if you missed it and read the accompanying article.

The changes in science and technology are coming so fast that one noted scientist recently stated, “things change faster than you can publish them.”

Let this be “a word to the wise”, when, as an investor, you think you are on to something unique. Finding a “robust” technology, one that keeps working efficiently and economically, no matter what you throw at it is usually good enough, if you have the right team.

The U.S. economy is now faced with the choices of a man atop a burning, two-story building. He can make a terrible choice with known consequences by jumping and breaking his legs (inflate, regulate, and bail out, which will cause significant and harmful, but fairly well understood, consequences), or he can face the unknown and wait or run into the fire, hoping for it to be put out before reaching him or finding an opening to an escape. The results would likely be catastrophic, but he might survive (this equates to doing more tinkering around the edges or letting the weak markets crash and hoping for positive results – the outcomes are unknown but could range from all kinds of “nastiness” like Japan in the early 1990s and forward, to Germany’s hyperinflation prior to World War II).

Luckily, as of now, we’re only standing on the top of a one-story building! Unfortunately, that could change, and many stories added, if we continue down the path on which we have been.

Here are the resources you need to be a successful investor in nanotech and other “small” and advanced technologies. They are all free (except for the book, listed first below):

Nanotech Fortunes – the first and only book written on successful investing in “small technologies” – available on Nanotechnology.com or Amazon.com.