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8:30 AM Wednesday, October 12, 2005: I heard the R word for the first time from a housing developer/financier. He sees high-end development evaporating. He is now concentrating on entry-level, less expensive homes.

A "recession" won't hit all sectors of our economy equally. But it absolutely will adversely affect the stockmarket and make picking good stocks to hold even harder. As I've written before, my brain is turning increasingly to shorting stocks. My erstwhile favorite shorts include housing, banks and finance stocks. I now include tech stocks. My biggest recent "gains" have been in stocks I haven't been in -- like Microsoft, Intel, GM, TiVo, Apple, Commerce Bancorp, Powerwave, Best Buy, Dell and others which brokers have been hammering the table for.

Today's adage remains:

When in doubt, stay out. Or sell a little short.

FundAlarm is a free, non-commercial Website. Our view of the mutual fund industry is slightly off-center. We help you decide when it's time to sell a fund, instead of when it's time to buy. The mutual fund industry is full of broken promises, arrogance, greed, hypocrisy -- the list goes on. We try to shine a light in the darker corners, and poke holes in balloons that could use some poking.

Management changed recently at the Generation Wave Growth and Vice Funds and FundAlarm alerted its readers thus:

"Vice Fund: Manager Dan Ahrens abruptly resigns as manager, and leaves the firm that manages this fund. Ahrens is replaced by Michael Henry, who won't be encumbered by previous bad habits, since the 25-year old Henry has absolutely no experience managing a mutual fund, or executing a strategy anywhere close to the strategy this fund is supposed to follow. This has always been a silly gimmick fund, but at least Ahrens seemed to have some real passion about the fund's silly mission. ... There's also been some hint that Ahrens steppped down because he didn't want to be involved with some kind of impropriety at the fund management company. This could get good. But if you own this fund, you absolutely, positively want to observe the fun from the sidelines, so you might want to get your money out, fast. Ahrens, who also managed Generation Wave Growth, has been replaced at both funds by 25-year old Michael Henry, who has no prior mutual fund management experience.....In fact, as far as we can tell, Henry has no experience whatsoever executing the type of investment strategy practiced by either of the funds he's now running.....Prior to 2002, Henry wasn't even in the investment business: According to his resume, he was a sales rep for a tool and equipment company."

Nobel Came After Years of Battling the System: This story from yesterday's New York Times tells a lot about innovation in general and in the pharmaceutical industry in particular. You must read it:

When two Australian scientists set out in the early 1980's to prove that a bacterium, Helicobacter pylori, caused stomach inflammation and ulcers, they met opposition from a medical-industrial complex entrenched in the belief that psychological stress was the cause.

Opposition to their radical thesis came from doctors with vested interests in treating ulcers and other stomach disorders as well as from drug companies that had come up with Tagamet, which blocked production of gastric acid and was becoming the first drug with $1 billion annual sales.

Ulcer surgery was lucrative for surgeons who removed large portions of the stomach from patients with life-threatening bleeding and chronic symptoms. Psychiatrists and psychologists treated ulcer patients for stress.

The concept of curing ulcers with antibiotics seemed preposterous to doctors who had long been taught that the stomach was sterile and that no microbes could grow in the corrosive gastric juices. A bacterial cause "was just too wild a theory for most people" to accept, and something so ingrained as stress causing ulcers was too difficult to dismiss, Dr. J. Robin Warren, one of two who won the 2005 Nobel Prize for Physiology or Medicine on Oct. 3, said in a telephone interview.

Blame focused on psychological stress in part because many patients had stressful lives and scientists lacked another explanation. Also, Tagamet and similar drugs, known as H2 blockers, safely made ulcers and their symptoms disappear. But the H2 blockers were not one-shot cures. Ulcers often recurred, requiring repeated courses of the drugs, providing a steady stream of profits.

"The opposition we got from the drug industry was basically inertia," said Dr. Barry J. Marshall of the University of Western Australia, the other Nobel winner, and "because the makers of H2 blockers funded much of the ulcer research at the time, all they had to do was ignore the Helicobacter discovery."

"If the drug companies were truly into discovery, they would have gone straight after the Helicobacter," Dr. Marshall said, but they did not because of the success with H2 blockers.

"Had these drugs not existed, the drug companies would have jumped on our findings," he added.

Then, too, the fresh thinking was coming from what many doctors regarded as a medical outpost, Perth. All the factors created a type of rigidity that many doctors say still exists for better or worse.

Further, Dr. Marshall said, "The fact that the big drug companies who were supporting the journal articles ignored H. pylori was far more effective than actually saying that a bacterial cause was not true because if they had said it was false, or not important, they would have created a controversy and maybe media interest."

Right from the moment in 1979 when Dr. Warren, a pathologist, first saw bacteria in stomach biopsies at the Royal Perth Hospital, he said: "I met skepticism from my colleagues who mostly did not want to know, or believe, what I was describing. Anyone could see the bacteria through a microscope, but the clinicians did not want to see them."

Why was he the only one seeing the bacteria? Why had others not described them earlier? He did not know, Dr. Warren said in answer to the skeptics who asked. "Once I started looking for them, they were obvious," he said, "but convincing other people was another matter."

Even doctors who peered down the barrel of a microscope and did agree bacteria were present said they must be opportunists, not the cause of stomach ailments. Dr. Warren pointed out that the bacteria were all the same, not the variety that would be expected of secondary invaders. But, he said, "It was hard for me to prove them wrong."

Proof took years.

Early support came from Dr. Marshall's efforts in the library and laboratory. Aided by a librarian in Perth, Dr. Marshall painstakingly searched for papers published decades earlier than those listed in the United States National Library of Medicine's electronic data base that starts about 1965.

Although a few doctors had described the curved bacteria in the late 19th century, the findings were passed over in the hundreds of peer-reviewed articles published thereafter. Then Dr. Marshall performed a famous self-experiment in which he swallowed a culture of H. pylori, got sick, documented that he developed an inflamed stomach and was cured of the gastritis with an antibiotic.

Many critics took notice of the bacterium's dangers, Dr. Warren said.

As a practicing gastroenterologist, Dr. Marshall saw many patients go to surgery for ulcers and some die from internal bleeding. His top priority was to determine which combinations of antibiotics cured ulcers. "There was a lot of urgency to publish data because" the medical world wanted convincing proof, Dr. Marshall said.

But many American researchers, he said, "seemed more interested in carefully studying the mechanism of how H. pylori produced stomach damage rather than driving straight in to treat people."

There were many reasons for the different tacks. Dr. Warren said that "the medical profession is brought up to be very careful with new findings, and that is probably a good thing for most patients because you have to be fairly careful with new findings or otherwise you may do something stupid."

A cardinal rule of medicine is: First, do no harm. Experience has taught that rushing to use a new therapy without the backing of findings from controlled trials can have serious, if not lethal, outcomes. One example was that freezing the stomach cured ulcers, when it sometimes resulted in dead tissue.

It can be hard for doctors, like others, to admit error. Sometimes the caution is excessive and it, too, can cost lives.

Dr. Alfred Sommer, the former dean of the Johns Hopkins Bloomberg School of Public Health, recalled how medical leaders in the 1980's rejected evidence that inexpensive vitamin A pills could prevent death from infections as well as blindness.

Now it is standard therapy.

Dr. Samuel Hellman, a former dean of the University of Chicago's Pritzker School of Medicine, said that doctors "often fall in love with a hypothesis, and that holds in my field, cancer."

Medicine's peer-review system for deciding what articles to publish and which grants taxpayers should support "discriminate against the truly inventive, exciting, far-out ideas, Dr. Hellman said.

Peer review "tends to adhere to things that are consistent with prevailing beliefs and models," he said, and "really new ideas usually just get thought of as crazy."

The National Institutes of Health, a federal agency, supports biomedical research at its campus in Bethesda, Md., and in medical schools and centers throughout the country and abroad. But, Dr. Hellman said, "innovation does not get funded at the N.I.H. right now because it can pay for only a very low percentage of approved grants."

When this reporter interviewed American medical leaders about the Australian findings in 1984, some dismissed them as unimportant because a bacterial cause of ulcers had not been discussed at recent national scientific meetings.

Reflecting on his road to the Nobel Prize, Dr. Marshall said: "In the 1970's and 1980's there was a bit of a mind-set that all the important stuff in medicine had been discovered.

"So maybe we started something that was more important than we thought because Helicobacter has opened people's minds to the possibility of an infectious cause of all those other diseases whose cause is unknown."

Before you buy a new digital camera, check dpreview.com: This site has detailed reviews (or at least detailed specs) on the newest digital cameras. Items:
+ Point and shoot (i.e. automatic) digital cameras now sport as many as 8 million pixels -- which can produce phenomenal clarity and enlarging capability.
+ Some new cameras sport a large LCD screen, but no viewfinder. I find framing a photo backwards to be disconcerting and slow.
+ Most new cameras have little or no shutter lag. But you must check. Take a few photos before you buy.
+ Pre-focusing or turning off automatic focusing will speed shutter lag.
+ There is a big difference between optical zoom (that uses the lens) and digital zoom (which enlarges part of the image, discarding many pixels and often producing a blurry photo.) You don't want to use or rely on digital zoom.
+ The tiniest cameras generally produce the worst photos. Conversely, the biggest, heaviest and most expensive ones produce the best images.
For ultra-convenient, infrequent photo taking, nothing beats a $10 disposal camera.

Old but still wonderful:
If you remember the Original Hollywood Squares and its comics, this may bring a tear to your eyes. These great questions and answers are from the days when Hollywood Squares game show responses were spontaneous and clever, not scripted and (often) dull, as they are now. Host Peter Marshall asked the questions.

Q. Do female frogs croak?
A. Paul Lynde: If you hold their little heads under water long enough.

Q. If you're going to make a parachute jump, at least how high should you be?
A. Charley Weaver: Three days of steady drinking should do it.

Q. You've been having trouble going to sleep. Are you probably a man or a woman?
A. Don Knotts: That's what's been keeping me awake.

Q. According to Cosmopolitan, if you meet a stranger at a party and you think that he is attractive, is it okay to come out and ask him if he's married?
A. Rose Marie: No; wait until morning.

Q. Which of your five senses tends to diminish as you get older?
A. Charley Weaver: My sense of decency.

Q. In Hawaiian, does it take more than three words to say "I Love You"?
A. Vincent Price: No, you can say it with a pineapple and a twenty.

Q. It is considered in bad taste to discuss two subjects at nudist camps. One is politics, what is the other?
A. Paul Lynde: Tape measures.

Q. When you pat a dog on its head he will wag his tail. What will a goose do?
A. Paul Lynde: Make him bark?

Q. According to Ann Landers, is their anything wrong with getting into the habit of kissing a lot of people?
A. Charley Weaver: It got me out of the army.

Q. Back in the old days, when Great Grandpa put horseradish on his head, what was he trying to do?
A. George Gobel: Get it in his mouth.

Q. Who stays pregnant for a longer period of time, your wife or your elephant?
A. Paul Lynde: Who told you about my elephant?

Q. Jackie Gleason recently revealed that he firmly believes in them and has actually seen them on at least two occasions. What are they?
A. Charley Weaver: His feet.

Q. According to Ann Landers, what are two things you should never do in bed?
A. Paul Lynde: Point and laugh.

Recent column highlights:
+ How my private equity fund is doing. Click here.
+ Blackstone private equity funds. Click here.
+ Manhattan Pharmaceuticals: Click here.
+ NovaDel Biosciences appeals. Click here.
+ Hana Biosciences appeals. Click here.
+ All turned on by biotech. Click here.
+ Steve Jobs Commencement Address. The text is available: Click here. The full audio is available. Click here.
+ The March of the Penguins, an exquisite movie. Click here.
+ When to sell stocks. Click here.

Harry Newton

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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