An ethanol pump
An ethanol pump - 
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BOB MOON: If you're looking for the "next big thing" to strike it rich, how about the alternative energy business? Democrats in Congress are making energy independence a top national priority. And even though the cost of a barrel of oil edged down a bit today, the recent trend has prices moving back up. That's got investors focused on companies offering renewable energy sources.

It doesn't seem to matter if they can actually deliver on their promises. Just the idea can be enough to attract eager investors. Perhaps we should say overly eager investors.

Forbes magazine writer Daniel Fisher has found all kinds of so-called "penny stock" operators making pitches on the Internet. But his recent article on the subject warns that you should watch your wallet. Just because they've got an impressive pitch, doesn't mean you've found an easy way to get rich quick.

DANIEL FISHER: That's something that struck me, is these guys all have pretty sophisticated websites. It almost made me wonder whether they go to the same website development company. But they are pouring money into the presentation. Which makes me suspicious. If you look in their financials, they don't spend much on research and development. So it's hard to see how they're gonna push this stuff forward.

MOON: How do I know? What should I be looking for to make sure I don't get ripped off?

FISHER: You know, it's a tough one. Because there are companies that have this sort of taint on them and then burst out. There's nothing to say that any of these companies couldn't emerge from penny stockdom and be the next big thing. However, if the managers of the company drove their previous company into bankruptcy, or if they've switched on a dime from Internet to goldmining to this to that, you have to wonder how much of a track record do they have? What ability do they have to actually build a functioning company as opposed to jump on a next trend and sell stock? That's the question I would ask.

MOON: Well your article is pretty skeptical about a number of companies. Is it fair to tar these with the same brush?

FISHER: I'm not saying that all these executives don't think that they're on to something good. But, in some cases . . . like U.S. Sustainable Energy. They may be on to the next great thing. Certainly I've heard from their shareholders in three-part harmony since the story came out. However, it seems like their process, which they say is a secret, is pyrolysis

. Pyrolysis has been around since the days of ancient Egypt. It involves putting organic materials into a tube and heating it very high. The Egyptians used it to make charcoal. In the 70s it was used, theoretically, to make fuel from used tires. It's been reborn as a source of biofuel, but all the experts I spoke to said nothing significant has happened in terms of the development of this. It still has very serious economic problems. You have a lot of carbon you have to dispose of. So what I'm saying is, you peel the onion and dig into it, you find out it's an old process. Not much new has happened. It's just been dusted off and presented as the solution to America's energy problems. That may be true, but I'm skeptical. I want to see evidence.

MOON: You're suggesting that alternative fuels are really ripe for these scammers at the moment. Why? Why are they focusing so much on alternative fuels?

FISHER: Well, first of all, I don't want to call them scammers. Although I do highlight at least two serious swindles in my story. But I think the penny-stock crowd like this because . . . It's kind of ironic that a lot of these folks missed the dot-com boom. When they had a chance to build a company based on absolutely nothing — nothing but a business plan and achieve market values of hundreds of millions of dollars — you didn't see too many of these faces in there. I think that's because they come from a tradition of hard assets, of gold mines, of businesses, manufacturing businesses that they buy and say they're turning around. And this plays to their strengths because they can buy a little machine shop and say, "We are building the next generation of fuel source." And they can actually show some revenues, and they can build a company that appears to be built on solid assets. But when you probe into it, you see nothing but a long history of losses and not much prospects of that turning around.

MOON: Daniel Fisher of Forbes, thank you very much.

FISHER: Thank you.