Wednesday, March 05, 2008


After writing about the "fundamentals", I found a post about a bio-fuels stock, VSE. It has fallen from its peak price of $21.47 to $7.75. I would not touch the shares with a ten foot pole.

While the constant stream of media stories has been about alternative energy, big research money has also been spent on improving technology for hydro carbon extraction and use. There has been significant progress. For example, a new method has been discovered to convert tons of radioactive nuclear waste into harmless and manageable substances. Even more interesting is all the laboratory success in learning how to dramatically increase the speed at which deep earth hydro carbons are converted to clean burning natural gas.

The fundamentals are that gold and commodities are priced up partly because of fear. Warren Buffet once said that in the short run the market is a voting machine and in the long run it is a weighing machine. In other words, psychology can push stocks in the short run but in the long run it is the fundamentals that count. Knowing this "fundamental truth", we simply must be willing to hold for the long run (if we only knew how long the anxiety and the opportunity would be reduced).