| Greed and Fear |
18 August 2003
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Renewable Energy -- A Passing Wall Street Fad
While most of the northeastern US sat in the dark Thursday and Friday last week, some on Wall Street sought to make a buck on the shortcomings of the North American power grid situation -- that is, after all, what Wall Street is there to do. But the enthusiasm for renewable energy stocks had all the hallmarks of a bubble building. This is what comes of emotions in stocks rather than reason.
Friday was a thin day in the trading pits; a mid-August Friday exacerbated by an unofficial holiday left volumes far below the norm. And in thin markets, a hot idea has more room to over-shoot. The renewable energy sector was certainly an idea worth entertaining, and the fact that only 7% of American energy usage is supplied by such sources allow for immense growth potential.
As a result, Ballard Power was up $0.70 to $13.55, FuelCell Energy rose $0.08 to $9.48, Capstone Turbine hit $1.85 rising $0.11, and Plug Power was up $0.02 to $5.18. What happened to these stocks had nothing to do with their costs, their management, their margins or anything else that one learns about in economics class. Instead, speculators came in hoping to pick up a few bucks, few with the appropriate research to back up their trading decisions.
By the close on Monday the 18th, Ballard was down to $13.37, FuelCell was lower at $9.15, Capstone was down to $1.79, and Plug was off $0.18 to an even $5. In other words, in 3 out of the 4, prices were actually lower than they were before all the attention was focused on the sector, and in all cases, they were unable to hold their gains.
These aren't the only stocks affected by the blackout, and loads of factors affect stock price. However, it is illustrative of why traders who have been in the business for years get in and out of the market when things are quiet -- the rest is just emotional guesswork and no way to build a career that lasts more than a week.
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