The past few weeks have had me extremely busy — reading, researching, and ripping apart companies. We've made a few investments this quarter, but I haven't had time to write about any of them here. Sadly, F Wall Street's portfolio has gone from largely ignored to entirely ignored.

I mentioned in this post, I got rid of DBB — the base metals ETF. Admittedly, I'm hanging my head in shame — not because we lost money (actually, we made money) but because I made a stupid judgment mistake that cost us opportunity. (Fortunately, there's a lesson in here.)

My mistake was not in my evaluation of the commodities or reasoning for buying them. The mistake was that I bought an investment that grouped the three together instead of buying a virtual certainty.

I can't believe that it has been nearly two years since F Wall Street was originally launched on June 25, 2007. And what a two years it has been!

Since our launch, we saw the S&P 500 climb to an all-time high in October of 2007, only to watch it plummet nearly 58% to a level first seen in May of 1996. Some of the causes of the drop were highly predictable. Some of the events, such as the September 2008 disaster, were completely unpredictable. And through it all, we were largely, if not entirely, invested in individual stocks.

There is no discounted cash flow method for commodities. They don't pay dividends or bear interest rates; they don't generate cash. Long-term investing in commodities is all about finding opportunities where supply and demand are out of balance and the price is low relative to where it "should" be on an inflation adjusted basis.

With no external forces acting on a commodity price (ie., supply and demand are in balance and the currency doesn't change), commodities prices would move in lockstep with inflation. A 3% increase in inflation would result in a 3% increase in commodities prices.

In general, there are four main factors that affect commodities prices:

• Supply & Demand
• Inventories & Stocks
• Currency
• Inflation

Let's go down the list to best understand their harmony. We'll start in a tiny, isolated town of farmers and families.

Mention the word "commodities" and one of three images usually pops into mind. Some people immediately think of Trading Places, of Louis Winthorpe and Billy Ray Valentine cornering the orange juice market and issuing a false crop report to the Duke Brothers, leaving the Dukes high, dry, and utterly broke. (The story has a happy ending. The Duke Brothers make a comeback in Coming to America.)

One of the topics I covered was basic economics. More specifically, the two laws of economics that can't be broken, and that are paramount to investment success and thinking about investing:

1. Supply and demand can get out of whack for a long time; but, they always work towards balance over the long-term; and,
2. Whomever controls the prices gets the money.

You don't have to be an economic guru to understand these laws. Still, not understanding them could be disastrous to your portfolio. Today, we'll look at the first point and I'll cover the second in a subsequent article (in less than a month — promise).

Let me continue this economic discussion, though I also have to get back to a few other topics as well. There is a lot of chatter as to whether we are in a recession or depression. Since November of 2007, Wall Street has been calling bottoms to this market, first setting their sights on Dow 13,000, and then incrementally lowering their targets by 1,000 points as time marched on.

Optimism and pessimism have no place in investing. Let's look at the economy from a realistic perspective to see why this recession will be nothing like the Great Depression.

In December of 2007, as Apple was approaching $200 a share, you couldn't say a word about it for fear of backlash from the Apple investment community that insisted it was going to $600 a share. Today, Nouriel Roubini and Peter Schiff are considered gods for predicting the economic turmoil, and anyone discrediting their teachings should be burned at the stake. Well, get the gas and matches, because I have to say that Peter is full of Schiff in his latest article.

A broken clock is still right twice a day. The problem is this: If you look at that clock at that exact "right" moment in time, you should not automatically assume that the clock is always right. Warren Buffett came out recently and said how "dumb" he was in 2008. Should we then assume that Buffett is doomed to be eternally wrong in the future?

In its recent end-of-quarter filing, Berkshire Hathaway reduced its stake in Johnson & Johnson by 54%. As is often the case, the media automatically assumed that Buffett turned sour on Johnson & Johnson and was dumping the stock. Before you run off and sell 50% of your JNJ stake because Buffett is allegedly dumping his year-and-a-half old investment in the company, let's look at the sale logically.

I'm going to quickly run through the latest filing so that you can ignore the noise going forward. First, let's look at the "reporting entities" in the filing. For Berkshire, there are 21 reporting entities on this filing which means that holdings listed on the 13F-HR include decisions made by...and not made by...Warren Buffett.

So, I bought a bank. I know...I know. I said I wouldn't. Then again, that was a year or two ago, when I couldn't understand what the hell these guys were doing to make money. CDOs. Sub-prime mortgages. I would try to read the annual reports, and they would make my head spin.

Fortunately, the days of "creative" investing is over...for now. I have full faith that Wall Street will ensnare the markets in another mess in the next ten or twenty years. Still, banks will eventually return to "normal" for at least a while. (That is, of course, once they get through this "panic" mode.)

The other day, I said that I had purchased Wells Fargo to the tune of 10% of the F Wall Street portfolio. As it continued to sink, I made another purchase in the $16s to bring the total Wells Fargo investment back up to 10% of the portfolio's assets.

The natural question, of course, is: Why? Why a bank? Why Wells Fargo? And why now?

When it comes to buying stocks, there are a million different approaches, a million different ways to value companies, a million different charts to look at... You get the idea. It can be dizzying, especially if you are trying to learn how to invest and find some stable ground on which you can build your strategy and knowledge base.

That said, time and time again, the great value investors — Warren Buffett, Charlie Munger, Seth Klarman, and others — all teach investors one fundamental rule to intelligent investing: Stick with companies you understand really well in industries you understand really well.

I have a personal goal — something I've been doing for years. Every day, I try to learn something new. I don't always focus on business or investing (though those are two of my greatest passions). From time to time, I'll try my hand at something new, and I am all over the board with my learning. Sometimes I'll read a biography or history book, sometimes I'll learn about spot welding or video game design. I'll take mixed martial arts classes. I've built remote control cars.

(Inadvertently, some of these little diversions of mine creep into my investing by helping to increase my sphere of competence and confidence in various businesses and industries.)

What does it take to start a hedge fund? The scary truth is that virtually anyone can start a hedge fund; and, it can be fairly inexpensive and easy to do. Why is this so scary? Among other reasons, hedge funds can attract investors while providing very little information; so, investors may not be able to make well-informed decisions. Then, hedge funds don't need to provide regular (or audited) information on an ongoing basis. If your manager is a crackpot and you have to stay invested for the remainder of the year (or quarter or whatever), you could wind up with very severe losses.

(Prospective investors should choose very carefully.)

On a number of occasions, we've discussed Buffett's early partnerships—their performance, his investment style, or some other aspect of 1950s and 1960s Buffett. One of the great things about Buffett was that Warren put his money where his mouth was, unlike today's mutual fund manager that generally puts your money where his/her mouth is.

If you are considering starting a "hedge" fund, you might want to consider an Early Buffett Partnership structure.

Second only to Do you think we've hit a bottom?, the most common question I hear from folks is: Where should I be (or are you) putting money these days? It is usually followed up with some statement about how terrible the stock market is and/or how impossible real estate is right now.

Then, I get hit with the request for affirmation—the old, XYZ company is pretty beat up. What do you think? Most recently, the request has been about General Motors and Ford. Before that, Bank of America, AIG, and Fannie/Freddie.

In this comment, I had said that I was "way wrong" on American Eagle Outfitters, and that sparked some good questions. Namely: The price is down some 60%; but, what happened in the business that makes me feel like I was "way wrong"? The short answer: The business is taking a step back (due largely to the economy) before it can leap forward; so, I was wrong on my assessment of value and overpaid for the company.

If you want the long answer...

Everybody knows that Warren Buffett gets his investment information largely from annual reports. Today, companies call him; but, 50 years ago, Buffett was not the go-to guy if you wanted to sell your company or raise capital for your failing bank.

In an interview with Warren Buffett, Adam Smith, author of Supermoney, asked how "regular" investors can find good investment ideas.

The US Government passes a $700 billion bailout (or rescue) package, and the markets continue their spiral down. Financial advisors across the country are shouting, "Stay the course!" (Usually from under their desks.)

This crisis is unlike anything we've seen in recent history (and perhaps not-so-recent history); so, what should we do now?