Three years ago, ethanol producers were the darlings of the stock market. They were selling for 100 times earnings and their stock prices were doubling and tripling every few weeks. I remember playing golf with two high school basketball coaches at the time. One of them asked me how to invest in ethanol.

Now the ethanol industry is struggling. The American public thinks ethanol caused food prices to rise. Politicians are attacking the ethanol industry to win votes. The press hates ethanol. Even Charlie Munger (Warren Buffett's investment partner) hates ethanol. He says, "Running cars on corn is about the stupidest thing I ever heard of."

VeraSun Energy, the largest ethanol stock, trades below book value. In other words, you can buy this company for less than the cash invested in it. VeraSun Energy's stock price is down 68% in the last six months. Pacific Ethanol – another large ethanol stock – has fallen from $45 a share to $3 a share in the last two years.

The manager at the ethanol plant was mad about what has happened. He said the Cattlemen's Association and Big Oil have used their marketing power to smear the ethanol industry. And the ethanol industry is too small to fight back.

You see, cattlemen hate ethanol because corn is more expensive and they make less profit selling meat. Oil companies hate ethanol because they sell less gasoline with so much ethanol in the system.

The plant manager said the public is wrong about ethanol and food prices. He said oil is probably the biggest factor in the soaring cost of food. And the cheap dollar is probably the second biggest factor. High oil prices make transportation and packaging costs go up. The cheap dollar makes foreigners less sensitive to the rising prices of American crops.

He also said no one realizes ethanol has reduced the cost of gas by 15%. Without ethanol, gas prices would be even higher now.

I'm trying to figure out if ethanol's a good investment. Frankly, I haven't made up my mind yet. The fortunes of the ethanol industry depend on the government. Without the government's support, the ethanol industry wouldn't exist in America. So to invest in ethanol, you have to know what the government's going to do.

John McCain hates ethanol. If he wins the election, he'll remove all the ethanol subsidies and hurt the farm economy. If the Democrats win, they'll keep the subsidies in place, and ethanol stocks will probably take off...