Late Night Update

Today was exhausting. I was in a class to become a notary public from 8 AM to 5PM, then I had class from 5PM-8:30 PM. When I got home I had chores and only now at - 10:30 PM - two hours later am I unwinding a bit.

The good news is that both of my trades stabilized a bit from their apocalyptic levels earlier this morning. Truthfully, I do not understand the current developments in either trade. I cannot tell if the indicators are telling me that I am totally wrong in my thinking here - or if I am just being shaken out before a significant move in either one. A brief commentary on the state of things:

1) FRO - this is extremely puzzling. The disaster in Louisianna has been horrible. Oil has skyrocketed along with gasoline prices. Just today a block from my house it finally hit $3.07 per gallon for 87 octane at the cheapest store!!! But the effect on tanker rates has been zilch and they have actually decreased. So either - a) I am a total amater who has no idea how these things work (very possible) or b) I need to wait a few more days.

The stock is up about $.50 from where I purchased it at, but it opened up today way down and only recovered later in the day. The effect on the energy stocks from this rise in the price of crude and gasoline also appears to be extremely limited. The direct refinery plays are skyrocketing (re: VLO), but many of the majors are stagnating to up mildly over the past few days. I guess we will have to wait and see - I think I have the balls to hold out at least until the end of the week in this one - assuming no crash in price. And believe me these tanker stocks are volatile.

2) NEM - This trade has been horrendous so far. I woke up this morning to see my investment almost cut in half as all the gold price was down $5+ dollars and all the miners were down between 2-7%. Newmont was down about 3.5% and I was hurting big time. It ended the day a little up from there - but I still took a major hit and am down almost 45% on the investment in one day. I knew that things would be volatile but not this much! I guess it goes to show that you need to know just how leveraged you are with the options.

I plan on waiting things out here a few more days as I have three more weeks till expiration, but at the current rate my options will be worth $0 by Friday. In terms of the developments in both Gold and the miners - I can't figure it out. My theory is based on the following:

A) Huge government stimulus package coming in the form of dollars to bail out the South due to the disaster. This has got to prop up the equity markets and put a lot of dollars out there. This should increase supply of dollars and dollar should depreciate more against hard assets and other currencies. This is certainly true of Oil - although that story appears to be more one of speculative demand, but nothing has happened in Gold.

B) The fear of a slowdown due to the disaster combined with weak economic numbers appearing in the reports so far - should create a fear by the Fed that they need to slow their tightening and may in fact only raise one or two more times. As consensus is for them to be at 4.25 by the end of the year - this would be negative for the dollar and bullish for gold.

C) The oil price spike is inflationary and the fed hikes may not be at a pace to keep up with the rapid rise in the price of energy. We could be paying $3.50 - $4 per gallon of gas by the end of September but nobody thinks this is bullish for gold. Isn't this what happened in 1970s?

Anyways - as everyone can see I clearly have a far too one-sided view of the developments. I am trying to find reasons to be bullish when my speculation has clearly gone against me. Well.....lets give it till the end of the week and see what is going on, I don't know if I can handle another open though like today was.

Regards,

-BG