Unbelievable

We are seeing some outstanding returns in Gold again today! My options which have all been sold already.... :( - are currently trading at $8.30!!!! That could have made for a 350%+ return in only two weeks. Still it is tough to hate yourself for taking profits at 100% and 150% respectively.

The biggest surprise for me has been seeing the amazing strength in gold. The traders have really taken ownership of this group and are running it up on big volume. Considering the fact that I am in all cash and positionless - I am having to make a tough determination of whether to jump back on the train or wait it out.

I firmly believe in the bull case for gold over the coming six months and I am considering making a drastic change of plans in my portfolio. I currently have just over 10K in there. I am thinking of taking up to 50% of my portfolio's value and leveraging the gold play some more. I will not make any move until after the fed meeting. As discussed much previously - I expect the Fed to raise rates on 9/20 (next Tuesday). If all trends as expected Gold will sell off somewhat and the goldminers should sell off somewhat.

I was originally expecting a decline for gold into the $430 range - but that no longer looks like a reasonable expectation. I will play the game again here with the NEM call options. I have not yet decided on the time horizon for this speculation. I am debating carrying a position out into the January or March of 2006 time horizon - but I am thinking that might be too long.

I am also considering purchasing a sizeable chunk of out of the money call options on this one - something that I have traditionally called a no-no. So what is going on here - when Ben is breaking all of his "rules"? Basically - I am getting greedy. Some people say that greed is good. Others say - don't be greedy - the protestant values. All I can say is that the biggest certainty I have had of anything in the past 5 years is as follows: 1) Gold will be higher than $500 an ounce by the end of 2005 and 2) Housing is a bubble waiting to burst, and when it does - it is going to plunge our economy into a debt-driven meltdown. This is going to have huge deflationary implications which I expect the Federal Reserve to attempt to meet with monetary stimulus - the likes of which we have never before seen (scary huh?).

Anyways - item 2 above was just a rant it is item 1 which is of significance here. I will lay out the bull case for gold this weekend as I think all of the ducks are lining up for us here. There are a lot of potentially countervailing factors - but I do think many of the gold miners could make a 20-100% move over the next 6 months and I want to be there when this happens. If things do not pan out as expected - I will have lost some money - a significant amount in fact. If things do turn out as planned ........ the returns could be phenomenal.

If this post has been crafted correctly it should sound like the devil inviting you out for dinner at the finest restaurant in town. There are no sure things in the financial markets as we know all too well. Still, I like the odds on this one too much.

Let's hope that I get the pullback after the Fed meeting that I have been hoping for - otherwise I may be in a very precarious position.

Additional Note: - the remaining allocation of the portfolio will likely be in cash and some short (re: put) positions in the following sectors (homebuilders, mortgage lenders, financials, etc.)

Regards,

BG