Aug 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.34	102.00	-32.00%	-82.74%	-89.78%	-74.82%
VRTX	18-Apr-07	57	31.65	1,812.05	26.86	1,531.02	-19.15%	15.63%	-15.51%	-11.60%
NBIX	22-May-07	158	11.33	1,798.14	5.17	816.86	9.58%	13.88%	-54.57%	-46.19%
BQI	13-Jul-07	565	3.35	1,900.75	4.15	2,344.75	-30.11%	1.72%	23.36%	20.40%
GSS	19-Jul-07	451	4.19	1,897.69	1.53	690.03	-41.60%	-51.58%	-63.64%	-59.66%
GSS	24-Aug-07	613	3.08	1,896.04	2.62	1,606.06	-41.60%	-51.58%	-50.53%	-49.99%
SLT	5-Oct-07	111	19.75	2,200.25	14.22	1,578.42	-8.44%	-45.45%	-28.26%	-30.84%
BZP	19-Nov-07	245	9.77	2,401.65	19.70	4,826.50	-26.63%	76.21%	100.97%	145.38%
BZP	30-Jan-08	186	11.27	2,104.22	19.70	3,664.20	-26.63%	76.21%	74.14%	160.03%
WB	1-Feb-08	-57	39.99	-2,271.43	15.89	-942.21	-50.19%	58.22%	58.52%	122.84%
BZH	24-Mar-08	-214	10.99	-2,343.86	6.96	-1,489.44	-82.20%	6.33%	36.45%	105.14%
cash				-2,393.50		10,519.71
ISOP	03-Jan-07			10,000.00		24,579.73	-21.40%	12.52%	145.80%	77.05%
Global HF	03-Jan-07			10,000.00		10,645.30	-1.27%	-4.21%	6.45%	4.05%
NASDAQ	03-Jan-07			2,415.29		2,367.52	1.80%	-10.74%	-1.98%	-1.26%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus—or minus for short positions—the value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: None.

News:

• 1 Aug—VRTX 2Q08 results
• 7 Aug—TMY gets stay of delisting from AMEX ’til 31 Oct
• 9 Aug—GSS 2Q08 results disappoint: BIOX processing production costs still rising
• 12 Aug—TMY 2Q08 results: sans new financing, the death spiral continues
• 19 Aug—VRTX announces launch of telaprevir phase 3 trials

Comments: GAK! If you thought our up-till-then worst month ever in July, -8%, was bad, check out August: a minor catastrophe at -21%. We were murdered by both the NASDAQ (+2%) and the Global Hedge Fund Index (-1%); overall after 20 months of operations, the ISOP is now +146% compared with +8% for the hedgies and -4% for the NASDAQ.

Given the almost unanimous meltdown on the part of every holding in the portfolio this month, it’s a little tempting to claim that we purposely engineered big losses in order to prove our point that speculation is a high-risk activity. That’s not the case, but if we had tried to do that, we could hardly have done better than these results achieved by accident. While overall, the market was more optimistic in August, commodity prices were generally down. Thus we suffered from a double whammy: our real estate and banking shorts soared in price (which meant we lost money) while our miners and energy plays declined in value. BZH was up 82% and WB up 50%—we are short both of them—to headline our losses. Our energy plays were all hurt bigtime, with TMY -32%, BQI down -30%, and BZP -27%. Our miners were also down; GSS -42% on continued production cost issues and SLT -8%. Our biotechs were mixed, with VRTX -19% and NBIX +10%.

We believe that this month was an anomoly. If our macro analysis is correct—we are due to pay the piper for years of overspending and the central banks’ easy money policies are merely postponing (and making worse) the eventual day of reckoning—then it makes sense for commodity prices to head south here, as demand will rapidly shrink, but it makes no sense for BZH and WB to be increasing in value (and the market to be moving north overall, as it did this month). On the other hand, if we are wrong, and the credit infusions do rescue the economy, then fine: it would make sense for BZH and WB—and the market overall—to prosper, but there is no good reason in that scenario for commodity prices to decline.

So lacking any clarity in where things are headed in the immediate future, we are standing pat here. While we expect the real estate and finance sectors to continue to decline, the best bet continues to be that the Fed holds things together with the markets in general through November’s USA elections. Having said that, however, the Olympics are over now, so the Chinese government is likely to lose some interest in the collective efforts to apply lipstick to the pig (or, in this case, bear). Therefore, the risk of a serious downturn is now greater and we will be watching closely for signs of same.

Even if we do make it to November relatively unscathed, then it will be time to seriously reevaluate the port and consider more of a short bias.

Jul 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.50	150.00	-20.63%	-74.62%	-84.97%	-70.00%
VRTX	18-Apr-07	57	31.65	1,812.05	33.22	1,893.54	-0.75%	43.00%	4.50%	3.48%
NBIX	22-May-07	158	11.33	1,798.14	4.72	745.44	12.60%	3.92%	-58.54%	-52.18%
BQI	13-Jul-07	565	3.35	1,900.75	5.94	3,354.97	-8.65%	45.54%	76.51%	71.68%
GSS	19-Jul-07	451	4.19	1,897.69	2.62	1,181.62	-2.60%	-17.09%	-37.73%	-36.73%
GSS	24-Aug-07	613	3.08	1,896.04	2.62	1,606.06	-2.60%	-17.09%	-15.29%	-16.24%
SLT	5-Oct-07	111	19.75	2,200.25	15.53	1,723.83	-2.33%	-40.43%	-21.65%	-25.70%
BZP	19-Nov-07	245	9.77	2,401.65	26.85	6,578.25	-8.67%	140.16%	173.91%	323.45%
BZP	30-Jan-08	186	11.27	2,104.22	26.85	4,994.10	-8.67%	140.16%	137.34%	461.30%
WB	1-Feb-08	-57	39.99	-2,271.43	10.58	-639.54	31.87%	72.18%	71.84%	198.19%
BZH	24-Mar-08	-214	10.99	-2,343.86	3.82	-817.48	31.42%	48.59%	65.12%	313.71%
cash				-2,393.50		10,502.20
ISOP	03-Jan-07			10,000.00		31,273.00	-7.71%	43.16%	212.73%	106.32%
Global HF	03-Jan-07			10,000.00		10,782.24	-2.28%	-2.97%	7.82%	4.90%
NASDAQ	03-Jan-07			2,415.29		2,325.55	1.42%	-12.32%	-3.72%	-2.38%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus—or minus for short positions—the value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: We sold Elán (ELN) when further analysis of the Phase 2 results for bapineuzumab reported last month called into question the entire theory the anti-Alzheimer’s Disease drug is based on.

• 30 Jul – Sold 129 ELN for $21.74/shr (ROI of 56% and CAGR of 40%)

News:

• 3 Jul—TMY acquires rights to “difficult” fields in Russia
• 5 Jul—SLT learns U.S. bankruptcy court will allow Grupo Mexico bid for Asarco
• 9 Jul—BQI releases favorable analysis on quality of bitumen
• 12 Jul—SLT announces tentative agreement with Asarco unions
• 23 Jul—WB rallies 33% on dismal results: another good shorting opportunity!
• 25 Jul—ELN 2Qo8 results—healthy growth in tysabri sales
• 31 Jul—NBIX 2Q08 results—no new news

Comments: POW! Following our best month of the year in June, we had our worst month ever in July, down 8%. We were outperformed by both the NASDAQ (+1%) and the Global Hedge Fund Index (-2%); overall after 19 months of operations, the ISOP is now +213% compared with +8% for the hedgies and -4% for the NASDAQ.

Our energy plays led the decline, with our sick puppy TMY -21%, and both BZP and BQI down -9% and commodity prices faltered. Our miners were also down; GSS down 3% and SLT down 2%. Our remaining biotechs—after our sale of ELN—were mixed, with VRTX -1% and NBIX +13%. Our shorts performed well, with BZH declining 31% (+31% for us) and WB 32%.

If you are following our macro analysis, you know that we have been anticipating a market crash ever since the Fed started lowering rates nearly a year ago. We still expect the central banks to do their utmost to hold things together until (at least) after the Olympics to avoid embarrassing the Chinese and ideally until after the USA elections to avoid the risk that too many hard questions might be asked of the politicians.

But the Olympics end on 24 August, so the crash watch alert level will be going up a notch or two. Stay tuned.

Jun 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.63	189.00	40.00%	-68.02%	-81.06%	-67.28%
ELN	04-Apr-07	129	13.90	1,801.10	35.55	4,585.95	41.97%	61.74%	154.62%	112.45%
VRTX	18-Apr-07	57	31.65	1,812.05	33.47	1,907.79	16.91%	44.08%	5.28%	4.38%
NBIX	22-May-07	158	11.33	1,798.14	4.19	662.02	-15.01%	-7.71%	-63.18%	-59.39%
BQI	13-Jul-07	565	3.35	1,900.75	6.50	3,672.50	42.23%	59.31%	93.21%	97.68%
GSS	19-Jul-07	451	4.19	1,897.69	2.69	1,213.19	-9.12%	-14.87%	-36.07%	-37.56%
GSS	24-Aug-07	613	3.08	1,896.04	2.69	1,648.97	-9.12%	-14.87%	-13.03%	-15.12%
SLT	5-Oct-07	111	19.75	2,200.25	15.90	1,764.90	-28.18%	-39.01%	-19.79%	-25.87%
BZP	19-Nov-07	245	9.77	2,401.65	29.40	7,203.00	29.29%	162.97%	199.92%	499.51%
BZP	30-Jan-08	186	11.27	2,104.22	29.40	5,468.40	29.29%	162.97%	159.88%	892.37%
WB	1-Feb-08	-57	39.99	-2,271.43	15.53	-921.69	34.75%	59.16%	59.42%	211.32%
BZH	24-Mar-08	-214	10.99	-2,343.86	5.57	-1,191.98	19.86%	25.03%	49.14%	343.65%
cash				-4,194.60		7,672.15
ISOP	03-Jan-07			10,000.00		33,886.98	18.75%	55.12%	238.87%	126.92%
Global HF	03-Jan-07			10,000.00		11,033.81	-1.03%	-0.71%	10.34%	6.83%
NASDAQ	03-Jan-07			2,415.29		2,292.98	-9.10%	-13.55%	-5.06%	-3.43%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus—or minus for short positions—the value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: None.

News:

• 2 Jun—SLT signs agreement to acquire Asarco
• 2 Jun—WB axes CEO Ken Thompson (two years too late)
• 9 Jun—VRTX announces great phase 2 telaprevir results
• 10 Jun—BZP finally obtains permits to transport crude to Talara refinery
• 11 Jun—TMY receives bid frm Hong Kong-based group
• 12 Jun—SLT bid for Asarco gains ground against Grupo Mexico challenge
• 17 Jun—ELN announces mixed phase 2 results for anti-Alzheimer’s Disease drug
• 17 Jun—NBIX announces completion of treatments in phase 2 trial of elagolix; data due in September
• 18 Jun—SLT facing serious Grupo Mexico counteroffer for Asarco
• 24 Jun—VRTX phase 3 trials for telaprevir to focus on 48-week treatment cycle instead of 24-week cycle
• 26 Jun—BQI reserve estimates up 85%

Comments:

WOW! Our best month of the year: +19%. In fact, aside from our freaky Dendreon bonanza (up 78% in March 2007), this is our best month ever. We again beat both the NASDAQ (-9%) and the Global Hedge Fund Index (-1%); overall after 18 months of operations, the ISOP is now a record high +239% compared with +10% for the hedgies and -5% for the NASDAQ.

Folks, it really isn’t this easy…or more precisely, the vaguaries of speculation being what they are, while it is feasible to be up big in a short period of time, it is just also easy to be down big. Case in point, TMY, which was up 40% this month on the buyout bid from Hong Kong—but overall is still down 68% for us. Or our biotech spec play NBIX, down another 15% this month and -60% overall in the wake of last year’s surprise recjection by the FDA of their insomnia remedy. Or GSS, our gold miner with the lingering production cost issues, down another 9% this month.

Of course, on balance, the good outweighed the bad this month. On the strength of nearly doubled reserve estimates, BQI was up 42% to lead the port, along with ELN which despite mixed results on their Alzheimer’s drug was also up 42%. The big picture for banking and housing continued to decline in June, and our short positions were strong again: WB up 35% and BZH up 20%. BZP was up 29% on the news that they were finally shipping crude and VRTX was up 17% despite somewhat disappointing news on the design of the phase 3 trials for telaprevir. SLT dropped 28% on concern they may end up overpaying for Asarco.

While there is a temptation to sell off everything and just sit on the funds for the next six months—we are up 55% YTD and it’s hard to imagine the hedgies or market catching us by December—we still think the market holds it together through the Olympics at least and the USA election most probably, and so we are holding pat here. Should we get a decline, then we will have to review the energy plays and possibly the mining and biotech plays, and we could be looking for more shorting opportunities.

May 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.45	135.00	-13.46%	-77.16%	-86.47%	-75.93%
ELN	04-Apr-07	129	13.90	1,801.10	25.04	3,230.16	-4.75%	13.92%	79.34%	65.79%
VRTX	18-Apr-07	57	31.65	1,812.05	28.63	1,631.91	12.19%	23.25%	-9.94%	-8.95%
NBIX	22-May-07	158	11.33	1,798.14	4.93	778.94	-9.21%	8.59%	-56.68%	-55.82%
BQI	13-Jul-07	565	3.35	1,900.75	4.57	2,582.05	5.06%	12.01%	35.84%	41.55%
GSS	19-Jul-07	451	4.19	1,897.69	2.96	1,334.96	-10.84%	-6.33%	-29.65%	-33.41%
GSS	24-Aug-07	613	3.08	1,896.04	2.96	1,814.48	-10.84%	-6.33%	-4.30%	-5.57%
SLT	5-Oct-07	111	19.75	2,200.25	22.14	2,457.54	6.49%	-15.07%	11.69%	18.50%
BZP	19-Nov-07	245	9.77	2,401.65	22.74	5,571.30	16.74%	103.40%	131.98%	391.59%
BZP	30-Jan-08	186	11.27	2,104.22	22.74	3,623.28	16.74%	103.40%	101.01%	722.76%
WB	1-Feb-08	-57	39.99	-2,271.43	23.80	-1,414.46	18.35%	37.42%	37.42%	167.12%
BZH	24-Mar-08	-214	10.99	-2,343.86	6.95	-1,487.30	37.22%	6.46%	36.54%	446.33%
cash				-4,194.60		7,672.15
ISOP	03-Jan-07			10,000.00		28,536.37	7.96%	30.63%	185.36%	110.98%
Global HF	03-Jan-07			10,000.00		11,148.64	1.84%	0.32%	11.49%	8.05%
NASDAQ	03-Jan-07			2,415.29		2,522.66	4.55%	-4.89%	4.55%	3.15%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus—or minus for short positions—the value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: In the long run, we like oil, as the continuing buildout in Asia will ensure demand tends to challenge supply, and it also serves as a hedge against the declining dollar. Be that as it may, $125/barrel seems too high, too soon to us, and accordingly we took a position in an inverse ETF that goes up 2x any daily decline in the price of crude (and vice versa). However, the market disagrees, and it only took six days and a high print of $132.78 to decrement our position by 10%. Mindful of John Maynard Keynes’ famous oberservation that “Markets can remain irrational longer than you can remain solvent,” we hit the silk. In March, Goldman Sachs analysts forecast a spike as high as $200/barrel. While we still think that is unlikely anytime soon, we’re no longer willing to bet on a near-term decline.

• 14 May – Bought 82 DUG for $29.73/shr
• 20 May – Sold 82 DUG for $26.23/shr (ROI of -11.8% and CAGR of -99.9%)
• 27 May – WB dividend of $0.375/shr

News:

• 6 May—BZP provides drilling update
• 6 May—GSS still producing scant, costly gold
• 6 May—BZH default threat not likely to be material, alas
• 9 May—TMY shows no production improvement
• 12 May—BQI issues dilutive stock offering to raise funds
• 15 May—BZP issues new reserve estimates
• 20 May—TMY gets new investor-nominated directors
• 20 May—BZP converts International Finance Corporation debt to equity
• 30 May—TMY threatened with delisting by AMEX

Comments:

Another excellent month, up 8%. We beat both the NASDAQ (+5%) and the Global Hedge Fund Index (+2%) for the fourth time in five tries this year. The big picture for banking and housing clouded up in May, and our short positions lead the port for the month: BZH up 37% and WB up 18%. On the energy front, BZP was up 17% on continued strength in the price of oil and improved reserves data, BQI was up 5% and the outlier was TMY, which produced nothing but more bad news and sank another 13%. Our biotech plays were mixed: VRTX was up 12% on no particular news, ELN lost 5% and NBIX shed 9%. On the mining front, SLT was up 5% but GSS was decimated (approximately) by 11%.

We still think the market holds it together through the Olympics at least and the USA election most probably. By around then we will have to review the energy plays and possibly the mining and biotech plays, and we could be looking for more shorting opportunities.

Apr 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.52	156.00	-41.57%	-73.60%	-84.37%	-75.43%
ELN	04-Apr-07	129	13.90	1,801.10	26.29	3,391.41	26.03%	19.61%	88.30%	80.34%
VRTX	18-Apr-07	57	31.65	1,812.05	25.52	1,454.64	6.82%	9.86%	-19.72%	-19.13%
NBIX	22-May-07	158	11.33	1,798.14	5.43	857.94	0.56%	19.60%	-52.29%	-54.42%
BQI	13-Jul-07	565	3.35	1,900.75	4.35	2,457.75	10.41%	6.62%	29.30%	37.91%
GSS	19-Jul-07	451	4.19	1,897.69	3.32	1,497.32	-2.92%	5.06%	-21.10%	-26.11%
GSS	24-Aug-07	613	3.08	1,896.04	3.32	2,035.16	-2.92%	5.06%	7.34%	10.90%
SLT	5-Oct-07	111	19.75	2,200.25	20.79	2,307.692	16.67%	-20.25%	4.88%	8.73%
BZP	19-Nov-07	245	9.77	2,401.65	19.48	4,772.60	-10.35%	74.24%	98.72%	365.92%
BZP	30-Jan-08	186	11.27	2,104.22	19.48	3,623.28	-10.35%	74.24%	72.19%	785.70%
WB	1-Feb-08	-57	39.99	-2,271.43	29.15	-1,698.03	-7.96%	23.35%	25.24%	151.88%
BZH	24-Mar-08	-214	10.99	-2,343.86	11.07	-2,368.98	-17.14	-48.99%	-1.07%	-10.09%
cash				-4,194.60		7,945.90
ISOP	03-Jan-07			10,000.00		26,432.68	-1.06%	21.00%	164.33%	108.56%
Global HF	03-Jan-07			10,000.00		10,947.21	1.59%	-1.49%	9.47%	7.08%
NASDAQ	03-Jan-07			2,415.29		2,412.80	5.87%	-9.03%	-0.10%	-0.08%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: None.

News:

• 1 Apr—BPZ announces good drilling results
  
• 1 Apr—SLT credit rating upgraded
  
• 16 Apr—TMY seeks new financing
  
• 16 Apr—BQI releases detailed winter drilling program report
  
• 16 Apr—ELN surges on increase in tysabri useage
• 24 Apr—ELN 1Q08 results
  
• 27 Apr—SLT reports FY08 results
  
• 27 Apr—VRTX announces more good telaprevir results
  
• 30 Apr—NBIX 1Q08 results

Comments:

We were down 1% in April, our fourth losing month out of 16 so far. We also trailed both the NASDAQ and the Global Hedge Fund Index for just the fourth time. A bad month for us, but otherwise a pretty good month: the NASDAQ was up 6% while both our shorts lost money as the big picture for banking and housing appeared brighter to investors. (We don’t see it that way, unfortunately, although we do think the sun is likely to stay out through November.) Our biopharma stocks were strong, especially ELN. BQI up 10%, BZP down 10%…normal random Brownian motion for speculative E&P positions. SLT recovered some losses and is back in the black for us overall. TMY continued their spectacular meltdown.

All in all, a pretty quiet month.

Mar 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	0.89	267.00	-28.80%	-54.82%	-73.25%	-65.46%
ELN	04-Apr-07	129	13.90	1,801.10	20.86	2,690.94	-8.39%	-5.10%	49.41%	49.94%
VRTX	18-Apr-07	57	31.65	1,812.05	23.89	1,361.73	35.51%	2.84%	-24.85%	-25.91%
NBIX	22-May-07	158	11.33	1,798.14	5.40	853.20	7.78%	18.94%	-52.55%	-57.99%
BQI	13-Jul-07	565	3.35	1,900.75	3.94	2,226.10	-1.50%	-3.43%	17.12%	24.64%
GSS	19-Jul-07	451	4.19	1,897.69	3.42	1,542.42	-16.99%	8.23%	-18.72%	-25.60%
GSS	24-Aug-07	613	3.08	1,896.04	3.42	2,458.13	-16.99%	8.23%	10.57%	18.15%
SLT	5-Oct-07	111	19.75	2,200.25	17.82	1,978.02	-14.53%	-31.65%	-10.10%	-19.63%
BZP	19-Nov-07	245	9.77	2,401.65	21.73	5,323.85	37.79%	94.36%	121.67%	790.06%
BZP	30-Jan-08	186	11.27	2,104.22	21.73	2,399.40	37.79%	94.36%	92.08%	4,882.00%
WB	1-Feb-08	-57	39.99	-2,271.43	27.00	-1,575.48	11.82%	29.00%	30.64%	423.09%
BZH	24-Mar-08	-214	10.99	-2,343.86	9.45	-2,022.30	n/a	-27.19%	13.72%	81,810.12%
cash				-4,194.60		7,932.68
ISOP	03-Jan-07			10,000.00		26,716.40	8.37%	22.30%	167.16%	120.86%
Global HF	03-Jan-07			10,000.00		10,811.43	-2.10%	-2.73%	8.11%	6.49%
NASDAQ	03-Jan-07			2,415.29		2,279.10	0.34%	-14.07%	-5.64%	-4.57%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: Another quiet month transaction-wise, as all we did was sell short Beazer Homes (again), as it climbed to our longstanding GTC price of $10.99…actually, it got as high as $11.44 on 24 March, but we are just grateful to be short a homebuilder again as a hedge against further market deterioration.

• 24 Mar—Sold short 214 BZH for $10.99/shr

News:

• 3 Mar—BPZ increases reserves by 50%
  
• 18 Mar—BQI winter drilling program report
  
• 19 Mar—TMY management buyout offer fizzling
  
• 19 Mar—BPZ sells 2MM shares to raise capital
  
• 26 Mar—BZH bonds downgraded by Moodys
• 27 Mar—VRTX announces Phase 2 results for prospective cystic fibrosis treatment
  
• 31 Mar—TMY announces still more bad news
  
• 31 Mar—VRTX announces good Phase 2 telaprevir results
  

Comments:

Yet another great month: +8% while the NASDAQ was flat and the hedge funds declined (-2%). Don’t take this the wrong way…we are happy the fund is doing so well…but we are constrained to say that being +167% in fifteen months (a new record all-time high, BTW) is not typical…and way beyond our expectations for future performance. However, it is a good example of the kind of results that speculation—as opposed to long-term investing—can generate. We need to keep in mind that this sort of wild fluctuation can work both ways when one is speculating.

The long-term outlook remains gloomy and doomy, as discussed in more detail in our IMSIP 1Q08 report posted Friday. We expect to limp into the elections reasonably whole, but we are currently short one financial services company (WB) and one real estate company (BZH) as a hedge against a sooner-than-expected decline (and also because we believe their stocks are overpriced here, of course). Meanwhile, we continue to monitor our long positions. TMY looks like a writeoff here and at this point, we are holding it primarily as a potential tax loss. Our other energy plays, BQI and BPZ, still have strong fundamental stories (so long as oil remains pricey, at least). Our commodity plays (GSS gold and SLT zinc) are down so far this year, but more related to individual issues than the macros. Our biotechs are a mixed bag: ELN is down, NBIX is up, VRTX has been down and up.

We’ll know more in another month, although the additional information won’t necessarily mean more clarity.

Feb 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	1.25	375.00	-11.95%	-36.55%	-62.42%	-57.14%
ELN	04-Apr-07	129	13.90	1,801.10	22.77	2,937.33	-10.21%	3.59%	63.09%	71.55%
VRTX	18-Apr-07	57	31.65	1,812.05	17.50	997.50	-14.05%	-24.67%	-44.95%	-49.73%
NBIX	22-May-07	158	11.33	1,798.14	5.01	791.58	-7.05%	10.35%	-55.98%	-65.32%
BQI	13-Jul-07	565	3.35	1,900.75	4.00	2,260.00	24.22%	-1.96%	18.90%	31.49%
GSS	19-Jul-07	451	4.19	1,897.69	4.12	1,858.12	2.74%	30.38%	-2.09%	-3.36%
GSS	24-Aug-07	613	3.08	1,896.04	4.12	2,458.13	2.74%	30.38%	33.20%	74.03%
SLT	5-Oct-07	111	19.75	2,200.25	20.85	2,314.35	2.26%	-20.02%	5.19%	13.39%
BZP	19-Nov-07	245	9.77	2,401.65	15.77	3,863.65	22.25%	41.06%	60.87%	448.79%
BZP	30-Jan-08	186	11.27	2,104.22	15.77	2,399.40	22.25%	41.06%	39.40%	5,605.40%
WB	1-Feb-08	-57	39.99	-2,271.43	30.62	-1,781.82	n/a	19.48%	21.56%	1175.96%
cash				-6,538.46		5,579.52
ISOP	03-Jan-07			10,000.00		24,654.01	7.56%	12.86%	146.54%	118.37%
Global HF	03-Jan-07			10,000.00		11,001.40	1.84%	-1.00%	10.01%	8.61%
NASDAQ	03-Jan-07			2,415.29		2,271.48	-4.95%	-14.36%	-5.95%	-5.17%

Position = symbol of the security for each position Purchased = date position acquired (for long positions) or sold (for short positions)

Shares = number of shares long or short in the portfolio

Paid = price per share

Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash

Now = price per share as of the date of the report

Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)

Change = Change since last report (not applicable for positions new since last report)

Year-to-Date = Change since 31 Dec 07

Return on Investment = on a percentage basis, the performance of this security since purchase

Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: A quiet month transaction-wise, as all we did was sell short Wachovia (again) and pay out a WB dividend (when you are short, you have to pay any dividends instead of collecting them).

• 1 Feb—Sold short 57 WB for $39.99/shr
• 27 Feb—WB dividend of $0.64/shr

News:

• 11 Feb—VRTX 4Q07 results…more stock to be issued to raise funds
• 11 Feb—BQI update on drilling results
• 13 Feb—BZP tanker fire update
• 13 Feb—ELN 4Q07 results
• 18 Feb—TMY CEO buyout financing still not a done deal; no deadline extension forthcoming
• 19 Feb—VRTX sells 6.9MM shares to raise funds
• 28 Feb—ELN concerns raised about criteria for AAB-001 testing
• 28 Feb—GSS 4Q07 results

Comments: Another great month—up 8% in a month where the NASDAQ continues a sharp retreat (down 5% on the heels of a 10% decline in January) and the hedge funds recover nicely (+2%), although they are still down for the year so far. This fund is doing embarassingly well, now up to a record high +147% since inception 14 months ago. We are not doing a very good job of demonstrating why speculating in individual stocks is less desireable than making long term investments in ETFs. But where there is life, there’s hope: the road looks rocky ahead and the odds of hitting a pothole look good. The Fed is still issuing credit and devaluing the dollar as if all those Asian and European purchasers of dollars and Treasury debt are in so deep they have no choice but to throw good money after bad and thus keep financing our debt. (Maybe there is no good money…so it doesn’t matter what you spend it on.) While we still think really bad stuff is likely to be deferred until after the Olympics and election, the risk of a meltdown is signficant here. We feel good about getting back into our Wachovia short (on which we are already up 22% in 28 days). We hope that we will soon be short Beazer again. Meanwhile, we are—hopefully—monitoring our current long positions. The $3/shr management buyout deal for TMY is all-but dead and we hope management will now face reality and accept a third-party offer. VRTX is—we hope—near a bottom here; telaprevir may have been delayed but it is still the best bet out there with respect to hepatitis C. We hope that NBIX will soon—or, failing that, eventually—announce a partnership with respect to their GnRH antagonist candidate drug for fighting endometriosis. We hope GSS shows progress on getting their BIOX plant to work better processing gold mining ore. And we hope BQI continue to progress with respect to their tar sands processing plans in Saskatchewan. And, as every month, we hope things will look clearer in another 30 days.

Jan 08 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	YTD	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	1.42	425.97	-27.92%	-27.92%	-57.32%	-54.67%
ELN	04-Apr-07	129	13.90	1,801.10	25.36	3,271.44	15.38%	15.38%	81.64%	105.82%
VRTX	18-Apr-07	57	31.65	1,812.05	20.36	1,160.52	-12.35%	-12.35%	-35.96%	-43.17%
NBIX	22-May-07	158	11.33	1,798.14	5.39	851.62	18.72%	18.72%	-52.64%	-65.86%
BQI	13-Jul-07	565	3.35	1,900.75	3.22	1,819.30	-21.08%	-21.08%	-4.29%	-7.61%
GSS	19-Jul-07	451	4.19	1,897.69	4.01	1,808.51	26.90%	26.90%	-4.70%	-8.58%
GSS	24-Aug-07	613	3.08	1,896.04	4.01	2,458.13	26.90%	26.90%	29.65%	80.89%
SLT	5-Oct-07	111	19.75	2,200.25	20.39	2,263.29	-21.79%	-21.79%	2.87%	9.14%
BZP	19-Nov-07	245	9.77	2,401.65	12.90	3,160.50	15.38%	15.38%	31.60%	295.04%
BZP	30-Jan-08	186	11.27	2,104.22	12.90	2,399.40	n/a	15.38%	14.03%	66.6 sextillion percent
cash				-8,809.89		3,302.59
ISOP	03-Jan-07			10,000.00		22,921.27	4.93%	4.93%	129.21%	116.17%
Global HF	03-Jan-07			10,000.00		10,802.63	-2.79%	-2.79%	8.03%	7.44%
NASDAQ	03-Jan-07			2,415.29		2,389.86	-9.89%	-9.89%	-1.05%	-0.98%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (not applicable for positions new since last report)
Year-to-Date = Change since 31 Dec 07
Return on Investment = on a percentage basis, the performance of this security since purchase
Compounded Annual Growth Rate = annualized ROI for this position since purchase (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: Kind of weird that we end up covering our shorts in a month where the NASDAQ essentially crashes (down 10%)…but then the whole concept of speculating is a bit weird and often leads one to counter-intuitive actions. The proceeds of the sale of FDG were balanced out by the purchase of a second tranche of BZP; the net is that we still have some cash to deploy.

• 22 Jan—Sold 44 FDG for $32.57/shr (ROI of 42% and CAGR of 51%)
• 22 Jan—Bought-to-cover 171 BZH for $5.70/shr (ROI of 48% and CAGR of 379%)
• 22 Jan—Bought-to-cover 59 WB for $31.91/shr (ROI of 18% and CAGR of 134%)
• 30 Jan—Bought 186 BZP for $11.27/shr

News:

• 8 Jan—BZP completes drilling of 18XD in Corvina
  
• 9 Jan—VRTX provides update; no word on start of Phase 3 for telaprevir
  
• 10 Jan—TMY provides preliminary 4Q07 data; no word on management takeover
  
• 14 Jan—ELN tysabri approved for Crohn’s disease in USA
  
• 14 Jan—NBIX changes CEOs
  
• 17 Jan—GSS 4Q07 results…more red ink
  
• 23 Jan—VRTX announces Phase 3 for telaprevir; results not due until mid-2010
• 24 Jan—BQI gets more acreage in Alberta
• 31 Jan—BZP Peruvian naval tanker transporting BPZ oil explodes and sinks
• 31 Jan—TMY extends deadline for management buyout proposal

Comments:

Excellent start to the new year for us—up 5% in a month where the NASDAQ essentially crashes (down 10%) and the hedge funds had their worst monthly performance since July 2002 (-3%). Still, we are not without concerns.

Strategically, given that the Fed is going in the wrong direction and despite all the presidential debates, only one fringe candidate (Ron Paul) seems to grasp the significance of the fact that we are destroying our own currency here, we see doom and gloom ahead…and thus we feel a bit exposed here with no short positions. The Fed flushed us out of our real estate and banking shorts with their “shock-and-awe” 75-basis point rate cut, but we will be looking to rebalance the port ASAP. Things may well hold together until the election, but it is not wise to be 100% long here.

Tactically, we have issues, too. TMY is likely to decline sharply if the $3/shr management buyout deal falls through. VRTX is looking less attractive with a potential year-or-more delay in the potential approval of telaprevir. NBIX remains weak in the wake of the indiplon catastrophe last December. GSS continues to limp along with their disappointing BIOX plant. And we still have cash to put to work somewhere…2% annual interest is certainly not compensating for the fall in the value of our dollars!

So our to-do list consists of trying to fix the things we can (go short on something and deploy our cash) and watching the things we can’t control (all the problem children listed above) closely in case we need to hit an eject button or two.

Dec 07 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	1.97	591.00	11.30%	-40.78%	-41.06%
FDG	20-Mar-07	44	22.68	1,005.92	38.60	1,799.69	13.23%	78.91%	110.20%
ELN	04-Apr-07	129	13.90	1,801.10	21.98	2,835.42	-4.56%	57.43%	84.34%
VRTX	18-Apr-07	57	31.65	1,812.05	23.23	1,324.11	-8.51%	-26.93%	-35.97%
NBIX	22-May-07	158	11.33	1,798.14	4.53	717.32	-65.13%	-60.11%	-77.80%
BQI	13-Jul-07	565	3.35	1,900.75	4.08	2,305.20	-9.33%	21.28%	50.99%
GSS	19-Jul-07	451	4.19	1,897.69	3.16	1,425.16	4.64%	-24.90%	-46.95%
GSS	24-Aug-07	613	3.08	1,896.04	3.16	1,937.08	4.64%	2.16%	6.25%
BZH	18-Sep-07	-178	11.18	-1,982.04	7.43	-1,322.54	12.49%	33.27%	174.22%
SLT	5-Oct-07	111	19.75	2,200.25	26.07	2,893.77	-0.87%	31.52%	215.91%
WB	12-Nov-07	-59	40.63	-2,389.17	38.03	-2,281.53	11.56%	4.51%	38.89%
BZP	19-Nov-07	245	9.77	2,401.65	11.18	2,739.10	-1.93%	14.05%	213.73%
cash				-3,340.38		6,881.41
ISOP Overall	03-Jan-07			10,000.00		21,845.19	-4.34%	118.48%	119.99%
Global HF	03-Jan-07			10,000.00		11,112.68	0.59%	11.13%	11.23%
NASDAQ	03-Jan-07			2,415.29		2,652.28	-0.33%	9.81%	9.90%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (blank for positions new since last report)
Return on Investment = on a percentage basis, the performance of this security to date
Compounded Annual Growth Rate = annualized ROI for this position (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2007 inclusively) provides a CAGR of around 15.1%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 10.1%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: A quiet end to a great year.

• 27 Dec—FDG dividend of $0.534/shr

News:

• 5 Dec—BQI raises $68MM via private placement
• 12 Dec—WB ups loss provision to $1B
  
• 13 Dec—NBIX shocker: FDA turns down indipon
  
• 13 Dec—ELN shivers as Biogen Idec gets cold shoulder
  
• 20 Dec—BQI closes overallotment of private placement; nets another $8MM
  
• 31 Dec—TMY management moves to take company private
  

Comments: How apropos…the first year of our speculative fund—which soared in March due to the surprise decision by an FDA advisory commitee to recommend approval of one drug (Dendreon’s provenge)—crashed in December due to a surprise FDA decision not to approve another (Neurocrine’s indiplon). That pretty much sums up the way it goes when you speculate in individual stocks: youse pays your money and youse takes your chances.

In the wake of the bizarre decision by the FDA to nix what would have been the company’s first significant product, Neurocrine (NBIX) stock plunged 65%, dragging the entire portfolio deep into last place for the month of December, with a 4% loss. The hedge fund index lead the parade in December with a 1% gain while the NASDAQ was flat.

For the year as a whole, the ISOP turned in a spectacular +118% performance while finishing with the best ROI in seven out of the twelve months of 2007. The Greenwich Global Hedge Fund index finished +11% while winning two months (November and December to come from behind) and the NASDAQ was +10% while winning three months.

We started this fund with the intention of [a] gathering intelligence that should help us make better decisions for our macro strategy investment fund (IMSIP), [b] demonstrating the vagaries of speculation, and [c] having fun. If you are thinking that we have achieved objectives “a” and “c” but we needed to lose money to properly demonstrate “b”, think again.

Our success this year was lucky, with over half of our profits ($6100) coming from one trade—the Dendreon (DNDN) options. (Plus we eventually made $500 on our sale of DNDN stock after the FDA ignored their committee’s recommendation.) The vote in that committee hearing was actually going the other way when someone thought to question the wording of the efficacy question. The question was reworded on the spot and that turned around several votes and most probably reversed the outcome. Now had the outcome of that vote been negative, we still would have profited because we owned puts that would have gained in value (in the event we sold them at a 99% loss), but we also would have lost money on the DNDN stock we owned. Overall, perhaps we might have ended up with $3000 in profits, instead of $6600. Had the vote been more neutral, then the value of the stock probably would not have changed much in which case neither the puts nor the calls would have been worth anything…and accordingly we would have lost $2000 instead of gaining $6600…a turnaround of $8600!

So that one reworded question could have been the difference between an ROI of +118% and +32%. (Or, in different circumstances, between, say, +50% and -36%.) The potential for this sort of risk is why we commit only 10% of our funds to speculation, and focus 90% of them on investment.

‘Nuff said.

Here is a thumbnail sketch of the ISOP holdings as of 31 Dec 07:

• Transmeridian (TMY, -41%)—management have failed to capitalize on this glorious asset play and need to sell out to someone better financed; best we can hope for here is coming close to getting our initial investment back…we should know early in 2008
• Fording Canadian Coal Trust (FDG, +79%)—appears to be approaching full value
• Élan (ELN, +57%)—with tysabri sales growing and a promising Alzheimer’s candidate product in the pipeline, this looks like a hold for 2008
• Vertex (VRTX, -27%)—the delay in the launch of a Phase 3 test for telaprevir, the candidate hepatitis-C treatment has hurt here, but we anticipate better news in 2008 and beyond
• Neurocrine Biosciences (NBIX, -60%)—ah, a poster child for the risks of speculation: a stock that plunged 65% in a few days…indiplon is dead but we still like the endometriosis candidate drug currently in Phase 2b testing, so for now we are holding on here in the expectation we will recoup some losses here
• Oilsands Quest (BQI, +21%)—great asset play; long-term buy-and-hold
• Golden Star (GSS, -23% net, counting both positions)—good gold mining asset play beset by operational issues but another long-term buy-and-hold
• Beazer Homes (BZH, short position, +33%)—a weak link in an over-stressed chain
• Sterlite Industries (SLT, +32%)—major player in Indian buildout; long-term buy-and-hold
• Wachovia (WB, short position, +5%)—expect more shoes to drop here in 2008
• BPZ Resources (BZP, +14%)—good natural gas and oil asset play with integrated power story; long-term buy-and-hold

And here is a brief review of the positions we divested ourselves of during 2007:

• 30 Mar/Apr $5 DNDN calls (UKODA, +742%)—our big hit for the year…if we had held on for a few more days instead of liquidating the day after the advisory committee meeting, we could have redoubled our money—up to an ROI of +1400% or so—but no one’s complaining
• 30 Mar/Apr $5 DNDN puts (UKOPA, -99%)—happy to get 1% of our money back on these, which eventually expired worthless
• 9 May/Dendreon (DNDN, +55%)—again, if we had held on for a few days instead of liquidating the day the negative FDA decision was announced, we could have done a bit better, but since then the stock declined back to near where we bought it, so selling was clearly the right decision
• 16 Jun/LionOre (LMGGF, +88%)—nickel mining play that got bought out, probably too cheaply…but no one’s complaining
• 5 Oct/Syntax-Brillian (BRLC, +21%)—buying a consumer play in the face of an impending recession was, theoretically, a dumb move—on top of which, the stock has since collapsed due to company-specific issues, so it turns out buying BRLC was, in practice, a dumb move—but we got lucky when a better opportunity came along a week later and we had to sell something to raise funds…so at the end of the day, this is a useful example of why speculation is a lot closer to gambling than investing is
• 5 Nov/Petrochina (PTR, +76%)—we could have gotten $250/shr instead of $222 but it closed the year at $175 so again, no one’s complaining
• 5 Nov/India Fund (IFN, +44%)—this one closed the year higher than we sold if for, but we wanted to eliminate all duplication with our IMSIP
• 5 Nov/FTSE/Xinhua China 25 ETF (FXI, +97%)—was going for $215+/shr in October and $197/shr in December, but we are happy with our $190/shr proceeds…closed the year at $170/shr

In conclusion, obviously we don’t expect an ROI of 118% every year (or else we would have all our money in the ISOP, instead of just 10%!). In the long run, if we can break even here—and garner intelligence that helps inform our IMSIP decisions—it will be well worth the effort. Anything beyond that is gravy.

Bottom line, no two ways about it—2007 was a great year for gravy-lovers.

Nov 07 Intelledgement Speculative Opportunity Portfolio Report

Position	Purchased	Shares	Paid	Cost	Now	Value	Change	ROI	CAGR
TMY	03-Jan-07	300	3.30	998.00	1.77	531.00	-2.75%	-46.79%	-50.16%
FDG	20-Mar-07	44	22.68	1,005.92	34.09	1,577.75	-6.40%	56.85%	90.54%
ELN	04-Apr-07	129	13.90	1,801.10	23.03	2,970.87	-3.24%	64.94%	114.18%
VRTX	18-Apr-07	57	31.65	1,812.05	25.39	1,447.23	-21.49%	-20.13%	-30.46%
NBIX	22-May-07	158	11.33	1,798.14	13.02	2,057.16	40.76%	14.40%	29.18%
BQI	13-Jul-07	565	3.35	1,900.75	4.50	2,542.50	-17.10%	33.76%	113.60%
GSS	19-Jul-07	451	4.19	1,897.69	3.02	1,362.02	-16.11%	-28.23%	-59.51%
GSS	24-Aug-07	613	3.08	1,896.04	3.02	1,851.26	-16.11%	-2.36%	-8.52%
BZH	18-Sep-07	-178	11.18	-1,982.04	8.49	-1,511.22	24.40%	31.15%	288.44%
SLT	5-Oct-07	111	19.75	2,200.25	26.30	2,919.30	1.27%	32.68%	532.39%
WB	12-Nov-07	-59	40.63	-2,389.17	43.00	-2,574.76	n/a	-7.21%	-78.09%
BZP	19-Nov-07	245	9.77	2,401.65	11.40	2,793.00	n/a	16.30%	14,929.01%
cash				-3,340.38		6,869.96
Overall	03-Jan-07			10,000.00		22,836.07	-4.82%	128.36%	148.73%
Global HF	03-Jan-07			10,000.00		11,047.50	-1.66%	10.47%	11.62%
NASDAQ	03-Jan-07			2,415.29		2,660.96	-6.93%	10.17%	11.28%

Position = symbol of the security for each position
Purchased = date position acquired (for long positions) or sold (for short positions)
Shares = number of shares long or short in the portfolio
Paid = price per share
Cost = what portfolio paid (including commission); note for short sales, the portfolio gains cash
Now = price per share as of the date of the report
Value = what it is worth as of the date of the report (# shrs multiplied by price per share plus value of dividends)
Change = Change since last report (blank for positions new since last report)
Return on Investment = on a percentage basis, the performance of this security to date
Compounded Annual Growth Rate = annualized ROI for this position (to help compare apples to apples)

Notes: The benchmark for the ISOP is the Greenwich Alternative Investments Global Hedge Fund Index, which historically (1988 to 2006 inclusively) provides a CAGR of around 15.4%. For comparison’s sake, we also show the NASDAQ index, which over the same time frame has yielded a CAGR of around 11.0%. Note that for the portfolio, dividends are added back into the value of the pertinent security and not included in the “cash” total (this gives a more complete picture of the ROI for dividend-paying securities). Also, the “Cost” figures include a standard $8 commission and there is a 2% rate of interest on the listed cash balance.

Transactions: Two of our three sales this month eliminated duplication between the spec port and the investment port. Now, the vast majority of our speculative positions—and all our our investment positions—are consistent with our macro analysis. E.g., positions in a specific E&P company for the spec fund and in the IFC ETF for the investment fund are both thematically consistent with our macro analysis that the relative value of energy is rising. However, one of the purposes of the spec fund is to push ourselves to gather more intelligence and learn new things and duplicating the same positions as we have in the investment fund does not advance the ball in that regard. While these sell decisions were based purely on ROI considerations, we were happy to get rid of the dupes and do not anticipate seeing such a situation arise again. Note: because we are short Wachovia (WB), we had to pay out the 64-cent dividend on 28 Nov, rather than collecting it as is normally the case with dividends.

• 5 Nov—Sold 8 PTR for $222.10/shr (ROI of 76% and CAGR of 106%)
• 5 Nov—Sold 24 IFN for $60.80/shr (ROI of 44% and CAGR of 65%)
• 5 Nov—Sold 10 FXI for $189.81/shr (ROI of 97% and CAGR of 169%
• 12 Nov—Sold Short 59 WB for $40.63/shr
• 19 Nov—Bought 245 BZP for $9.77/shr
• 28 Nov—WB dividend of $0.64/shr

News:

• 1 Nov—TMY receives buyout offers; reaches gas flaring agreement thru 2008
  
• 2 Nov—NBIX agreement with Dainippon Sumitomo Pharma on indiplon for Japan
  
• 5 Nov—VRTX triple whammy: delayed Phase 3, disappointing data, more competition for telaprevir
  
• 5 Nov—BQI underwhelming reserve estimates
  
• 6 Nov—BZH surprizes with more charges; shareholders seek CEO’s head
  
• 7 Nov—GSS 3Q07 results not too shabby
  
• 11 Nov—TMY 3Q07 results underplayed, justifiably
  
• 18 Nov—SLT Indian power market plans presentation
  
• 21 Nov—BQI announces another round of stock sales
  
• 26 Nov—BZP consummates deal for additional acreage in Peru
  

Comments: The hedgies won! The hedgies won! Yes, folks, the professional hedge fund managers finally recorded their first monthly victory of 2007—that is, the first month they have outperformed both ISOP and the NASDAQ—by virtue of managing to lose money slower than anyone else: only -2% compared to -5% for us and -7% for the NASDAQ. Way to go, pros! Ironically, it was also their worst month of the year, in terms of ROI…in fact, November was easily everyone’s worst month of the year.

Despite the Fed’s continued determination to lower interest rates and increase liquidity to counter the housing and credit crises, the US stock market shrank at the prospect of looming recession…or worse. There was really no good news whatsoever this month. For us, in fact, mostly there was bad news—Vertex ( VRTX, -21%) saw competitors to their prospective anti-hepatitis drug, telaprevir, wax stronger…Oilsands Quests (BQI, -17%) reported underwhelming reserve numbers and announced another dilutive offering of more shares…Golden Star (GSS, -16%) had another quarter of unanticipated operational challenges…Beazer Homes (BZH, +24%) had an even worse-than-expected quarter—which is saying a lot as folks expected a very bad quarter—but in this case as we are short the stock, bad news is good for us. Our star performer for the month was Neurocrine (NBIX, +41%) but most of the runup there was due to anticipation of FDA approval of their sleep drug, indiplon, next month, rather than any genuine good news. Our newest position in BPZ Resources (BZP, +16%) was up sharply for us in just 11 days but that was mostly a rebound from the bad news that they, too, plan a dilutive sale of additional shares.

Despite the sharp pullback, overall we are still way, way ahead: +128% so far in 2007 compared to +10.48% for the Greenwich Alternative Investment’s hedge fund index and +10.17% for the NASDAQ.