Hurricane Dolly made landfall north of Brownsville, Texas Thursday as a Cat 2, 100 mph storm. I got that part of the forecast pretty much right, but totally blew the investing part.

Image: Hurricane Dolly making landfall north of Brownsville, Tx.

In addition to the RIG and CHK that I had been holding prior to the storm, I purchased a relatively small position in UNG during its development. All three got killed last week. It could have been my over-eagerness at the first storm to approach the Oil/NG infrastructure in nearly three years, trying to buy the dip in energy, etc.  But I think my biggest mistake was overestimating the stupidity of Wall Street, since that is all a hurricane play really is. Sure, a hurricane might shut down, or even destroy, some rigs. However, as soon as the storm passes surviving rigs come back online, operate at 110%, and drive the price right back down. Just take a look at 2005.  Thus, a hurricane play is simply playing on short term shortsightedness. It can be very profitable, when done properly. For Dolly, the situation was slightly different. I never expected Dolly to strike the serious Oiland NG infrastructure at any time, it was simply too far south. I was hoping to profit on the “fear that we might need to start fearing about shutting down rigs” rather than just “fear about shutting down rigs.” Obviously a mistake. In the future, I will not go long any natty related stocks or funds unless at least two models forecast a storm to move north of 27N latitude. Dolly didn’t make it past 25.

In the past week, I sold all of my UNG on Wednesday, once it became apparent Dolly was going to be a dud, at 47.50 to take a $2.00/share loss on the trade. I am still holding RIG from $140.50 and CHK, which I added to on Thursday at $46, for a $53 cost basis. I like both at their current levels, but will look to sell out at least some of my positions once they rise back above my cost basis. These stocks only compose about 20% of my overall portfolio right now, with a further 30% being cash. That being said I am pretty sore at energy right now.

For the upcoming week, the tropics are quiet. There are no current threat areas and the computer models are not calling for anything to develop in the next five to seven days.

Image: Current Atlantic Satellite showing a whole bunch of nothing.

However, I feel for anyone living in Taiwan right now. Typhoon Fung-Wong is passing directly over the island at the moment and is sure to bring a pretty steep toll.

Image: Typhoon Fung-Wong over Taiwan