Letter To A Friend

St. Stephen's Day, 2009

Dear Michael,

Thank you very much for your well thought out gifts.

I have read both of them, I particularly like Kahlil Gibran's The Prophet. I have marked some passages. Some of it spoke directly to me, "Was it I who spoke? Was I not also a listener?", "And I the believer was also the doubter", "And how shall you speak of (beauty) except she be the weaver of your speech?", "Your body is the harp of your soul", "God listens not to your words save when He Himself utters them through your lips".

In the Omar Khayyam, I was surprised not to see the verse
xii
A Book of Verses underneath the Bough,
A Jug of Wine, a Loaf of Bread - and Thou
Beside me singing in the Wilderness -
Oh, Wilderness were Paradise enow!

I hope you enjoy the music I sent you.

I have found most, but not all, of my jukebox parts. I have all the parts which go to make it play, I am missing a decorative piece, as well as screws, washers, nuts and bolts. The most recent part found is a wooden shelf which has a circuit diagram, quite faded. The service manual and operator's guide has arrived in the post.

Wishing you a happy New Year and looking forward to seeing you on Thursday the 30th,

David ****

A Prayer

While cleaning the Aga, wiping egg stains off it, the thought came to me, this is revealing God's glory, and a prayer came to me, May I reveal God's glory.
David ****

Prayers And Eff Words

I dip my pen in the inkwell and form the words "God" and "fuck" written in the ink of my life.

In the beginning was the word, and the word was with God, and the word was God. Was the word the eff word?

Does the truth, God, goodness itself tell evil, badness, to fuck off? Or is it too polite, being, possibly, politeness itself? To politeness, in the sense of an adopted, meaningless manner, I say fuck off.

Did Christ, when he drove the moneychangers from the temple, tell them to fuck off? I asked a friend this question and he said he beat them with a flail. I said that was telling them to fuck off.

What shall my dieing words be? I'm fucked, or fuck it, now I will fucking find out, or not, as the case may be. Or shall I end with a prayer, assuming I am compos mentis at the time?

Perhaps I will feel as one walking a tightrope, hopefully an experienced practitioner of that art.

What is life, asked an old Irishwoman, but a time between two mysteries, the mystery of our coming and the mystery of our going?

"Everything is futile, it would be better never to have been born" - Samuel Beckett. A barman said "I wouldn't go that far". Beckett again, "Fuck you God, you don't exist".

God bless freedom of speech.

David ****

An Embryonic Deal

Taking Up A Rights Issue

I have 2029 shares in Lloyds Banking Group PLC (code lloy), a FTSE100 company, and so am offered the chance to buy that number of shares in a rights issue, at thirtyseven pence per share.

I was at my accountant's office on Friday week when the message from my broker came in. (My accountant handles my shares). The price on the market was fiftyseven pence. It seemed like a no-brainer, buy and sell on the same day and make a profit, but it was not that simple, it never, or rarely, is. (I have not done this type of deal before). I asked to see the share on a graph, and said I would take up the offer.

I spoke to my broker on the phone, and he said the date of the rights issue is Monday, fourteenth December next. I told him to buy and sell on the same day, and, if the price is climbing, to wait for it to go up further, he said they always would. He said I would need to send eight hundred and fifty euros, to cover the cost of the shares (750) plus his company's transaction fee (100). He emailed bank account details.

I went to my bank and found that to transfer the money would cost twentyfive euros to do it within two days or nothing or fifty cents in four days. I chose the free option.

At home, I looked at the graph on Sharescope and found the share had been trading somewhat flat for the last few days. I did some calculations.

If the market price moved down to .37, I would lose 100 euros, the transaction cost. If it stayed at or around .57 I would make 1156 gross, 1056 net, a profit of 206. Break-even (no loss or profit) = 850/2029, =.41/share.

My brother somewhat got cold feet, and, after another phone call, I found that the last time I could cancel the deal, at no cost to me, is market closing time on Tuesday next, eighth December. The date of the transaction is Monday fourteenth next.

My accountant said the broker consensus is that people should take up the rights issue, and such consensus will probably push the price up. He confirmed that the price usually moves up on the day of issue.

For every penny the share price goes above 41 pence, I make 2029 pence, that is 20.29 euros. The lowest price of the last thirty days was 52.47 pence, apart from recent figures. The price has now been moving up for two days. It moved within a range of .51 to .61 since the offer was made, well above my break-even point. The last time it went as low as .41 was in the middle of July last, since then it has always been above that figure.

Trading is a matter of getting all your ducks in a row, you must understand everything about what you are doing, inside out and backwards. Why would I not take up this issue and hold the shares? First, because I have meagre resources. Secondly, traders say an investment is a trade that went wrong.

I think it was the excellent book on mathematics, Against The Gods, that said that if you have a chance to make a sure hundred or a possibility of making two hundred or nothing, take the hundred.

I am not certain that I will make a profit on this deal, or even that I will take it up, I have until the end of Tuesday to decide that, but I want to know everything about it before I act. I hope there is nothing I have overlooked. If the deal succeeds, capital gains tax will be payable at the end of the year, but only if my capital gain for the year exceeds the threshold.

This deal, if taken, will not be a gamble, but a calculated risk.

Below are prices (pence) on LLOY since the offer was made:

2009..... .....Open..... High..... Low.......Close..... Gross (low * 2029)..... Net Profit (Gross-850)
Fri 27 Nov 56.00..... 61.52.... 54.62.... 58.60..... 1108.24 (euros)........... 258 euros
Mon 30 ".. 56.68..... 58.87.... 54.59.... 55.15...... 1107.63......................... 257
Tue 1 Dec. 55.50..... 56.35.... 53.38.... 54.14...... 1083.08........................ 233
Wed 2 " ....54.50...... 54.56.... 51.11..... 53.10...... 1037.02........................ 187
Thu 3 " ......54.21...... 57.06.... 54.21.... 55.45...... 1099.92........................ 249
Fri 4 "........ 54.76...... 56.95.... 52.20... 56.00...... 1059.13......................... 209
Mon 7 "
Tue 8 " ENTER - take deal or leave it, last day to cancel transaction, day 1 of trade if taken
Wed 9 "
Thu 10 "
Fri 11 "
Mon 14 " EXIT - date of deal, buy and sell on this day, close deal.

The net profit figures shown above are calculated by multiplying the low of the day by the number of shares (and subtracting the cost), but I would hope that my broker would sell at or near the day high on the exit date, 14th December next.

Here's Hoping,

David ****

PS This is partially written in response to A Certain Person who said anyone can tell about a deal they made that turned out successfully. Mainly, I write what is on my mind.
Two other thoughts occur to me.
1. In spread betting, there is no transaction fee and no tax to pay on winnings. That is why it is growing in popularity.
2. Longer term trades have the characteristics of a slow-motion day trade.

The Sacred And The Profane

A Message To The Artist
Talk through your art, not your arse.

To experience art is to journey into the soul of the artist, a journey which only the soul can take. Or greater, it is to travel into the soul of being, to experience oneness with reality itself, the reality in the real and of the real, otherwise only experienced through the things of the natural world.

Why do I talk as I do? I am the sum of all of my experiences, both sacred and profane, and talk and write as such. Being made of bits and scraps of this, that and the other, I appreciate the saying that the whole is greater than the sum of its parts.

As an adolescent, I asked my mother why are there two words meaning the same thing, real and reality. She replied that reality is the essence, the meaning of the real, and not the thing itself. Then why are the words treated as meaning the same thing, I asked.

I still await the answer.

***************************************************
GLOSSARY: a vocabulary of words requiring special explanation: a dictionary.
ARSE: n. the posterior parts of an animal. adv. and adj. Arsy-versy, backside foremost: contrary. [A.S. ears; Ger. arsch, Sw. ars; cog. with Gr. orros.]
ARTIST: n. one who practices art.
PROFANE: .........v.t. to put to a wrong use: to pollute: to debase. n. profanation: a treating of anything with disrespect.
SACRED: .............adj. entitled to respect or veneration: devoted to destruction: set apart or dedicated, esp. to God:........
***************************************************
Selections from my old dictionary.
I appropriate inappropriate language. Such words have been misappropriated, I return them as lambs to the fold. No word is inherently good or bad, but may be "put to a wrong use" or a right one.
David****

A Pregnant Hush

(For Oominor).

To A Mother To Be

When, at last, you finally give birth
Miraculously shall shrink your enormous girth
Returning you to your former self, so slim and slender
Then may you go on one almighty bender.

(After Ogden Nash).

Losing At Spread Betting

I am a loser, overall, when it comes to spread betting. (This is by way of response to A Certain Person's comment on my last post on this subject. He made the mistake of mistaking the example for the thing exemplified, I was explaining the mechanics by way of example).

Broadly speaking, I have lost maybe one thousand or one thousand five hundred euros in this racket.

Why did I lose? I jumped in with the big boys when I was a small fish. I took a position on Apple (a share price at the time at probably one hundred and twenty dollars) and it went against me. That position could have either made or lost a lot of money, relatively speaking. Everything is relative, in this case to the size of one's trading capital. I lost on some other shares as well. I also made profits, but my losses outweighed my gains.

Have I learned anything from my mistakes? I hope so. First, I ceased to trade. Second, I commenced paper trading (no money involved), taking theoretical positions on shares within my price range, in which the loss, hopefully, could not be more than fifty to a hundred euros per bet, fifty preferred.

What is the result? I have been winning on paper for the last three months.

There are pitfalls in trading in the markets. A share may "gap", upwards or downwards, that is jump in price way above or below yesterday's closing price and, if it goes against you, going right past your stop loss, in which case the spread betting company closes your bet at the first available opportunity, and you have lost more than you bargained for. This does not happen very often, and, of course, it can work in your favour as well.

You will always have losing trades, and if you can't take losses (emotionally or financially) you should not trade. You must be Mr. Supercool.

There is such a thing as a "guaranteed stop loss", which means that if the price moves beyond your stop loss, you are stopped out at the stop loss price. Beginners are advised to use these, but there is some difficulty in obtaining them.

Spread betting companies make their money on the spread, that is, the difference between the buying price and the selling price, that is why it is called spread betting. When you place an up bet, it is called "buying" and, to get out of the trade (if it has not been stopped out), you "sell", and vice versa for a down bet. There are only a few points in the difference between the buying and selling price, increasing with the price of the instrument (for example, a share), and, for a guaranteed stop loss, the spread is greater. Some of the companies advertise themselves as having "tight spreads".

My brother said that in my last piece on this subject I did not mention filters. Of course, you always "filter" the market using your intelligence to find bets which meet your criteria. However, the Sharescope program, which I use has computerised filters, which may be tailor made to suit your approach.

There are over four thousand shares on the New York Stock Exchange (NYSE), and you don't want to look at them all. I have various filters in play, both for up bets and down bets, resulting in my being presented with sometimes between, say, ten and twenty graphs to look at. Of course, I don't bet on them all, I use my eyes to look at the graph, for example to see whether there is much momentum behind the movement I am looking at. If not, it is a no-no, as far a I am concerned. This, itself, is probably capable of being filtered by the program. Learning is a continuous process of refinement. Whenever you introduce a new filter, the result is a smaller number of items for you to choose from. I am still learning, it never stops.

How do you learn? Go to the best sources. There are many good books on the subject of trading, get the best.

As regards stop losses and where to place them, there are many approaches. Choose the one that suits you best, that you understand and seems to work for you. Too close, and you get stopped out on a jiggle in the price. Some people use a factor such as twenty per cent below the price. An ideal book would list every approach to every aspect of trading and the new trader would pick the ones that suit him best.

I have only ever done one day trade, as mentioned in my last piece, day trading does not suit me, you have to stay looking at your computer screen until the trade ends. It is somewhat frenetic. You choose the type of trading you do according to your personality type. My trades theoretically last up to about twenty days in duration, but have never lasted that long.

A trade is exited in one of two ways, either you are stopped out, the price hits your stop loss, in which case you may have made or lost money, because you may have moved your stop loss in the direction of the bet and gone beyond the break-even point, or you sell out. Why would you sell out? Again, this is done according to your philosophical approach. If the price goes flat for three days, I get out, or if it seems to be going nowhere, which is more or less the same thing.

The trend following system is not perfect, nothing is, and does, of course deliver some false signals. Over the last three months, on paper I have lost on more than fifty per cent of my bets but my profits have outweighed my losses by a good margin. Cut your losses and let your profits run.

People should test their systems on paper or on computer or both before they enter the market but should remember that when real money is at stake they may act differently. Women have been said to be good traders because they are process oriented, they ask themselves "What is the right thing to do now, what is the rule" whereas men, on average, are goal oriented and, if so, think of the money they might make or lose, and make a decision based on emotion, a wrong decision. And women are said to be the emotional gender. You must be process oriented, with a rule for every occasion.

Practice makes perfect, the rules become second nature. You instantly know what to do in every eventuality.

There are only four states to the market, up, down, sideways and volatile, the latter two being signals to get out fast or not to get in. You must be responsive and adaptable, adapting to suit market conditions. Go with the flow, as the hippies used to say.

Make money slowly.

As you win, you increase your trading capital. If your trading capital increases by ten per cent, you increase your bet size by ten per cent.

"The most powerful force in the universe is compound interest" - Albert Einstein.

I hope this may clear up some confusion about trend following and spread betting.

As with everything else, dedication is required in order to succeed.

David (where are those asterisks?)