Well well, what a surprise! It seems Northern Wreck is not the only bank to be going cap in hand to the Old Lady of Threadneedle St, although Barclays won't admit to the fact yet....oops, sorry - only "allegedly" is it Barclays - but certainly shareholders in the whole banking sector will (should?) be feeling a tad worried. In the USA (as doubtless you'll be aware from all the media hysteria) Merrill Lynch has lost its chief exec and it's more than likely that today will be "the day" for Citigroup's head honcho. In the former case, the guy in question has lost the bank about $8bn - and the figure "could be" $12bn - as if they don't know where the measly $4bn difference has been misplaced....lost in a whole landfill of toxic waste, of course. (If you're a newcomer to these ramblings, please use the WICS search engine - it works! - and type "toxic waste" therein.) Anyway, the man himself is certainly no loser, and is walking away with a $159m payoff, triggering a message from Williams to bank boards throughout the world - fellas, if YOU want to lose even more - say $20bn as an achievable target, I'll do that for you within twelve months for the truly knockdown fee of - let's say - $99m.....in fact if you sign my contract before next Sunday I'll give you a special, one - off deal.....to you, because I like you..... a measly $94.99m! What could be fairer than that?
As far as Citigroup is concerned, they (and Bank of America) have "downgraded" their profits forecasts to reflect the fact that they really have no idea how much they have actually lost in the landfill. UBS (a big Swiss bank) has posted a loss of £300m but says "it might be more". Oh yes. But banks never learn, and in the case of Merrill Lynch above, it seems that "because commodities are the next hot thing and because we have a load of mortgage bond (toxic waste) salespeople that we need to sack, maybe we'll just re - employ most of 'em as commodities traders...." Aaaghh.

Moving along, but still with banks - last weekend I mentioned "lax lending standards" seemed to be creeping back in to the UK market a bit on the "soon" side. But it seems the best place to go for a loan at the moment is Latvia, where the number of loans at low interest rates and with little need for paperwork, has already increased this year by 30%, compared with the whole of last year. A wee bit behind the curve then, Latvian bankers.

Oh yes - before letting go of this generally "anti - bank" rant, it was interesting to discover during the week just how caring and helpful is Northern Rock when it comes to dealing with its many clients who currently find themselves in some financial difficulty as regards their "unsecured" personal loans - you'll doubtless be aware from all the adverts how aggressive over the past few years NR has been in marketing these products. Anyway, it seems the vast majority of these loans are for £20000 or over, and ALL of them are made to "homeowners". (Note the inverted commas - do you actually 'own' your home on a 100% interest - only mortgage?) More than a few personal loans were made to those with 100% mortgages - especially if these mortgages were with NR itself.

When things go wrong, you'll be aware that the idea is to contact the lender right away and discuss potential solutions - often involving "payment holidays" or IVAs and the like. It would be fair to suggest (see - I CAN be even - handed about banks when I try!) that for the most part, lenders are as helpful as they can be, because it's in nobody's interest to be unnecessarily harsh. BUT......good old Northern Crock, which remember has had to go cap in hand to the Bank of England, and whose management has pretty effectively destroyed the business, does things rather differently. "Trouble with repaying your debts madam? Leave it to us - we'll deal with it - and by the way, we will NOT speak to any debt management company, nor will we agree to any IVA in whatever form. Nope, we'll just go straight to court and get a judgement against you. Then we'll get a Charging Order, and lo and behold, your formerly unsecured debt is now secured against your property. What was that you said? You can't do that? We just did, madam." Tell me if I'm being unfair to NR in suggesting that is their modus operandi........maybe the Bank of England or a shareholder action group should take that route with the NR board of management? It's not at all amusing of course, despite the Williams flippancy.

Anyway, enough about banks (for the moment). Moving on, "another scam" would seem to be the best way to describe the Competition Commission's findings that Tesco et al are NOT distorting the free market and that small retailers, together with suppliers to big supermarkets, are completely out of order in complaining. This is the third time the CC has reported the same thing. OF COURSE the big supermarkets do not pressurise their suppliers, nor do they force out the little guy. How could anyone believe such a terrible accusation? Methinks it's time the Competition Commission's own monopoly on reporting such stuff, should be broken. Just another example of how the execs of "Big Business" are those who actually run the world.

Next (at last!) on to matters TTEW, and the first thing to say - especially to those of you who are new to these rants - is "PLEASE, don't be scared to email me with a question!" There are NO "stupid" questions. I realise that last weekend I implied that some questions are unnecessary - what I meant was that the odd time, somebody will email me the exact same question several times, albeit with different wording, ignoring the fact that he or she has already been pointed in the direction of an answer. That implies laziness and the desire to be spoon fed, and my point in being against that attitude is a simple one - I would love you to succeed as a trader, but if you're lazy about learning, you're not going to get there, with me or without me. It really is that simple.

One question that is asked a lot (totally understandably of course) is "How much can I expect to earn from trading, and how soon?" There's an answer of sorts in the WICS Archive FAQs, but I accept its inadequacy - unfortunately there is nothing to be done about that. However, I'll reproduce below part of an email from one of you and my response thereto, in the hope that it might add something to the comments in the FAQs.

"Ian.......My second question is more generic and I will understand if you feel unable to answer it. If I follow a conservative trading philosophy, not trying to be too aggressive, limiting my risk correctly, doing the correct due diligence on my trades, what sort of return, in say percentage of the trading fund, should I be aiming at or hoping for. I understand that everyone is different but given the track record of both yourself and your pupils is a doubling every 5 years, 1 year, 1 month or 1 day, the sort of return that I should be planning for. I ask this because I have growth aspirations for my portfolio and a plan for where I would like to be in 5 years and I need to make a judgement on what is a reasonable amount to invest in this part of my portfolio to achieve my aims. I promise I won’t remind you of this advice if I fail, because any failure is mine and mine alone, but I would be silly if I didn’t try to get advice. Thanks, C....".

My response was

" C...., as you say, we are all different & a meaningful response is thus pretty hard to give. 'A reasonable amount' of your funds is a bigger issue than one might imagine - the reason being psychological. If you can be totally and utterly cold & objective, then it's 'reasonable' to seek to double one's bank annually. BUT there is a 'hidden' problem with that, which is that if your bank is say £2000, then as long as that £2000 means very little to you, you'll turn it into £4000 pretty quickly - probably in less than a year. If then that 'new' £4000 bank still means little, you'll do the same again. But pretty soon a day will arrive when you realise that your 'new' £8000 fund - or whatever amount applies (psychologically speaking) to you - DOES 'mean something'. Then, when three or four trades go wrong and your £8000 has become say £ 6900, you may find your 'doubling every year' idea stops dead in its tracks. At that point, fear will have arrived, and at that point, your 'cold, objective attitude' mentioned earlier, goes straight out the window. It's thus all too easy to set a target based on 'doing everything correctly' only to see it derailed by internal issues connected with that fear. It would perhaps be fair to say that everyone goes through the same process in that regard, building up capital and then handing much of it back before eventually either giving up, or getting their attitude to money consistently 'right' and moving forward with no further problems. Sorry for being longwinded but this is not an easy thing to explain other than to those who already know from experience how right I am about it. Regards, Ian."

Now you'll know that has all been discussed before - especially the 'fear' bit - and the main thing to take from it is the almost certain fact that at some point after you have built up capital from 'doing things right' you'll hand most or all of it back to the markets. That happens to us all - sometimes more than once - and you need to allow for it. Once it HAS happened to you, you'll understand what I'm saying! The main point is to appreciate that handing back your hard - earned profits is very much part of the deal in this business. Eventually of course, you arrive at the stage (if you're becoming successful) where a) you accept happily that some of your 'paper profit' is worthless because the market will be getting it back in due course and b) you keep a whole lot more than you ever hand back.

And on that note, let's have a look at one or two charts. First of all we'll examine Euromoney again (last featured in these ramblings on 23rd September and 14th October) to look at stop loss management and the possibility of 'doubling up' an existing position or entering a completely new trade if you're not already 'in' one. (And note that 'doubling up' of course is exactly the same process as 'entering a new trade' - it just happens to be in the same stock, that's all - but 'normal' entry criteria must apply.) Then we'll check out different DMA lengths vis a vis stop loss (SL) management on the Minerva chart. It's on the TTEW home page and also in WICS of 7th October 07. Use the search engine and you may well find further references to it. And finally we'll look at Templeton Emerging Markets investment trust to discuss a little of what was mentioned above about "handing back paper profits" - and again we'll discuss SL management.

That's your lot for this weekend then, so I'll wish you well until next weekend.

All the best,

Ian.

'IMPORTANT NOTICE: These WICS charts are for EDUCATIONAL PURPOSES ONLY. They represent only MY understanding of what is happening in the market for any particular share, stock, commodity or index. In NO circumstances should they be construed as recommendations to trade. If I choose to trade what I see, that is MY decision. YOU must, in turn, come to YOUR OWN conclusions about what action, if any, YOU might choose to take'.