Tigerchess

The collapse of sterling has hardly gone unnoticed at Tigerchess HQ. As an exporter I have to say that it’s hugely beneficial, and no doubt other UK businesses are also feeling the benefit.

Obviously it will also get expensive if someone tries to go anywhere which means that domestic UK holidays may regain their former popularity. But this in turn may be bad news for British chess because we may no longer get such cheap rates in Britain’s fading holiday resorts.

Isn’t economics a beautiful thing?

One of the most important ideas to be developed by a chess player was Steinitz’s principle of proportion. The former World Champion and father or modern chess strategy stated that the attack must be in proportion to the amount of advantage held, a concept which has far reaching applicability in other spheres.

The area which most readily comes to mind is that of speculation, many traders failing not because they were right or wrong but simply through having overplayed their hand with excessive leverage. One can be quite right on overall direction, but excessive leverage means that you can be forced out of a position before it finally goes in the direction that has been predicted.

It could well be that this is a major factor in ‘the public’ losing money in stocks as well. The cause of public selling is commonly attributed to the fear caused by falling prices, but perhaps there’s a heavy leverage element in there as well. During the good times people will often have a surplus and will think about saving for the future in a rising asset class. But when a downturn arrives increasing pressure on the necessities of life (induced perhaps by a drop in income) forces them to sell these investments.

Where Steinitz’s theory really kicks in is when someone is heavily leveraged in investments such as housing, their ‘attack’ being way out of proportion to the perceived advantage (rising prices). When the denouement comes their position can deteriorate at a horrifying rate, for example being a modest 3 times leveraged (owning £50k of a £150k house) means that a 15% adverse move in housing causes a 45% loss in net worth.

Obviously this is much worse in the case of a ‘buy to letter’ who has several properties based on a 5% deposit. Even if they’re tenanted they will be losing money as long as the mortgage is higher than the rental yield. The situation may not be too bad as long as they can support the cash bleed with their salary and the properties are fully occupied. But take one of these supports away and the position can rapidly implode.

This is why I’d make ‘Lasker’s Manual of Chess’, which explains these things, compulsory reading at schools throughout the land. Any openings in the ministry of education?

My trip with junior to Lewis’s in Liverpool today brought to mind a story that was once told to me by the Hungarian IM, Tibor Karolyi.

Lewis’s has a truly ancient lift that requires an operator, which is where Karolyi’s story comes in. During one tournament in the USSR he was in a queue for an upstairs restaurant as people tried to go up in the lift. The problem was that there were two enormous women operating the lift (it didn’t actually require any), which meant that just one or two people could go up with them at any one time. And when he finally got up to the restaurant it was almost empty, many of the waiters standing around doing nothing.

How could such madness possibly arise? That’s simple, just take away the profit incentive and design business to serve the ‘workers’ rather than the consumer.

Today I started experimenting with a new form of time management based on a reduction in hours. Essentially I only need to work 5 hours, from 9.30 to 14.30, but this 5 hour stint requires the kind of intense concentration that is brought to bear during a chess game. I have to say that the first day has been an unqualified success, I managed to finish a huge chunk of work that was well overdue.

The reason that this may work well for me is that it’s the same routine as in a chess tournament, an intense ‘playing session’ of around 5 hours and the rest of the day off. I must admit that the thought of working 8 or more hours in a day somewhat dampens my enthusiasm to ever get started, but knowing that I’ll be free by mid afternoon changes this completely. There are some other rules, for example the phone must be switched off and no breaks are permitted. But I find both of these conditions quite agreeable.

There is a subplot to this idea in that I want to start trading again in the new year, but only trade a certain part of the day. The 09.30 to 14.30 schedule will allow me to trade the US pre open, buy or sell the open or place limit orders. I believe it should be possible to operate like this, the things I want to avoid being the feeling that I’m obliged to watch the markets whilst spending time with junior, or being unable to go out in the evening and relax. Of course another important factor in this is NOT TO HAVE TOO MUCH LEVERAGE! Heavy leverage is one sure way to develop nervous ticks and insomnia.