Tuesday, July 31, 2007

Cheerful retreat

In times of adversity we tend to reflect and often contemplate retreat.

In the Zhouyi, the commentary to the Judgment of Tun / Retreat says:
Conditions are such that the hostile forces favored by the time are advancing. In this case retreat is the right course, and it is through retreat that success is achieved. But success consists in being able to carry out the retreat correctly. Retreat is not to be confused with flight. Flight means saving oneself under any circumstances, whereas retreat is a sign of strength. We must be careful not to miss the right moment while we are in full possession of power and position.

A retreat in war would mean surrendering hard won ground to the enemy. It could also allow the enemy a chance to harass a retreating army. A good example was when the US led UN forces put to rout the fleeing Iraqi army after chasing it out of Kuwait.

However if a retreat is well planned and orderly, the enemy or the Xiao Ren (mean man) can take no advantage. The retreats by the Shu Army led by the sage like Chuko Liang after attacking the kingdom of Wei on various occasions provide good examples of such withdrawals since even his equally wise adversary, Sima Yi was often confused. And therefore the Shu army always safely returned home with minimal harassment from the pursuing enemy.

If a superior army only knows how to advance but does not know how to retreat, the incompetent general or supreme commander should be quickly replaced before more damage is done to the army.

Investment in the stock market is almost similar to fighting a war. Investments need much pre-planning and doing lots of homework. Just by studying the Art of War of Sunzi and Wu Chi may not be quite enough. You also need to learn how to trade – which means buying and selling or advancing and retreating. Any Tom, Dick and Harry who have the means know how to buy into shares (Plan A) but how and when to sell is equally important to turn a profit. (Plan B) If an investor only knows how to buy shares but does not know when to sell them, the particular investor is largely relying on luck to make money.

A good time to sell shares is when your preset target (Plan B) has been reached; another is beating a cheerful retreat from the stock market in times of adversity. (Plan Zhouyi) By cheerful retreat, I mean ‘laughing all the way to the bank’.

For example, the counter that shot up 50% last Friday when the global stock markets were tumbling went up by another 50% on Monday before profit taking set in. Happy with the gains, I sold the investment slightly below its four years’ high. These shares bought in early July gave a net 110% return on investment. Even foreign fund managers who planned to invest for the long term would have no reason to wait for further profits. (The purchase of this particular investment was based on past Yi charts records. No divination was performed.)

What are the benefits of a cheerful retreat to a Junzi according to the Yi? The top line of Hexagram 33 Tun / Retreat, a favorite line of mine, says:
Cheerful retreat. Everything serves to further.

The situation is unequivocal. Inner detachment has become an established fact, and we are at liberty to depart. When one sees the way ahead thus clearly, free of all doubt, a cheerful mood sets in, and one chooses what is right without further thought. Such a clear path ahead always leads to the good. [W/B]

Only when we have well laid plans for an orderly retreat can we see the way ahead clearly. The timing is also crucial. (The price of the sold stock fell 20% from its Monday’s close.) One relies on preset targets derived from the 64 hexagrams chart and the timing can either be depicted in the annual Yi chart or by the prognostications. This is the way how one usually invests in the KLSE since 1993.

For those who do not have such aids from the Yi, they still have to learn how to advance and retreat in a war or in any investment. How and when to advance and retreat (read changes) forms part of Daoist studies, by the way.

By reading this entry perhaps readers can learn something of use.

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