太极生两仪,两仪生四象 : The Tao Of Investing


<Image credit to Themindunleash.com>



道德经中有:道生一,一生二,二生三,三生万物。还有一句话是无极生太极,太极生两仪,两仪生四象,四象生八卦

太极生两仪,两仪生四

两仪
两仪指天地或阴阳。一些武术家借用此词来引申到拳法中,如武术家孙禄堂就将动为阳、静为阴,合称动静为两仪。
关于两仪,综合历代易学家的理论,计有七说:一说为阴阳,一说为天地,一说为奇偶,一说为刚柔,一说为玄黄,一说为乾坤,一说为春秋。但通常是指阴阳。


四象
四象即为:太阳、太阴、少阴、少阳。
而其又名:少阳、老阳、少阴、老阴。
从数学角度论四象为:四、九、八、六。
从方位角度论四象为:东、南、西、北。
从一年季节论四象为:春、夏、秋、冬
从人的名字论四象为:孟章执名监兵陵光
从飞禽走兽论四象为:青龙玄武白虎朱雀



This great blog post “ The 4 Seasons  (click) “ from my friend and fellow blogger ( BULLy the BEAR )  inspired me to write something about market cycles. In his blog post , he try to define the market in 4 seasons base on TA chart and interestingly highlighted that  “  it can be a complicated year with more than 4 seasons. Blame it on climate change lol! We see winter-spring-summer-autumn then followed by a complex winter-spring-winter-spring and finally summer season. “   😃

In ancient Chinese thought, two polar opposites known as “Yin and Yang “ (阴阳) are deemed to set the limits for change in the world. This traditional approach, known as the Tao or "Way or Path" , holds that a wide range of cyclical changes observed in human existence result from the dynamic interplay between contrasting pairs of symbolic polar elements.

Well , how can we apply this so called “ Yin – Yang “ in today’s market

Yin-Yang (阴阳) can be defined as positive or negative market returns and the 四象 ( Four seasons ) as market are moving in cycles .

Whenever one of these polar elements reaches an extreme level, Chinese thought suggests that it will eventually reverse in favor of the opposite element and is very common that market just swing from +ve return to -ve return periodically.









Further reading : Definition of “ Tao “ from Wikipedia

Tao or Dao (English pronunciation: /daʊ/DOWfrom ChinesepinyinAbout this sound Dào (help·info)) is a Chinese word signifying 'way', 'path', 'route', 'road', 'choose', 'key' or sometimes more loosely 'doctrine' or 'principle'.
Within the context of traditional Chinese philosophy and religion, the Tao is the intuitive knowing of "life" that cannot be grasped full-heartedly as just a concept but is known nonetheless through actual living experience of one's everyday being.

 The Tao reverses the typical [cultural] order of values: it emphasizes the weak over the strong, the feminine over the masculine, the water that wears down the rock, the space between things rather than the things themselves.[1]
Laozi in the Tao Te Ching explains that the Tao is not a 'name' for a 'thing' but the underlying natural order of the Universe whose ultimate essence is difficult to circumscribe due to it being non conceptual yet evident' in one's being of aliveness.

The Tao is "eternally nameless" (Tao Te Ching-32. Laozi) and to be distinguished from the countless 'named' things which are considered to be its manifestations, the reality of life before its descriptions of it.


You may read the full description ( here ).


In Chapter 7 of this book “ The Dao of Capital : Australian Investing in a Distorted World “ , written by Mark Spitznagel ,the author clearly illustrate the failure of mainstream economics which emphasize the “rationality “ and “ equilibrium “ of market force and also very much “ physics centric “ base on empirical evidence and quantitative modelling has plunged the world back into years of repeated global financial crisis and “Great Depression”.

  
Investors would do well to incorporate a little eastern philosophy and adopt a ‘Tao of Investing’ by understanding that market move in cycles and swing from positive to negative territory , quite often.

We knew that market cycles are impossible to predict. Their price movements are essentially random. But, we also know that markets will neither continue up indefinitely, nor fall to zero. In the past they have always “reverted to the mean. ( which I have blog about it here , here )


One should avoid “panic selling “ during harsh winter time and adjusting our portfolio allocation between “Equity : Cash/Bond “  ratio during different seasons. We should also keep some “war chest “ during the good time in order to take advantage on market irrationality from time to time . Also , I don't think is wise to hold 100% in cash and waiting for the market to crash as we really don't know when the crash will happen.

I will try to increase my cash/bond position when seeing market moving above +1SD , but as I explained in my previous blog post , even we are not seeing bubble in STI as of now ( which is just slightly above long term mean level ) , but remember when "The US Sneezes, the World catches a cold." , 

STI was down by -43.5 points (1.31%) at the time of writing due to geopolitical tensions between US and North Korea , will market continue to drop and jitters by this unexpected incident ? Yet to see ...

Lastly , what do you think about stage of market cycle of STI index now ? are we in Spring or approaching Winter season soon ? Will this geopolitical tensions turn ugly and force market towards winter season ? 


Cheers !!



The desire to get rich fast is pretty dangerous.”  Except from the Book “ Tao of Charlie Munger”

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