HEXAGRAM 04: ORIGINAL, INTERPRETATION AND CASES

HEXAGRAM 04 - Meng - Youthful Folly

Above KEN KEEPING STILL, MOUNTAIN

Below K'AN THE ABYSMAL, WATER

In this hexagram we are reminded of youth and folly, in two different ways.

· The image of the upper trigram, Ken, is the mountain, that of the lower, K'an, is water;

o the spring rising at the foot of the mountain is the image of inexperienced youth.

· Keeping still is the attribute of the upper trigram; that of the lower is the abyss, danger.

o Stopping in perplexity on the brink of a dangerous abyss is a symbol of the folly of youth.

However, the two trigrams also show the way of overcoming the follies of youth.

Water is something that of necessity flows on.

When the spring gushes forth, it does not know at first where it will go.

But its steady flow fills up the deep place blocking its progress, and success is attained.

THE JUDGMENT

YOUTHFUL FOLLY has success.

It is not I who seek the young fool;

The young fool seeks me.

At the first oracle I inform him.

If he asks two or three times, it is importunity.

If he importunes, I give him no information.

Perseverance furthers.

In the time of youth, folly is not an evil.

One may succeed in spite of it, provided one

· finds an experienced teacher and

· has the right attitude toward him.

This means, first of all, that the youth himself

· must be conscious of his lack of experience and

· must seek out the teacher.

Without this modesty and this interest there is no guarantee that he has the necessary receptivity,

which should express itself in respectful acceptance of the teacher.

This is the reason why the teacher must wait to be sought out instead of offering himself.

Only thus can the instruction take place

· at the right time and

· in the right way.

A teacher's answer to the question of a pupil ought to be clear and definite

like that expected from an oracle;

thereupon it ought to be accepted as

· a key for resolution of doubts and

· a basis for decision.

If mistrustful or unintelligent questioning is kept up,

it serves only to annoy the teacher.

He does well to ignore it in silence,

just as the oracle

· gives one answer only and

· refuses to be tempted by questions implying doubt.

Given in addition a perseverance that never slackens

until the points are mastered one by one,

real success is sure to follow.

Thus the hexagram counsels

· the teacher as well as

· the pupil.

THE IMAGE

A spring wells up at the foot of the mountain: The image of YOUTH.

Thus the superior man fosters his character

By thoroughness in all that he does.

A spring

· succeeds in flowing on and

· escapes stagnation by filling up all the hollow places in its path.

In the same way character is developed by thoroughness that skips nothing but, like water,

gradually and steadily fills up all gaps and so flows onward.

THE LINES

Six at the beginning means:

To make a fool develop

It furthers one to apply discipline.

The fetters should be removed.

To go on in this way brings humiliation.

Law is the beginning of education.

Youth in its inexperience is inclined at first to take everything carelessly and playfully

must be shown the seriousness of life.

A certain measure of taking oneself in hand, brought about by strict discipline, is a good thing.

He who plays with life never amounts to anything.

However, discipline should not degenerate into drill.

Continuous drill

· has a humiliating effect and

· cripples a man's powers.

0 Nine in the second place means:

To bear with fools in kindliness

brings good fortune.

To know how to take women

Brings good fortune.

The son is capable of taking charge of the household.

These lines picture a man

· who has no external power, but

· who has enough strength of mind to bear his burden of responsibility.

He has the inner superiority and strength that enable him to tolerate with kindliness the shortcomings of human folly.

The same attitude is owed to women as the weaker sex.

One must

· understand them and

· give them recognition

in a spirit of chivalrous consideration.

Only this combination of

· inner strength with

· outer reserve

enables one to take on the responsibility of directing a larger social body with real success.

Six in the third place means:

Take not a maiden who

When she sees a man of bronze,

Loses possession of herself.

Nothing furthers.

A weak, inexperienced man, struggling to rise,

easily loses his own individuality

when he slavishly imitates a strong personality of higher station.

He is like a girl throwing herself away when she meets a strong man.

Such a servile approach should not be encouraged,

because it is bad both for

· the youth and

· the teacher.

A girl owes it to her dignity to wait until she is wooed.

In both cases it is undignified to offer oneself, and

no good comes of accepting such an offer.

Six in the fourth place means:

Entangled folly brings humiliation.

For youthful folly it is the most hopeless thing to entangle itself in empty imaginings.

· The more obstinately it clings to such unreal fantasies,

· the more certainly will humiliation overtake it.

Often the teacher, when confronted with such entangled folly,

has no other course but to leave the fool to himself for a time,

not sparing him the humiliation that results.

This is frequently the only means of rescue.

0 Six in the fifth place means:

Childlike folly brings good fortune.

An inexperienced person who seeks instruction in a childlike and unassuming way is on the right path,

for the man devoid of arrogance who subordinates himself to his teacher will certainly be helped.

Nine at the top means:

In punishing folly

It does not further one

To commit transgressions.

The only thing that furthers Is to prevent transgressions.

Sometimes an incorrigible fool must be punished.

He who will not heed will be made to feel.

This punishment is quite different from a preliminary shaking up.

But the penalty should not be imposed in anger;

it must be restricted to an objective guarding against unjustified excesses.

Punishment is never an end in itself but serves merely to restore order.

This applies

· not only in regard to education

· but also in regard to the measures taken by a government against a populace guilty of transgressions.

Governmental interference

· should always be merely preventive and

· should have as its sole aim the establishment of public security and peace.

1. ("Fool" and "folly" as used in this hexagram should be understood to mean the immaturity of youth and its consequent lack of wisdom, rather than mere stupidity. Parsifal is known as the "pure fool" not because he was dull-witted but because he was inexperienced.)

04 - YOUTHFUL FOLLY

MANAGERIAL ISSUE:

The CEO – managing under the weight of his youthful inexperience or lack of managerial experience – how it affects the corporation.

Hexagram 4 represents the CEO’s:

· Youth, and his lack of managerial experience, as well as lack of knowledge of the industry. However, by no means does it represent the CEO’s lack of intelligence.

· Inability to take action in the face of unknown dangers. To the I Ching, the problem with youth lies in not knowing what to do in the face of danger: “Stopping in perplexity on the brink of a dangerous abyss is a symbol of the folly of youth”. The I Ching envisions the time when the CEO will freeze because he does not know how to deal with the problems he will encounter in this industry, thus his Youthful Folly. The irony lies in the notion that the same act of freezing in the midst of danger sometimes, strangely enough, helps him to succeed - but only sometimes. In a way, if and when success is achieved, it is to be seen as beginner’s luck assisted by able helpers and not as the result of the CEO’s wisdom and experience.

MANAGERIAL LESSON:

The Superior CEO realizes there is nothing wrong with lack of experience provided there is humility, awareness of one’s lack of knowledge/experience, relentless search for a wise teacher, respect for his teacher and a sincere desire to learn. With the proper attitude, he may still be successful.

The Superior CEO knows the best course of action when he lacks knowledge is to:

1) Be humble. Seek and rely on expert advice as the sure way to achieve success.

2) Be respectful - Show respect for his experienced advisors by executing the advice exactly as he was told. The worst attitude would be for the inexperienced CEO to ask for advice and then proceed to do as he pleases. This unfortunately is a common event. Read the book Focus of Al Ries to realize all the folly of the CEOs.

3) Be thorough/Skip nothing - Continue to practice until he gets it right. For the CEO, to learn about an industry he must continuously practice, with the help of experienced assistants, until he becomes an expert. Through constant practice, he will become successful. Tenacity, the kind U.S. Grant had, is the key to success.

This was the Hexagram of George W Bush. His adversaries were wrong when they thought he was not smart. Gore and Kerry found that out. He was inexperienced. And he was smart enough to follow the I Ching’s advice - to surround himself by the more experienced members of his father’s previous Cabinet. The problem was that unbeknownst to him, the Cabinet was split in two: the conservatives and the Neo Cons who were spoiling for a war. We all know what happened.

INVESTMENT ADVICE:

For the investor, the Youthful Folly represents in general terms an unfavorable Time-Space to invest.

Hexagram 4 (Youthful Folly) is not for the common CEO/investor who should look for easier projects/investment alternatives. In a way, this Hexagram at times might even imply the CEO/investor’s doubt about the I Ching’s advice and the I Ching’s contempt for his attitude. The I Ching also gives the CEO/investor an important warning: because the CEO/investor goes to the I Ching to ask for advice rather than the I Ching going to the CEO/investor, it is the CEO/investor’s duty to pay close attention and ask the question only once. It would be typical of some CEO/investors who ask the Oracle the same question again and again. When that happens, the I Ching will only play with the CEO/investor and sometimes even confuse him on purpose.

When the I Ching tells the CEO/Investor at first that a project/investment will not be profitable, he should look for another one and not insist with more questions about the same project/investment. After all, there are over 15,000 stocks to choose from in the market. The I Ching is very clear and very definite in its answers to the questions.

The I Ching will not help the CEO/investor who shows doubt.

· The I Ching says “A teacher's answer to the question of a pupil ought to be clear and definite like that expected from an Oracle; thereupon it ought to be accepted as a key for resolution of doubts and a basis for decision. If mistrustful or unintelligent questioning is kept up, it serves only to annoy the teacher. He does well to ignore it in silence, just as the Oracle gives one answer only and refuses to be tempted by questions implying doubt.”

By itself (no lines), the Time-Space points to success provided the CEO is humble:

YOUTHFUL FOLLY has success.

It is not I who seek the young fool;

The young fool seeks me.

At the first Oracle I inform him.

If he asks two or three times, it is importunity.

If he importunes, I give him no information.

Perseverance furthers.

In the time of youth, folly is not an evil. One may succeed in spite of it, provided one finds an experienced teacher and has the right attitude toward him. This means, first of all, that the youth himself must be conscious of his lack of experience and must seek out the teacher. Without this modesty and this interest there is no guarantee that he has the necessary receptivity, which should express itself in respectful acceptance of the teacher. This is the reason why the teacher must wait to be sought out instead of offering himself. Only thus can the instruction take place at the right time and in the right way.

A teacher's answer to the question of a pupil ought to be clear and definite like that expected from an Oracle; thereupon it ought to be accepted as a key for resolution of doubts and a basis for decision. If mistrustful or unintelligent questioning is kept up, it serves only to annoy the teacher. He does well to ignore it in silence, just as the Oracle gives one answer only and refuses to be tempted by questions implying doubt.

Given in addition a perseverance that never slackens until the points are mastered one by one, real success is sure to follow. Thus the hexagram counsels the teacher as well as the pupil.

The lines, however, present two rare possibilities to invest but there are better possibilities in other corporations:

The following are cases of corporations under the Youthful Folly Time-Space:

· Deutsche Bank AG DB under CEO Josef Ackermann

· Celgene Corporation CELG under CEO Robert J. Hugin

· American Express Company AXP under CEO Kenneth I. Chenault

(Read at the end of the Hexagram)

THE LINES

SIX IN THE FIRST LINE

Managerial Issue: The CEO – managing under the weight of his youthful folly - inexperience and immaturity.

Managerial Lesson: Be disciplined.

Managerial Warning: At the first stage of the Youthful Folly Time-Space, the CEO takes his managerial responsibilities in a light manner. His behavior is erratic. On the one hand he does not follow any rules himself, and on the other he does not impart any discipline on the employees. Worse, because of his inexperience, he does not know how to punish. And when he does carry out a punishment, he goes over board and punishes the personnel in an excessive manner.

Managerial Advice: The Superior CEO understands he must first apply discipline to himself before he applies it to others.

The I Ching advices the CEO something that should be written in letters of gold by private industry, government, parents, teachers and anyone else who wants to learn the essence of management:

Law is the beginning of education.

To apply discipline to others we must first apply it to ourselves, to conquer others, we must first conquer ourselves. The I Ching advises the CEO to be serious about his job and to apply discipline to both himself and others, but without stifling personal growth and creativity.

The I Ching says, “Youth in its inexperience is inclined at first to take everything carelessly and playfully. It must be shown the seriousness of life. A certain measure of taking oneself in hand, brought about by strict discipline, is a good thing. He who plays with life never amounts to anything. However, discipline should not degenerate into drill. Continuous drill has a humiliating effect and cripples a man's powers.”

Investment Advice: Do not invest

NINE IN THE SECOND LINE

Managerial Issue: The CEO – managing the employees’ youthful inexperience – his lack of power.

Managerial Lesson: Be gracious.

Managerial Warning: At the second stage of the Youthful Folly Time-Space, the CEO has the qualities, the smarts, the experience, the maturity to do the job, and enough strength of mind to bear his burden of responsibility. But he has no power. However; he has two qualities, which will bring about an eventual success:

He has the patience to put up with the youthful inexperience of his personnel, and
He has the kindness to turn them around without insulting them.

Yet this does not represent a winning team but rather the abilities of a single person.

Managerial Advice: The Superior CEO is kind and tolerant.

The I Ching’s advice to the CEO could be regarded as a controversial one, particularly amongst women. It advises the CEO to treat his personnel the same way one should treat women; to be kind, tolerant, understanding and to recognize their merits, because women, like any other large social body (i.e. a nation or a corporation) require chivalrous consideration.

The I Ching says: “The same attitude is owed to women as the weaker sex. One must understand them and give them recognition in a spirit of chivalrous consideration. Only this combination of inner strength with outer reserve enables one to take on the responsibility of directing a larger social body with real success”.

Investment Advice: Do not invest

SIX IN THE THIRD LINE

Managerial Issue: The CEO – managing under the weight of his youthful inexperience - his lack of dignity.

Managerial Lesson: Be dignifying.

Managerial Warning: At the third stage of the Youthful Folly Time-Space, the CEO is not only inexperienced but is also a wimp. He lacks character, the essence of leadership. He is an imitator of the CEO of the most successful corporation in his industry. He has failed to create a corporate culture. This line represents both the typical corporation that copies its products from the more successful competitors, as well as a corporation, which is desperately looking for someone to buy it out.

Managerial Advice: The Superior CEO develops his character and dignity to earn the respect of others and be successful. Any CEO, who is looking for a buyer for his corporation, must wait until someone approaches it first rather than go out desperately looking for the first buyer that comes along.

Investment Advice: Do not invest.

SIX IN THE FOURTH LINE

Managerial Issue: The CEO – managing under the weight of his youthful inexperience – his unreal fantasies.

Managerial Lesson: Be real.

Managerial Warning: At the fourth stage of the Youthful Folly Time-Space, the CEO lacks the necessary humility to be successful: he is arrogant about his goals for his corporation, which are completely unrealistic. And to compound the error, he seeks but will not heed the advice of his most experienced counselors. The I Ching warns him that the obsessive execution of his unrealistic plans will lead the corporation to lose its best people and will cause an eventual drop in the value of the stock, as well as his own demise.

Managerial Advice: The Superior CEO is humble. He knows that when his attitude is not humble and his corporate goals are unrealistic, no decent consultant or assistant will be willing to work for his corporation. In a way this is good, because out of the catastrophe will come the change in management and the corporation’s eventual turnaround.

Investment Advice: Do not invest.

SIX IN THE FIFTH LINE

Managerial Issue: The CEO – managing under the weight of his youthful inexperience – when he lacks knowledge but has plenty of humility and is desperately willing to learn.

Managerial Lesson: Be solicitous.

Managerial Warning: At the fifth stage of the Youthful Folly Time-Space, the inexperienced CEO has the humility but might not look for the proper teacher.

Managerial Advice: The Superior CEO is humble enough to always look for wise teachers who can guide him and correct him.

The I Ching comments the CEO’s humility will eventually bring him success.

In a way this represents some of the Japanese companies in their beginnings. They had a tremendous desire to improve themselves and to succeed; they were also very humble and desirous to learn from the West. This in turn was flattering for the western companies, which were willing to share their knowledge with them. The Chinese are following the same course now.

Investment Advice: Do not invest. There are better alternatives.

NINE IN THE SIXTH LINE

Managerial Issue: The CEO - managing under the weight of his youthful inexperience – stupidity beyond repair.

Managerial Lesson: Be repentant.

Managerial Warning: At the sixth stage of the Youthful Folly Time-Space, the CEO is so inexperienced and so arrogant that there is no hope for him. The market has already become aware of the CEO’s arrogance and poor managerial abilities and his corporation is about to reflect this fact with a mayor correction in the price of the stock. This correction will be kept up until the Board of Directors changes the CEO or his goals in which case the market will probably push the price of the stock up. After all, this corporation in essence is good, but the Board of Directors has to first make some major changes, beginning with its CEO. This was certainly the case of ATT when it’s foolish CEO decided to buy NCR out.

Managerial advice: The Superior CEO is humble at all times.

The I Ching would advise us that when a CEO is so arrogant and so stupid that he will not listen to the experts’ advice in matters he knows nothing about, and when he insists in executing his strategies against the advice of his own experts, then it is time for the Board of Directors to replace him. However, the I Ching warns us that such punishment must not be done in anger:

“Sometimes an incorrigible fool must be punished. He who will not heed will be made to feel. This punishment is quite different from a preliminary shaking up. But the penalty should not be imposed in anger; it must be restricted to an objective guarding against unjustified excesses. Punishment is never an end in itself but serves merely to restore order.”

Investment Advice: Do not invest. Follow it closely for the inevitable changes.

MANAGERIAL CASES

Deutsche Bank AG DB under CEO Josef Ackermann

Josef Ackermann’s Performance: ROI= (48.61%) Annualized Return= (11.43%)

SPY’s Performance: ROI= 3.44% Annualized Return= 0.62%

Josef Ackermann became CEO of Deutsche Bank on February 1, 2006. His performance is classic of the Youthful Folly Time-Space. Smart CEOs (Doctorates) lacking in maturity and experience, who refuse to follow the I Ching’s advice: to surround themselves with the most talented and experienced managers and to listen and follow their advice to the letter.

Joe Ackermann came to Deutsche Bank with the clear goal of making the traditional German bank a competitor to the most successful Wall Street investment banks.

"The entire pools of loans that Deutsche Bank securitized and to a large degree originated in the transactions are plagued by rampant fraud and misrepresentations and an abdication of sound origination and underwriting practices," Assured stated in its New York court filing. They declared, "more than 83 percent of 1,306 defaulted loans examined in one of the transactions... breached Deutsche Bank's representations and warranties." In other plain language, they claim Deutsche Bank lied. In the second deal, Home Equity Loan Trust, 86 percent of the 1,774 loans breached the agreements, Assured said

According to Bloomberg financial writer and author, Michael Lewis, under Ackermann's leadership at Deutsche Bank, the bank, through its New York offices, set out to outdo Goldman Sachs in the home mortgage securitization bonanza of the past decade. Lewis documents the fact that Deutsche Bank in New York was selling what it knew were toxic waste or junk mortgage bonds on US subprime mortgages to "stupid German investors in Duesseldorf" as one Deutsche Bank New York bond trader told Lewis.2

The "stupid German investors in Duesseldorf" it turns out, were IKB, the daughter of the German state Kreditanstalt fur Wiederaufbau. The interesting point is that Ackermann's DB sold what were allegedly fraudulently-constructed "AAA" CDO's or Collateralized Debt Obligations; some of the highest risk fraudulent derivatives from Wall Street mortgages to IKB at a time Deutsche Bank knew or should have known that the US mortgage default crisis was beginning to explode. In effect it appears that the DB dumped its toxic waste onto IKB. At the same time Deutsche Bank was selling exotic US real estate collateralized debt obligations to the "stupid German investors" at IKB, it was aggressively organizing other Wall Street banks and hedge fund managers to bet on the crash of that same mortgage bubble. No one at Deutsche Bank headquarters in Frankfurt seemed to mind so long as the profits rolled in from all parties. 3

To add injury to insult, or even more injury to injury, Deutsche Bank's Ackermann personally sent a notice to the head of the German bank regulator, BaFin-Chef Jochen Sanio, on July 27, 2007, kindly alerting the German regulators that IKB held a pile of toxic bonds and that the bank could be in trouble. Ackermann even went public to the press and admitted he knew because Deutsche Bank had sold the toxic financial securities to IKB.4

That announcement by Ackermann is credited with bringing IKB to the brink of bankruptcy and necessitating a state taxpayer rescue of billions. What the charitable Herr Ackermann did not divulge is how much profit his bank might have made in the collapse of IKB. The collapse of IKB, as I detail in my Der Untergang des Dollar Imperiums (((PLEASE hyperlink))), was the catalyst to explode the multi-trillion Euro US financial bubble worldwide, a bubble which today is far from deflated.

Notable as well is the fact that two days after being sued for fraud in New York court, Deutsche Bank announced that it had set aside more in compensation for employees of its corporate and investment bank in the first nine months of 2010 than Goldman Sachs. Deutsche Bank reserved enough money to pay a bonus of 285,352 euros to each of the 16,194 workers at the division, which includes transaction banking, company data show. But that money goes only to a handful of top traders whose bonus is likely in the tens of millions. "The market continues to be very competitive and top talent has its value and its price and we cannot ignore that fact," Deutsche Bank Chief Financial Officer Stefan Krause said according to a report in Business Week magazine. "And the beat goes on, and the beat goes on, on, on..." as the pop song goes.

Points the investor should consider:

1) THE HEXAGRAM

Youthful Folly (4) is negative

YOUTHFUL FOLLY has success.

It is not I who seek the young fool;

The young fool seeks me.

At the first Oracle I inform him.

If he asks two or three times, it is importunity.

If he importunes, I give him no information.

Perseverance furthers.

Given in addition a perseverance that never slackens until the points are mastered one by one, real success is sure to follow. Thus the hexagram counsels the teacher as well as the pupil.

2) THE ADVICE

A spring wells up at the foot of the mountain: The image of YOUTH.

Thus the superior man fosters his character

By thoroughness in all that he does.

A spring succeeds in flowing on and escapes stagnation by filling up all the hollow places in its path. In the same way character is developed by thoroughness that skips nothing but, like water, gradually and steadily fills up all gaps and so flows onward.

3) THE LINES:

There are two moving lines which point to failure. The more worrisome is the last or the nine at the top which warns him: Sometimes an incorrigible fool must be punished. He who will not heed will be made to feel.

Six in the third place means:

Take not a maiden who

When she sees a man of bronze,

Loses possession of herself.

Nothing furthers.

A weak, inexperienced man, struggling to rise, easily loses his own individuality when he slavishly imitates a strong personality of higher station. He is like a girl throwing herself away when she meets a strong man. Such a servile approach should not be encouraged, because it is bad both for the youth and the teacher. A girl owes it to her dignity to wait until she is wooed. In both cases it is undignified to offer oneself, and no good comes of accepting such an offer.

Nine at the top means:

In punishing folly

It does not further one

To commit transgressions.

The only thing that furthers is to prevent transgressions.

Sometimes an incorrigible fool must be punished. He who will not heed will be made to feel. This punishment is quite different from a preliminary shaking up. But the penalty should not be imposed in anger; it must be restricted to an objective guarding against unjustified excesses. Punishment is never an end in itself but serves merely to restore order.

This applies not only in regard to education but also in regard to the measures taken by a government against a populace guilty of transgressions. Governmental interference should always be merely preventive and should have as its sole aim the establishment of public security and peace.

4) THE MOVING HEXAGRAM

Hexagram 46 – Sheng - Pushing Upward is positive

THE JUDGMENT

PUSHING UPWARD

has supreme success.

One must see the great man.

Fear not.

Departure toward the south

Brings good fortune.

The pushing upward of the good elements encounters no obstruction and is therefore accompanied by great success. The pushing upward is made possible not by violence but by modesty and adaptability. Since the individual is borne along by the propitiousness of the time, he advances. He must go to see authoritative people. He need not be afraid to do this, because success is assured. But he must set to work, for activity (this is the meaning of "the south") brings good fortune.

American Express Company AXP under CEO Kenneth I. Chenault

Kenneth I. Chenault’s Performance: ROI= 2.00% Annualized Return= 0.19%

SPY’s Performance: ROI= 4.01% Annualized Return= 0.37%

The I Ching’s warning of Chenault’s incompetence is evidenced by his poor performance since he became CEO (Jan 2001).

The I Ching warned him about entangling himself with empty imaginings. What does it mean?

Overreaching to obtain returns he well knew were not in accordance with corporate risk acceptance.

David Evans of Bloomberg wrote:

“The numbers looked compelling. Buy this investment-grade collateralized debt obligation and you'll get a return of up to 10 percent, Credit Suisse Group said. That was almost 25 percent more than the average yield on a similarly rated corporate bond.

Investors snapped up the $340.7 million CDO, a collection of securities backed by bonds, mortgages and other loans, within days of the Dec. 12, 2000, offering. The CDO buyers had assurances of its quality from the three leading credit rating companies --Standard & Poor's, Moody's Investors Service and Fitch Group Inc. Each had blessed most of the CDO with the highest rating, AAA or Aaa.

Investment-grade ratings on 95 percent of the securities in the CDO gave no hint of what was in the debt package -- or that it might collapse. It was loaded with risky debt, from junk bonds to subprime home loans. During the next six years, the CDO plummeted as defaults mounted in its underlying securities. By the end of 2006, losses totaled about $125 million.

The failed Credit Suisse CDO may be an omen of far worse to come in the booming market for these investments.

American Express Loss

American Express Co. learned about risky CDOs the hard way. The New York-based company invested in high-yield CDO transactions starting in 1998. By 2001, American Express reported losses of more than $1 billion from those investments.

Chief Executive Officer Kenneth Chenault told shareholders in a July 2001 conference call that the company didn't understand CDO risk. He said when his traders first bought CDOs; defaults were at historically low levels.

``Many of the structured investments were investment grade, so they thought they had a reasonable level of protection against loss'' he told investors. ``It is now apparent that our analysis of the portfolio did not fully comprehend the risk underlying these structures during a period of persistently high default rates''

As a result, he said, American Express would stop buying CDOs. Chenault declined to comment for this story.”

Kenneth I. Chenault should never have become CEO of American Express. The union of both created a negative Time-Space. He continues entangling himself with empty imaginings. After having harmed the shareholders, the honorable thing for him to do would be to resign as soon as possible. But why should he? He continues to make millions for running his corporation into the ground.

Points the investor should consider:

1) THE HEXAGRAM

(Same as Above).

2) THE ADVICE

(Same as Above).

3) THE LINES:

The lines point to a negative performance and the need for him to resign.

Six in the fourth place means:

Entangled folly brings humiliation.

For youthful folly it is the most hopeless thing to entangle itself in empty imaginings. The more obstinately it clings to such unreal fantasies, the more certainly will humiliation overtake it.

Often the teacher, when confronted with such entangled folly, has no other course but to leave the fool to himself for a time, not sparing him the humiliation that results. This is frequently the only means of rescue.

4) THE MOVING HEXAGRAM

The moving Hexagram (64) tends to be positive but gives him a warning about being careless.

HEXAGRAM 64 - Wei Chi - Before Completion

This hexagram indicates a time when the transition from disorder to order is not yet completed. The change is indeed prepared for, since all the lines in the upper trigram are in relation to those in the lower (1). However, they are not yet in their places. While the preceding hexagram offers an analogy to autumn, which forms the transition from summer to winter, this hexagram presents a parallel to spring, which leads out of winter's stagnation into the fruitful time of summer. With this hopeful outlook the Book of Changes comes to its close.

THE JUDGMENT

BEFORE COMPLETION.

Success.

But if the little fox, after nearly completing the crossing,

Gets his tail in the water,

There is nothing that would further.

The conditions are difficult. The task is great and full of responsibility. It is nothing less than that of leading the world out of confusion back to order. But it is a task that promises success, because there is a goal that can unite the forces now tending in different directions. At first, however, one must move warily, like an old fox walking over ice. The caution of a fox walking over ice is proverbial in China. His ears are constantly alert to the cracking of the ice, as he carefully and circumspectly searches out the safest spots. A young fox who as yet has not acquired this caution goes ahead boldly, and it may happen that he falls in and gets his tail wet when he is almost across the water. Then of course his effort has been all in vain. Accordingly, in times "before completion," deliberation and caution are the prerequisites of success.

Celgene Corporation CELG under CEO Robert J. Hugin

Robert J. Hugin’s Performance: ROI= 11.25% Annualized Return= 10.22%

SPY’s Performance: ROI= 19.66% Annualized Return= 17.79%

Robert Hugin became CEO of Celgene in June of 2010. He is too new in the job to see the entire development of the Youthful Folly Time Space. The I Ching is giving him a warning about his Youthful Inexperience and his need to surround himself with wise men. He also has one advantage over the other two CEOs in that he has no moving lines.

Points the investor should consider:

1) THE HEXAGRAM

(Same as Above).

2) THE ADVICE

(Same as Above).

3) THE LINES:

There are no moving lines. This is positive because the lines in the Youthful Folly Hexagram tend to be negative.

4) THE NUCLEAR HEXAGRAM

Because there are no moving lines it is a good idea to look at the Nuclear Hexagram, which is Hexagram 24 The Return of the Light or the Turning point. This hexagram tends to be excellent.

HEXAGRAM 24 – Fu - Return (The Turning Point)

The idea of a turning point arises from the fact that after the dark lines have pushed all of the light lines upward and out of the hexagram, another light line enters the hexagram from below. The time of darkness is past. The winter solstice brings the victory of light. This hexagram is linked with the eleventh month, the month of the solstice (December-January).

THE JUDGMENT

RETURN. Success.

Going out and coming in without error.

Friends come without blame.

To and fro goes the way.

On the seventh day comes return.

It furthers one to have somewhere to go.

After a time of decay comes the turning point. The powerful light that has been banished returns. There is movement, but it is not brought about by force. The upper trigram K'un is characterized by devotion; thus the movement is natural, arising spontaneously. For this reason the transformation of the old becomes easy. The old is discarded and the new is introduced. Both measures accord with the time; therefore no harm results. Societies of people sharing the same views are formed. But since these groups come together in full public knowledge and are in harmony with the time, all selfish separatist tendencies are excluded, and no mistake is made.

The idea of RETURN is based on the course of nature. The movement is cyclic, and the course completes itself. Therefore it is not necessary to hasten anything artificially. Everything comes of itself at the appointed time. This is the meaning of heaven and earth.

All movements are accomplished in six stages, and the seventh brings return. Thus the Winter solstice, with which the decline of the year begins, comes in the seventh month after the summer solstice; so too sunrise comes in the seventh double hour after sunset. Therefore seven is the number of the young light, and it arises when six, the number of the great darkness, is increased by one. In this way the state of rest gives place to movement.

THE IMAGE

Thunder within the earth: The image of THE TURNING POINT.

Thus the kings of antiquity closed the passes

At the time of solstice.

Merchants and strangers did not go about,

And the ruler

Did not travel through the provinces.

The winter solstice has always been celebrated in China as the resting time of the year - a custom that survives in the time of rest observed at the new year. In winter the life energy, symbolized by thunder, the Arousing is still underground. Movement is just at its beginning; therefore it must be strengthened by rest, so that it will not be dissipated by being used prematurely. This principle, i.e., of allowing energy that is renewing itself to be reinforced by rest, applies to all similar situations. The return of health after illness, the return of understanding after an estrangement: everything must be treated tenderly and with care at the beginning, so that the return may lead to a flowering.