At First I Was Afraid

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Don’t Fear The Reaper

by Alex King, CEO, Cestrian Capital Research, Inc

Want to know what gets investment research a bad name? Investment research. That’s what. In the old days at least the nonsense was restricted to investment banks saying things like it was a great idea to buy the WebVan.com IPO (it wasn’t). These days you still have the Wall Street sellside operation talking up the new new things but you also have the far more pervasive and persuasive Furu (‘fake guru’) community on social media telling you to load up on Microstrategy ($MSTR) because of the amazing Bitcoin yield it offers. (You’re right. “Bitcoin Yield” isn’t a thing. No I don’t know how they get to keep saying this either.). Anyway, in good times most of this kind of thing works fine, until it doesn’t, and then your average investment research provider, and I am using the term in its widest sense, either doesn’t know a top when they see one or, worse, they do, but they aren’t going to tell you. This is what gets investment research a bad name.

It’s also what causes investors to fear bear markets, because the whole narrative is that bear markets are too hard, etc, and best avoided. The problem with that is that most investors lack the patience to just sit in cash even if they did sell out at the right time. People always want to do something, it seems, and in bear markets it’s usually the case that trying the stuff that was working in the bull market … doesn’t work any more. And so investors burn a lot of that cash they so carefully banked at the top. Or, worse, their funds have cascaded over the top and are sliding headfirst into the abyss with the now-panicky investors trying all manner of things in the hope of arresting the decline and then making at all back &c.

Sound familiar? Oh and by the way the only people that can answer “no” to that are machines and self-deluders. We all have to have our “uh oh I messed it all up” moment and then we can choose to recover, or to drown in a sorrowful pit of our own making.

It Doesn’t Have To Be This Way

I am old, like Gen-X old, and have been a professional investor through a number of cycles, from dot-com to this day. Every market cycle is different but the common thing into each bear cycle is the misapprehension that all you can do is either cash up, get the popcorn and watch the carnage from afar, or else be part of the carnage yourself. At this point people stop thinking about markets because their limbic brain takes over and floods the zone with a paralyzing fear.

I would encourage all our readers to take a different tack. I don’t know if we’re in a bear market or not, I think not to be honest, I think this is just a correction - but if it’s a correction it’s a dress rehearsal for whenever the next grizzly does come along. And in my experience you can learn a whole lot more in downcycles than during Number Go Up periods.

My most recent major learning experience was the Ursa Minor of 2022.

In 2022 I found myself not understanding why the JP Morgan Hedged Equity funds were dragging the S&P500 around (sounds weird? sounded weird to me too. But they were). It turned out that I only thought I understood options. In fact I only had a basic grasp of the notion. So I went digging and thanks to one of our subscribers (thanks Karan!) I came across the good people at SpotGamma who explained how things really were in the options market. And this helped my investing and trading a lot. Like, a lot-lot.

I also finally worked out how to make hedged-pair ETF trading work correctly, something I had dallied with for some time but not really cracked the code. The final pieces of the puzzle were explained to me by Robert P. Balan, a longtime expert-practitioner on this topic. This again gave me a whole new set of skills with which to do battle.

If I can suggest two places you might consider as you use this correction to improve your own skills:

Firstly, this correction is being navigated with ease by the machine built by Jay Urbain, Ph.D, whose SignalFlow AI service we host. This simple risk on / risk off service is easy to use and helps you to work the market with the dead-eyed calm of an algorithmic. It doesn’t have any emotion so it can’t become fearful, greedy, despondent, euphoric, self-congratulatory or self-immolatory. You can learn all about it right here.

And secondly, about the only sensible Bitcoin post I have seen in about a year was today, from Yimin Xu who runs his YX Insights macro service on our platform. This was the post. I learn a lot from Yimin’s work - I think you can too - check it out here.

Thanks for reading this note and remember, if it’s fun, you probably aren’t doing it right anyway! And I can guarantee that you can turn any difficulties you are currently experiencing into winning strategies in the future. All you need to do is sit back, keep calm, reflect, learn, and go again. That’s the secret of life of course. Whatever happens? Just go again.

Cestrian Capital Research, Inc - 27 March 2025.