The Stoic of Wall Street
To win, master emotions not numbers
If you’re holding a bag of stocks or crypto and your numbers haven’t been inching upward, you’re doing something seriously wrong.
Markets are hot, and valuations are coming close to, or even surpassing, all-time highs.
The number crunchers of Wall Street are pulling longer hours, dissecting indicators, and devising their perfect entry and exit points.
That’s why today’s Alt Macro edition will be slightly different.
When “number go up” all around us, the best alpha isn’t from uncovering gems; instead, it comes from standing apart from the sentiment of the herd. It’s about staying cool when everyone else is losing their marbles.
Instead of going with the flow, you paddle against it.
Mastering emotions, not numbers, separates profitable investors from those left holding the bag when the markets crash (and they will).
Here’s how you channel your inner Marcus Aurelius and work the markets like a Stoic.
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The only cheat sheet you’ll need
(Image by Jean-Paul Rodrigue)
This chart maps how herd mentality evolves during the market cycle stages.
Like a good Stoic, the only question you need to ask yourself to be a successful investor is: What phase of the market cycle are we in?
The answers are all around you, quite literally.
What are the talking heads on CNBC saying? What’s the word on Twitter (or ‘X’)? How are your friends and neighbors feeling?
Deciphering the market cycle
The Stealth Phase is a cautious one. Everyone is licking their wounds from the recent market crash, and the few glimmers of hope that arise quickly fade away. Everyone regrets not selling when prices were high - but quietly, and below the surface, markets are slowly ticking upwards.
This is when Stoics of “elite ninja” status buy into the market.
The Awareness Phase turns up when people look at their bags (if they’re still holding them) and realize they don’t look as shabby as they once did. There’s a bit of optimism about where things are going. Some buy into the market, but traumas from the past scare them into selling at any slight downturn (the “bear trap”).
This is when the rest of the (not-so-elite) Stoics buy into the market.
Mania Phase kicks off when everyone realizes that things are finally looking up. Excitement is the predominant emotion, and before you know it, the highs of the previous cycle are within reach. Life is good, and you start ordering a side of guacamole at Chipotle again.
By now, the Stoics are fully bought in and watching “number go up” with an eye on taking profits.
And finally comes the Blow Off Phase. The excitement hits a crescendo, and everyone is FOMO’ing in, afraid to miss the generational opportunity. Things get delusional. Celebrities are shilling dog and cat cryptocurrencies, and everyone thinks the stock market will never crash.
The Stoics have cashed out, and their profits are ready to be redeployed after the next crash.
The Way of the Stoic
If Marcus Aurelius had to conquer Wall Street, this would be his approach:
1. Don’t let past scars blind you. New trends emerge, and you’ve got to be open-minded. Otherwise, you’ll miss the train.
2. Hope is good, but don’t get carried away. Stay grounded. Accumulate knowledge (and maybe some stocks) when you’re feeling it.
3. Optimism is contagious, but don’t lose your head. Keep your wits about you. Remember, trends don’t last forever.
4. Euphoria blinds. Stay rational. Set exit strategies. Don’t hang on to your bags while the markets crash.
And finally, here’s the question you’ve been waiting for… What market cycle phase do you think we’re in right now? My tea leaves tell me that we’re about to see some manic moves upward ;)
Stay safe, stay Stoic, take profits.
Did I miss anything? How do you plan on navigating this phase of the bull market? Leave me a comment or hit reply if you’re reading this from your inbox - I would love to hear from you!
Disclaimer: Material on AltMacro.com and the Alt Macro newsletter is not investment advice but is for general information only. You are solely responsible for making your own investment and financial decisions. Owners of Alt Macro, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority.