We have pull backs, corrections, bear markets, etc.. These things occur in the normal course of events. Everyone is prepared for the markets to be volatile. Most recognize the opportunity in them.

But, what do you do when the market crashes? Is there opportunity in a crash? There is, as long as we are not talking about Lehman Brothers, AIG or Long Term Capital Management. There is no opportunity in zero.

A stock market crash is almost always caused by people investing in things that they don’t understand – portfolio insurance, margin, collateralized debt obligations. There is also, normally, an artificial or unwarranted valuation in the price of things, like page views or banner clicks.

I can’t help but look at Bitcoin and other crypto currencies as a fair example of an unjustified valuation of something that most people don’t understand. So many have invested in crypto because, “It always goes up.” Social media posts of people “rolling contracts at 13% profit”, pyramid schemes encouraging people to ” get in on the action”. Red flags, for sure.

Perhaps, the best answer to the question of “What to do when the market crashes?”, is simply to be in things that won’t/can’t go to zero. Can Bitcoin, for example, go to zero? I don’t know.