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Flash Crash Update

  • Apr 6
  • 2 min read

Updated: Apr 6

The flash crash in the world’s most overvalued, crowd favorite stocks



The flash crash in small caps



The flash crash in crude oil



The no crash in gold



Natural gas completely oblivious to everything that’s going on



I have written articles starting from…

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Preparing for a Minsky Moment (December 2024), and finally,

…all calling for something like this to happen.

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So, why did I not avoid this flash crash? I had the macro right.

Non-subscribers, quick context: I bought stocks worth 20% of my portfolio on Thursday and Friday


Two reasons:

  • The best way to profit off this move was by shorting futures, and I don’t do that in this newsletter. The KARE Portfolio is long-only equities except for the Nvidia short.

  • The only way for a long-only portfolio to avoid a flash crash is by selling everything and going to cash, or by buying puts. I reckon I would have needed to allocate 5% to puts to avoid this crash, and if I get the timing wrong, that becomes a very costly hedge with nothing to show for it. By owning good stocks, I know I can always recover the lost performance. Buying puts has a binary outcome. As for selling everything – I have the cash, the risk appetite, and face no threat of margin calls; I’d rather buy bargains and ensure long-term outperformance than try to protect current gains.

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I started my career in IT sales, specializing in the insurance sector. The most basic certification course on property and casualty insurance talks about four approaches to risk: avoid, mitigate, insure, accept.

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Some risks are easy to avoid. Never drive a motorcycle without a helmet, always wear your seatbelt, etc. Some risks can be mitigated. Pull over and take a quick nap instead of driving home tired and sleepy at 2 am. Some risks can be insured. P&C insurers offer bumper-to-bumper insurance, including coverage of accidents caused by non-owner drivers. Some risks simply have to be accepted. Over long distances, flying is statistically safer than driving but I love my road trips and won’t give them up.

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I’m a macro thinker. I buy stocks based on fundamentals and technical analysis. For my style, I’m better off simply accepting the risk of a flash crash than mitigating (buying puts) or avoiding it (going to cash).

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