Today’s market environment can be confusing – one minute market averages and exchange traded funds (ETFs) are at all-time highs, the next they’re heading for the bottom.

The volatile market has created a lot of pain and uncertainty, and many are left wondering if a market crash is looming or happening right now.

Bill Barker for The Motley Fool ponders this thought and thinks back to 1934, when Benjamin Graham, the father, grandfather, founder, and creator of securities analysis came up with these three forces behind a market crash:

1. The manipulation of stocks. Since the advent of more market regulation by the federal government, with the creation of the Securities and Exchange Commission (SEC) in 1934, there’s less potential today for manipulation. New regulations on the books keep most manipulation relegated to the micro-caps.
2. Lending money  to buy stocks. This issue is still a problem today. Excessive use of margin contributed to the market collapse earlier this decade and in 1929. A record high of $381 billion in margin debt was recorded in July.
3. Excessive optimism. We’ve got that, and current price-to-earnings (P/E) ratios reflect it. Some stocks are squarely in range of normal P/Es and sport record amounts of cash on their balance sheets and continue to replenish reserves even as they re-purchase shares.

The markets are unpredictable, but if you stick to your investment strategy and subtract emotions from the equation, you will be equipped to handle the ride.

Tags: Federal Reserve, Micro-Cap