Mark Cuban Dribbles on Himself
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For cryin' out loud, I just finish dispensing with Henry Blodget and now I have to smack down Mark Cuban?
No, they're not.
To fully fisk this garbage would take weeks. The piece is thoroughly infested with micro-errors (e.g., confusing stocks with options, interchanging investing and speculation, assuming that dividends are fixed and guaranteed). He also has a complete misunderstanding of the Efficient Markets Hypothesis --which, contrary to Cuban, does not say that investors cannot make money, but rather that an investor cannot expect to do better than any other investor over a sufficiently long time horizon. Two very different assertions!
No, instead it's easier to look at Cuban's foggy forest than bemoan his sickly trees.
Basically Cuban's entire thesis goes something like this: I'm not a professional investor, almost everyone who trades stocks is not a professional investor, therefore there can be no such thing as a professional investor. Or, alternatively, Wall Street is a casino for me, Wall Street is a casino for most people, therefore Wall Street must be a casino for everyone.
Gee, that sounds neat. Let me try it: I'm not a professional basketball player, almost everyone who plays is not a professional basketball player, therefore there can be so such thing as professional basketball.
'Nuff said.
One other point that really got my goat:
Um...
The point of this chart of the Dow Jones Industrial Average (and any other major U.S. stock index would look the same) is this: Anyone who has a diversified portfolio of stocks and an investment horizon longer than a stint in the NCAA should not expect to lose money! Yes, it is (almost) a 50-50 bet whether a stock, or an index, will go up or down tomorrow. And yes, a stock can go to zero. But over any significant time horizon (typically 10-12 years), a broad portfolio of U.S. equities will almost certainly provide a positive return. The longer the time horizon, the more certain it becomes. That has been true for two centuries; it will be true for at least two more. The fact that Cuban doesn't see that doesn't make it any less true. If you're as myopic as he is, then yes, you might as well "invest" in lottery tickets.
Cuban and his fortune were a product of the Nasdaq bubble, and his investment outlook clearly reflects that. I don't begrudge him his money -- let him do with it as he pleases. But how sad it would be if his admirers (assuming he has any) mistake his luck for wisdom and make bad financial decisions because of his uninformed ranting.
Hat tip to Reason Hit & Run (review the comments -- some insightful tidbits there). Also, LCD ("lowest common denominator"?) has a good response.
Suggested Reading: A Random Walk Down Wall Street: Completely Revised and Updated Eighth Edition, by Burton G. Malkiel.
Related Posts:
Mutual Funds: The Good, The Bad and The Blodget
Taking Stock of Stock-Picking
Humpty-Trumpty Now Officially an Omelet
I've decided to start a new hedge fund. However, this hedge fund won't invest in stocks or bonds, or any type of business. It's going to be a fund that only places bets. A gambling hedge fund.
...
It's an idea whose time has come.
I have bet on stocks long and short for about 15 years now. I've done very well. There has already been one hedge fund started based on my trading results. In those 15 years, I have learned that despite all the claims and books written about efficient markets, the trading of individual stocks are not efficient. There are always people trading on better or worse information. There are always people trading on emotion rather than logic. There are always people trading on hopes of the big hit. What Peter Lynch would call the "10 Bagger." They were gambling. Nothing more. Nothing less.
It's not unusual to hear people refer to trading stocks as no different than going to Vegas. They are right.
No, they're not.
To fully fisk this garbage would take weeks. The piece is thoroughly infested with micro-errors (e.g., confusing stocks with options, interchanging investing and speculation, assuming that dividends are fixed and guaranteed). He also has a complete misunderstanding of the Efficient Markets Hypothesis --which, contrary to Cuban, does not say that investors cannot make money, but rather that an investor cannot expect to do better than any other investor over a sufficiently long time horizon. Two very different assertions!
No, instead it's easier to look at Cuban's foggy forest than bemoan his sickly trees.
Basically Cuban's entire thesis goes something like this: I'm not a professional investor, almost everyone who trades stocks is not a professional investor, therefore there can be no such thing as a professional investor. Or, alternatively, Wall Street is a casino for me, Wall Street is a casino for most people, therefore Wall Street must be a casino for everyone.
Gee, that sounds neat. Let me try it: I'm not a professional basketball player, almost everyone who plays is not a professional basketball player, therefore there can be so such thing as professional basketball.
'Nuff said.
One other point that really got my goat:
How efficient can a market be when the majority of investor [sic] expect to lose money?
Um...
The point of this chart of the Dow Jones Industrial Average (and any other major U.S. stock index would look the same) is this: Anyone who has a diversified portfolio of stocks and an investment horizon longer than a stint in the NCAA should not expect to lose money! Yes, it is (almost) a 50-50 bet whether a stock, or an index, will go up or down tomorrow. And yes, a stock can go to zero. But over any significant time horizon (typically 10-12 years), a broad portfolio of U.S. equities will almost certainly provide a positive return. The longer the time horizon, the more certain it becomes. That has been true for two centuries; it will be true for at least two more. The fact that Cuban doesn't see that doesn't make it any less true. If you're as myopic as he is, then yes, you might as well "invest" in lottery tickets.
Cuban and his fortune were a product of the Nasdaq bubble, and his investment outlook clearly reflects that. I don't begrudge him his money -- let him do with it as he pleases. But how sad it would be if his admirers (assuming he has any) mistake his luck for wisdom and make bad financial decisions because of his uninformed ranting.
Hat tip to Reason Hit & Run (review the comments -- some insightful tidbits there). Also, LCD ("lowest common denominator"?) has a good response.
Suggested Reading: A Random Walk Down Wall Street: Completely Revised and Updated Eighth Edition, by Burton G. Malkiel.
Related Posts:
Mutual Funds: The Good, The Bad and The Blodget
Taking Stock of Stock-Picking
Humpty-Trumpty Now Officially an Omelet
Related Posts (on one page):
Posted by KipEsquire on
4 December 2004
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