"The Stock Market Is For Suckers": Mark Cuban

Discussion in 'Trading' started by ByLoSellHi, Jan 2, 2007.

  1. The Stock Market is for suckers....

    Jan 3rd 2006 11:25PM


    I wanted to respond to Tom Hawks comments. Someone i respect a lot, but who i disagree vehemently on this topic.

    Tom I stand by what I said. You can have as long a term horizon as you want, but like most other long term plans we have, most peoples lives dont match up to their "horizons". Its amazing how life intervenes. Kids, whatever. its a fortunate few that can just shell it away and never touch it. Your "horizon" hits a dead end when you have to put money into a checking account. I have never seen any investing research that deals with random withdrawls that represents real world. And boy oh boy, if life hits you hard when the market is down, you make a withdrawl and you wont ever catch up.

    But thats just the start of the problem. Lets say you buy into what the brokerages and funds are selling. Buy and hold, or whatever. How do you pick from the 17k funds ? By reading some websites ? By talking to some friends ? By watching the commercials ? By selecting among the options your company gives you in their plan ? Which of course was the result of a salespitch that the fund company put together to the person offering the plan to your company. Everyone is getting paid on the gravy train, except for the guy putting in the money at the end.

    Wall Street has done an AMAZING job of creating conventional wisdom . "Buy and Hold " is the 2nd most misleading marketing slogan ever, after the brilliant "rinse and repeat" message on every shampoo bottle. We as a country have fallen for it. Every message from every marketer of stocks tell us. Young or old, if you can hold for the long term, things will work out for you.

    That is total bullshit. Its for suckers.

    Ive traded stocks for almost twenty years now. IM good at it. When i work at it. And it takes a lot of work. Not just reading all the 10K/Qs and corporate websites and product managers, or talking to people at the outskirts of the company where management doesnt reach. It takes often knowing the market for a company's product better than the company does. After all just because a company is public doesnt mean a thing other than someone has , and continues to make money buying and selling the stock as their own product.

    If you are going to trade stocks, you just have to follow one rule and remember one thing. That rule is always have a definite knowledge advantage about the company you are trading, and always remember that every stock transaction has a sucker, and you have to know whether its you or the person on the other side of the trade. No one buys a stock from your, or sells one to you knowing they are leaving money on the table.

    The bottom line is that unless you plan on making it a full time job to do your research and put yourself in a position to have an advantage, you are going to get your ass kicked at some point by someone who does. You just have to hope that it doesnt put a big financial hurt on you when it happens

    The same logic applies to funds. Funds are in the business of making money for themselves first. You 2nd.

    First check what the heads of some public mutual funds are making. Someone help me out, I cant find the link right now .Was it Mario Gabelli who not only paid himself more than his fund earned for its shareholders in a year (forget the people with money in his funds), but he was paying himself from like 3 companies at the same time ? Get me the links and I will update them here.

    Then you should check the turnover of fund managers some day. You know where the good ones go ? To start or manage their own funds.

    Then there is the portfolio turnover. How often they completely turn over the stocks in their fund. last numbers I saw was that on average funds turnover their portfolios 85pct every year. Thats not investing. Its fund managers doing whatever they can to beat their peers, knowing that if they dont, they are out of a job. Their bosses know that if they dont beat their peers, the money flows out, and that is a HUGE problem for any fund. So many funds take chances they shouldnt, with your money . We never see any headlines for funds that close. Why is that ? We never see any headlines for fund managers who get fired. Why ?

    But even if performance sucks, rather than saying how bad it is, they pick the short stint when it wasnt so bad. Forbes did a nice job reviewing this little marketing habit of funds and referencing some manager turnover issues at Fidelity.

    As far as ETFs. Which one ? Remember, the Dow and S&P are marketing tools. They change the indexes. Look at the stocks in there today, vs what was in there in years past. You are not buying a passive investment that tracks the economy. You are buying the stock pickers at those respective indexes. Last time I looked, both Dow Jones and McGraw Hill are for profit companies. They want people to think their DJ 30 & S&P 500 indexes are powerful indexes that can be reported daily as a reflection of market action. So they change the stocks when they think they need to. To help them with their product.

    Ive said a lot of this before. The stock market is by definition a ponzi scheme. As long as money keeps on coming in, then there is someone to take the stocks from the sellers. If the amount of money coming in is reduced, the stocks, indexes, et al go down. What if, for who knows whatever reason, the amount of money going into stocks declined significantly ? Who would buy stock from the sellers. I mean goodness gracious, you could see something disastrous happen. Like the Nasdaq dropping from 5000, to under 2000 in just a few years. Its happened before, it can happen again.

    Which is exactly why we get all these nonsensical commercials from brokerages. To keep the money coming in . I wish someone would index the amount of money spent on marketing by mutual funds and brokerages to the Nasdaq and Dow and see if it correlates.

    Money inflows drives the business. We can get all the economic data we ever dreamed of getting, but if money inflows declined significantly for an extended period of time, then every rule of thumb would go out the window until money started flowing in. Yes it would flow in eventually as prices dropped. From big investors like me who wouldnt have gotten hurt by a huge market decline and could come in and buy huge chunks, or companies outright.

    You ? You probably would be like Charles Ponzi's customers. You wouldnt be able to get your money out of the fund when it went down, and by the time you did, it would be too late. You would have been crushed.

    Ive said it before, a stock that doesnt pay dividends is valued like a baseball card. Just whatever you can sell it for. The concept that you own "your share" of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold the shares. Meaning you.
  2. wow, that's a pretty ignorant rant from someone whom i respect. if i started disecting that, i might never stop.

    i'd very much like his life however.

    he had a nice call on youtube.com recently, making big headlines in the press for blasting youtube.com, calling it worthless, that they simply supply bandwidth for free, etc, etc. he kept going on, then a month later, arguably the best company in the world Google buys them out for $1.65 billion.

    wonder how that sports hedge fund idea worked out (because there is more information available it will crush the stock market). like you can't get a bigger edge in investing than in sports. you can be a pro gambler, but that's hard work, and is not at all scalable to a $100 million fund.

    he has balls and is a worker, but that guy has gotten a little big for his britches. let's face it, his billion dollar sale of broadcast.com to yahoo was fortuitous timing in the biggest bubble in history. he has run the mavericks well however, and he gets credit for selling out at at the top. but he's not quite as smart as he thinks he is and his arrogance is affecting his judgement
  3. The best stock trade he ever made was unloaing a ton of YHOO in 1999
  4. also, the average investor is not just told to "buy and hold"

    he's taught to DOLLAR COST AVERAGE

    and there is not a single 20 yr period in history where that wasn't a decent investment, and for most periods - an EXCELLENT Investment that beat most asset classes

    the average investor (INVESTOR) should not try to BEAT the market

    he should just continually buy good stocks every month with some money, and reap the rewards

    the stock market is the greatest wealth producer ever invented
  5. At first I dismissed it.

    But now, I've read this probably four or five times.

    Mark Cuban is no idiot. Not by a long shot.

    There are things in this I agree and disagree with. I am still working through it.
  6. I agreee with Mark Cuban and here is why.

    No one wants to buy in at the low. The reason is because at the low everything looks bleak like last summer. Everyone wants to buy in when things look good like right now. Unfortunately, right now looks like its at the high.

    Ultimately, some people will establish new positions only for there to be a correction within the next few months and then all their gains gone.

    Yes, the stock market is for suckers most of the time. Even seasoned professionals cant get it right sometime. Look at Jim Cramer who has a spotty record on his Mad Money show and his action alerts portfolio is mediocre at best.

    If you want to beat the market, then you have to get in at the right time. Unfortunately, the right times seem like the wrong times and so its difficult to make that call...
  7. Say what you want about him, but he has had some good calls in the past.

    He was also tremendously short in 2000 and I even recall him being on a national cable tv/broadcast for some interview [[and, keep in mind, at the time the market had already dropped tremendously. This was like the 2nd/3rd wave down where allot of people were still trying to buy the dips.]]

    Somehow in the discussion the topic of the stock market came up and Cuban flat out blatantly stated something to the effect of, I am short and the market still has a long way to go down. At that moment, people thought he was crazy. This was also right around the time where the biotechs had skyrocketed to Pluto as the general tech/nasdaq was getting taken apart. Literally within a few months of that interview, the biotechs unravelled and joined the nasdaq as it was on its 4th & 5th wave down to crashing.
  8. he says it's scam with worthless paper. really? are the companies not real, with real assets, making real money, growing very fast, and raising the standard of living. weren't they able to do all that by raising money through selling shares of ownership in the company.

    and how else would he propose valuing a company, their brand, their assets, their cash, their growth prospects than through the most efficiently priced markets in the world. you know they are fairly efficient, because of the deep liquidity pools. that defines efficiency.

    if you can forecast either by studying history or having foresight or otherwise gaining an edge over others, than you will outperform any other asset class.
  9. right on, dafugginman

    look, the average investor doesn't (and shouldn't) try to time the market

    i;'ll say it again - dollar cost average

    my frigging GRANDFATHER taught me that, and it's the best advice he ever gave me

    he was an NYPD cop and he DCA'd every month of every year of his life. he later opened his own business, and retired a wealthy man

    try to tell him that the stock market is for suckers

    it's the greatest wealth creation machine ever invented. because it;s a proxy for the dynamic companies in our economy, which are as well

    you are spot on, man

    when you buy stock, you are buying a piece of a company

    that is a phenomenal opportunity

    TRADING is very difficult. traders try to beat the market

    i scalp the dow futures. i know all about it. that's how i make my living. but it is a completley different thing from how i INVEST my savings for capital appreciation

    the "average investor" should have been DCA'ing every month of this year. at the lows, at the highs, and in between

    and in doing so he beat the VAST majority of traders

    and like i said, for every rolling 20 yr period in the history of the stock market - it has been a good investment. some periods better than others, obviousy
  10. you are totally right.

    also, alot of literature past decade suggest to buy at high places, and sell higher on momentum. i know more than 1 periodical that suggests people buy at highs as opposed to buying at lows. i found that sectors at multi year lows with almost no interest almost always go up.

    #10     Jan 2, 2007