Mark Cuban: How Stocks are like Baseball Cards (2004)
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Mark Cuban: How Stocks are like Baseball Cards (2004)
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Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#2Basically - The big Funds drive volume, and therefore stock price.
They're looking for a return on investment, through either Dividends (small) or Equity Growth (potentially massive). When they buy a Share, they want to know it's going to be worth more to them in the future.
Since no company is going to pay dividends at 30% of the share price, but the market can move that much fast (up 50% in Australia since the March 09 bottom), Funds care about Equity Growth.
And they know that growth is driven by volume. When they buy today, they don't care what the fundamentals, profitability etc tells them - they just want to know will there be more Volume in the future?
Did we mention these are the same companies that drive the actual Volume?
Cuban calls it a Ponzi scheme. It can certainly turn into a circle-jerk, where every Fund drives Volume by buying because they expect every other Fund to drive Prices up by driving Volume by buying.
But they forget that the Fundamentals can destroy a company. And a company that doesn't exist, doesn't trade anymore.
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#3I remember this Mark Cuban quote from another entry, it really made me think (emphasis mine):
> The stock market is probably the worst investment vehicle out there. If you won’t put your money in the bank, NEVER put your money in something where you don’t have an information advantage. Why invest your money in something because a broker told you to? If the broker had a clue, he/she wouldn’t be a broker, they would be on a beach somewhere.
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#4Basically - The big Funds drive volume, and therefore stock price. They're looking for a return on investment, through either Dividends (small) or Equity Growth (potentially massive). When they buy a Share, they want to know it's going to be worth more to them in the future. Since no company is going to pay dividends at 30% of the share price, but the market can move that much fast (up 50% in Australia since the Marc…
volume alone does not drive price.
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#5Basically - The big Funds drive volume, and therefore stock price. They're looking for a return on investment, through either Dividends (small) or Equity Growth (potentially massive). When they buy a Share, they want to know it's going to be worth more to them in the future. Since no company is going to pay dividends at 30% of the share price, but the market can move that much fast (up 50% in Australia since the Marc…
volume alone does not drive price.
No, that was my fairly basic reading of the OP.
Of course, excess Volume in either Supply or Demand will affect prices (down or up respectively).
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#6So where are we supposed to put our money then? Especially with inflation becoming a big concern in a few years.
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#7So where are we supposed to put our money then? Especially with inflation becoming a big concern in a few years.
If you're worried about inflation, then you might want to take a look at TIPS http://www.treasurydirect.gov/indiv/products/prod_tips_glanc...
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#8So where are we supposed to put our money then? Especially with inflation becoming a big concern in a few years.
If you're worried about inflation, then you might want to take a look at TIPS http://www.treasurydirect.gov/indiv/products/prod_tips_glanc...
that's kind of cool. Ok, don't shoot me, but that is probably based on the CPI and folks on reddit say government published inflation data understates inflation. Maybe I should just stop reading reddit ...
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#9Cuban makes a lot of good points in this series, but fundamentals do exist. Compare his philosophy to Warren Buffet. Sure, Buffett does often get better deals not available to retail investors, such as the recent Goldman deal, but Buffett also buys plenty of common stock as well. (There is plenty of overlap in the philosophies as well...looking over his 2008 letter, seems like he favors dividend paying stocks, but don't hold me to that).
Re: Mark Cuban: How Stocks are like Baseball Cards (2004)
#10Basically - The big Funds drive volume, and therefore stock price. They're looking for a return on investment, through either Dividends (small) or Equity Growth (potentially massive). When they buy a Share, they want to know it's going to be worth more to them in the future. Since no company is going to pay dividends at 30% of the share price, but the market can move that much fast (up 50% in Australia since the Marc…
> But they forget that the Fundamentals can destroy a company. And a company that doesn't exist, doesn't trade anymore.
A wise company with poor fundamentals but a good image and an inflated share price could, however, use that overvalued currency to buy other companies (with better fundamentals) in an all-stock deal.
There are some who would say that this is pretty much how the entire internet industry works...