Mark Cuban & Me

Mark Cuban and I have a lot in common.  Both of us were quoted in the same Barron's magazine article about which blogs investors should read, and both of us got really lucky during the .com Bubble.  I sold out out of my stocks in January 2000 so I could travel in Europe.  He sold out broadcast.com to Yahoo and became an overnight Billionaire.  We are survivors.

Since then, we've had our disagreements and split ways.  For example, he told The Motley Fool that if a stock doesn't pay a dividend, it's the equivalent of investing in a Ponzi Scheme.  Then he revealed on his blog that his core holdings include such blue-chip luminaries speculations as Lions-Gate Films (NYSE: LGF) and GuruNet (NASD: ANSW).  This sounds like hypocrisy, made all the worse because his adoring readers and fans seem to gobble up everything he says.  A cursory reading of his blog archives will avail you to many other absurdities.

His latest entry sounds like a set-up to a presidential run, as he unveils his plan to lower the price of gas:

Make it a requirement that only those who actually are hedging their  use and sale of oil and gas are able to buy and sell oil and gas futures.

Its that simple. There is plenty of liquidity in place, the market wont miss the speculators and prices will go down.  

It amazes me that while watching all the talk about oil prices on the QVC for stocks channels, that no one I have   heard has talked about the role of speculators. They think its a problem for housing, even though 70 pct or more of   new housing purchases are homes for the buyers.  For some reason the “pundits” seem to think that price movements are driven purely by supply and demand for the commodity. What nonsense.

Apparently, Mr. Cuban needs to reminded about the vital role that speculators play in any market.  I'm happy to oblige.  Any futures market consists of hedgers and speculators.  Hedgers are the airlines or petro-chemical companies who want to have an assured price of oil when planning their operations and budgets.  Speculators, then, serve as insurance for the hedgers, gauranteeing them a price in exchange for the opportunity to make big profits if oil swings wildly from that price.  A market can't exist with hedgers alone.  Mr. Cuban scoffs at this:

Want to jump in and day trade ? Just try the   E-Mini Crude Oil Futures

Like the brochure says ” Volatile energy prices make for some terrific trading opportunities ” And for the truley   excitable, you can trade them electronically 24 hours a day. Now thats what i want to see Jim Cramer do.

Of course volatility offers terrific trading opportunities!  If there weren't volatility, nobody would need to hedge, and speculators wouldn't have a role!  Mark Cuban is right when he says that extreme speculation can distort markets, and that price doesn't always reflect supply and demand perfectly.  But he's wrong to suggest that the solution is to get rid of a vital part of any market.  The solution is to let the euphoric speculators get creamed, like they have during every other bubble, and hope they learn better the next time. 

One thing nice think about writing about Mark Cuban is that he reads every blog entry that mentions his name.  So Mark, when you read this, perhaps you'll change your views, and then re-inform your readers, or at least forward them to The Stalwart (www.thestalwart.com).  Thanks in advance.

Comments

[Nike Shox Turbo]

Rejoicing in hope, patient in tribulation. (John Kennedy, American president)

[New Jordans 2011]

I don't find any difference between Islam and Islamic fundamentalists. I believe religion is the root, and from the root fundamentalism grows as a poisonous stem. If we remove fundamentalism and keep religion, then one day or another fundamentalism will grow again. I need to say that because some liberals always defend Islam and blame fundamentalists for creating problems. But Islam itself oppresses women. Islam itself doesn't permit democracy and it violates human rights.

[chaussureairmaxtn]

Rejoicing in hope, patient in tribulation