The Stock Market

I get asked all the time to write a book about business and my approach to it. I’m not ready to take that leap yet,
but along the way, whenI find a book that really impresses me, I try to help it find an audience. In this case,
it wasn’t long ago I read my now favorite book about the stock market called

The Number
by Alex Berenson. I liked it so much, I volunteered to write the forward for the paperback edition which
comes out this week.

Here isthe foreward I wrote for

The Number
.I recommend that anyone with an interest in the market jump at the chance to buy it.

In 1990, I sold my company, MicroSolutions which specialized in what at the time was the relatively new
business of helping companies network their computer equipment to CompuServe. After taxes, I walked away
with about $2 million. That was going to be my nest egg, and my goal was to protect it at all costs, and grow it
wisely.

I set about interviewing stockbrokers and settled upon a broker from Goldman Sachs, Raleigh Ralls. Raleigh was
in his late 20s, and relatively new to Goldman. But we hit it off very well and I trusted him. As we planned my
financial future, I made it clear that I wanted my nest egg to be invested not like I was 30 years old, but as if I
were 60 years old. I was a widows and orphans investor.

Over the next year I stuck to my plan. I trusted Raleigh, and he put me in bonds, dividend-paying utilities
and blue chips, just as I asked.

During that year, Raleigh began asking me a lot of questions about technology. Because of my experience at
MicroSolutions, I knew the products and companies that were hot. Synoptics, Wellfleet, NetWorth, Lotus, Novell
and others. I knew which had products that worked, didn’t work, were selling or not. How these companies
were marketed, and whether or not they were or would be successful.

I couldn’t believe that I would have an advantage in the market. After all, I had read A Random Walk Down Wall
Street in college. I truly thought that the markets were efficient, that any available knowledge about a company
was already reflected in its stock price. Yet I saw Raleigh using the information I gave him to make money for
his clients. He finally broke me down to start using this information to my advantage to make some money in the
market. Finally after more than a year, I relented. I was ready to trade.

Notice I didn’t use the word invest. I wasn’t an investor. I just wanted to make money. The reason I was ready
to try was that it was patently obvious that the market wasn’t efficient. Someone like me with industry knowledge
had an advantage. My knowledge could be used profitably. As we got ready to start, I asked Raleigh if he had any
words of wisdom that I should remember. His response was simple. “Get Long, Get Loud”.

Get Long, Get Loud. As we started buying and selling technology stocks, most of which were in the local area
networking field that I had specialized in at MicroSolutions, Raleigh put me on the phone with analysts, money
managers, individual investors, reporters, anyone with money or influence who wanted to talk technology and stocks.

We talked about token ring topologies that didn’t work on 10BaseT. We talked about what companies were
stuffing channels – selling more equipment to their distributors than the distributors really needed to meet the retail
demand. We talked about who was winning, and who was losing. We talked about things that really amounted to
the things you would hear if you attended any industry trade show panel. Yet after hanging up the phone with
these people, I would watch stocks move up and down. Of course as the stocks moved, the number of people wanting to
talk to me grew.

I remember buying stock in a Canadian company called Gandalf Technologies in the early 90s. Gandalf made Ethernet
bridges that allowed businesses and homes to connect to the Internet and each other via high-speed digital phone lines
called ISDN.

I had bought one for my house and liked the product, and I’d talked to other people who’d used it. They had
decent results, nothing spectacular, but good enough. I had no idea Gandalf was even a public company until a
friend of Raleigh’s asked me about it. What did I think about Gandalf Technologies? It was trading at the time at
about a buck a share. It was a decent company, I said. It had competition, but the market was new and they had as
much chance as anyone to succeed. Sure, I’ll buy some, and I would be happy to answer any questions about the
technology. The market size, the competition, the growth rates. Whatever I knew, I would tell.

I bought the stock, I answered the questions, and I watched Gandalf climb from a dollar to about $20 a share over
the next months.

At a dollar, I could make an argument that Gandalf could be attractive. Its market was growing, and compared
to the competition, it was reasonably valued on a price-sales or price-earnings basis. But at $20, the company’s
market value was close to $1 billion – which in those days was real money. The situation was crazy. People were
buying the stock because other people were buying the stock.

To add to the volume, a mid-sized investment bank that specialized in technology companies came out with a buy
rating on Gandalf. They reiterated all the marketing mishmash that was fun to talk about when the stock was a
dollar. The ISDN market was exploding. The product was good. Gandalf was adding distributors. If they
only maintained X percentage of the market, they would grow to some big number. Their competitors were trading at
huge market caps, so this company looks cheap. Et cetera, et cetera.

The bank made up forecasts formulating revenue numbers at monstrous growth rates that at some point in the future
led to profits. Unfortunately, the bank couldn’t attract enough new money to the stock to sustain its
price. It didn’t have enough brokers to shout out the marketing spiel to entice enough new buyers to pay the old
buyers. The hope among the “sophisticated buyers” was that one bank picking up coverage would lead to others doing the
same. It didn’t happen. No other big investment banks published reports on the stock. The volume turned
down.

So I did the only smart thing. I sold my stock, and I shorted it to boot. Then I told the same people who asked me
why I was buying the stock that I had shorted the stock. Over the next months, the stock sank into oblivion. In
1997, Gandalf filed for bankruptcy. Its shares were canceled – wiped out – a few months later. I wish I
could take credit for the stock going up, and going down. I can’t. If the company had performed well, who knows
what the stock would have done?

But the entire experience taught me quite a bit about how the market works. For years on end a company’s price
can have less to do with a company’s real prospects than with the excitement it and its supporters are able to generate
among investors. That lesson was reinforced as I saw the Gandalf experience repeated with many different stocks
over the next 10 years. Brokers and bankers market and sell stocks. Unless demand can be manufactured, the
stock will decline.

In July of 1998, my partner Todd Wagner and I took our company, Broadcast.com, public with Morgan Stanley.
Broadcast.com used audio and video streaming to enable companies to communicate live with customers, employees,
vendors, anyone with a PC. We founded Broadcast.com in 1995, and we were well on our way to being profitable. Still, we
never thought we would go public so quickly. But this was the Internet Era, and the demand for Internet stocks was
starting to explode. So publicly traded we would become and Morgan Stanley would shepherd us.

Part of the process of taking a new company public is something called a road show. The road show is just
that. A company getting ready to sell shares visits the big mutual funds, hedge funds, pension funds – anyone who
can buy millions of dollars of stock in a single order. It’s a sales tour. 7 days, 63 presentations.
We often discussed turning up the volume on the stock. It was the ultimate “Get Loud.” Call it
Stockapalooza.

Prior to the road show, we put together an amazing presentation. We hired consultants to help us. We
practiced and practiced. We argued about what we should and shouldn’t say. We had Morgan Stanley and others
ask us every possible question they could think of so we wouldn’t look stupid when we sat in front of these savvy
investors.

Savvy investors? I was shocked. Of the 63 companies and 400-plus participants we visited, I would be
exaggerating if I said we got 10 good questions about our business and how it worked. The vast majority of people
in the meetings had no clue who we were or what we did. They just knew that there were a lot of people talking
about the company and they should be there.

The lack of knowledge at the meetings got to be such a joke between Todd and I that we used to purposely mess up to
see if anyone noticed. Or we would have pet lines that we would make up to crack each other up. Did we ruin
our chance for the IPO? Was our product so complicated that no one got it and as a result no one bought the
stock? Hell no. They might not have had a clue, but that didn’t stop them from buying the stock. We batted
1.000. Every single investor we talked to placed the maximum order allowable for the stock.

On July 18, 1998, Broadcast.com went public as BCST, priced at 18 dollars a share. It closed at $62.75, a gain
of almost 250 percent, which at the time was the largest one day rise of a new offering in the history of the stock
market. The same mutual fund managers who were completely clueless about our company placed multimillion orders
for our stock. Multimillion dollar orders using YOUR MONEY.

If the value of a stock is what people will pay for it, then Broadcast.com was fairly valued. We were able to
work with Morgan Stanley to create volume around the stock. Volume creates demand. Stocks don’t go up
because companies do well or do poorly. Stocks go up and down depending on supply and demand. If a stock is
marketed well enough to create more demand from buyers than there are sellers, the stock will go up. What about
fundamentals? Fundamentals is a word invented by sellers to find buyers.

Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely
metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how
profits are calculated is manipulated to give confidence to buyers.

I get asked every day to invest in private companies. I always ask the same couple questions. How soon till I
get my money back, and how much cash can I make from the investment? I never ask what the PE ratio will be, what
the Price to Sales ratio will be. Most private investors are the same way. Heck, in Junior Achievement we were
taught to return money to our investors. For some reason, as Alex points out in The Number, buyers of stocks have
lost sight of the value of companies paying them cash for their investment. In today’s markets, cash isn’t earned
by holding a company and collecting dividends. It’s earned by convincing someone to buy your stock from you.

If you really think of it, when a stock doesn’t pay dividends, there really isn’t a whole lot of difference between
a share of stock and a baseball card.

If you put your Mickey Mantle rookie card on your desk, and a share of your favorite non-dividend paying stock next
to it, and let it sit there for 20 years. After 20 years you would still just have two pieces of paper sitting on
your desk.

The difference in value would come from how well they were marketed. If there were millions of stockbrokers
selling baseball cards, if there were financial television channels dedicated to covering the value of baseball cards
with a ticker of baseball card prices streaming at the bottom, if the fund industry spent billions to tell you to buy
and hold baseball cards, I am willing to bet we would talk about the fundamentals of baseball cards instead of
stocks.

I know that sounds crazy, but the stock market has gone from a place where investors actually own part of a company
and have a say in their management, to a market designed to enrich insiders by allowing them to sell shares they buy
cheaply through options. Companies continuously issue new shares to their managers without asking their existing
shareholders. Those managers then leak that stock to the market a little at a time. It’s unlimited dilution
of existing shareholders’ stakes, death by a thousand dilutive cuts. If that isn’t a scam, I don’t know what
is. Individual shareholders have nothing but the chance to sell it to the next sucker. A mutual fund buys
one million shares of a company with your and your coworkers’ money. You own 1 percent of the company. Six
weeks later you own less, and all that money went to insiders, not to the company. And no one asked your
permission, and you didn’t know you got diluted or by how much till 90 days after the fact if that soon.

When Broadcast.com went public, we raised a lot of money that certainly helped us grow as a company. But once
you get past the raising capital part of the market, the stock market becomes not only inefficient, but as close to a
Ponzi scheme as you can get.

As a public company, we got calls every day from people who owned Broadcast.com stock or had bought it for their
funds. They didn’t call because they were confused during our road show, were too embarrassed to ask questions and
wanted to get more information. They called because they wanted to know if the “fundamentals” – the marketing
points – they had heard before were improving. And the most important fundamental was “The Number,” our quarterly
earnings (or in our case, a loss). Once we went public, Morgan Stanley published a report on our company, as did
several other firms. They all projected our quarterly sales and earnings. Would we beat The Number?

Of course, by law, we were not allowed to say anything. That didn’t stop people from asking. They needed
us to beat the forecast. They knew if we beat The Number the volume on the stock would go up. Brokers would
tell their clients about it. The Wall Street Journal would write about it. CNBC would shout the good news
to day traders and investment banks that watched their network all day long. All the volume would drive up the
stock price.

Unfortunately, patience is not a virtue on Wall Street. Every day, portfolios are valued by at closing
price. If the value of your fund isn’t keeping up with the indexes or your competition, the new money coming in
the market won’t come to you. It just wasn’t feasible for these investors to wait till the number was reported by
companies each quarter. The volume had to be on the stocks in you fund. To keep the volume about a stock up, and
the demand for the stock increasing, you needed to have good news to tell.

Volume, The Number, whisper numbers, insiders granting themselves millions and millions of options –
these are the games that Wall Street plays to keep on enriching themselves at the expense of the public. I know
this. I have tried to tell people to be careful before they turned over their life savings and their financial
future to someone whose first job is to keep their job, not make you money.

Till I read The Number by Alex Berenson, I never had a book that explained how the market truly worked that I could
tell my friends, family and acquaintances to read. I never had a book that would truly warn them that the market
was not as fair and honest as mutual fund and brokerage commercials made them out to be. I may be a cynic when it comes
to the stock market, but I am an informed cynic, and that has helped me make some very, very profitable decisions in
the market.

If you are considering investing in the market, any part of it, or if you are considering giving your hard earned
money over to someone else to manage, please, please read The Number first.

Mark Cuban, Dallas, Texas, January 2004

82 thoughts on “The Stock Market

  1. Very interesting blog, Mr Cuban. Especially the Gandalf story, the reason for the stock decline was not quite as you have stated, quote:

    \”…Unfortunately, the bank couldn\’t attract enough new money to the stock to sustain its price. It didn\’t have enough brokers to shout out the marketing spiel to entice enough new buyers to pay the old buyers. … The volume turned down.\”

    The main problem was that the bank had trouble promoting a company whose technology was quickly becoming stale.

    I worked at Gandalf Technologies during the 80\’s and early 90\’s, and saw a company that had once risen under the leadership of technical co-founder Colin Patterson wither and die when he left the company in the non-technical hands of Des Cunningham.

    We back-room engineers had some insider acronym jokes about the ISDN which we (unlike the MBA types) believed was to be short-lived, based on new advances on the technological horizon. For example \”Innovations Subscribers Don\’t Need\”, \” I Still Don\’t kNow\”, and of course to reflect the stock hype \”I Smell Dollars Now!\”.

    Unfortunately by the time Gandalf management began to realize they were in trouble and tried to jump on the new techologies bandwagon it was too late. Others had made the market inroads first, and Gandalf lost it\’s earlier role as a technology leader and became a \’me too\’ outfit instead.

    Even when offered a brand-new technology called \’CDDI\’ which showed the promise of 100 Mb/s (10 times the then 10Base-T ethernet data rate) on metallic cable instead of expensive optical fibre, Gandalf management turned this down since \”nobody else was doing it\”, \”too risky\”, and of course the initial research to prove the technical feasibility was an unauthorized back-of-the-lab project that management had not been aware of and thus would not justify. But we all know what happened after that – we published the test results, Crescendo Communications continued to pioneer the CDDI concept and were bought by Cisco Systems, CDDI evolved into the 100Base-T ethernet physical layer, and Cisco profitted. Gandalf Technologies went bankrupt. It could have been so different.

    Comment by Glen Chenier -

  2. Hi,

    Your blog is nice and informative. We would like to share few informations with users. Indian stock market is not a place for speculators anymore. As it has become too volatile. Still day traders are requested to trade with strict discipline and a small suggestion for Long term players is dont take any long term delivery position as Nifty and Sensex are still in bearish zone. Just wait for right time and opportunity before taking long position.

    For any doubt please feel free to ask us.

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    SHARETIPSINFO TEAM

    Comment by sharetipsinfo -

  3. you have got to check out the intellgent investor by warren buffet, and lessons for coporate america, great boooks!!

    Comment by farouk -

  4. Hi Everyone,

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    On 29th Feb 2008 budget was declared. It was expected to be in favor of middle class people . As in budget all loan of farmers were waived off, its a
    Positive news for farmer which can give rise to agro based industries too.

    Overall budget was good for everyone.

    Now with time USA is coming out of the jinx of sub prime and recession and we have already witnessed some good movement in US market too. Recent fall in Indian stock market was due to Overbought Nifty, USA recession margin pressure and panic.

    Now Nifty is in consolidation phase. Once consolidation is over we will see major rally in the stock market.

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    Comment by sharetipsinfo -

  5. Hi Everyone,

    This Blog is really nice and helpful. We hope our post will be useful for all visitors of this prestigious blog.

    On 29th Feb 2008 budget was declared. It was expected to be in favor of middle class people . As in budget all loan of farmers were waived off, its a
    Positive news for farmer which can give rise to agro based industries too.

    Overall budget was good for everyone.

    Now with time USA is coming out of the jinx of sub prime and recession and we have already witnessed some good movement in US market too. Recent fall in Indian stock market was due to Overbought Nifty, USA recession margin pressure and panic.

    Now Nifty is in consolidation phase. Once consolidation is over we will see major rally in the stock market.

    Few stocks for delivery are:-

    1. RCOM

    2. GDL INFRA

    3. DISH TV ( Only above 66 )

    4. RPOWER

    5. HFCL

    Please note above stocks are for MEDIUM term delivery.

    Please feel free to contact us at sharetipsinfo_1@yahoo.com for further details

    Thanks

    Warm Regards

    ShareTipsInfo Team

    Comment by sharetipsinfo -

  6. Dear Visitors,

    This blog is really nice and informative. We do think our posting will be highly beneficial for you too. From past few days we have witnessed
    major downward rally in Indian stock market along with other major exchanges. It was there due to fear of recession in USA which is major economy.

    But if we talk technically then Indian stock market is set to go up but still trend is not clear as few indicators are giving buying signals and few are still giving selling
    Indications.

    So we suggest everyone to wait till
    Nifty touches 5350 before taking any long position.

    If you have any query feel free to contact us.

    Regards

    Sharetipsinfo Team

    Comment by sharetipsinfo -

  7. I strongly agree with what you said. It is imperative that we focus all of our efforts on finding the true \”fundamentals\” of stocks before we buy/sell. With todays struggling economic situation, it is hard to judge what is \”undervalued\” because almost everything is, but make investments based on the long term. That is, if you buy cheap today, hold for at least 3-6 months because it will take time for stocks like Apple and Microsoft to turn around! I was using http://www.swiftstocks.com this week in order to follow these two stocks and it is amazing how quickly bad news effects stocks. The minute negative news came out for Apple, the stocks price plummeted because people are scared! Anyways, buy and hold long. You will not be disappointed! Cbrown

    Comment by Chris Brown -

  8. Indian stock market

    Hi Everyone.

    Your blog is nice and informative. We think your visitors will like this posting.

    We all know that Indian stock market has become volatile now a days. One day its going up and another day its coming down. So we all should like to know
    what is the reason for it. As in the last post we have mentioned that FII are the main reason, but now to there are few more factors adding to worries, they are:-

    1. FII profit booking.

    2. Political issue – Indo-US nuclear issue.

    3. 25 Basis cut which was expected by US people of atleast 50 basis.

    4. Low volumes due to holidays in coming week.

    We suggest you to take bit long positions right now as market is volatile so dont prefer intraday trading for few days.
    All scripts are currently trading at low price hold them for 10-15 days so gain maximum.

    Regards

    SHARETIPSINFO Team

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    Comment by sharetipsinfo -

  9. Indian stock market

    Hi Everyone.

    Your blog is nice and informative. We think your visitors will like this posting.

    We all know that Indian stock market has become volatile now a days. One day its going up and another day its coming down. So we all should like to know
    what is the reason for it. As in the last post we have mentioned that FII are the main reason, but now to there are few more factors adding to worries, they are:-

    1. FII profit booking.

    2. Political issue – Indo-US nuclear issue.

    3. 25 Basis cut which was expected by US people of atleast 50 basis.

    4. Low volumes due to holidays in coming week.

    We suggest you to take bit long positions right now as market is volatile so dont prefer intraday trading for few days.
    All scripts are currently trading at low price hold them for 10-15 days so gain maximum.

    Regards

    SHARETIPSINFO Team

    09899056796
    09891655316
    09891890425

    Comment by ShareTipsInfo -

  10. Hi Everyone.

    Your blog is nice and informative. We think your visitors will like this posting.

    We all know that Indian stock market has become volatile now a days. One day its going up and another day its coming down. So we all should like to know
    what is the reason for it.

    Well We say its the game of FII how they direct the market. They have huge money with them they can direct any share as per there needs and requirement.
    Now its a alarming time.

    We suggest you to be very much beware now as year closing of FII is on the cards. There year closing is based on year to year basis. Not like ours i.e. March.

    So many will try to invest more money and rest will try to take there profit back home. In this scenario its best to follow market trend and work with small
    quantity. Just wait and watch.

    Warm Regards

    SHARETIPSINFO Team

    09899056796
    09891655316
    09891890425

    Comment by ShareTipsInfo -

  11. This is a great post, and it is true that sector and industry knowledge is more important than years you might spend on Wall Street. They all got wiped out in 2000 and they\’re well on their way there again. I have a few clients – web startups – who have secured over $4 million each in VC funding and they have no idea what they\’re doing, or how they\’re going to monetize. When I think about all the money being spread around Silicon Valley, all I can say is that a lot of people, ordinary investors, who have no idea where their funds are being used, are going to end up in a big soup. And this is going to happen last quarter 2008 or early 2009.

    Comment by Franklin -

  12. Hi everyone,
    Your blog is quite nice and informative.
    We hope our information will be quite useful for your users also.
    As we can see Dollar is becoming weaker day by day as compared to Indian Rupees, which is affecting IT Sector Still IT sector got lot of potential as is due to zoom up once again.

    Moreover Recently we have witnessed that Indian stock market has touched new heights surprisingly IT sector was not part of it.

    Now NIFTY is already in overbought zone. We can expect NIFTY and SENSEX to fall bit that is correction is due.

    Best strategy now- For investors wait for minor correction and buy IT stocks at dips.

    For traders You can mint money in bearish and bullish market both .

    Regards
    SHARETIPSINFO team

    Comment by sharetipsinfo -

  13. Some real great comments by Mr Roe Leer, your comments were spot on and 100% correct for that style of manipulation.

    The insiders have many different styles they use to distribute stock at high levels that they bought at low levels.

    Price action of a stock or commodity is the main tool they use to induce the public to buy high, backed up by friendly freemason contacts in journalism.

    The average Joe thinks that there is only one type of insider trading and that is finding out about some key information and trading on the short-term effect of that news, that style is amateur hour and the SEC have computer programmes that check for unusual volume in a stock or commodity, only small amounts of money can be made this way and its a sure way to get caught if you do it more than say five to ten times.

    The Elite have always manipulated a market over the long term (commodities between 1 to 3 years in low areas and stocks depending on where the stock is historically between 6 months to 10 years, they are not in rush to make a killing and they have the funds to be patient and use the correct tactics. The correct tactics wont trigger any SEC volume checker programmes.

    The way it works is like this, the elites spot a stock, then they start a buying and selling programme to induce the public to sell out of that stock by using depressing price action and the news media, when a stock has a large number of Joe public holding its shares it can be said that it is in weak hands, when that stock has moved to strong hands thats when the gradual at first rise will then start to take place, this is called accumulation and the gradual rise is called the mark-up stage and this sometimes can take years to complete, later on once the market has reached a very high price the stock the elites bought in the low range maybe 2 or 3 years pervious will then be distributed to the public who have a habit of always investing right at the top, of course they are egged on by the news, brokers and price action and once the pubic and pension funds are holding the majority of the shares the price begins to slip because no new supportive buying is coming from the elites and the shares finally plummet to begin the fleecing all over again.

    This tactic works because human nature never changes and the average Joe never does his research into past price action, he or she always wants something for nothing, thats why the Stock market is so attractive to the average human because of that fatal human flaw of wanting greatness without putting in the hard work of research.

    I could write and write about how easy it is to control a stock or commodity and there various different tactics they use, but to give the best fact as to absolute power the elites wield is this: How does a market move up? It moves up because money buys it, so does it not stand to reason that who has the most money can control a stock or commodity with organized buying and selling, of course they can and they do it every day with long term goals and plans, they understand human nature and use price action to bring out the desired results.

    Also the elites through there freemason (skull and bones) style contacts encourage custodians of public pension funds to invest in stocks that are high level and due for a big drop, the custodians could care less because its not there money and it would be very hard to prove that this type of tactic is in use, they could simply say it was a genuine investment decision. This is exactly what happened in the tech boom, the smart money was buying in 94 to 97, while the public was selling and by the time the market was spiking the public were heavy buyers while the elites were happily distributing there highly over valued stocks to them.

    This has happened throughout history, just check out the stories of the South Sea bubble and other boom and bust situations.

    When Silver was at 4$ an ounce all the elites were snapping up all the contracts the public did not want to hold because of discouraging price action, look where Silver is today, the elites think long term.

    Accumulation then distribution, then repeat the same process.

    Also great news that Mr Cuban has some balls and is helping the 9/11 truth movement, my hat goes of to you sir and I have great respect for you backing a truth film about 9/11 and standing up for what you know to be a blatant cover up by a corrupt elite and government.

    Keep up the great blogs, I have learnt a lot from them and being a young man from the UK I try to learn every day and your blogs help me do that, its nice to see a different way of thinking.

    Peace on earth

    Comment by Peter Bond -

  14. First, A Random Walk Down Wall Street is a recommended read for anyone looking to be involved in the markets either as an investor or trader. I am a trader and investor, but I am curious as to whether Mr. Cuban really would have been playing the stock market game if it weren\’t for such high flying times in during the 1990s? If you have ever been a trader that has lost money due to either stupid mistakes, bad timing, volatile markets or just being involved, you would understand that not everyone makes money and it hurts when you lose.

    Comment by MarkeDenizen -

  15. Indian stock market tips –
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    Comment by Sharetipsinfo -

  16. The reverse is also true.Crowd psychology rather than the efficient market theory better explains why the DJIA is 3-5 times higher at the end of the second Bush Presidency compared to the end of the first Bush Presidency. In 1992 DJIA traded between 2,000-3,000. It is now trading in the 10,300 range.

    Comment by wow powerleveling -

  17. Do they exist? Jesus, I feel like i’m living in a very surreal world where some very basic truths are deliberately ignored, or distorted, for reasons i can’t begin to comprehend!

    Since I have a trust fund I’ve taken a recent interest in stocks the market and just what they are. At first I thought perhaps the value of a stock was based ultimately on dividends(probably a common misconception) But from my own portfolio dividends are so puny that couldn’t possibly fully explain stock price.

    Comment by runescape money -

  18. I am impressed. Very insightful. Couldn’t agree more. Well done.

    Comment by Brian Fleenor -

  19. Interesting article.

    For someone like me who hasn’t been in the investment world for a long time fundamentals and unbiased reports have worked extremely well. a couple of months ago i found a service http://www.marketgrader.com i have been able to buy and sell some of my stock in a good timeframe.

    Thanks again for your article great learning material

    Comment by Charles Paris -

  20. http://www.colabar.org/
    Thanks

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  21. Stock Market is a competition of minds, and it is no difference whether a company has a potential or not, The Game is all.

    Comment by UnderstandMarket -

  22. Good post,
    Thanks

    Comment by Mostafa -

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  26. Nice site. Check this one out sometime…
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  27. The stock market can be fickle. And it can be the ticket to riches beyond anyone’s dreams. *cough*

    Thanks Mark for the insights.

    Comment by Share Trading -

  28. Hello,

    I am in the process of writing a new book on money making tips and secrets. I wanted to include stock trading teqniques and strategys, as well as in debth information about the Money movent strategy and why I believe that the stock market is getting ready to become very bullish over the next 2 years. I am strongly conviced that whenever the housing market begins to loose steam, rich investors tend to put more of their money in the stock market.

    Please let me know if you have any more information on this topic.

    Comment by David Perry -

  29. ———-“Stocks are ultrahyped limited edition company trading cards which somehow have a profound relationship to company finance and a nations economy”——–

    Dear Mark Cuban, Thanks for your great article. Or at least what little i understood, Im a beginner at at stocks, bonds, etc. While I still have a lot to learn about the markets this article said a lot of what
    I suspected but wasn’t entirely sure do to my relative lack of knowledge and the fear that my opinions were just crazy. The fact that a billionaire is saying the same things I was thinking while is reasurring.
    Anyways….
    Since I have a trust fund I’ve taken a recent interest in stocks the market and just what they are. At first I thought perhaps the value of a stock was based ultimately on dividends(probably a common misconception) But from my own portfolio dividends are so puny that couldn’t possibly fully explain stock price. So I thought that maybe its ultimate value was deferred to in some way to some other buyer. What was a stock and how was it valued? I was confused and my tax accountants explanation just confused me more. So I tried investopedia and other resources on the internet but their explanations were frustratingly vague. What do they mean when they say I “own” a part of a company and take “a part in their success.” In what sense can I own a company? and yes I do take a part in the companies success if the stock goes up but the question is how does that happen? While i haven’t gotten into what stock market is in depth and detail. I don’t know where to start the books i’ve come across seem almost deliberately incoherant and what does make sense feels like bullshit. I feel like I know enough to know that something is very peculiar and disingenuous or self deceptive with the way stocks and the market are described. Which is why I feel its such a relief to my own sanity that you’ve written the article you did. It confirmed more or less what I suspected. Which is that Stocks are ultrahyped limited edition company trading cards which somehow have a profound relationship to company finance (i know its a fund raising tool, but beyond that i’m confused) and a nations economy.

    What resources can I get ahold of that talk about the stock market and stocks from a sane perspective for a beginner (assuming i’m not the crazy one)? Do they exist? Jesus, I feel like i’m living in a very surreal world where some very basic truths are deliberately ignored, or distorted, for reasons i can’t begin to comprehend!

    Do the elites in this country really believe that stocks are literally ownership? (other than the majority owner, of course*). Can it be that people who don’t have the simplest comprehension of the theory underlying those securities are running our economy. Determining the “right” way to manage third world economies, etc. Our are they machiavellians, lying because they believe its the only way to keep the system afloat?

    ———————-
    How can there be talk of “intrinsic value” and overvaluation of stocks? When their is no intrinsic value? What formula could possibly determine the correct P/E ratio . But then without dogma and outright lies the system would never work. Thats scary because it would imply an economy of enlightened people would never work.

    But isn’t there actually some math that accounts for how supply and demand tendencies. I mean not all the formulas can be contrived can they?

    “Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how profits are calculated is manipulated to give confidence to buyers.” Basically what I suspected.

    You had the exact same metaphor I had. Its a relief that of all people at least ” If you really think of it, when a stock doesn’t pay dividends, there really isn’t a whole lot of difference between a share of stock and a baseball card.” But, I don’t think dividend stocks except maybe blue chip stocks( which are essentially like bonds i think) are really different from baseball cards either given the amount of dividend they provide.

    Given that the stock market appreciates in value appreciates at 10% average rate versus 4% general inflation might stock appreciation be accounted by disproportionate inflation on an elite sector of the economy?

    Do you know any sane resources that explain to a beginner how money is created in the american economy?

    This is a very very weird world.

    Comment by Matthew L -

  30. I read your forward for The Number. Sounds like an excellent book, I’m going to pick up a copy. I just finished reading The Great Stock Market Swindle by Jim Salim, also a good book.

    I appreciate the information.

    Thanks,
    Jeff

    Comment by Jeff -

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  33. This person’s post was dead-on…”Posted Apr 24, 2004, 1:15 AM ET by SF
    What did you really mean to say?”

    Usually when you do a lot of finger pointing you should also be pointing a finger at yourself…right vic & tif

    Comment by Legacy Village -

  34. Low interest rates lift cialis’s sales performance..

    Comment by cialis -

  35. My life’s been completely bland. Not much notable going on to speak of. I haven’t been up to anything lately, but such is life. I’ve just been staying at home not getting anything done.
    http://www.phonebell.net/

    Comment by long distance call -

  36. i like here

    Comment by lyrics -

  37. I’ve been investing in the stock market for three years and have become fascinated with its ability to reveal human behavior. The tendency to buy when there is a big rally and sell when there has already been a ton of selling is amazing. I’ve done alright but have realized that my emotions are plagueing my success. I am going to have someone else take my password and change it and that way I can only trade by requesting the person to do the trade for me.

    What do you think of using another person as a check/balance system?

    Comment by best money market -

  38. Great story. Wish I had your hand in the stock market. I am sure even today it’s still possible to know much about companies and profit from it. Pitty though that the offshort funds with their naked shorting can destroy all the knowledge that should have helped in the investments.

    Love to read all your thoughts. Thanks for sharing.

    Comment by thom -

  39. I read all kinds of stock market books. Yours was enlightening and offered a different view. I also read another beautifully written book about the market called “The Perfect Stock”. I live in Arizona nd this book refers to the stock price moves of Taser – a local Arizona company. As many know Taser ran up 7000% in 1 year in 2003-2004. I am surprised not many know about this book. For those interested they offer a free review and excerpts at http://www.theperfectstock.net

    Comment by Lila -

  40. Buy cialis and achieve satisfaction in your life.

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  41. Your experience seems to indicate that trading is better than indexing, but for 99% of professional mutual fund mangers (and probably an even higher percentage of other stock pickers) indexing yields better results. Imagaine if you ahd not forseen that company falling from a 1 billion market cap to bankruptcy…

    Comment by Stock market blogger -

  42. o “mathematical method” – Long Term Capital Management had a model too, and a couple nobel prize winners. 😉 Even chaos mathematics won’t help. see: Trillion Dollar Bet
    http://www.pbs.org/wgbh/nova/stockmarket/

    o Maggie Maher wrote a good book too, “Bull…”

    o It’s going to get a lot worse before it gets better. Checkout “The Coming Generational Storm” or http://www.cepr.net. There is a bill now in the house to privatize Social Security. Wall Street will love those fees. On top of that, there is a trend in pensions from the tradional defined benefit to the defined contribution. One is insured, guaranteed, no market risk; the other is unsured, not guaranteed, and has market risk; guess which one the CEO’s get. Also look at Berkshire Hathaway Pension long-term rate of return, reduced to 6.5%; Not 11% or 12% which financial firms market.

    o How’s this for a story title,
    “Markets may avoid ‘meltdown,’ economist says” –
    http://www.bloomberg.com/news/economy/fedwatch.html

    “Meltdown”!

    The story starts out saying, a “meltdown” can be avoided if
    retirees don’t sell stocks, bonds, or houses. Yikes! Holy market caps, Batman.

    Calling all baby boomers – Do Not, I Repeat, Do Not Sell Your Stocks, Bonds, or Houses or our Nation will go into a “meltdown”.

    Mark I loved your blog, your right on the money, clear, articulate, energized. I disagree w/”SF” sometimes we have to swim with the sharks to learn their feeding patterns. Mark survived, learned and is now using that information in a positive way. Go! Go! Go for it!

    o Perhaps efficient market theory will go away when the old University professors are replaced with new University professors. They are the ones promoting it.

    Comment by PiggyBank -

  43. I am curious to know what you may be thinking about the Google IPO. It’s said to be the 8th largest in US hostory, and the stock is looking great so far.

    Thanks!

    Comment by Sam Bently -

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    Comment by Eddie -

  47. Did Richard Ney ever meet a specialist firm he liked?

    Richard Dennis may have made alot of money and been a huge benefactor of the liberal left but one of the wildest statements ever heard from him was after he, as General Partner of a commodity trading fund sponsored by my old employer, Drexel Burnham Lambert, said that “the markets didn’t behave rationally” after losing around $50 million in a very, very short amount of time……..markets are not rational Mr. Dennis and coming from your mouth didn’t lend any credence to your ability to manage public money after the fact. Remember folks, the stocks don’t know that you own them and won’t behave any differently if they did!! With Wall Street sucking a cool 50 Billion a year out of the spreads, fees and commish to pay themselves perhaps the public has decided to throttle back the enthusiasm. But then that would be giving too much credit to the intelligence level of the average American, wouldn’t it?

    Comment by Dean Parisian -

  48. Regarding your Market article…

    I have developed a purely mathematical method that proves the Market moves (is moved.. on two permanent, fixed grids of TIME and DISTANCE. My TimeSineWave analysis calls every Major High and Low in Real Time. Because the two grids are fixed, the same numbers for turns keep repeating over and over again. It took me nearly thirty years to accomplish this understanding.

    Such an understanding (discovery) has never been done before. It is both priceless… and worthless. I pursued it strictly because it was said “It can never be done.”

    This accomplishment will never be published in any great detail. If I knew in absolute terms that this knowledge would only be used to help alieve the suffering of millions, I would transfer the knowledge to such a person. But the world is in love with money FIRST, rather than doing the right thing. None I know of can be trusted. Some mysteries are best left as they appear to the undecerning eye. Despite a very high IQ, I am NOT a trader nor a lover of money first, i.e., a thief.
    I live a simple, humble life.

    I write you only to indicate that a rare few know the Market is a den of thieves, a Gaambling Policy structured against the “Commons Stock of We the People..”, who suffer all the losses.

    Richard Ney understood this as well as Gann.

    Peace,
    Dave Franklin

    Comment by Dave Franklin -

  49. Mark,

    So much of what you say is true. However, many investors themselves subscribe to the idea that stock market investments are merely stripes on a roulette wheel or squares on a Craps Table.

    After many years investing and listening to brokers, I have started to TRY to think about investments in a more coherent fashion. I do believe there ARE internet resources out there that allow investors to behave more rationally. I particularly like Morningstar.com and especially the financials section of “5-Yr Restated” financials, which one one page, lets the reader know if revenue is growing, if earnings are growing, if a dividend is paid and if it is growing, is there free cash flow present…or is the company “burning” available cash, and finally what is the balance sheet like…are there lots of assets or are the current liabilities overwhelming the available assets.

    Very few investors want to do their homework and find out this stuff. They would rather follow the mob with the latest nanotechnology stock than invest in a stock with real fundamentals.

    Maybe I am just getting older and more conservative. But I can only invest in a few stocks and I demand the best from them! I have posted a lot of my ideas on MY blog at http://bobsadviceforstocks.tripod.com/bobsadviceforstocks/ where I think you will see my rationale.

    I do think there is hope for the investor in the market, but not on an easy ride but with discipline and caution and skepticism, he or she may still make a reasonable profit in the market.

    Bob

    Comment by Robert Freedland -

  50. Mark, you come across in your blog as a genuine individual and you clearly stated that you hate hypocrisy. I first read your entry about the NBA and also the “Donald”. At the same time you talk about insiders are essentially stealing money from investors and deriding them for it, you explained how you worked the dog and pony show yourself. As an insider (you had direct connections to the financial guru’s) you hyped a stock only to dump it when you could maximize your profit after others bought into the hype you helped create. You also related your experience taking broadcast.com public and “working” the mutual fund crowd. “Selling” (marketing) the stock (your company) up to a 250% gain. You are no better than the “Donald” who you criticized for not caring about the 1% of his partners invested in “losing casinos”. You did the same to every one of your partners (fellow shareholders) in those tech companies you hyped like Gandolf. You even had the audacity to say “I sold my stock, and I shorted it to boot.” And you wondered why the price dropped. I found your comment, “I wish I could take credit for the stock going up, and going down”, to be as telling as your description of the “Donald” and the pictures in his office.

    I too am finishing my J.D. (as an earlier commenter addded) and one thing I learned is that when making an argument, never to give so much evidence that you first win the case and then lose the case. You made the case that the market unfairly rewards insiders but unfortately lost my respect by showing us how an an insider you took part in the manipulation that created the tech bubble. To quote you, “I hate hypocrisy.” I am not sure what to make of this and solicit a response via your blog.

    Good luck with your new television series and I hope the Mavs do well, you have an exciting team there.

    Comment by SF -

  51. Really enjoyed reading this, had some similar experiences in the market with family companies and IPO allocations… Want to buy the book. Have you read “Fooled by Randomness” by Nassim Taleb? Fantastic and you must read tomorrow.

    n

    Comment by Nicholas Jarecki -

  52. The stock market is basically a money game.Inflows to the stock funds pushes stock prices higher. The reverse is also true.Crowd psychology rather than the efficient market theory better explains why the DJIA is 3-5 times higher at the end of the second Bush Presidency compared to the end of the first Bush Presidency. In 1992 DJIA traded between 2,000-3,000. It is now trading in the 10,300 range.

    Rich Dennis, the legendary futures trader in Chicago, was once asked what books he read that is responsible for his financial success. His answer was so unexpected that it left a lasting impression. Instead of books on finance or economics, he said he read books on psychology and philosophy because “people have an amazing ability to self-destruct”.

    The stock market is indeed a Giant Ponzi Scheme where “bulls make money, bears make money, and pigs get slaughtered”.

    Comment by Richard YuKhin -

  53. http://tinyurl.com/39eq5

    Comment by M1EK -

  54. Mark,
    Insightful article about the market. Down to earth is a good word for your persona. I enjoy your wise and frank discussions on a number of topics. I still think you go bit over the top when your passion for hoops gets out of control. But your life is an earthly dream come true. Congratulations.
    KL

    Comment by kyle r. lundy -

  55. what are ur thoughts on WIMAX techonlogy and the stocks in that universe.

    Comment by mike s -

  56. Excellent points by Mark. His description of the markets as supply / demand driven explains why we could have such good earnings numbers this quarter yet still sell off.

    Lok at last week’s news: IBM has a good first quarter, reaffirms guidance for the year, meets all expectations – then sells off. SanDisk meets top line expectations, is “optimistic for the 2H – and loses 15% in value. Stocks that do not exceed expectations or disappoint (i.e., Nokia or Lexar Media) – get slaughtered.

    Ned Davis made the observation that: “I invest based upon the supply and demand for stocks, and once there are no doubts left about the economic expansion, you are likely near extreme optimism. Extreme optimism means demand is largely satisfied and, almost by definition, the top is the point of maximum optimism.”

    People who trade or invest on the headline news are invariably dissappointed . . .

    Comment by Barry Ritholtz -

  57. Hey, interesting read (and I ordered the book, to boot). Your blog entry sounds a lot like something else I just read on another blog-page: http://www.cartmell.com/cartmell/archives/000028.html

    Funny that several years later, people are starting to talk.

    Comment by NScott -

  58. This article on the stock market was one of the best I have ever read! And I have been reading finance articles for some 10 years now! Straight up no bullshit and I take the same cynic approach because it is so true! I am a finance major in orlando and have seen my parents get robbed blind by the industry! I hope to defintely read The Number when I get some extra money!

    Comment by Darren Ciccone -

  59. I love it! I come the the blog of the most entertaining owner in the NBA and the message with the most comments is the wonderful commentary on the stock market. People want to read about sports and their teams, but want to talk about their money. Maybe because it’s the sport we all try and play every day?

    Keep up the good work Mark!

    Comment by MJBrown -

  60. As a thirty year veteran of Wall Street, I know how accurate Mr. Cuban’s revelations are.
    Unfortunately, seeing this similarity to a PONZI scheme, I never made any money in these hot stocks; however, I didn’t lose anything in the bubble burst. My children’s college tuition was all covered by my buying Treasury Coupon Bonds when the yielded 8 or 9 percent.
    Dealing in those “hot stocks” is like a group of men standing in a circle, one of them holding a live hand grenade. He pulls the pin and passes it to his left, and HE passes it to HIS left and so on.The trick is to be the NEXT TO LAST man holding the grenade.
    By the way, I gave this anecdote to a major newspaper interviewer several years ago, but it was edited out in favor of several other people’s comments touting Tyco and some other “blue chips”

    Comment by Charles Mackay -

  61. Mark,

    I appreciate that you share your opinion on this highly volatile matter. So many people pray for the return of the internet bubble because it is there only hope of retiring. They become very defensive when you tell them that 2% dilution, 3% inflation, and 2% management fees mean you need to make 7% to stay even. And when you say that P/E are near an alltime high while dividends are at an all time low(because their earning cannot support a higher dividend)which would imply that this is a dangerous time to be invested, they come back with “a well diversified portfolio grows at 9% a year” and then I say, “tell that to someone who invested in the dow between 1967-1978.

    Please keep sharing your thoughts, you might just save someone’s retirement.

    ws

    Comment by wes -

  62. I accidentally stumbled across this article (and this blog), and as someone who is a long-time Wall Street “insider,” I would have to say that much of what Mark says rings true.

    To be fair, however, there are many financial professionals who are honest, who take their fiduciary responsibilities seriously, and who are genuinely interested in comprehending the mysteries of the market.

    That said, it is certainly a place, as Mark wisely suggests, where “outsiders” should know the lay of the land before they dive in. The Number is certainly an excellent source for some of that information.

    I am hoping my forthcoming book, The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World(http://www.stockmarketjungle.com), will also help to level the playing field for individual investors.

    Comment by Michael Panzner -

  63. I enjoyed your insights on the ponzi scheme, and particularly the dilution of stock with stock options to insiders. TASR is a current example of a stock which has gone ballistic, but which diluted its stock by nearly 40% in the form of insider options in less than 12 months.

    As for fundamentals being unimportant, I think that applies the most at the manic end of a bull market. Following a genuine bear market, when most investors have lost more than they thought possible, and it has gone on longer than believed possible, fundamentals start becoming important again. No one wants to touch stocks at the bottom of a bear market. Those who do have the courage to buy at the end of a bear market, pick companies with great earnings and cash flow and book value and all those other things, and they do so because they are convinced that the steady growth in earnings will eventually cause the stock price to rise, despite the terrible inertia in the market. The last bear market like this occured in the mid 1970s.

    Certainly Warren Buffet, John Templeton and other seasoned “investors,” trade out of favor ideas with good fundamentals and ignore the momentum crowd.

    There are many ways to make and lose money in the market. Trading long and loud can certainly work, although I am very bad at it. Trading fundamentals also works, although less well at the top of a cycle than at the bottom.

    Again, thanks for your insights.

    Comment by Don Webster -

  64. While I can’t agree with the wholesale cynicism about the market, it’s amazing how often investors, like sports fans and sports teams, forget that something that is a good buy at one price can be a terrible investment at a different price. That Gandalf story is a great example of the phenomenon.

    Comment by Baseball Crank -

  65. Richard Ney’s books and research into the markets and insiders/specialists preaches “Where millions of dollars are at stake, nothing is left to chance”. As markets make highs, insiders (pronounced capitalists) and specialists sell at each successive top to eager public/institutional buyers, eventually establishing enormous short positions. Once public investors are fully commited to the long side, the market has no place to go but down. After zigs and zags on the downward direction (up-moves to offload acquired inventory when the public sells on the down- moves) eventually comes an ongoing pattern of lows when public capitulation/sales enable insiders to cover short positions and ultimately begin to establish long positions prior to the rally the public has long since given up hope for. Truly, at market highs, who is selling/selling short? Maybe 1-3% of contrarian public traders and 97-99% of market insiders. Conversely, at market lows, who is buying/accumulating? Same answer. This movement of capital from public “investors” to market insiders is why the exchange was formed, and any changes or supposed improvements are only to mask the shell game and, in fact, only advance the purposes of redistribution of wealth that market insiders have established. Financial news is also closely influenced by capitalists to trigger the public to buy, hold or sell — all in concert with inventory goals of insiders. With the advent of bearish mutual funds, private traders can participate in upcoming bear markets without the timing challenge of puts or the nightmare of short selling. It won’t look like insiders rigged a market crash, nor that insiders are profiting by the decline, but the redistribution of wealth will occur nonetheless. Great article on the IPO and corporate insider angle, but true insiders keep their actions and participation on a more discrete and unfathomably more impactful basis.

    Comment by Roe Leer -

  66. Mark your writing style is great and I think that you will have no worries about your “voice” when you do finally get that idea for your book.

    As for the content of your article, I was impressed with your honesty (I think you spoke the truth); however, I’m a little suprised by your frankness particularly coming from someone with such a high profile as yourself (your not going to recieve positive feedback from your associates in the financial industry).

    The ever-rising stock market (ponzi scheme as you rightly call it) and its commitant financial assest/wealth generating capacity is what the american “system” has evolved to. In the 1920’s someone said, “the Business of America is Business…”; in the 1980’s and 1990’s until today, that statement could be updated to, “the Business of America is the Stock Market…”. Everything and I mean everything in this society is now geared to this perpetual wealth creation machine called the financial markets. Mark you know this through your experiences and intuition, but I sense in your comments a deeper sence of unease and foreboding at what all this means for the bigger picture and the “ethical implications” for us as a people.

    We’ve become the “Mammon Nation” which only takes the increase and doesn’t put back anything of value. If this is truely what we have become and embraced as individuals, a people, and a nation leading a trouble world (and I think this might be your secret message) America has lost its way… And I’m truly sorry for our Children that will come after us, because we are spiritually bankrupt.

    Your thoughts and ideas are welcomed. Thanks.

    Comment by Keith Schemm -

  67. Mr. Cuban is wrong to suggest that a non dividend paying stock is no different than a baseball card. There certainly is a big difference if the company that the stock represents is generating real income; whether they use that income to pay out a dividend, buy back shares, put it in the bank, or invest it into their operations, the income has a real value for the investor.

    The most obvious point is that the income can be used to support the value of the stock by purchasing shares of the company in the open market, therefore making each share a greater portion of ownership and of course the income flow. Also, if the share price drops, the company that has real earnings can easily start paying a dividend in order to prop up the price.

    Baseball cards can do none of this because they don’t generate income. They truly are just a tool of speculation that has a value determined by market psychology.

    Of course the key is knowing whether the profits reported by the company are real or whether they are Pro-Forma (usually inflated). I do agree with Mr. Cuban that most stock market activity is more speculation than investment. This distinction is made very clearly in “Random Walk”, an excellent book even if its controversial thesis of efficient markets is wrong.

    Comment by Paul Taylor -

  68. Mr. Cuban,
    I love this piece. I am finishing my Juris Doctorate and have taken a job with a large wirehouse (supposibily honest) as a private wealth manager. I greatly appreciate your insights into the market. I hope to get long and loud respectably.
    Scott

    Comment by Scott King -

  69. Mr. Cuban’s main issue seems more to do with governance rather than the stock market itself. While I concede that a large majority of the so called ‘small-cap’ stocks are dominated by the whims of day traders, the majority of this blog deals with corporate governance and the regulation of the stock market. Granted, in the late ’90s, nobody gave a damn what a company’s fundementals were; the only number that mattered to institutional fund managers, pension managers and most importanly day traders was the stocks closing price. However, after the bubble burst of early 2000 we have seen a return to traditional value investing. This is not to say that there won’t be certain stocks that are only day trades-however with the passing of Sarbanes-Oxley and other further governance laws and regulations placed on brokerage houses by the SEC, we will see for the intermediate term stability in stock price growth (ie 9-15%) and investors caring more about fundementals rather than simply the stock price.

    Comment by Ben -

  70. While browsing the web I came across your article not realising how knowledgeable you are with the market (my g/f is a huge fan of yours which prompted me to read your blog). Like many others I’m just trying to hold onto what I have now financially but soon I hope to start investing & one of the fears I’ve always had is just how you put it…these investors aren’t out for our benefit, they’re out to first keep they’re jobs. I’ll be looking for this book over the weekend, thanks again for such a great article. You should write more on this subject if you have time, you definately have a talent in writing. And good luck with your team!!!

    Comment by Bill -

  71. I’ve been a very small investor for about two years now less than $100 a month not including 401K contributions. I love gambling, again limited amounts per day, and realized that the stock market wasn’t that different, but had the potential to pay off over the longer term. It didn’t take long to realize the market is gamed for the short term and big money people.

    I guess my question is, is there not a way to do smaller long term investing in reputable companies, or should I just go ahead and take my chances in Vegas?

    Comment by Beth -

  72. I have had this funny feeling about the stock market but couldn’t really put my finger on it. Mark’s words resonate well and I can’t wait to get this book. Just ordered it on Amazon. I also ordered ‘The Biggest Game of All’ and ‘Survival Is Not Enough: Why Smart Companies Abandon Worry and Embrace Change’.

    Thanks again. Go Mavs!

    Comment by justjump -

  73. My first time reading your blog and I’ll definitely be back as I respect your views on business & marketing almost as much as your desire to see the Laker’s downfall..:) Seriously, I appreciate this nugget as it echoed some thoughts I’d read on a website I help run about the insider side of the market. I’m do various internet projects and I setup the site of a day trader friend who wrote about how the markets seem to consistently react to news a couple minutes BEFORE the news hits. This is someone who is constantly watching the market. I hadn’t thought about the dilution effects of all those stock options, but combining all this information, I’ll definitely be more wary of the markets.

    Thanks….Ravi

    Comment by Ravi -

  74. I like the analogy of the baseball card. I always said that short term trading is just glorified gambling. On the other hand, long term investing is not like that because over time, it is proven statistically that you will make money if you are properly diversified.

    Comment by Jeff Clark -

  75. Trading vs. investing, you have it pegged nicely. Finding trends before the masses is key to trading. Once management begins thinking they are more important than the people that got them there, (shareholders), things begin to break down.
    It is the ultimate money game that unfortunately relies on a percentage of players left holding the “bag”
    Good luck to your Mavs in the playoffs.
    Because of your investment in Mamma.com I now have a team to root for.
    Mike

    Comment by Mike -

  76. I agree with the above comment about you being a great writer. I anxiously await your autobiography. You are a pretty fascinating dude. It’s nice to see an Indiana boy doing well.

    Comment by Jason -

  77. I loved the way you broke it down. Being that I was in college during that time, I would take the refund money that I got from my loans and invest in the stock market hoping to make enough money by the time I graduated that I could pay my loans back and have some extra pesos. I actually invested my $900 refund check in Yahoo YHOO in ’97. Upon graduating in May ’98 the $900 had grown to $2500, where I sold $1000 worth to fix my car from various dents. That 1500 grew to a whopping $19+K by Jan. 99. During that point I was buying and selling stocks that I had been watching like BCST. The thing was, before the bubble burst i would buy stock and then wait a day to see how much I could sell the other stock (YHOO) to pay for the stock I bought and have extra money. When the bubble burst a few days after buying BCST, I had to sell quick to not be in the hole with the stocks that I had bought. I lost about $4000 trying to cover my young tale but I was young and I felt I had a grasp of the market in order to come out on top. I was giving recommendations to executives that I had met once I move to Dallas. In the end I made enough money to make a nice down payment on my “then” new car which I just finish paying off, being that a college female student pulled out in front the car I just had fix and painted new. She did not see my car, having me to wreck 1 hour into my trip of moving to Dallas. After moving, I then had some money to buy my first nice suit for interviews and to survive until I found my then dream job (Advertising AE). After 9 months, I found my job, I moved my then longterm girlfriend from Chicago to Dallas and preceded to start my life of becoming successful. It didn’t all go the way I planned but I did enjoy having had the resources to do those things which were important at that time and buy me my first and only computer. As for my story, The make a long story short, my now ex hated Dallas, so she moved back to chi-town, I got laid off and I am starting life back over with no money! I really miss the internet bubble because I once calculated that if I had never taken that $1000 out to fix the dents, that $900 would have been close to $50K at my peak of holding YHOO! The only sad part is the beloved charcoal grey Tommy Hilfiger suit I bought, I ripped the pants earlier “today” after coming from a interview for next year’s RA at grad school. This was my favorite and only suit. If I ever get on the Benefactor and win, I am gonna get me a new suit and pay my way through my current grad school studies and pay the debt that took me down once I got laid off! I’m somewhat like Mark now, I ain’t that fun of the stock market anymore. The End🙂 That’s my story!

    Comment by Myron T -

  78. Thanks for writing out that entry on the Market. Your thinking is extraordinary and so very practical, and you’re an excellent writer as well, as another guy mentioned in his comment. (You’ve both got to learn to spell “foreword” though — that’s what it’s called when it’s in a book!🙂 I’ll definitely read the book you mentioned now. I read several of Spoelstra’s just because one of them was the only place I could find your actual writing — in his foreword. You’re great — thanks so much for letting the rest of us in on how you think.

    Comment by Lily Casura -

  79. Tim O’Reilly recommened Moneyball in his blog so it had been in my mind for awhile when you recommended it. I read it recently and was impressed.

    I will read The Number as well. I loved your introduction – when I was young I continually badgered my mother about how the stock market worked because I couldn’t grasp how it was different from ‘baseball cards’.

    Comment by Cody Hess -

  80. A very informative post. Much appreciated.

    (ps watching the Mavs rip the Grizzlies at the moment.)

    Comment by Dimitri Kanis -

  81. I think I am going to buy this book. Excellent foreward for the book. You are a good writer, why don’t you take the leap and write some books?

    Comment by TDavid -

  82. great post…ever since i watched the frontline on the wall street fix (link below) i was shocked more people don’t talk frankly about this.

    http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/view/

    Comment by wagz -

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