Haven’t blogged in a while. So I decided to look back and pull out one of my first blog posts, from 2004. An oldie, but goodie !
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
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Comment by Logoloji Tasarım -
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Comment by Ali Emrah -
Appreciate how you always come at any topic with your own candid take on it, Mark. I both agree and disagree with what you’ve said above about the market. Berkshire Hathaway’s cash generation capability I would argue is more than “a baseball card,” and you don’t need to be cynical to participate. But you are right to challenge everyone on what exactly they’re buying.
Personally, I am very comfortable participating in the market through index funds / ETFs with my eyes wide open, and I sleep well at night. Fundamentals are one of the reasons why. They are a useful way to triangulate on relative valuation. Stocks relative to each other. The market relative to where it has traded in the past. But yes, it’s all relative.
A topic people need to explore is whether the aging Boomers and their need for liquidity over the next couple decades are going to flood supply and push relative valuations down. Maybe. Or maybe it will be so slow that it will have an immaterial impact. I’d like to see WSJ or CNBC explore that one, personally.
One last comment. Now might be a good time to lay low on this topic. Unless you like poking the SEC regulators in the eye and seeing what happens? I am about as cynical as they come on politicians. These guys are in it purely for making political hay, and you are a pawn in their game. Know the enemy. Listen to your lawyers. And lay low.
Comment by stt71 -
Peter Thiel is not investing in my concept because I am contacting Mark Cuban!
I have created a prototype of a concept that has never been done before. It takes everything you get on the internet for and will compress it into one website, your profile. The website will give the user the freedom to imagine by allowing them to design their own profile right down to each icon. Through innovative programs and applications no other website currently offers, Star54 will revolutionize the internet. I recently emailed you the prototype. Once the site is live the Backstage Pass Page will generate revenue that no other website could match! I assure you in less than five minutes I can explain how it will change the world and make millions, if not billions, a month.
I came up with this concept five years ago and have been working on it every day. No longer will one have to cycle through multiple sites from endless search engines only to find nothing, they would have to simply sign onto their profile and it is all right there in front of them. Star54 will always be moving forward by abolishing the use of the back button. Through multiple years of research Star54 introduces a world for each user that will rewrite how websites are built and operate. Social and business websites (SoBiz) can be and do so much more! We will finally give the people a website they need and has a true purpose.
Let us revolt the internet!
Thank you,
Will Frankenburger
863.698.6326
willfrankenburger@gmail.com
Comment by Will Frankenburger (@WFrankenburger) -
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Great insight from years past!
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Comment by Anthony Ilardi (@ant4tw) -
Reblogged this on Jayon Park.
Comment by jayonpark -
Help with our company… When we launch they are going to try and squash us! How do we compete? Allaboutptg@aol.com
Comment by Cj Rongish -
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Comment by John Cruse (@JohnCruse01) -
I think you’re right about the market now. In the 1950’s maybe it was different. By the way Mark, you should take a look at my friends analysis of the NBA franchise this year with a brief tour of each team in terms of rank. I saw you’re number 5. Not bad for being the 8th largest city. http://www.chicagonow.com/mayor-daily/2013/01/nba-franchise-values-897/
Comment by Steven Petrovas -
I look after a bit of money for friends and family. Just private arrangements really. I am not authorised to run funds or the like. Anyway last year ( 2012 ) the lowest return was 15% and the highest 82%. The 15% was made on about €56K whilst around €15-20K of that was kept in cash so the 15% was really made on around €40K.
The 82% was made on just €2.5K ( the guy has since put more money into his account ) as I invested it in one ultra cheap share.
I think if you know what you are doing you will make money.
http://www.Market-Swings.com
Comment by Marcel Springorum -
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If you have a sec, care to give your take on the ongoing Herbalife debate?
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Comment by antihackerorg -
Why would you be a cynic to the stock market, when that was how you’ve sold broadcast.com – by ramping up the price/share through intangible factors.
Comment by Chris Einar San Agustin -
Mark, I have a interesting request for you. let me start out by saying I envy you and you inspire me in everyday of my life. I watch you on shark tank every week and you always seem to impress me.
I am a 22 year old kid that is trying to figure out this crazy thing we call life. so far life has been challenging as it is for everyone. what my request is just to spend a day with you and talk.
I dont want any of your money or not asking you to pay for anything or invest in anything, all i want is it fly myself out to Dallas and spend a day with you. I truly think that you could help show me direction in my life. I am asking for a rare chance just to talk. the reason I want to come talk to you is I want to see what a day is like in your shoes. I want to see what your life is like in my own eyes.
I am a very determined person and just feel like I have lost my way a bit in life. I feel like if I got this chance to see what you see maybe that will put me back on track.
If you think this is something you could do please let me know. I appreciate your time and possibly the chance to let me meet you.
here is my number and email address
614-592-4649
Jbreitinger45@gmail.com
Comment by Jimmy Breitinger -
Have you actually read the annual reports of the companies you invest in? Scarry stuff! I’m with you Mark, dividends! Amy
Comment by ThinkingAmy -
Great article. I have been an investor for many years (and done well), but it may be time to trade a little bit.
Comment by El Dabe Law Firm (@ElDabeLawyer) -
I agree with the sentiments of this article and that the market has asymmetrical information gaps, but doesn’t the “fundamentals” have a bearing in the stock price because stock is also a reflection of ownership in the company? If stocks were so easily manipulated wouldn’t corporate takeovers happen more frequently?
Comment by Max Hodge -
RKUS that I recommended to you just went up 12% not bad for 2 days. PDL on the TSE or PAL on U.S markets went from 1.15 to 1.70. Just check my past emails Mr. Cuban. Lets make it happen.
Comment by whitewoody -
Mark
I have watched you on the Shark Tank and wanted to reach out to you independently, I am sure you get tons of emails like these. While I am not one to go on TV with the kind of business I am in, I am all about business and not afraid to go after the resources I need to get the job done.
I started my business 11 years ago in Charlotte, NC, my firm has vendor contracts with some insurance companies, we are not a very large business and our yearly sales have averaged 300 to 500,000 a year over the last 11 years. Our focus is on workers compensation fraud and investigation. I have been in this industry for 21 years and decided to open my own business 11 years ago. We compete in a very competitive business market. One of our largest competitors based in NC does nearly 100 million a year in revenue. So it is a very lucrative industry and recession proof because as you know getting benefits from an insurance company is tax free and someone is always trying to defraud the insurance companies. Fraud is a 90 billion dollar a year problem for the insurance industry. The key issues as in any business is waiting to get paid by clients and keeping everything balanced. As a SBO I am having to do many task as I am sure you know, I am success driven and wish to take my company to the next level and can do so if I could focus on my marketing which we both know is key. In order to be able to focus a larger amount of my time on marketing, I need to have more staff to help me with this, However capital to hire staff is as always an issue, so I would prefer to get an investor involved vs. any more bank loans and in return of course for a percentage in ownership. I am also implementing a plan to establish a board of advisors from various insurance company executives to help guide me to the success level I want.
Within the last few years I suffered a divorce and it cost me dearly, now I am re-building and after having some loss in sales in 2011 have come back in 2012 with an additional 100,000 in sales and now on course to pay down business and personal debt on a 5 year plan. My business debt does not out way my gross revenue so it is workable. I moved my office home because our business is received mostly on email and very rarely do clients visit us, I had an office for most of the life of my business but realized at the end of my last lease that having an office was not necessary. Basically with all the technology available to us and online case mgmt., I can and have run my business from anywhere. This keeps cost down as well, The employees and subcontractors I have are very dedicated and work hard. My son also works full time for me and my goal is to give him my legacy when I decide to retire if I can retire.
Having you as an investor and with your business connections would be a great asset to DJG and would enable us to compete on a much larger scale. I would like the opportunity to speak with you further on this matter. Please visit our website http://www.djginvestigativeservices.com for more information on DJG. Thank you in advance. I can be reached at 704-536-8025 ext 102.
With Regards,
Dwayne Green
Comment by Dwayne Green -
Doing well with my picks. AMP went up so took profits today sold at 65.37.
RKUS is a little down but ironically it was on Cramer’s mad money tonight. LOL I don’t know if that is a good thing or a bad thing. The market is starting to look toppy so I will hold my recommendations for you.
Mr. Wonderful Kevin O’leary was in my hometown today in Halifax. He’s pretty good but your the best.
Mark Farwell, January 2013
Comment by whitewoody -
Reblogged this on CHARLES BATEMAN.
Comment by c.bateman60 -
I dont know alot about NDA’s but I was wondering why you wont sign one. Is it a trust issue or do you feel they do not have any validity?
Comment by Trisha Tennyson -
Love Shark Tank – so glad that they brought you in – was kind of getting stale. Plus, love your investment strategy and advice.
Comment by Steve Johnson -
Do you think ETF’s are the new Mutual Funds without the 12b1’s and management indifference?
Comment by krose231 (@K_R231) -
Why are my posts getting deleted. Is that freedom or what?
Comment by whitewoody -
I first heard the term widows and orphans from my grade 8 teacher quite a few years ago. When I bought my first shares in 2012 I looked for safe, dividend paying shares because, while neither a widow or orphan, I am a lower income single person with only about a dozen years to go before I want to retire (who knows if I will ever be able to retire).
I have a DRIP inside a Canadian tax free savings account so my dividends are automatically reinvested.
First time here. I did not know you blogged. You are 1 busy man.
Comment by janesavers -
Mark, you are incorrect. The wealthy in this country are supposedly getting wealthier. At the same time, the wealthy are the ones who generally have their money in the market. The wealthiest are hurt the most in downturns such as 2008 and rewarded the most in the stock recoveries afterwards, because again, they are the biggest investors.
No, not every stock or business is a great business to invest in. In fact, I would say 90% of the business’s are terrible investments. Just drive down any freeway/interstae in our country and you will see virtually the same stores/business’s every 20 miles(McDonald’s, SBUX, KFC, etc), those business’s are real and growing.
There are also new comers into the market that upstage oldcmers. A great example is a company like Under Armour, which is gaining a major foothold in the appare/footwear industry and compared to Nike has a lot of room to grow.
Of course stocks are “scams” in the same ay anything is. You’re ownership of your team can be rendered worthless a decade from now when we regular people realizethat with our stagant wages, we could go and watch the guys play in the prk for free an not really notice any difference(because the guys playing for you all came from the park originally) and a nice $80 bucks would be saved eevery night we idn;t go out to a game. That is the nature of business. But you mde the “investment” because you are betting that in 10 years there will still be demand for something that really is so ridiculously overpriced and could be watched just as nicely at home on a big screen TV with two big steaks.
At the end of the day, 50% of market retuns come from dividends, and the rst is share appreiation. So if one can reasnably predict or find a company that will be around for the next 30-40 years, or can predict which companis will be amking tons of cash in the next decade that they will have enough to begin instituting a dividend, then they can make money.
There is no “easier” way to make money than giving over your time but for those realizing tht the market is inefficient, one can like you said use ther knowledge to profit off the inefficiency and irrationalism. Just lke you get suckers to come into the door for $50-100’s of dollars for something they can watch as part of their cable package in the comfort of their homes, I think you have found yourself a nice set of suckers to feed off of as well.
Love you on shark tank bro. Keep up the great stuff, but you don;t know everything. Stay humble.
Z
Comment by Selig Tenenbaum -
Investing time, money, and HARD WORK in ourselves (and others) has always proven to be a better investment than the stock market for us.
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Comment by Selimiye Emlak (@selimiyeemlak) -
Congratulations. Nice post. I think the impact of social media must call as a parameter. Everything is changing and incessantly.
Comment by Selimiye Emlak (@selimiyeemlak) -
hi Mark Cuban
I want to work for you in the stock market so bad. You picked a stock that went from 1$ to 20$. Congrats what a great pick. Then the success you had on your IPO Broadcast that was one hell of a record gain.
I have been emailing you hoping you would give me a chance to trade with you. I just need 7 minutes of your time. I would fly to Dallas asap and while there proving I am an a$$Et to you I would also check out the Ewing ranch. How I loved that show.
It is ironic how you put on a 2004 article about the stock market. I have been sending you emails since then hoping you would give me a shot. I never give up. Recently I have been giving you a list of stocks I bought and sell in real time. Maybe you have been seeing my gains.
I have been waiting for an honest view of the stock market . I am so happy you reshowed this article. I agree P/E ratio and Dividends don’t mean much. I am a chartist and spend my time looking at hundreds of charts. I will keep sending my picks to you. But please contact me. Look back at the Canada picks I sent you last week . They were all good. Here is some other stocks I bought on Friday RKUS at 21.79 and AMP at 64.75. I have some great one’s for Monday I will let you know. The reason I am doing this is to prove that I am worth that meeting with my mentor.
Sincerely,
Mark Farwell
Comment by whitewoody -
Pingback: Authenticity « Laconic Sagacity
You, Sir are right!! I tried for years to make sense of the market as I had studied via 4 years degree in business. I won’t say it’s fiction but it did not work as they claimed in school. Regularly I’ve seen stock fly and drop with no explanation in sight. I then started to look at the market as a popularity contest which gave me a better view of how things work. On a day to day basis stocks mostly go up and down not on fundamentals but on how well a stock is being marketed by the dealers and brokers. P. T. Barnum was right, a sucker is born every day. Once you know that and take it as abosolute truth then you can make better market decisions.
Comment by Edgar Estrada -
Hi Mark- I recently emailed you about a novel I wrote. I am now writing an autobiographical true account of the trials and tribulations of a Bronx boy who was born & raised across the street from Yankee Stadium. After graduating from college and working for a few companies I Knew I had to be in my own business. I started a company with a close friend in the field of Oceanography in 1969. Through a group of accountants, 2 of whom started a company and took it public, we were brought before an underwriter. We did a dog & pony show that was a classic. No one had a clue what Oceanography or Limnology was, but Jaques Cousteau had specials on tv that glamourized Oceangraphy. It was a no brainer. We didn’t have a nickels worth of business, but thiis 90 year old firm that never did a strart-up in its history gave us a firm commitment in writing for a full blown public offering. It was the tail end of raging bull market and the public was ready to buy anything that sounded sexy and glamourous. In November of 1969, with a red herring that made things look as bleak as could be, we had an extfremely successful offering. We raised $1.2 million (in 1969) at stock price of $8.00 per share, based on nothing tangible, and we were oversold. We could have sold three times the number of shares The stock opened at $12 a premium of f50% and we didn’t have any sales. Months before I had quit my lucrative job because I had a passion. If it was 2 weeks later it wouldn’t have happened. The back office crunch became public and the market crashed. But we had the capital we needed to start our business. A few months later our underwriter came to us looking for a loan. I had to unlist my home telephone number. I was getting calls from friends,aquaintences and strangers seeking inside information. One of my wifes doctors was pissed offf because I would.t give him “the inside scoop.” “ONLY IN AMERICA”. I have many interesting stories like you that I will write about My brush with the mob, my first scuba dive in Lake Tanganyika, etc. I enjoy reading your stories and comments. Please don’t stop.
Comment by Don Ptalis (@donptalis) -
I couldn’t agree more or at all at the same time. For someone in coroproate governance for whom’s fortune or destitute (financial ruin) is totally dependent on a keen understanding of an industry, who eats, breathes and sleeps an industry, who talks about the industry with other industry titans and has access to the industry,having knowledge about the supply and demand of securities within this industry is a given , you would probably just be considered lazy if you were unable to capitalize on this sort of access (eliminating how easy it would be to capitalize on insider info). Most of us don’t have this sort of access, it does not mean that we cannot notice trends around us. But ceterus parabus we must rely on standards of reporting information. Would you purchase a stocke with a P/E of 10,000 with a stock price of $5,000? Or stock with a P/E of 20 and a stock price of $10? Every trend, wild swing in stock prices only represent the markets sentiment about a firms ability to earn. Supply and Demand is created by perceived value which must be represented in some way to us commoners, that’s why theirs an SEC, that’s why there’s FASB, that’s why there’s GAAP, that’s why there are banks, that’s why there’s Venture Capital, that’s why there’s Private Equity, Angel investors, Sharks and everything in between. We have to rely on consistent reporting of information, if we did not have to, than there would be no need for this sort of fraud to appear in the first place. I applaud you for not being lazy, but really what you were able to do with your trades is not extraordinary, it’s expected. When a common man is able to routinely out perform markets year after year due to dilligent research, and secure his family’s future, and pay for college for his children by combining what he knows, with what he is able to dilligently research about a company (yes using fundamental information) is in fact extraordinary. What you have accomplished is without a doubt extraordinary, but I hold off my golf clap on your trades unless you are able to explain to me how you were able to trade in markets mostly unfamiliar to you and beat the street using what you think you know about supply and demand for a security.
Comment by Colin Smith -
Eczema – totally unrelated to this blog, but I heard you mention on Shark Tank that your young son suffers from Eczema. I distribute a clinically proven line of medical clothing called Dermasilk Therapeutic Clothing. It is a class 1 medical device, hospital grade silk underclothes and sleepwear with a bonded antibacterial. Happy to supply your son with a sample to try out. You or his Derm may want to review the clinical data on our website dermasilk.ca. you can email me directly if interested. dan@westernallergy.com.
Apologies for the odd way of emailing you, but I grew tired of looking for direct contact, not looking for a handout, just enjoy you on the show annd thought our product may help.
Best regards,
Dan
Comment by Dan Sharp -
*shrug* I think we may see more and more younger individuals see the market from Mark’s vantage. I know quite a few of my peers who have watched their parent’s retirements disappear due to machinations by companies and automated systems and convoluted loops they will never understand.
Many of us view ourselves as the Mickey Mantle card Mark mentions. Why invest in something I cannot own or control when I can simply invest in myself? Failed entrepreneur that I am (and in good company), the lessons learned are worth as much as if I had dumped $50k into the market 7years ago to be left with $50k today (if I was lucky).
The point isn’t to not invest. Some day I’m sure I will. But I will invest in what I know and what I understand, knowing and understanding the market limitations Mark describes limit the potential of said investment. Not every game has rules that are fair. Doesn’t mean you should quit. Mark hasn’t left the NBA, even though he doesn’t agree with all the rules.
Comment by Tommy Galloway (@tommygtwo) -
Thank you for your generosity in sharing your thoughts with us in this re-post. I’m a Warriors fan but cheered for the Mavericks in your Championship year!
Comment by Calvin Wong -
I’ve read this article a number of times now, and it never gets old. I personally put my money strictly in cash. Even though a lot of you agree with Mark, I personally think most of you are easily taken in by the Mutual Fund and Stock Broker Hucksters still. Get a brain please. I make money 2 ways. My job and a small business. That’s it. No asset allocation, no BS with aggressive or conservative investing.
If you’re lucky enough to make cash with stocks, great! Just don’t put all your cash in the market. I’d rather be safe and have peace of mind. Most don’t have the emotional balls to handle the markets either. And don’t say you do if you don’t.
Much success to all. Thanks Mark.
Comment by CanadianGuitarPlayer (@mdgrove) -
Very interesting! I had a slightly different take on the stock market back in ’09, but your post certainly lends more credence to my belief.
I just hope my latest investment (and my only investment) in Senesco Technologies – SNTI, bears as much fruit as your Gandalf Technologies investment did. 🙂
Comment by Marc -
I’m an economist and I’ve never viewed the stock market as anything other than an insider Ponzi scheme. Having said that, to those who can figure out the mechanics of how it operates, it can be a lucrative endeavor. I just bumped across a book by a guy named Chris Camillo called “Laughing at Wall Street” that sounds pretty interesting – turned 20 grand into 2 million in about 3 years. Interesting & smart obviously; sounds like a very similar common sense approach through observing the world around him that you describe. Nevertheless, my biggest issue is that – as you pointed out previously – only about 1% of all the money that flows through there actually goes into investing in working capital for companies to grow their business.
Comment by Rudy Arnauts -
This article was written 9 years ago? It seems very fresh to me. But it’s also very disturbing. I am not a high income person—-but I’m a good saver and I have a lot of money in the stock market—-a lot of exposure that if there’s a collapse, I will be in serious trouble. But what do we do? Putting money in a bank account doesn’t even keep pace with inflation. And make no mistake about it—-regardless of the damned, inaccurate “government statistics” we are experiencing inflation. I don’t care what they say. I tend to put my money in large, low cost mutual funds—-mostly domestic large cap value companies—-but a smattering of everthing else too. Some index/some actively managed but low cost. I’ve done pretty well staying that course since the late 1980s—–but I’m very concerned about this view that it’s somewhat “fixed.” Seems that a “little guy” like me—-even investing conservatively—-can be manhandled/fleeced.
Comment by dcangelo -
@ BrianStone.. If you are in the comments section of a blog asking where to invest your money you haven’t learned a thing from what you just read.
You have to take what you just read and deduce the next step for yourself. The world can’t spoon feed you everything.
Thanks Mark Cuban!
Comment by wisconsincarry (@wisconsincarry) -
You guys are missing the point that Mr. Cuban is trying to make through sharing his story. Do your homework and take control of your own money! Don’t bitch and moan about how Wall Street works and your distrust of the markets. It is what it is. Most people don’t even know how it works. That is why they blindly put their money in the market because they don’t take the time to do the homework themselves. They put too much trust in the starched shirts and rolex wearing brokers who drive a Mercedes who pick lent off their suit while sipping a latte while talking to you on their Blackberry trying to pump up the next big stock for you to put your money in. If you understand how Wall Street truly works (whether you like how things are or not) you can use it to your advantage to make money. At the end of the day that is what it’s about. Making money! I find it interesting that the majority of the people that invest their hard earned money don’t take the same amount of time, if not more, in learning how and where to invest their own money then it took them to make it. Because if you are going to be successful in trading and investing you have to put the time in and do it yourself.
Comment by Mark Burdette (@markburdette) -
Great post! Thanks for the book suggestion!
Comment by Heather Buen (@dallassinglemom) -
What is your view/opinion on a website like Lendingclub.com? It’s a peer lending site. I’ve been using it recently and love that I can get 10% return on my money. I don’t like that I have to wait 3 years, but the fees are next to nothing and it seems to help good people who need it.
Comment by Peter Melnik -
And the beat goes on. In the meantime hard working people like me suffer the consequences. Not that I lost money in the market during that time, other than my retirement which no longer exists, but in trying to attract investors who got burnt when the bubble burst. Many, (and for good reason,) got very paranoid, though not necessarily smarter.
After almost two years of struggling I am finally entering an incubator where I will be able to prove my product. My biggest problem? I am not a tech company, though the word, “technology,” has been bastardized enough to encompass me now because I have what has become known as a, “green,” company, even though it was not my intention to develop my product as such. I just wanted to build the proverbial better mouse trap which I have done.
Investors are still impatient and want what they believe will bring them a fortune overnight. If you are tech, the investors ask how long before the market opens, when the company can go public and what is the exit strategy so the investors can cash out quickly, often to the detriment of the company they helped build. I have seen this when attending seminars and conferences which I find myself being invited to more and more.
I always get the chance to offer my “pitch”, but until I learned to use the new politically correct buzz words for green technology very few listened. Now the military is interested. Still, the investors want to know the same things. If they invest, when can they get out. Many even ask how much they can get when they dump me. They want specific answers as well as dates for exiting. Only one has bothered to get into what I am doing and why it will be a success. None have offered money. The one who is asking the right questions is watching me closely though and communicates a few times each week. The guy is a member of a group called Desert Angels. He does not invest in too many companies but has a reputation of picking winners, most of which he sticks with.
The other big problem these days is the government, who, with their black eye from such statements as, “You didn’t build that,” is not making it so many like myself cannot built “that,” without them, (the government.) To this end I have been pushed into programs such as STTR grants. While they have not given any word to date as to being accepted, it has been made clear that I cannot get my products certified unless I play ball with the government. I am doing so and things are starting to move along.
This company will succeed despite them though, and it will be a solid company with good products that many want. (Market research as well as prior sales has proved this.) Not only that, but I did not even realize the licensing potential for several of the products we developed to support our primary products as these have many uses beyond our own needs. Those who refused to support me before will be crying in their collective sleeves when they see what we have accomplished, especially those who told us the USA does not want or need brick and mortar companies anymore. The very few who have been supporting me and encouraging me through these last few years will be rewarded handsomely. All my hard work will pay off, and not too far in the future either. Within six months in the incubator and we will emerge, and soon after the whole world will wonder where we came from.
Comment by Rick Murray -
Good story. Reminds me of Peter Lynch’s book to buy low and then wait till the stock explodes.
Comment by Tom Handy (@handytc) -
Hi Marc, I am interested to talk with you about my company Eruption. I need someone to look at the big vision. Hope you can contact me so I can discuss this opportunity with you. Or as for anything else some of your good advise like all the Blogs I read from you I am very impressed. Best Regards, Gwen Legge President, CEO Eruption Inc. gl@eruptioninc.com http://www.eruptioninc.com 714-724-2687 – Direct Line
Sent via BlackBerry by AT&T
Comment by Gwen Legge -
Hi Mark
This is a truly brilliant article which exposes the fundamental (err, I am using the word fundamental) flaw/weakness in how Wall Street operates. You have nailed it a 1000%. There are many points in this article which I personally always felt as valid, but I was always alone in my thinking and never had any reference to look up to.
Today I really felt relieved reading your blog post. A huge weight was taken off my chest now that I know for sure, what I thought about Wall Street – that there is something fatally wrong with Wall Street – was confirmed beyond doubt by your article.
The courage, fearlessness, honesty and humbleness shown by you in writing this article is truly rare these days.
Hope the individual investor understand as soon as possible this great chain of ponzi scheme played by the evil alliance among Wall Street (reckless speculation with cheap money) + Fed (print as much cheap money as possible and create phony & bubble economies) + Government (Borrow from everybody and spend, spend, spend).
Thankfully there are sane soles like you and Peter Schiff (who has been alerting people tirelessly since almost a decade) to whom we look up to for advice and insights.
Thanks a tonne.
Regards
Harsh K
Comment by Harsh Kharshingkar -
Pingback: A few random links from my blog | Listics
If you have a sec, care to give your take on the ongoing Herbalife debate?
Comment by Noelle Doan Nguyen -
Alas, Where do I put my money? Real inflation is destroying my nest egg. And the fed/tres won’t let me earn a fair rate of return. AHHHH!!!
Comment by Bill LaJoie -
This is awesome! I was just about to put a recent windfall into the market, blindly. Thanks for sharing. Todd
Comment by Todd Ackerman -
Your quote early in the article…”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.” (end quote) made me think of “ponzie scheme”.
Nice to see near the end of your article you expose it as a ponzie scheme.
Consumer debt needs to be reduced through low interest rate incentives rather than bailouts. However, that would cause banks that are too big to fail, to shrink, and that goes against everything the government and wall street stands for.
Comment by alexlogic -
10 comments, 2 self promotions. Yes, it’s all about marketing
no matter how cheap shottish.
Great article, confirms my cynical investment approach.
Comment by Shaishen (@Shaishen) -
Mark,
my question would be are you still in the market today? and do you invest just in companies you understand or take advise from your brokers?
thanks,
Mark T.
Lincoln, NE
Comment by mark treinen (@tcaptainmo) -
Mark – nice post, thanks. As a side note, you should see how social media is ruining the stock market. You would think social media would be good for info, now when news hits it’s like “the number” x 10000 tweeters
Comment by Rebecca Diggler (@rebeccadiggler) -
Hey Mr. Cuban, another great article I’ll pass along.
I heard you were bashing on Facebook for taking themselves too seriously, not focusing on being a fun time waster. You make a lot of great points in everything I read from you – straight talk is appreciated by us combat vets out here. I’ve already noticed I don’t visit Facebook as often as I used to, and I see a lot of others migrating off as well.
Not really a surprise, the ‘internet landscape’ changes so fast, what’s unheard of THIS week is worth Pinterest money the next. 😉
Anyway, happy 2013, come check us out at NE1UP.com some time if you’re looking for a fun social network to get behind again.
Thomas
Comment by Thomas ʕ•̫͡•ʔ (@ne1up) -
Mark- Your posts are always interesting. You are never boring. You do a lot of good in the world just by sharing your knowledge and enthusiasm (not to mention all the Shark Tank investment dreams come true). Cheers to you, man. You are awesome.
Comment by Shawn Haning -
Awesome
Sent from my iPhone
Comment by J Z -
Great post Mark, Thanks! I enjoyed reading it and loved gaining that perspective…. will most certainly pick up that book as well.
Comment by kauffmanteam -
Very interesting. Thanks for your honesty about this. This is something I’ve kind of suspected but didn’t really want to believe was so true. Looks like I need to pick up that book. Seems the market may have only gotten more extreme in this sense since 2004. Either way, I wouldn’t have thought that you could love investing in businesses so much after knowing how much of many business’ success is based largely on marketing hype. Makes me feel like we are investing more in marketing effectiveness than in the businesses themselves. How do you still love business investing so much and still be so cynical about the salesmanship of it all?
Comment by Helen Hoefele (@figmentations) -
what then do you suggest John Q. Public should invest in to grow their money?
Comment by Brian Stone -
Ok Mark, you are a hard guy to reach so I figure that since I am the 3rd person to comment on this post, you are going to read this. Maybe not, but it’s a shot!
My company is working to disrupt the old established ways of reaching out to engage donors for global humanitarian relief.
I want to visit with you about our GiveNetwork platform. My intent is to gain your interest and hopefully your involvement.
I appreciate your time and hope to hear back soon.
Best,
Bob Jones
Comment by Give.mobi (@GiveDotMobi) -
Great article. it works to our benefit in reverse today too- great companies that do pay dividends, are buying back shares (not issuing more), are not getting loud, and can be bought at amazing values (at times). Yet the majority don’t even read the financial statements so wouldn’t recognize a value if it ran into them!
Comment by Jim Peterson -
It sounds like when you started your businesses you were passionate. I have a sense of cynicism coming from your blog today-sort of blaming others for chasing the almighty $. I have always appreciated your enthusiasm for creativity in business. It is refreshing. I think you help a lot of people who are also passionate about creating businesses through your show.
Comment by Miriam Yablon Hubbard -
Thank you for sharing your experience. Anytime someone; that has experienced the type of success that you have.. shares their story.. it brings it down to Earth.. Your story somehow; now, seems more human.. It’s crazy how; from afar, it all seems so impossible, what you have done…what you have achieved.
I was managing ‘Tower Athletic’, at that time.. putting together softball games for many of the folks that you were feeding advice to.. Before ‘Tuesday Morning in September’; before I had to have two spinal fusions.. That’s life..
Thanks again..
________________________________
Comment by James Kosior -
I wish I had seen this in 2004. Could have saved some money.
Comment by Casey Stevenson -
Spot on Mark if you want to learn how other commodities etc are manipulated have a read of my book. http://www.thistimeitsdifferentnot.com
Comment by Aivars Lode -