Entrepreneur Mark Cuban speaks against investment diversification

[Chester_A._Riley]

I saw this interview with entrepreneur Mark Cuban and wondered if Mr. Cuban is merely diverting attention from his NBA labor problems with some inflammatory statements on investing or if he truly believes this stuff. Either way, will he be doing any damage?

Cuban on Investing: Diversification Is for Idiots - MarketWatch Video

 

[MasterBlaster]

This is the sort of the antithesis of Bernstein's MPT's holding of uncorrelated assets philosophy.

That's quite a talent to pick only the winners and dump the losers. If he can consistently do it then more power to him.

 

[Gone4Good]

After a quick read of his comments, all I can say is that it is better to be lucky than good.

His comments and his actions are internally inconsistent:

Today, there’s so much money in huge hedge funds with vast research capabilities, Cuban believes “there really aren’t any advantages for the individual traders. And so my approach has always been (that) unless I know something specific, put it into cash.” . . . In 2008 and 2009, Cuban says he piled into master limited partnerships, mortgage-backed securities and Australian bonds.

Really, he knew something specific about mortgage backed securities in 2008, when people who've been dealing with them for years couldn't figure out what was happening? Doubtful. And what possible information could he have had about Australian bonds that the market didn't know?

Anyway, his opinion seems to be that diversification is for idiots and also there really aren't any advantages for individual traders.

Brilliant.

 

[bbbamI]

I don't have anything to say about the article; I just have to comment on Gone4Good's avatar...I love it...it cracks me up!

 

[Gone4Good]

I don't have anything to say about the article; I just have to comment on Gone4Good's avatar...I love it...it cracks me up!

Thanks . . . it's a photo of me monkeying around in Jamaa-el-Fnaa Square, Marrakesh, Morocco.

 

[nbw888]

"Wide diversification is only required when investors do not understand what they are doing.”

“Risk comes from not knowing what you're doing.”

--Warren Buffett

 

[Gone4Good]

"Wide diversification is only required when investors do not understand what they are doing.”

“Risk comes from not knowing what you're doing.”

--Warren Buffett

Given Buffett's track record picking individual stocks, I might be inclined to believe he knows something about stocks that the rest of us don't.

Cuban, meanwhile, made his fortune selling his company with $13.5MM in revenues for $5.9B. Nice trade, for sure. But I don't think this qualifies him as an expert investor.

"Hey, I won the lottery! Now let me tell everyone why they should disregard generations of investment wisdom and listen to my investment advice."

 

[nbw888]

And what possible information could he have had about Australian bonds that the market didn't know?

The Australian economy and currency has been much more solid than a majority of nations throughout the world. Australian bonds pay more than the US, and are perceivably safer since Australia doesn't have the structural problems the US does. I don't think he's a genius, he just spends his time researching all of this stuff more than most. Same with Buffett. He's not a genius, he spends all day looking for good companies that are undervalued.

 

[FinanceDude]

The Australian economy and currency has been much more solid than a majority of nations throughout the world. Australian bonds pay more than the US, and are perceivably safer since Australia doesn't have the structural problems the US does. I don't think he's a genius, he just spends his time researching all of this stuff more than most. Same with Buffett. He's not a genius, he spends all day looking for good companies that are undervalued.

Hey, who had better market timing than Mark Cuban, selling his company for a WAY overpriced number right before the market crashed? He is a genius.........

 

[nbw888]

You make a good point!!

 

[clifp]

Given Buffett's track record picking individual stocks, I might be inclined to believe he knows something about stocks that the rest of us don't.

Cuban, meanwhile, made his fortune selling his company with $13.5MM in revenues for $5.9B. Nice trade, for sure. But I don't think this qualifies him as an expert investor.

"Hey, I won the lottery! Now let me tell everyone why they should disregard generations of investment wisdom and listen to my investment advice."

I am on the fence about Cuban. I was definitely rolling my eyes listening to the interview a few days ago. On the other hand he clearly is a smart guy and a great marketing/promotion talent. Certainly of himself!.

I also have watched him in the Angel Investment show "Shark Tank" and he is at times an insightful entrepreneur. I just think his advice is not particularly useful to folks who aren't near genius and don't have Texas size egos and self-confidence.

 

[harley]

Hey, who had better market timing than Mark Cuban, selling his company for a WAY overpriced number right before the market crashed? He is a genius.........

Hey, I sold my house for a really good price just before the market crash. Maybe I'm a genius too! Of course, I then built an even more expensive one that is currently worth about 2/3 what I paid for it. Maybe I'm not a genius. How has Cuban done since the big win? That's the question.

 

[arebelspy]

The dude finally won his championship ring, he's allowed to say whatever he wants this summer.

/still happy the heat lost

 

[BLS53]

I see Cuban as this generation's Ted Turner. A super successful entrepreneur, who also happens to be a nutcase.

 

[eytonxav]

I see Cuban as this generation's Ted Turner. A super successful entrepreneur, who also happens to be a nutcase.

Yes, but he did behave himself during the playoffs.

 

[teejayevans]

"Wide diversification is only required when investors do not understand what they are doing.”

“Risk comes from not knowing what you're doing.”

--Warren Buffett

A quick check shows that Berkshire hasn't done that much better than the S&P in past 10 years. Can I match the returns the billionaires get with their access to information and staff to analyze the individual stocks, no, but I'll do better than most.
TJ

 

[kcowan]

I think both Buffet and Gates built their riches by betting on what they were good at, not on asset allocation.

 

[Nords]

A quick check shows that Berkshire hasn't done that much better than the S&P in past 10 years. Can I match the returns the billionaires get with their access to information and staff to analyze the individual stocks, no, but I'll do better than most.
TJ

Funny you should mention Berkshire. By buying in 2001-02 and selling in 2008 we [-]facilitated a big chunk of our early retirement and sent a child to college[/-] doubled our money.

I'm pretty happy we don't invest in the S&P500.

 

[wildcat]

A quick check shows that Berkshire hasn't done that much better than the S&P in past 10 years. Can I match the returns the billionaires get with their access to information and staff to analyze the individual stocks, no, but I'll do better than most.
TJ

Buffet is kind of cursed with the law of large numbers at this point (tons of cash but fewer places to put it to work that would make a difference). You could go back even further when Berk was smaller and acquisitions and portfolio purchases had a bigger impact on the compay & check back in though.

Personally, I think Cuban makes sense the times I have read what he posted on his blog and doesn't give bad advice although it is much more geared towards the non-Bogle crowd/entrepreneurial crowd. I also think he has come up with some decent 'out of the box' ideas when it comes to small business growth.

He had a blog post some years ago that basically said his keys to getting rich (apparently people ask all the time) for others would be:

1) there are no shortcuts, it's not easy
2) pay off debt
3) don't use credit cards
4) be frugal, build cash and put it in the bank/CDs
5) study and learn everything you can about a business that interests you (even get a job in the sector)
6) when the fat pitch comes along go all in as you should have the cash to take advantage of it

That's not too bad to me. Everyone is also discounting the fact that he built and sold a company prior to the Internet score. He was already a multi-millionaire before the broadcast.com sale so perhaps he should get a tad more credit .

 

[haha]

. He was already a multi-millionaire before the broadcast.com sale so perhaps he should get a tad more credit .

Credit is dispensed sparingly around here.

Ha

 

[teejayevans]

Funny you should mention Berkshire. By buying in 2001-02 and selling in 2008 we [-]facilitated a big chunk of our early retirement and sent a child to college[/-] doubled our money.

I'm pretty happy we don't invest in the S&P500.

Again, take a look at a chart of S&P, same return, 800 in 10/2002, 1558 in 10/2007,
If you had bought Apple, it was 7.015, close today at 366.
Hmmm, you could have had a lot more children.
TJ

 

[REWahoo]

Jack Bogle: Why Mark Cuban Is Wrong on Investing - MarketWatch Video

Buying and holding stocks and bonds for the long term and maintaining a diversified portfolio are still the smartest strategies for the average investor, says Vanguard founder Jack Bogle in answer to Mark Cuban and other critics of these traditional approaches. In the Big Interview with Journal columnist Jason Zweig, Bogle takes aim at the culture of market speculation. Betting on long odds, he says, "doesn't pay off very often."

 

[Gone4Good]

Betting on long odds, he says, "doesn't pay off very often."

No, but it gives the appearance that winning the lottery is a matter of skill and determination. Never mind that the highly paid and highly motivated teams of analysts and portfolio managers, who do nothing else but study stocks for 80 hours per week, have access to insiders and technical trading flows, can't reliably do it, Joe Blow with a couple of extra minutes per day, CNBC, and a news letter or two can. Makes perfect sense.

 

[ziggy29]

Jack Bogle: Why Mark Cuban Is Wrong on Investing - MarketWatch Video

Of course, the irony is that Mark Cuban doesn't have to be right. He could take all of his investments in the market, blow it in Vegas, and still be filthy rich. Most of us don't have that luxury.

It's easy to take extreme risks (or take none at all) when you have so much money that neither a market crash nor lack of compounded growth can wipe you out.

 

[GregLee]

Makes perfect sense.

But it does make sense. You have a reason to make money for yourself, but a professional portfolio manager who could actually make money at it would have no reason to make money for you -- he'd be making it for himself.