Mark Cuban on Investing
I still think it's funny that I enjoy reading Mark Cuban's blog so much. I even read some of the basketball stuff, and I don't think I've watched an entire NBL game in my entire life!
But it's the non-basketball stuff that I really enjoy. Like one from a couple weeks ago called What's an Investor?.
A couple of my favorite parts are:
I'm cool with investment. Speculation, not so much. And yet speculation is everywhere these days! All my friends watch their investment portfolios constantly, and all they care about is if they'll be able to sell for more than they bought. Or worse, if they can sell for a high enough price to pay back the money they borrowed to buy the shares and still make a profit. They could care less what the companies do or anything other than making money from the transactions. The same with their houses. They don't buy a house because they love it, because they want a nice home. All they're thinking about is resale value I swear, some of them would live in a cardboard box if they thought they could sell it for twice what they paid within 5 years!
The way Cuban explains the benefits of investment explain exactly why I like this approach:
Like I said in a previous entry, I'm a win-win kind of guy.
He also does a pretty good job of explaining why I don't like speculation, either on a small-scale personal level, or even less on a large-scale level:
It's that part about how, if the money ever stops flowing in, everything falls apart that I'm not too keen on. But so many people are willing to take the risk and bet that they'll get in, make a butt-load of money, and get out before it all hits the fan. And then when they do get caught out and lose their asses, they all start crying and moaning about how they got screwed.
I see this stuff on a small scale all the time. It's bad enough at that level. But when it gets to the point where stockmarkets crash, banks and investment companies go under, etc. it ain't pretty.
But it's the non-basketball stuff that I really enjoy. Like one from a couple weeks ago called What's an Investor?.
A couple of my favorite parts are:
The difference between the two [speculation and investment]is very simple. If you spend the money and the only way you can earn a return on that money is by selling whatever it is you have purchased. You are speculating.
If you give your money to a person or company, and that money is used directly to create commerce or to create an asset that will be used in commerce and if there are profits from that commerce that can be returned to you as a result, that is an investment.
I'm cool with investment. Speculation, not so much. And yet speculation is everywhere these days! All my friends watch their investment portfolios constantly, and all they care about is if they'll be able to sell for more than they bought. Or worse, if they can sell for a high enough price to pay back the money they borrowed to buy the shares and still make a profit. They could care less what the companies do or anything other than making money from the transactions. The same with their houses. They don't buy a house because they love it, because they want a nice home. All they're thinking about is resale value I swear, some of them would live in a cardboard box if they thought they could sell it for twice what they paid within 5 years!
The way Cuban explains the benefits of investment explain exactly why I like this approach:
When money goes to create commerce, that’s capitalism at its best. Money going to smart people to do smart things. If it has good results, everyone makes money. The economy grows. Expectations are based on the prosperity of the company, typically over a longer term. New ideas create new wealth. It’s not a zero sum game. It can be an everyone wins game.
Like I said in a previous entry, I'm a win-win kind of guy.
He also does a pretty good job of explaining why I don't like speculation, either on a small-scale personal level, or even less on a large-scale level:
When most of the money being ingested into our public markets is speculative, then the competition for returns increases. When the majority of speculative money is deployed by funds, who must compete with each other, and within which fund managers must compete to keep their jobs, the amount of risk acceptable for any given level of return increases.
This only works as long as new money continues to come in. As long as people keep streaming part of their paychecks every payday to mutual funds. When the money stops flowing in, there is no one for the speculators to sell to and the prices start falling and everyone starts freaking out.
It's that part about how, if the money ever stops flowing in, everything falls apart that I'm not too keen on. But so many people are willing to take the risk and bet that they'll get in, make a butt-load of money, and get out before it all hits the fan. And then when they do get caught out and lose their asses, they all start crying and moaning about how they got screwed.
I see this stuff on a small scale all the time. It's bad enough at that level. But when it gets to the point where stockmarkets crash, banks and investment companies go under, etc. it ain't pretty.
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