Whether you love him or hate him, you would have to agree that Mark Cuban is force within himself.
The product of a working class family, Cuban once sold garbage bags at the age of 12 to pay for a new pair of expensive shoes. From there the entrepreneur was born, eventually earning himself a place in the Forbes 400 with a net worth of $2.4 billion.
So when Cuban has something brutally honest and obvious to say about the markets it is worthwhile to listen in.
Prompted by the “Flash Crash”, here’s Cuban take on the whole matter.
From blog maverick entitled: What business is Wall Street In?
“The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It’s a platform to be exploited by every technological and intellectual means possible.
The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.
I recognize that one is illegal, the other is not. That isn’t the important issue.
The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days ?”
“There will be another crash, because there are too many players looking for the trillion dollar score. They can’t all win, yet how many do you think wouldn’t risk everything, even what is not theirs, for that remote chance to score big ? Put another way, there is zero moral hazard attached to any trade. So why wouldn’t traders take the biggest risk possible ?”
Of course, I am of the opinion here that Mark Cuban has absolutely nailed with this piece. Which is why I want you read the following article.
Because let’s face it, being perfect for 61 straight trading days is as likely as being mauled by a polar bear in the Grand Canyon.
And when the 4 big banks manage to all do it all at the same time it’s about as likely as getting mauled by that same bear on the moon.
Only on Wall Street folks…with your money no less.
From the New York Times by Eric Dash entitled: 4 Big Banks Score Perfect 61-Day Run
“It is the Wall Street equivalent of a perfect game of baseball — 27 up, 27 down, the final score measured in millions of dollars a day.
Despite the running unease in world markets, four giants of American finance managed to make money from trading every single day during the first three months of the year.
Perfect trading quarters on Wall Street are about as rare as perfect games in Major League Baseball.
But Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase & Company produced the equivalent of four perfect games during the first quarter. Each one finished the period without losing money for even one day.
Their showing, disclosed in quarterly financial filings, underscored the outsize — and controversial — role that trading has assumed at major financial institutions. It also drives home the widening lead that a handful of big banks are enjoying over lesser rivals on post-bailout Wall Street.
Experts said it would be difficult to repeat such a remarkable feat this quarter. Even so, the performance could feed the debate in Washington over the role of proprietary trading at banks, as well as sometimes conflicted roles banks play as market makers in matching buy and sell orders.
Risk management experts said the four banks, as well as other Wall Street players, reaped big rewards without necessarily placing big bets that stocks or bonds would go up or down. Instead, they mostly played matchmaker, profiting from the difference between the prices at which clients were willing to buy and sell. Banks said that customer order flows were particularly strong during the period.”
Great stuff Mark.
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