3 ms·
Here's my response from the HN discussion a year ago [0]: ----- If Mark Cuban thinks the market is now all about exotic derivatives rather than buying stock i
by lotharbot 15y ago
Here's my response from the HN discussion a year ago [0]:
-----
If Mark Cuban thinks the market is now all about exotic derivatives rather than buying stock in companies you believe in, he's listening to the wrong people. Commission-based brokers talk about exotic derivatives; Warren Buffet still talks about buy-and-hold.
The biggest wins and losses in day trading will come from exotic derivatives simply by their nature: they're highly leveraged bets. Those firms that create the vehicles to make those bets aren't "hackers", they're "Vegas". You ask for a bet against the housing market or for cattle, they set up a structure to let you make that bet, and you play the odds -- and you might beat the other betters in the market over the short term, but it's the house (taking its percentage off the top) that always wins long term. Mark Cuban is right to be uncomfortable playing that game.
Meanwhile, people like Warren Buffet continue to look for healthy companies that are underpriced and buy into them for the long term. Day-to-day the market might be driven by short-term bets, but over the course of 3 decades it's still driven by the fundamental health of companies. If anything, those who care about "the performance of specific companies and their returns" benefit from the fact that occasionally, as a result of day traders' bets, healthy companies' stocks get sold at bargain prices.
If you try to play Vegas' game, you'll probably get burned. But if you stand back, watch the game, and buy when their game creates a bargain price on good long-term stocks, you stand to get very solid returns.
-----
[0] http://news.ycombinator.com/item?id=1332422 http://news.ycombinator.com/item?id=1332422
- gamble 15y agoWarren Buffet isn't the average value investor. He rarely buys stock on the open market. The average investor doesn't have his ability to buy control of the company, or to direct profits from a declining cash cow into another company with more growth potential. I suspect Buffet would agree with Cuban on the danger of buying common stock based purely on technical analysis.
- rfurmani 15y agoActually, Buffet has time and again said that if he had only 0.5-1.0 million to manage he could consistently get 50% a year. His greater capital does give him special access to management, but also greatly restricts where he can invest. I'm part of a fund that does automatic value investing based on an analysis of the fundamentals of the universe of stocks, and you can do quite well for yourself. Here Graham's "the intelligent investor" is still the bible
- benmccann 15y agoWhat fund is that?
- Tichy 15y agoWhat I don't understand is: why doesn't evolution weed out the Vegas types? Where does the steady new influx of money come from? Or was it just the housing bubble that provided the money (in the end even tapping into retirement funds of iceland)? Maybe now we have reached a point where most Vegas types will be eliminated. Perhaps not a bad thing? Except they are probably just poor individuals who were too lazy to think about finances for themselves. The first thing I learned about investing is "don't invest in anything you don't understand", which pretty much excludes complicated investments constructs, and is not that hard to digest. But what would be the solution? Forbidding "gambling" to individuals would possibly result in communism, as it would imply the state would have to dictate the investments.
- count 15y agoIt's not 'new money'. For every bet you make and lose, someone is winning (the money has to go somewhere!).
- lionhearted 15y ago> What I don't understand is: why doesn't evolution weed out the Vegas types? People have short memories. Seriously, that's the answer.