Sigh, I like Mark Cuban, its fun to watch him on Shark Tank but I don't think he makes a good case here. The financial markets have several ways in which people use and/or exploit them. One of the ways people use the stock market is for investing, one of the ways they use the market is for 'trading' which for all intents is extracting value out of the first (or second) derivative of market trades.
An analogy (weak but serviceable) is that a home town bank is for "saving money", you save your money, you deposit, you write drafts against your deposits that other people can use to make value limited withdrawals. Oh and the people in the bank? They also have a business where they take your deposits and they loan that to people who need money now and can repay it in the future. But to do that they have to do 'magic math' and figure out how likely it is that this borrower will pay it back and they do that with an interest rate. Now the bank, like it has from the beginning of time, is "making money using your money and dealing with people who will pay to borrow it."
Interestingly this exact same works on Wall street and with 'investment banks'. You "invest" (equivlaent to making a deposit) and instead of a chit that says you have $1000 on deposit you get one that says you have ownership of 50 shares of stock in AT&T. Guess what, the bank doesn't just sit on a bunch of stock certificates, they have another business where they let other people use those shares on the agreement they can always get back 50 shares to give to you if you decide you want the certificates to put in a safe deposit box or something. One customer is 'investing' and one (possibly different) customer is 'trading'.
Guess what you can do this with anything of value, and if its something someone consumes you call it "commodities", if its currency you call it "banking", if its stocks and bonds you call it "investing", and if its gossip you call it "journalism."
Mark is smart enough to know this, so why the blog post?
My guess is that a lot of people don't like high-frequency-trading because they can't afford to play. What has happened is that a large holding company, fund, or bank with programmers and computers and data center space near the exchange can easily out trade someone trying to do this through the e-trade Web API. I get how that could be annoying to someone who used to make money that way, tell it to all the folks who used to be able to make a class A game title with a couple of programmers and an artistically inclined person or two.
My opinion is that Mark Cuban works hard, but he's opinionated most in the areas where he knows the least. He is not an authority on anything, except maybe sports team management. He got lucky selling a shell of company to Yahoo (a fool of a buyer) in the dotcom boom.... but his performance on shark tank and on his blog tell me that, he's confused his luck with talent.
Agreed. He's entertaining and probably smarter and more focused than 99% of people but his poor arguments make me think he's not a precise thinker and isn't mentally flexible. I wonder if he'd be able to answer this question: What would he have to be persuaded of to change his mind on this topic? (I wonder what everyone including myself would answer to this question.)
I wonder what his motivation is. Is he upset by poor performance in his personal account and wants to blame someone? Does he buy the shockingly confused media hype? Is he threatened by something he incompletely understands? Is he doing it to get even more attention? Is he trying to seem intelligent or gain even more status by jumping on a bandwagon to criticize a popular scapegoat?
An analogy (weak but serviceable) is that a home town bank is for "saving money", you save your money, you deposit, you write drafts against your deposits that other people can use to make value limited withdrawals. Oh and the people in the bank? They also have a business where they take your deposits and they loan that to people who need money now and can repay it in the future. But to do that they have to do 'magic math' and figure out how likely it is that this borrower will pay it back and they do that with an interest rate. Now the bank, like it has from the beginning of time, is "making money using your money and dealing with people who will pay to borrow it."
Interestingly this exact same works on Wall street and with 'investment banks'. You "invest" (equivlaent to making a deposit) and instead of a chit that says you have $1000 on deposit you get one that says you have ownership of 50 shares of stock in AT&T. Guess what, the bank doesn't just sit on a bunch of stock certificates, they have another business where they let other people use those shares on the agreement they can always get back 50 shares to give to you if you decide you want the certificates to put in a safe deposit box or something. One customer is 'investing' and one (possibly different) customer is 'trading'.
Guess what you can do this with anything of value, and if its something someone consumes you call it "commodities", if its currency you call it "banking", if its stocks and bonds you call it "investing", and if its gossip you call it "journalism."
Mark is smart enough to know this, so why the blog post?
My guess is that a lot of people don't like high-frequency-trading because they can't afford to play. What has happened is that a large holding company, fund, or bank with programmers and computers and data center space near the exchange can easily out trade someone trying to do this through the e-trade Web API. I get how that could be annoying to someone who used to make money that way, tell it to all the folks who used to be able to make a class A game title with a couple of programmers and an artistically inclined person or two.