Tag Archives | Mark Cuban

What other bloggers are saying

There are many traps for traders. The first is that trading is not a gimmie.  For some reason that I have no idea how to explain, people think making money by trading is a cinch.

There are obstacles to overcome, and below are some recent blog excerpts on related topics.



From John Kay at johnkay.com

"Irrationality lies not in failing to conform to some
preconceived notion of how we should behave, but in persisting with a
course of action that does not work."

When it doesn't work, it doesn't work.  Accept that fact and move on.




There's some very good advice offered by David at CrosshairsTrader.

I suggest reading the original for all the details.

Here's one sample:

"Do the hardest work first. The greatest performers in
any field delay instant gratification in pursuit of their ultimate goal,
which is to be the best they can be while pushing through less than
comfortable situations.  For me, the hardest work is determining a loss
target.  I firmly believe that the very best traders determine where a
loss is to be taken before determining where money can be made.  It is
difficult to consider how much you are willing to lose before you
consider the instant gratification of adding to your bank account.  But
it has to be so.  Accept a loss and delay the gratification of instant
money for the reward of a lifetime of income."


Here is an example of simplified Mark Cuban advice, from his blog maverick. It's a repeat of what he has said before, but it's so important that I want to help spread the word. 

"Now that Madoff is in jail, no investment can offer returns with zero
risk. If you don’t fully understand the risks of an investment you are
contemplating, it’s ok to do nothing. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put your money in the bank."


Carl, at behavior gap discussed Things You Can Control

"Overconfidence
is a huge problem when it comes to making investment decisions. In
fact, it’s a huge problem when we’re dealing with any issue that has an
unknown outcome. It’s clear that we’re very bad at dealing with unknown
outcomes, but the biggest problem is that we actually think we’re good
at it.

We think that we can control much more than we can, and we can
actually forecast the future. Often we point to what we view as clear
evidence and wonder how anyone who doesn’t see it the same way can be
so stupid. Focusing on the things that matter and the things we can
control will go a long way to avoiding investor overconfidence."

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What Other Bloggers are Saying

Stephen Dubner, one half of he Freakonomics team, recently posted about

"John Allen
Paulos
, who writes about
numbers
as well as anyone around, has just published another excellent
piece
in the Times Magazine, this one about the strengths
and limitations of relying on data to make decisions in the modern
world.

Paulos provides an excellent example of tricky statistics from the
medical realm."

That example is well worth considering.


Freakonomics               
Super_f

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Preet Banerjee is giving away an iPad.  To enter, just leave a comment at his blog. Details: WhereDoesALLMyMoneyGo.com

In addition to the giveaway, Preet writes an excellent blog.  Take this opportunity to get acquainted.

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For investors who have some of their money invested passively, Michael James on Money raises an important question:

"For investors who maintain constant portfolio allocations to different
asset classes, such as stocks and bonds, there is a debate about when to
rebalance. Most advice is to rebalance periodically, such as quarterly
or yearly. Others suggest a threshold approach where re-balancing is
based on when the allocation gets sufficiently far from the target
allocation. I am in this latter camp."

Me too.  Passive investing is already unsophisticated.  If you are going to play,don't allow a random event, such as the date, influence your investment decisions.

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Mark Cuban lays it on the line when discussing: What Business is Wall Street in?

"Lets talk the real problem that regulators, public companies,
investor/shareholders and traders face.  The problem is that Wall Street
doesn’t know what business it is in. Regulators don’t know what the
business of Wall Street is. Investor/shareholders don’t know what
business Wall Street is 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."

If you agree, as I do, then it's truly foolish to be invested in the stock market.  It is a big gambling casino and the quants have a big edge.  That doesn't mean you shouldn't trade, but if investing for a retirement that's decades down the road, is the stock market where you want to be?  I don't have any alternatives to suggest.

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Eric, in Falkenblog:

"A powerfully bad theory is like a lie–it has many inconsistencies
because it isn't true… One of the
many bad implications of having the delusion that risk begets a higher
expected return is that people invest in the stock market thinking they
then deserve a higher return
, a strategy that worked pretty well in the
US in the 20th century, as long as you implemented a low-cost strategy
that minimized trading and taxes… The idea that a
passive approach to equities implies higher-than-average returns puts
you at the mercy of brokers who … are selling hope."

Can you imagine trusting your financial future on the premise that you deserve a high return?  I recognize hat we all want to believe we are going to get that return, and passive investing adherents seem to believe it's the gospel truth, but why should the future resemble the past?

Knowing how to invest is very difficult.  During bull markets, we always believe that investing in stocks is good, but we reconsider during uncertain times.  Is that the problem right now?  The bull may be ending so some of us tend to pay attention to the doubters?  I don't know.  But I do know that each of us should seriously consider our alternatives, and not just blindly believe we deserve riches.

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