Mark Cuban perspective on bubbles was recently brought to light in his latest interview with real vision.
Mark Cuban noted that there are Fed-driven bubbles and people-driven buying bubbles. “I think this is a Fed-driven type of bubble rather than anything else” said Mark Cuban.
How does Mark Cuban perspective on bubbles compare with the internet bubble of the 90s?
“You can’t compare today with the internet bubble, interest was 4 or 5 % so people had alternatives they could put money in a saving account and make money” said Mark Cuban
“So, it was a personal choice to come in and buy” he said.
“I think this is a Fed-driven type of bubble rather than anything else”
In other words, in the age of there is no alternative (TINA) with negative real yields and zero negative interest rates capital flows into stocks are likely to continue, which supports the stock market bull has legs view. Think of the flow of water influenced by gravity flowing downstream with exits blocked and the only passage open for capital to freely flow is into the stock market. The greatest monetary easing experiment in the history of finance is gravity, which is causing a flood of capital into the stock market.
Mark Cuban perspective on bubbles, given no real alternative for investors is that we may be in a Fed driven bubble due to the central bank’s monetary accommodation policy
Meanwhile, the democratization of finance plays out in the form of stimulus checks, which is driving a stock market buying spree. Nearly half, 40% of any payments received will find their way into stocks and it is giving birth to a Reddit generation of traders.
“I love it is the revenge of the nerd the little guy, it is just using the same techniques that broking firms have used forever. Get long and get loud. It is not investing, not trading it is almost revenge and it is not a bad thing because of what it represents and what it could be going forward. Little guys turning into something that has a powerful impact” said Mark Cuban.
“I love it is the revenge of the nerd the little guy, it is just using the same techniques that broking firms have used forever. Get long and get loud.”
MARK CUBAN (on Reddit traders)
The revolution has gone digital too
“There is going to be bloodshed along the way, there is going to be pain people losing money” said Mark Cuban.
Mark Cuban perspective on bubbles also highlights a boom in margin trading, which could spark a spike in volatility
“People in the stock world expect to margin and goose their returns” said Mark Cuban.
That is fine so long as the bull market can keep running, but when bulls are sent in retreat and bears take territory that triggered a $20 billion margin call.
“You are going to get companies that don’t work but there are going to be a lot of winners. America 2.0 is going to come out” – Mark Cuban
Mark Cuban perspective on bubbles doesn’t apply to fourth revolution technologies where he remains ultra-bullish, particularly in the artificial intelligence blockchain space
Mark Cuban sees a transformation where blockchain technologies, transactional blockchain, and smart contracts today are similar to how digital streaming has transformed broadcasting over the last two decades. Few people today watch TV, listen to the radio or watch videos. Broadcasting has moved to digital streaming.
“You are going to get companies that don’t work but there are going to be a lot of winners. America 2.0 is going to come out” he said. “The game has changed 180 degrees if you don’t know it is going to smack you down and make you bleed. I mean being able to earn money via digital” he added.
“Disruptors always win, I don’t see any horses and buggies, it has got the same feel of the internet during the early days but we don’t know who winners will be yet. We don’t know who are the Amazons and who are the Pet.com” said Mark Cuban.
Surprisingly Mark Cuban perspective on bubbles does not extend to cryptocurrencies.
Bitcoin is a store of value because he thinks it is scarce.
I disagree Bitcoin can be divided into fractions similar in the way that numbers can be divided which is infinite. Moreover, it needs constant hype to keep the price propped up. My thinking is more aligned with Warren Buffett’s value investing. I believe a store of value is not an ideology, a rare diamond, a Renaissance work of art has value and is a store of value irrespective of your belief system.