Mark Cuban is starting a Hedge fund that will gamble. Literally! Forget stocks, forget bonds, the money will be used to make bets.
(In case you do not know, Mark Cuban is the Billionaire owner of the Dallas Mavericks and former owner of Broadcast.com.)
The article is great. It has so many interesting and thought provoking lines I really have to stress that you should read it. Some of the highlights:
On market efficiency:
"It's an idea whose time has come. I have bet on stocks long and short for about 15 years now. I've done very well. There has already been one hedge fund started based on my trading results. In those 15 years, I have learned that despite all the claims and books written about efficient markets, the trading of individual stocks are not efficient. There are always people trading on better or worse information. There are always people trading on emotion rather than logic. There are always people t rading on hopes of the big hit. What Peter Lynch would call the '10 Bagger'. They were gambling. Nothing more. Nothing less"On SEC Enforcement:
"Unlike the stockmarket, you know the rules exactly. You know without question, the house is going to play by the rules. The gaming commission appears to actually enforce rules of play, unlike the SEC.""
"When you think about betting on sports, there really is far better information about your local sports team than there is about any local business in your market. The local papers cover the team every day. The local TV station gives a report about every game. There are radio stations who cover them for hours at a time. That's far more information than you get about Tyco or Computer Associates or NFI."
On accounting games
"Public companies play so many games with their numbers it's ridiculous. Should they expense options or not? Per forma vs GAAP? One time write-offs? Buying company after company? Writing down inventories then reselling them?"
I agree with the news articles that suggest this is a long shot at best of getting off the ground, but I personally hope it does. While he goes too far in my opinion with the inefficiency story, I do agree that gambling markets are very efficient and regulators appear to have an easier enforcement task.
One question I have is whether the NBA would allow him to do this? My bet is no. (Pun intended) But I sure would love to see the fight that he would put up if the NBA does tell him he can't do it! :)