It is getting increasingly difficult to just invest in companies you believe in.
This is a key point, and he doesn't justify it at all. Are value investors negatively affected by someone making a penny when the value investor makes a $1000 trade? Or are they positively affected by liquidity? He is either unaware that it's a controversy with plenty of history, or he prefers to gloss over it. He seems bothered by the fact that there's a lot going on besides simple value investing, as if any other activity must be detrimental to the operation of the market. He seems to be implying that the other activities on Wall Street are preventing stock values from reflecting investors' rational estimates of the value of the underlying businesses. Seems to be, I can't be entirely sure. If that's his point, he needs to muster some evidence, because plenty of people claim the opposite.
Individual investors and the funds that just invest in stocks and bonds are not going to crash the market.
Individual investors are very much among those who panic and sell when the market goes down, or who establish stop-loss orders with their brokers that cause market losses to irrationally cascade. Plenty of individual investors are eager to turn into gold bugs at the faintest whiff of a downturn. If amateur investors or stock analysts are better at value investing than "traders", they should eat the traders' lunch when the market panics. If it's the other way around, then the traders aren't the ones crashing the market.
He also seems to miss the point that if it is more difficult to invest in value companies, it's because the market is doing a better job of value investing.
I.e., once upon a time, Promising Tech, Inc. might have been a great value play. This means that the stock price of PT was too low. In today's market, the stock price of PT is set at a level where you don't know whether to buy or short - that is to say, the stock price of PT is just right. PT is getting exactly as much money as they deserve.
Sounds like Cuban is just annoyed that Wall St. is doing a better job than he is.
Are you saying that the Efficient Market Theory (EMT) is correct?
The market is mostly efficient, but there are still many efficiencies that can be exploited by people who do their homework and are ready to stick around through volatility and/or wait for catalysts.
Yes, that's how firms on Wall Street make money: they exploit inefficiencies in the market in the short term or long term (and, by the way, by doing so, correct the inefficiencies). Paradoxically, firms that target the shorter term do better when volatility is high, because it usually means there are some pretty massive inefficiencies going on.
An alternative read is that he thinks that non-value investing is swamping value investing, and that prices have little correlation with underlying value. It's sort of like trying to figure out how much gold is worth, if all you know is how much gold is actually used by jewelry and industry - you'll get killed in the real market.
This is a key point, and he doesn't justify it at all. Are value investors negatively affected by someone making a penny when the value investor makes a $1000 trade? Or are they positively affected by liquidity? He is either unaware that it's a controversy with plenty of history, or he prefers to gloss over it. He seems bothered by the fact that there's a lot going on besides simple value investing, as if any other activity must be detrimental to the operation of the market. He seems to be implying that the other activities on Wall Street are preventing stock values from reflecting investors' rational estimates of the value of the underlying businesses. Seems to be, I can't be entirely sure. If that's his point, he needs to muster some evidence, because plenty of people claim the opposite.
Individual investors and the funds that just invest in stocks and bonds are not going to crash the market.
Individual investors are very much among those who panic and sell when the market goes down, or who establish stop-loss orders with their brokers that cause market losses to irrationally cascade. Plenty of individual investors are eager to turn into gold bugs at the faintest whiff of a downturn. If amateur investors or stock analysts are better at value investing than "traders", they should eat the traders' lunch when the market panics. If it's the other way around, then the traders aren't the ones crashing the market.