Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Sunday, September 11, 2011

Bogle versus Cuban

This is a really good interview, by Jason Zweig, of Jack Bogle found at Biz of Life's blog.  Jason Zweig is an excellent interviewer and asks the questions that occur to listeners.  The interview is about Mark Cuban's approach to investing where he says "buy-and-hold" and "diversification" are not the keys to good investing - I've paraphrased here big time; Cuban is a bit blunter.  All of this is exactly counter to the principles Jack Bogle has touted and on which his flagship index fund was built.

There are some interesting tidbits in the interview.  Bogle talks a bit about how exchange traded funds (ETFs) have increased volatility.  He mentions leveraged ETFS.  He is against them.  I agree and believe they should be banned.  Instruments that push capital markets more towards becoming a gambling casino just increase the odds of a bad macro outcome in the capital markets.  We know the script:  some "too big to fail" entity overdoes it, etc., etc.  I know there is a huge lobby out there ready to produce data for Congressmen and their staffs on the hedging characteristics of these instruments - especially over a fine dinner of steak and wine at one of DC's outstanding restaurants.  Leveraged ETFs remind me of other derivatives and former Fed Chairman Greenspan extolling their value as a hedging instrument.

Bogle also mentions "apocalyptic risk" - a subject on the minds of many today, especially with the ongoing failure of government finances.  He says that it is impossible to hedge against.  Actually that isn't exactly correct.  Investors can buy long-term puts on the S&P 500, for example.  Granted, they will cost and eat into positive returns.  For example, take 5% of the portfolio and buy long-term puts and, if the market is up 12%, you'll only get 7%.  But still, it is a hedge.

To be politically correct, here's the Mark Cuban interview.  I think he makes a good case for how a billionaire might approach investing.  He says to avoid diversification and stay fully invested.  Instead, invest in what you know, hang out in the weeds until volatile markets come along, and then make big bets in what you know better than the experts. Going unsaid is what happens to the smaller investor who makes a wrong bet and/or who doesn't have access to the sources that a billionaire attracts.

He does offer interesting comments on patent trolling and some basic rules that should be followed--like paying off credit cards and thinking about the transactional value of cash.  He is wrong in mentioning a deficit of $10 - $11 trillion.  The deficit is actually around $1.4 trillion.  He had in mind the national debt.


  1. Well said! The case for leveraged ETFs and other questionable securities like naked shorts, which in my opinion, are very destructive, is that they provide liquidity.

    They've been harping on this for quite a while and I don't think anything's going to change.

  2. Thanks for the mention and posting the Cuban interview. If I was worth several billion dollars I take some of my money and invest like Cuban as well, but I'm a long way from a billion dollars.

  3. re: MC Leverage is interesting. If you go to your bank and ask to borrow $100,000 to buy Microsoft stock they will laugh you out of the building. Banks of course are leveraged to the hilt and had to be rescued because of their leveraged exposure to toxic debt.
    re: Grouch I do as well. I think its important for the sake of keeping up with markets. Interestingly. Charles Ellis and Burton Malkiel ( the Jimmy Page and Eric Clapton of the investing world) dabble in individual stocks. To paraphrase a saying - anyone who has walked into an Apple store and not wondered if they could buy stock in Apple should check their pulse.

  4. I agree with you 200-300% on the leveraged ETFs. They should be banned since after 1 day, they start increasing tracking error. I am also a big believer in puts. In a true apocalypse, will they really be a hedge. I suppose markets might totally shut down and trading would stop making all contracts null and void. Now I don't think it would come to that. Hopefully, the OCC does its job with making sure each participant has appropriate means of paying.