Reddit-fueled market frenzy a 'short term phenomenon that will get worked out': Tom Marsico
Mark Cuban has one major piece of advice for day traders: Do your homework.
To the billionaire investor, there are more concerning things about the financial markets -- including risks in derivatives and foreign exchange -- than a horde of nascent stock pickers rushing into names such as GameStop Corp. after reading about them on a Reddit message board. While it’s risky, losing money sometimes is part of the game, he said.
“At the end of the day, get long and get loud has been the narrative to move stocks for generations,” Cuban said in an email interview. “Now that tool is available to small traders and can be empowering for them.”
Cuban, a serial entrepreneur and owner of the Dallas Mavericks basketball team, has both owned stocks and shorted them over the years. He says he wouldn’t buy any of the stocks that are part of the current frenzy -- “just not my thing” -- and advises newbies to do their homework.
“That’s part of the learning experience,” Cuban said of the risk. “It’s a whole lot less dangerous than forex trading that gets promoted all day every day.”
The rally in GameStop and other stocks has lifted them to heights that many professional investors see as unimaginable, and now it’s drawing attention from regulators. The U.S. Securities Exchange and Commission said it’s “actively monitoring” volatility in options and equity markets. Senator Elizabeth Warren called for the SEC to take a look at the market, criticizing hedge funds for using equity trading as their personal casino.
Cuban said regulators should be monitoring for whether the rally in certain stocks is a pump-and-dump scheme.
“Otherwise how is this any different from an investment bank putting out a call to clients with a price target and calling it a strong buy?” he wrote.