Mark Cuban believes high-frequency trading is making it nearly impossible for anyone to make real money in the stock market. After examining the current market traders and their algorithm based strategies, Cuban says he hedged his bets and actually earned money in today’s market.
In an interview with Fox Business, Mr. Cuban reveals:
“In 2008 we didn’t have high frequency trading the way we have it today. In 2008, ETFs weren’t being arbed… the way they are being arbed today. They weren’t being arbitraged the way they’re being arbitraged today. There are a lot of nuanced differences. Currencies weren’t as prevalent back then as they are today in trading.”
He also believes that automated trading is causing market swings and that traders are playing a game like ‘Terminator Rise of the Machine.’
As he explains, “And so it’s not like everybody that you know rushed to call their broker and sold stocks late this afternoon…All the different cases, there were multiple algorithms that appeared to have decided to sell a lot of different asset classes which in turn triggered other algorithms which in turn triggered other algorithms and it was a cascading effect. That’s the danger of when you have algorithms trading and there’s no human intervention.”
Last month Cuban hedged his bets when he realized he couldn’t look at the market and understand how and where people were actually making money. Cuban says he “hedged [his] whole liquid public portfolio” and has “done pretty well” because of that decision.