Cuban's Got it Right

Most people outside of Texas, and more particularly Dallas don't have a favorable opinion of Mark Cuban. Let's face it, he's a nusance to the NBA and gets away with it because he has billions of dollars. BUT it's hard to deny that he's a very smart man. You don't make billions of dollars if you're not. He often writes on his blog the BLOG MAVERICK on a wide variety of topics. In this particular clip from a post he wrote yesterday I couldn't agree more with what he is saying. He articulates a number of my opinions perfectly.

HIGHLY RECOMMENDED READ (even if you don't like economics)!

Some Thoughts on the Economy

"Our government doesn’t know the difference between an investor and a speculator or trader. If we did, we would understand that we should tax the trader/speculator more heavily than the investor.

The investor allows entrepreneurs access to capital and allows them to work with it and build businesses, which in turn build employment and do great things for the economy. The trader/speculator pushes companies to make more money now rather than invest in doing the right thing for the company. The trader/speculator dominates the stock market today, which in turn puts pressure on public company CEOs to cut jobs and play games with their financials in order to give the appearance of stability in a far from stable market. The investor understands the bigger picture and is ok if profits fall for several quarters or even several years as long as the company will maximize its return over the long run.

The government should raises taxes significantly on profits from short term capital gains on the sale of public stocks, indexes, commodities, futures held for 24 hours or less and extend the length of time required to qualify for Long Term capital gains and reduce the tax rate on Long Term gains. This will discourage flash trading, ETFs that move markets purely on cash inflows rather than fundamentals and also reduce the amount of speculation on commodities. It will also reward companies that act in the financial interests of long term holders and their employers. I think the impact on the economy would be far fewer layoffs as CEOs find themselves with more shareholders who think long term rather than short term. Believe it or not, there are shareholders who are fine with companies not beating their numbers if the company is making progress towards a clearly defined goal. I don’t care if the P/E of the stocks I own is 14 or 20. I want the companies investing in being a great company rather than trying to make traders of their stock happy. Most CEOs give great lipservice to this approach, but they are so focused on marking to market their own personal stock portfolios, they emphasize stock performance over doing the right thing for the company. Taxation can change the focus on public companies and stock trading. That would be a great thing for the economy."