Transforming $1 Million into $1 Billion: Mark Cuban's take on Share Market
Summary
TLDRThe script delves into the nuanced reality of stock ownership, debunking the common perception that holding shares equates to having control over a company. It highlights that true control is reserved for controlling shareholders or those who actively engage in corporate actions. The discussion then shifts to the U.S. capital structure and bankruptcy proceedings, illustrating how shareholders theoretically have claims in a liquidation hierarchy but practically lack control. Additionally, it touches on the shrinking pool of public companies, attributing the stock market's rise partly to this scarcity and corporate buybacks. The narrative concludes with personal insights into cryptocurrency investments, sharing the speaker's experiences with a Swedish Bitcoin ETN and the challenges of direct cryptocurrency purchases.
Takeaways
- 😊 Owning shares does not necessarily give you control or authority in a company.
- 🤔 Public companies going bankrupt is relatively rare, contributing to stock market growth.
- 📉 The number of public companies has dramatically declined from ~9,000 in 1998 to ~3,500 now.
- 👀 360 of the S&P 500 companies are buying back their own shares, decreasing supply.
- 🔐 Bitcoin and Ethereum have defined scarcity that increases their value.
- 🤑 The speaker owns Bitcoin exposure through a Swedish exchange-traded note.
- 😕 The speaker tried but failed to directly buy Bitcoin previously.
- 🙃 Bitcoin price volatility made the speaker hesitant to buy directly.
- 😎 The speaker does not own Ethereum.
- 🧐 Financial engineering helps some companies like IBM manipulate their stock price.
Q & A
What is the common perception about owning shares of a company?
-The common perception is that owning shares gives you ownership and control in a company, but this is often not the case unless you are a controlling shareholder.
How does the US bankruptcy process relate to stock ownership?
-In the US bankruptcy process, stock owners are paid last after senior lenders, junior lenders etc. So while stock represents ownership on paper, stock owners have little control or claim when a company goes bankrupt.
Why has the stock market continued to go up dramatically?
-Two reasons - easy money policies and the declining number of public companies, which has made existing shares more scarce and valuable.
How many public companies were there in 1998 versus now?
-In 1998 there were around 8,000-9,000 public companies but now there are only around 3,500.
What are share buybacks and what impact do they have?
-Share buybacks are when companies buy their own outstanding shares to reduce the share count. This makes the remaining shares more valuable.
Does the speaker own any cryptocurrency?
-Yes, he owns exposure to Bitcoin via a Swedish exchange-traded note (ETN) because it provides liquidity. He tried buying Bitcoin directly but found it too complicated.
What problems did the speaker face when trying to buy Bitcoin directly?
-He found it was a hassle in terms of time and effort. By the time he got his account open, the price had moved too much for him to justify buying.
Why does the speaker say there is no greater scarcity than Bitcoin and Ethereum?
-Because there is a finite supply of coins available. This scarcity drives the value compared to fiat money which central banks can always print more of.
What is the speaker's view on owning cryptocurrency?
-He seems to have a positive view on cryptocurrencies given his attempts to purchase Bitcoin and commenting on the scarcity value. But he has not directly invested other than the ETN.
What is the overall tone of the discussion around stocks and crypto?
-The tone is fairly positive and bullish. The speakers highlight reasons for the growth in equity markets while also noting the potential value and scarcity of cryptocurrencies.
Outlines
🤑 Ownership of public companies and stock market dynamics
The paragraph discusses the concept of stock ownership in public companies. It argues that while shareholders technically own a company, they have little control or authority unless they are a controlling shareholder. Public company bankruptcies are rare. Easy money policies and declining number of public companies have driven stock prices up. Top companies like IBM rely on financial engineering to reduce outstanding shares and boost prices.
Mindmap
Keywords
💡Share of Stock
💡Capital Structure
💡Bankruptcy
💡Corporate Buybacks
💡Scarcity
💡Bitcoin and Ethereum
💡ETN (Exchange-Traded Note)
💡Liquidity
💡Financial Engineering
💡Public Companies
Highlights
Stock represents ownership in a company, but shareholders have little control or authority unless they are majority owners
Public companies going bankrupt is relatively rare, so shareholders can make money as stock prices rise
The number of public companies has dramatically declined, contributing to rising stock prices due to scarcity
Many S&P 500 companies buy back shares to reduce supply and increase prices
Bitcoin and Ethereum have provable scarcity that drives increasing prices
The speaker owns Bitcoin exposure through a Swedish exchange-traded product for liquidity reasons
The speaker tried and failed to directly buy Bitcoin due to the hassle and volatility
The number of public companies has dramatically declined from 8,000 in 1998 to 3,500 now
IBM relies heavily on financial engineering instead of core business operations
It's difficult to directly purchase and own cryptocurrencies like Bitcoin
Public companies have declining shares outstanding, driving increasing prices
Owning cryptocurrency requires a time investment to set up accounts and secure keys
Volatility makes timing cryptocurrency purchases difficult
Scarcity drives increasing prices for assets like stocks and cryptocurrencies
The bankruptcy process prioritizes senior lenders first, then shareholders last
Transcripts
because look as much as a share of stock
is ownership in a company that's the
all-time lie right you have no Authority
no owners un control it yeah unless
you're the controlling shareholder right
or or you you're willing to spend a lot
to make a lot of noise place where it's
not a lie is in the US the capital
structure means something uh I know the
bankruptcy courts here sometimes are the
wild west but yeah you know if you if
you were to liquidate a company in
theory you you would liquidate the
senior lenders first then the junior
lenders then the
you you actually do have a claim by
definition yes by definition but you
have no control but in practice Yeah
right the number of public companies
since that's what's relevant right
number of public companies that are
going bankrupt is relatively small the
number of people are buying shares of
stock even though it's a de look part
you can make the argument that part of
the reason the stock market has
continued to go up so dramatically is
not just because of easy money but
because the number of public companies
has declined that's right when we went
public in 1998 there were 8,000
approaching 9,000 public companies
now there's 3500 and 360 of the S&P 500
are engaged in corporate BuyBacks yes
yeah so the number of shares outstanding
just keeps going down keeps on look at
IBM right they make a living of
financial engineering that right and so
yeah so there's scarcity so it's point
being scarcity sales right right and
there's no greater defined scarcity than
Bitcoin and ethereum do you own any of
the of the coin okay yeah do you own
which ones do you own I own I own an etn
in Sweden for Bitcoin sure so there's a
Swedish etn cuz I wanted the liquidity
yes um and it's a hassle to try to to
just buy it and you've got to make an
investment in time and effort to do it I
I tried
it and and I failed truthfully uh to buy
a small amount yeah um by the time I got
my account open it had moved so much
that I you I'm just not going to do it
even for fun I'm not going to do it
owned like one Bitcoin from like 10
years ago or whatever it was right
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