Transforming $1 Million into $1 Billion: Mark Cuban's take on Share Market

Summary

The 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.