In an interview with FOX Business Network’s Deirdre Bolton, entrepreneur Mark Cuban discussed market volatility.
Continue Reading Below
“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 said.
He said frequency trading contributes to market swings.
“What happens is that there are so many different algorithms that are competing from different sources with each other that they are playing a game like 'Terminator Rise of The Machine.' They are all going up against each other. 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,” he said.
He also said it’s hard to make money in this market.
“About a month ago I increased my hedges. Meaning I felt like if I can’t look to see and understand how and where people are making money, that means something’s going on, something’s not right. So I dramatically hedged my whole liquid public portfolio…Yeah, so I’ve actually done pretty well with all this volatility and this decline. But my point is I made that choice because it’s so hard for anybody to make money in these markets that they’re almost impossible to understand. And so the trades I’ve made aren’t traditional equities,” he said.
He said he agrees with Donald Trump’s views on hedge funds.
“I one hundred percent… I one thousand percent agree with him. A thousand percent. He is so right on the money that carried interest is not. It’s really just a vig, right? It’s like what the house takes at a casino. And they certainly should be taxed the same way… if it’s something that’s held a long time it can get long-term capital gains, if it's short term it’s short term capital gains. I have no problem with that, he’s absolutely right,” he said.