Dot-Com Billionaire Mark Cuban on How to Know When the Market Rally Is Over
Mark Cuban made his multi-billion-dollar fortune during the dot-com boom of the 1990s and got out before the crash, so he knows a thing or two about quitting while you’re ahead.
Cuban also discussed what stocks he’s bullish on, but more on that below.
And while Paul Tudor Jones sees a lot of similarities between the stock market then and now, Cuban said things are much different now.
“Interest rates were a lot different back then,” Cuban said on CNBC’s “Fast Money Halftime Report.” “And you saw a lot more people participating in the market. … You don’t see that now. That individual day trading really led the market to be frothy.”
Along with the shrinking of day trading, index funds have seen a major rise in prominence.
“There’s so much money chasing index funds, so as long as those funds keep on growing the market is going to go up,” Cuban said.
Cuban, the Dallas Mavericks owner and Shark Tank star, sold Broadcast.com to Yahoo for $5.7 billion in April 1999, and his answers were in response to questions from investors comparing today’s market to the one we saw right before the dot-com bubble burst in 2000.
Jones did exactly that, as we covered in a story here Wednesday, calling the current market “crazy” and very much like 1999.
“We are just again in this craziest monetary and fiscal mix in history. It’s so explosive. It defies imagination,” Jones said on CNBC from Davos, Switzerland. “It reminds me a lot of the early ’99. In early ’99 we had 1.6% PCE, 2.3% CPI. We have the exact same metrics today.”
Like Cuban, Jones also mentioned how different interest rates are now compared to then. In 1999 the fed funds rate was at 4.75% while today its at 1.5% to 1.75%.
Cuban said the ultimate arbiter of where the market is headed in 2020 after a banner 2019 is up to the Federal Reserve and its benchmark interest rate. The S&P 500 rose a whopping 29% in 2019 and is up about 3% year to date. And as long as rate stay low, “Where else are you going to put your money?” Cuban asked rhetorically.
“So that money is going to continue to flow into our equities, our market,” Cuban said, referring to a phrase comparing low interest rates to universal basic income “for rich people.”
“I think interest rates will tell us what’s going to happen next in the market. Is it frothy? You can definitely make that argument. Is it like 1999? No.”
Cuban High on NFLX, AMZN Stocks, Says ‘Data Is the New Oil’
Cuban said he’s still “very bullish” on Netflix despite weak guidance and this week’s subscriber miss this week, which sent the stock tumbling about 3.6% Wednesday. Netflix (Nasdaq: NFLX) is properly valued at around $140 billion, Cuban said, which sounds about right for the “second biggest media company in the world” behind Walt Disney Co.
Cuban said “data is the new oil” and “streaming media, entertainment and content is a global story now” as far as Netflix goes.
“It’s ubiquitous not just here, but it’s becoming more ubiquitous globally as well,” Cuban said. “I don’t see their competition negatively impacting that at all.”
As far as Cuban’s largest holding, it’s Amazon (Nasdaq: AMZN), which he called “the smartest company in the universe” and the “ultimate startup.”
“The knowledge they have with artificial intelligence gives them such a unique advantage,” he said.