Well, Cuban does engage in hyperbole to make his point, for example I don't agree with him when he says even if your house value is 10% of what you paid for, you should still stay, but he is insightful. If a house is worth a little less, then I think it's reasonable to consider his advice. After all, a new car is immediately worth less the second you drive off the dealer's lot, and you're underwater immediately on a 100% financed car purchase, but if you make a decent salary and are buying an "affordable" car like a Honda or Toyota Camry, you'd make your payments and enjoy the ride even though you're losing money on the deal. Same with a slightly underwater home, if you can make your payments, then make your payments and focus on building good family memories and plan on moving when the kids grow up. That's what I did and it worked out well for our family, our equity increased as we paid down the mortgage, we enjoyed great family memories like holiday dinners, our kids went to good schools. But a person on a gardener's salary buying a Hummer on 100% financing, like gardeners buying $500K homes or speculators flipping million dollar homes they never planned to live in, that's just wrong. In that case, the banks bear the responsibility for approving the loan (I'm sure it was harder for the gardener to get the car loan than to get home loans in the bubble years). I think the SEC has been doing a horrible job under Chris Cox, and the charges look like a publicity stunt compared to all the real Wall Street problems. I have less respect for the SEC than the NAR. The charges seem more like Martha Stewart charges that waste taxpayer money than real Ivan Boesky insider trading charges. Of course, if the story evolves and charges come out that appear more serious, I could change my opinion of Cuban's judgment. Here is another opinion on the charges from:
James Altucher
Cuban charged with insider trading by SEC
11/17/2008 11:40 AM EST
The SEC is supposedly charging Cuban with insider trading because he unloaded his 6% stake in Mamma.com when he heard they were going to do a PIPE financing. They didn't announce the PIPE financing until the day after he dumped his shares.
This is a ludicrous charge. First off, its a very gray area. When a company starts looking to do a PIPE financing, 100s of potential investors, lawyers, accountants, etc are made aware of the fact so its borderline what is public info and what is now.
More importantly, when is the SEC going to confront the real issue behind a PIPE financing: the fact that dozens of hedge funds secure borrow (so they can short after the deal is announced) before the deal is announced. This should be illegal (its not actual trading but its making moves that will make money based on information that is considered private despite what I saw above).
Position: long Mark Cuban's ability to fight this.
