Mark Cuban said WHAT? | SDITalk.com/313

Self Directed Investor Talk: Alternative Asset Investing through Self-Directed IRA's & Solo 401k's

Mark Cuban said WHAT? Political correctness rears its ugly, stupid head again. Today, we take a brief break from our “Choosing the Right Tool” series to address some utterly foolish comments made by a normally reasonable and thoughtful person. I’m Bryan Ellis. This is episode #313 of Self-Directed Investor Talk.

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Hello, Self-Directed Investors, all across the fruited plane! Welcome to Episode #313 of Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like you, where each day, I help you to find, understand and profit from exceptional investments and strategies.

Today’s show notes, transcript and resources are available to you, at no cost and with my complements, over at SDITalk.com/313.

Yesterday we began to focus on the question of determining which type of self-directed account is better for you: the self-directed IRA or solo 401(k). We’re going to return to that tomorrow and likely for a couple of additional episodes as well, but something came up today in my news feed that I thought I’d address with you.

Mark Cuban – the businessman who famously became a billionaire when he sold Broadcast.com to Yahoo in 1999 – is someone to whom I pay attention and whose words are generally surprisingly grounded given that he is, after all, a billionaire. I respect that.

Furthermore, I know a lot of you respect him and his work, too. And you and I as self-directed investors are obligated to pay attention to smart people since we make our own investment decisions. Unfortunately, it looks like Mark Cuban’s thinking may now be muddled and more politically-oriented than business-oriented.

Case in point: A new article on Yahoo Finance called “Mark Cuban describes the best way to reduce wealth inequality”. I’ve linked to it today from SDITalk.com/313, be sure to check it out.

Now right away, whenever you see the words “wealth inequality”, you know someone is speaking to a political audience and not an investor- or business-oriented audience, because wealth inequality is a totally contrived problem.

On the surface, the words “wealth inequality” seem to mean that some people have more wealth than some other people. Yep, that’s true. And thank God for it. Those who do better than I do provide great inspiration, motivation and examples for me to up my game. Hopefully I provide a good example for those not at my level. That’s what “wealth inequality” really is: The scorecard of capitalism and the financial representation of dogged determination.

That’s capitalism at the core, and capitalism is a good thing. My model of wealth building and your model of wealth building – self-directed investing – depend on capitalism. Always remember that.

Now “wealth inequality” might represent an actual real problem, rather than a totally contrived one, but only if our economy was a zero-sum game. If, in other words, it was the case that every dollar I make means that you can’t make that dollar… well, in that case, the scarce supply of wealth might change the game. But that’s not reality. When another oil well is found, new wealth is discovered. When a new software program is developed that has commercial appeal, new wealth is created. Wealth in a capitalist economy like ours is not a zero-sum issue, but is simply a representation of the value of resources and ideas. There are zero circumstances under which it can be said that the fabulous wealth of Bill Gates or Warren Buffett or Jeff Bezos or Mark Cuban has hurt my ability or your ability to become wealthy in any way. In fact, it’s likely that every one of them have IMPROVED your odds in some way.

That’s why Cuban’s promotion of this issue is disappointing to me, and also quite illogical. In the Yahoo Finance interview, he’s suggesting, for example, that to really change the wealth inequality situation, that people on the lower end need to begin accumulating assets. I totally agree with this, by the way. But then he goes on to suggest that one of the provisions of the new Federal Tax law – the provision whereby a cap is placed on the amount of federal income tax deductions one can take for the STATE and LOCAL taxes they’ve already paid – Cuban suggests that this provision makes it harder for lower-income people to actually buy houses or other assets in order to get themselves above the lower-end of the financial spectrum.

That sounds good to people of a certain political persuasion, but here’s the problem: It’s wrong. Low-income people are, almost by definition, unaffected by the tax code provision he cites. As in, an effect of zero, zilch, nada. It just doesn’t make any sense what Cuban is saying here.

Of course, some of the other things in the interview he says DO make rational sense, so I’m not saying that this guy is a fool or is absolutely misleading. What I am saying to you is this:

Mark Cuban is now definitely endorsing some ideas that only make sense in a political world, not in the real world. Not all of them, but definitely some of his ideas can be described that way. So if you’re like me, you’re a self-directed investor and you’ve taken Mark Cuban’s advice to be the kind of advice which is inherently always worth considering seriously, well… maybe it’s time we rethink the degree to which we take his opinions seriously.

Because at the end of the day, folks, this is true: When it comes time to pay for your retirement, you’re not a Republican and you’re not a Democrat. You’ve got expenses to cover and bills to pay… and nothing said by a politician or aspiring politician will help you with that.

My friends, invest wisely today and live well forever.

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