It’s not “Dancing With the Stars” by any means, but Mark Cuban took a few minutes to answer some questions we had about his idea for an exchange traded fund (ETF).
We first heard him discuss his idea on NPR’s Planet Money podcast. The deal would be that instead of the government handing out money to banks or buying their bad assets or stocks – why not bundle those assets into an ETF and let the markets decide how they’re priced?
We think it’s an interesting idea. In fact, Cuban has taken a keen interest in the market mess, devoting Blog Maverick to the subject, as well as starting Bailout Sleuth in order to keep track of taxpayer dollars and maintain transparency. Awesome.
How would you structure this ETF? What would it be composed of?
Whatever assets that the TARP [Troubled Asset Relief Program] would buy.
How do you think it would solve the problem of the crisis?
It would create transparency. It would set true market values for the assets. It would allow government money to be replaced with investor money as shares of the ETF were purchased on the open market. It would allow for an orderly liquidation as shares of the ETF could be traded for the hard assets.
Where did you get the idea?
Just happened to think of it.
If such an ETF were constructed well and priced fairly, would you invest in it?
Of course. It would help the economy. It would improve the liquidity of the ETF. Most importantly, it would create a value for the assets to get the ball rolling.
As far as ETFs in general go, many believe that after the markets rebound, investors will be looking for more transparent products like these. What’s your take on this, and will you be one of those investors, too, if you aren’t already?
Actually, I think it’s the other way around. The more uncertainty, the more transparent assets are in need. One of the problems with hedge funds in particular and many mutual funds, is that they are not liquid. In fact, many limit when you can get out. Which is going to make funds far less attractive. Well-designed ETFs can be a valid alternative for consumers.