An old Russian anecdote goes like this:
A man notices his apartment is infested with ants. The local store has empty shelves where spray should be. He's trying swapping them with shoes but his shoes are full of holes and anyway more seem to be sprouting than he can kill. He visits an old magician. "My house is full of ants," he tells him and asks what he can do. The magician looks deep into the man's eyes and tell him to go home, gather up all the ants in a meeting, and tell them, "Ants, go away!" Be firm, the magician warns, and most importantly, do not smile. Bewildered, the man thanks the magician and heads home. "Do not smile!" the magician reminds him. When the man gets home, he puts on a stone expression on his face and calls the ants. They quickly assemble. "Ants," he tells them, "go away!" They look at him oddly, and cock their heads to one-side, but seeing that he is firm, start marching away! The man is so happy to see them poring out through the cracks and into the street and away from his home that he can't resist the smallest of grins. One of the last ants turns back one last time and sees the man smiling. "Hey!" the ant yells happily at his friends before him, calling them back home. "He's joking! The master is joking!"
And so Mark Cuban is joking about his new sports hedge fund idea. The maverick owner of the Dallas basketball team wrote on his weblog at blogmaverick.com that he would like to start a hedge fund (a mainly unregulated investment vehicle for wealthy individuals and institutional investors) that invests not in bonds or stocks or currencies, but simply places wagers, such as on sporting events.
Imagine the investor letter of such a fund. "Dear Investors, we are pleased to report a profitable second quarter as the Celtics launched a meaningless three pointer at the end of regulation to beat both the Lakers and the spread. We anticipate continued profitability in the third quarter as several of our short positions have profited due to injuries unanticipated by the market."
Just imagine what happens when the pension plan of one of the NBA's spouses invests in such a venture only to find out it would profit if her husband's team loses? Exactly how much chicken would she put in his chicken soup that night?
The biggest obstacles to such a fund, however, are neither public relations nor legal nor even the potential wrath of David Stern and the league. All that can be handled if the resulting profits were large enough to spread around. The biggest obstacle is the resulting profits aren't big enough.
Hedge funds can grow into the billions of dollars in assets. Just imagine how large a bet you can place on a single game. "Vinnie, put me down for thirty million on Paul Pierce getting a triple-double tonight, would ya? I'll wire the money from our prime broker. Does Regulation T margining apply?"
And what to do when Vegas no longer takes your calls? If you were a money maker in the sports business world, wouldn't you allow yourself the ability to ban whoever you want from the action? You're never going to find someone to take the immense other side of the professionals at their size; and who would want to?
No, Cuban used his blog not so much to actually push for this idea as to mock what he doesn't like about the stock market. He thinks a put option on a stock is as much gambling as a slot machine. He thinks more attention and analysis is paid to sports management than to company management. But he certainly doesn't think he can swing billions of dollars on one side of the sports betting market.
The problem is he can't admit he was joking, or, at the very least, exaggerating for effect. Because then he and his idea would be dismissed. He needs to keep it alive if he wants to make his other points come across.
Jokes tend to hit the air simultaneously, like a good idea. Within days of Cuban's post, the Onion was running a story claiming Bush had authorized a plan for people to wager their social security funds on their favorite sports teams.
So Cuban was joking but can't admit it. If he weren't joking, he would have proposed something far more practical than a sports hedge fund, something that would make a lot more money and be even more powerful than a hedge fund. It would be...
I can't tell you yet.
It's a secret.