When the scandals of Enron, Tyco, and WorldCom were first exposed the world was in shock. The stories of these three companies are not the only tales of woe from the business world that make us wonder if the average CEO of a publicly traded company has the best interests of his shareholders in mind.

The above mentioned scandals have caused some to loose faith in the stock market. Of course there are those talking heads on TV who would tell us that there is no reason to loose faith in the market and that the scandals which have been exposed are isolated incidents. Here is the issue, with hundreds of millions of dollars on the line; do you think that the temptation to steal will ever disappear?

Of course government regulatory agencies like the SEC that monitor publicly traded companies in this country have adapted since these scandals in an effort to make sure such antics are tougher to pull off for the future would be crooks. This sort of evolution is natural but the question is how much more comfortable should it make us feel?

I think that the evolution of regulatory laws governing the trading of securities is kind of like the evolution of the safe. At some point in the history of the world someone developed the first safe, and valuable were locked away in that safe. At some later date someone broke into that safe and stole the valuables. This led to an adaptation, someone had to investigate and discover the week points of this first safe in order to re-engineer a new-and-improved second safe.

With the advent of the second safe the thieves were forced to adapt themselves and develop even more clever ways to get around the safeguards of the second safe. This process has repeated itself, ad nauseum, to the present day.

So if you believe that “where there’s a will, there’s a way” and that with hundreds of millions of dollars at stake the temptation to steal will always exist, then I suggest to you that you might consider being concerned. It seems that I am not the only one who is concerned with traditional passive investments.

On November 27th 2004, in a post entitled “My New Hedge Fund”, billionaire Mark Cuban announced on his website BlogMaverick.com, plans to start a hedge fund based on sports gambling.

There are multiple potential ways to invest in the sports gambling by placing bets. One way would be from an arbitrage position. Different sport books set different odds for the same wager. A hedge fund could leverage even a small difference in odds into a potentially large source of profit if enough capital could be invested before the opportunity corrected itself.

Some of the lines on sports betting are determined by statisticians and sports experts who get together to create computer models in an attempt to determine the chances that a particular side will win in a sporting event.

By using more sophisticated tools and putting more effort into the modeling than Vegas odds makers, you could hope the gain an edge over the Vegas line. Exploiting such and edge with hedge fund capital is yet another way to potentially invest by placing bets.

At the time Mr. Cuban’s suggestion was an instant source of controversy. It seemed that some did not consider sports gambling as a serious investment.

Mr. Cuban might consider this an example of the “pot calling the kettle black” since he seems to consider that a significant number of people who invest in the stock market to be gambling. As Mr. Cuban said:

“It’s not unusual to hear people refer to trading stocks as no different than going to Vegas. They are right. Gambling is gambling.”

Cuban went on to explain that information regarding professional sports may well be more complete than information about the stock market. As Cuban puts it, there “is far better information about your local sports team than there is about any local business in your market.” Cuban points out local radio, TV, and newspapers cover sports news, for the local teams, in an extremely through manner and that that kind of coverage is “far more information than you get about Tyco or Computer Associates or NFI.”

In passive investing you park your money somewhere with the hopes that someone else will manage it for you. It takes very little work and is in that sense, is very convenient, but as we like to say here at Feedback Secrets, “convenience is expensive“.

Garry Kasparov held the title of World Chess Champion from 1985 to 2000. In his book, “How Life Imitates Chess”, Kasparov explains how vitally important it is in the modern day to stay mobile. He explains that in today’s fast paced world “a passive approach to investing and corporate strategy is as obsolete as siege fortresses and trench warfare.”

So if passing investing is dead, what are we left with? We are left with active investments such as real estate, franchising, do-it-yourself brick and mortar, and internet marketing.