Monday, 15 March 2010

Value(d) Opinions

Another bulging mailbag today, with some differing opinions on a few topics. A good thing. It would be a boring world if we all thought the same.

First the merit, or otherwise, of the Sports Betting Professor. Talkbet and Anonymous(1), as well as independent review services, rate this service highly, but Anonymous(2) isn’t so sure but Anonymous(2) bases his objection on the appearance of the home page rather than the results, and the expression “don’t judge a book by its cover” comes to mind. (He also loses credibility with his claim that I am “suddenly into Rugby” when my interest in the Super 14 was mentioned as far back as last May!)

Anonymous(7) queries the wisdom of using tipsters, and in 99% of cases, I have to agree. I certainly would never touch them for horse racing as JP does, but I am curious about the statistically based ones which appear to have a winning record, and which are reasonably cheap! I started subscribing to Football Elite, because their results did look impressive, they are reasonably priced, and I was curious about the teams that were being selected, and why. The results have been (slightly) profitable to level stakes, but it also gave me the nudge to start following the top leagues in Spain, Italy, France and Germany with the Elo ratings which, may or may not, prove to be profitable, but at least it’s (to me) interesting.

The Sports Betting Professor has piqued my interest because it is a statistical system, and again is reasonably cheap. For both of these services, the worst that can happen is that I lose a few quid, but there’s the possibility that the tips will be possible, or that they will trigger some idea that becomes lucrative. Either way, for me it’s cheap entertainment.

And now back to value. Anonymous(5) thinks I am completely wrong. He writes: “When you invest you are paid to hold stock as an owner of a company. The company invests your money and produces a return. The longer you hold it the more chance you will make money.”

I hold shares in a number of companies, some of which pay dividends (presumably what was meant by “you are paid to hold stock”) but not all companies do. Shares in the non-dividend paying companies were purchased for their growth potential, in the same way that I might back Spain to win the World Cup. Alternatively I can sell shares that I don’t have or lay Spain in the World Cup. In both cases I am investing because my opinion is that the current price offers value, that at some point in the future I will be able to trade out of my position for a profit. If my entry price wasn’t value, then long-term, this strategy is a losing one.

It’s also important to understand that shares don’t necessarily have to be held for a long time, but can be bought and sold within seconds. In the heyday of day trading, maybe ten years ago, it seemed like everyone was doing this. Very similar to in-play trading on sports, except that I could never understand how I thought I might have an edge over the insiders with far more money and knowledge than I could ever have on the outside.

I tried trading options for a while, but even when I was working in the City for a merchant bank and was able to trade with reduced costs, it was all just gambling. However much I read up on Rolls Royce, I was never going to have a better idea of their true value at any point in time than someone who lived and breathed Rolls Royce.

I digress. As for the statement “the longer you hold it the more chance you will make money”, this is undoubtedly true some of the time, but many companies collapse, or are taken over (just take a look at the original 30 companies of the FT 30 index at the bottom of this post), and any increase in the value of your shares needs to be measured in real terms accounting for inflation. Marks and Spencer may go up 10% in 10 years, but if the interest rate on your deposit account is paying 5% a year, that M&S purchase wasn’t value by most people’s standards.

Anonymous(3) – aka Dave posted a good comment, repeated here in its entirety:

Have enjoyed reading your blog for a number of years now.
Your current articles about value are certainly thought provoking. I think that it is very difficult to actually define value in investing/betting as everybody has a different idea of what value actually is.
If you look through the history of the stock markets, there are many examples of people who have made (and lost fortunes).
You will no doubt remember reading about Hetty Green in New York
(I recall you wrote a small article on her a while back). She did inherit money, however her aim was to compound her money by 7% pa. This was done through bonds equities even jewellery. Buying when everyone was selling and selling when people were buying i.e. going against the crowd. If you go to the other extreme and look at Larry Livermore (the boy plunger)he was only concerned with market direction (the line of least resistance)and in his lifetime he made and lost many fortunes trading those directions.
Turning to the betting markets up until the advent of Betfair it was estimated that about 5% of gamblers made a profit every year, however, with the popularity of Betfair I would suggest that the 5% figure has increased because the laying of sporting events is now possible.
I recall reading an interview with Harry Findlay who estimated that if you made 9% on turnover, then you were doing very well.
Probably the biggest difference between stock markets and betting markets, is time scale. In the stock market a share can be researched and if it meets your investment criteria you buy the share. If after buying the share it drops say 20% its now a dog, however if you decide to hold the share and after say 18 months its 50% above your purchase price you are very relieved and probably consider yourself the next Warren Buffett, however when holding the share where do you differentiate between good and bad value?
With sports betting/trading like every form of investment/trading the real value is in the amount of effort and methodology that is put into carrying out your research and your knowledge of the market you wish to participate in. In addition discipline is required to stick to your methodology.
After my ramblings I would suggest that value cannot be measured because being individuals we all have an interpretation of values.
“We all have an interpretation of values”. I like this comment. Our understanding of value depends on our time-frame, our investing ‘horizon’. The example of buying a share at and it drops 20%, before recovering and almost doubling is a good one. Think of a football match where pre-game the home team is 2.0. Is this price value? As the game stays goalless, the price drifts out, before they score and the game ends 1-0. Who was that 2.0 value for? Not for the five minute trader, but it was arguably value for the punter or for anyone with a view to trading out after the first goal. But the price moved out to say 3.0 before the goal arrived, so was 2.0 ever value? Wasn’t the value at 2.98? Was 2.0 value if the home side hit the woodwork six times, have 30 shots on goal and 25 corners and the game finishes 0-0? Good comment Dave.

To Anonymice(4 and 6) and anyone else who seems to think I need to post up my P&L statement, it’s not going to happen. This blog is not a tipping blog, it is not a results blog, it is not a horse-racing blog, it is not a “look how many millions I am making” blog. It is a general blog about the world of sports investing, in particular about the betting exchanges, and my P&L is irrelevant and totally boring and meaningless to anyone but me. Read my post on perspective if you don’t understand why the amounts won or lost are irrelevant. What ever amounts I posted up, some people would consider it a lot, (and bragging), and yet to others it would be a waste of time to spend so much time to ‘only’ make that amount.

Finally for Anonymous(6) who wrote:
“Cassini is just some dullard blogger taking thru his arse with his own perceived air of authority. Most of his value bets lose, I read quite a few blogs and like Cassini all the losing ones avoid talking about the real aim of gambling their pnl”
A couple of points –
a) If this blog is so dull, why are you reading it and commenting on it?
b) Most of my value bets can lose. In fact, it’s to be expected when backing at odds against.
c) While the real aim of gambling is certainly the P (there is no L in my gambling P&L), the aim of a blog isn’t.

And yes, Anonymous(7), I have certainly been called pompous many times - arrogant too, but usually only by my parents, siblings and close friends who have now learned not to take me too seriously.

Finally, finally, another probable bullseye for the Elo predictions tonight with Liverpool triumphing by the expected three goals... Rest assured I shall confirm either way if (when) I get my data back!

The original 30 companies in the FT 30 index: Associated Portland Cement • Austin Motor • Bass • Bolsover Colliery • Callenders Cables & Construction • Coats • Courtaulds • Distillers • Dorman Long • Dunlop Rubber • Electrical & Musical Industries • Fine Spinners and Doublers • General Electric Company • Guest Keen & Nettlefolds • Harrods • Hawker Siddeley • Imperial Chemical Industries • Imperial Tobacco • International Tea Co. Stores • London Brick • Murex • Patons and Baldwins • Pinchin Johnson & Associates • Rolls-Royce • Tate & Lyle • Turner & Newall • United Steel Companies • Vickers-Armstrongs • Watney Combe & Reid • F. W. Woolworth & Co


Anonymous said...

A couple of points –
a) If this blog is so dull, why are you reading it and commenting on it?

Boredom I suppose, I can't spend all day counting my winnings

b) Most of my value bets can lose. In fact, it’s to be expected when backing at odds against.

Probably be good if you manage one before the even too rather than your usual aftertiming

c) While the real aim of gambling is certainly the P (there is no L in my gambling P&L), the aim of a blog isn’t.

lol, walofs, you continually go on about money on the blog as if you're some big shot winner. Posting up PC charge screenshots etc as if that makes you a big winner but somehow omit the figures :)

Cassini said...

Write your own blog - you could call it "Green With Envy"!

Azzmovic said...

lol. Mr Anonymous can't spend all day counting his winnings!

I'd like to wager that you don't have any winnings at all, as why would someone who spends all day counting his winnings spend his spare time looking at blogs and writing bitter comments. It just doesn't add up i'm afraid.

Anonymous said...

Cassini doesn't appear to have any winnings either, so knocks that on the head!

Anonymous said...

"I am investing because my opinion is that the current price offers value"

And that is where you are so wrong. You invest for the long term and speculate / gamble in the short term. The value of a company isn't going to rise just because you bought and sold for a profit. You can't identify value on that basis. It's just some other fool took your offer for some reason and you cut a profit. That is all.

Anonymous said...

"Marks and Spencer may go up 10% in 10 years, but if the interest rate on your deposit account is paying 5% a year, that M&S purchase wasn’t value by most people’s standards."

This comment shows that you just don't really understand even the basics of your pompous posts. Anybody spot the obvious error in Cassini's summary?

Talkbet said...

On a side note, the home page of Sports Betting Professor put me off as well, I hate those type of websites. Fair play though, the results to date have been second to none.

Anonymous said...

"Green with envy at some bald fat guy who hasn't a clue and talks crap on a blog" has a ring to it I suppose.

Lol don't tell me he's also touting that Sports Betting Professor crap, same template as all the scams out there. Kind of makes sense for him to be touting those type of scams though.

Anonymous said...

Seems that comments about value is creating interesting debate and food for thought.
After reading Anonymous(6) about having cash against equities in ten years. Out of interest I had a look at both options.
Over ten years, the price of M&S shares have increased roughly 30% and the dividend has increased roughly 60%. Cash deposit rates have not really been that volatile however at present deposit rates vary from .2% to roughly 2.75%. Returns on both examples would be improved much more by reinvesting dividends and interest.One other point to consider is that both examples had a roller coaster time ie how would you have felt eighteen months ago if your cash deposit was with Northern Rock.
To invest in either of the above takes very little research but probably a lot of discipline to stick with it.
Betting can be a good means of short term profits but it takes a lot of research and discipline and I am sure there will be times when everything goes to plan and the profits mount up, then suddenly the whole world is against you and start losing. When considering betting profits it needs to be done over a time scale. If you publish figures every day, opinion will fluctuate from super star to muppet.
From my own point of view I much prefer to read about ideas for making money at betting which I can incorporate in various scenarios rather than reading about
P& L figures.



Anonymous said...

lol Azzmovic, I happy to post up my pnl against Cassini with no problem, what shall we do? Last 7 days last 30 ? I'll let Cassini choose so he can look for a winning period :)

Phil said...

No one wants to see pnl figures on a regular basis Dave, of course they'd much rather see betting ideas that will make them money rather than how much someone is making from ideas they never see.

The world of blogging is full of people like Cassini who like to give an impression of one thing though and never actually proove it. If you read this blog a lot of posts are continually mentioning money PC charges etc so it's not suprising some readers will be curious to whether he's actually making any money.