Each To Their Own

It would appear that my reference to Marks and Spencer shares yesterday was misunderstood by at least one person. M&S wasn’t supposed to be taken literally, it was an example to make a point. I’ll try again. The point is that a profit in actual terms isn’t always a profit in real terms. Buying shares for ₤1,000 that are worth ₤1,100 in 10 years is a profit, yes, but the investment isn’t value if the interest rate on your deposit account is paying 5% a year.

‘Investing’ versus ‘gambling’ or ‘betting’? Yes, I use the term investment slightly tongue-in-cheek, since most of the markets I invest in (there I go again) are very short-term, but at the same time, I don’t like to use the word ‘gamble’ because it has negative connotations. My Mum is far happier to hear that I make a number of short term investments on sports than that I was gambling. My grandfather was a stockbroker, and like many people, she felt that was an occupation for gentlemen whereas doing the same thing on sports was far less respectable, and not something to be talked about.

The Internet has changed all that, and although my Mum’s generation will never fully accept it, I don’t see it being too long before there is a general acceptance that trading on sports, elections, award shows etc. is viewed in the same way as trading on financial markets is currently viewed. You can already trade weather via futures and options, and as I posted the other day, a Hollywood market on movie success is imminent.

JP and his strategy were mentioned yesterday. He extensively uses tipping services, mostly horse racing with a golf service and Football Elite as well, (although not winabobatoo as of late) and over the past couple of years has done well. So well in fact that he is now betting full-time. That would make me very nervous. As he mentioned himself, his wages acted as a safety net, and once that is removed, betting or trading full-time becomes a whole lot more pressurized.

Again, the degree of pressure depends on where you are in life. If you are in your 60s with your mortgage paid off and enough money in the bank to live happily ever after, and a job you don’t enjoy, that’s one thing. If you are in your 30s still making your way in the world with a young family, that’s quite another. Full-time trading / gambling sound idyllic, and may suit some temperaments, but for me, giving up that safety net would make me very uncomfortable. Knowing that I have to make money to pay the bills would be a lot of pressure.

For me, betting and trading on the exchanges is a hobby and a secondary source of income. I don’t like losing weeks, but they happen, and when they do, I can live with it because the money is ‘play money’. Losing is an annoyance but no one is going to starve.

Winning is better, but as with my primary source of income, I don’t see too much to be gained from shouting about how much I make, or indeed comparing my income with anyone else. While it is useful to know how your peers are compensated in a normal work environment, it’s pointless in the betting arena because we are not comparing like with like. Fat Cassini occasionally enters road races, and I’m out there with the 20 year old skinny boys, zero body fat, without a hope in Hell of beating most of them. I’m also out there with the wheelchair racers, and I can’t beat most of them either! What’s of more interest to me is how I compare with other runners of a similar age, (and propelled on legs, not wheels), but the bottom line is that I am competing with myself, trying to improve my times and more importantly lose some weight!

With trading, whatever my P is over whatever period, there will always be some who have made more and some who have made less. There will be some who have spent more time gambling and some who have spent less time. There will be some who have risked a bigger percentage of their net worth and some who have risked a smaller percentage. There will be some who have years more experience than I do, and some who have far less. There will be some who made thousands betting but lost thousands in the stock market or on other ventures. I don’t care about anyone else’s numbers. They’re totally irrelevant. Anyone can have a P&L with one company that shows a huge profit and meanwhile with another company they have an (almost) corresponding huge loss. Perhaps the proposers of such a "test" are in favour of a full audit? After all, screenshots can be easily faked. Comparing P&Ls is simply a ridiculous idea. I am not in competition with anyone else. Nor should anyone else be. I am competing with myself, trying to raise my ROI and increase my all-time daily average, explore new possibilities and gain some cash!

And if my P starts becoming a P&L on a frequent basis, I’m out of here. Anyone who thinks that I, or anyone else without a hidden agenda, would spend time writing about a losing pastime doesn’t understand me or human nature too well.

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

Value - Or The Greater Fool Theory?

"Finding value in a gambling market and investing are not at all similar in any respect"

was the well argued comment by (of course) Anonymous, backed up with no examples or evidence whatsoever. I guess it shouldn't be a surprise that these dullards hide behind the cloak of anonymity when their ideas are simply nonsensical.

So finding value when investing in stocks, currencies options or sports doesn't matter ...except of course, that if you are not finding value in either, you will lose money. The principles are the same whatever the market, and anyone who thinks they can make money in the long run without finding value is someone who is in for an expensive lesson. The Greater Fool theory will catch up with you sooner rather than later. Of course, the comments are open if anyone can give a reasoned argument as to why value isn't important in the long run.

To make money, you need to be finding value. If you are making money, you are finding value, even if you are blissfully unaware of the fact.

Again a quiet day today starting with an easy win for the Queensland Reds over Western Force in the Super 14. Priced at a generous 1.38 before the start, Reds won by a club record 40 points and the outcome was never in doubt.

There were just three football investments today, all punts from Football Elite. Two recommended bets, with Bologna (2.68) only able to draw with Sampdoria, but Almeria at 2.14 beat Malaga, and from the short-list, Tenerife at 2.36 beat Espanyol for another profitable day. I have a feeling that the Manchester United 3-0 score over Fulham was probably a bullseye for the ratings, but until I can catch up the numbers I won't know for sure.

Someone (anonymous again of course) left a comment a few days ago during the debate on odds-on value about the success of Mike from the winabobatoo tipping service. From reading JP's blog, it appears that this service is in fact NOT a great example of finding value at any price, and even if Mike did once hold to the philosophy of not backing at odds-on, he has now re-thought that with selections being made at odds-on.

While we're on the subject of tipping services, I'm considering adding a second subscription to the Cassini Investment Portfolio - this time to the Sports Betting Professor. Jon at Talkbet has found this service to be profitable, and other reviews around the betting forums are similarly favourable, so watch this space. The Sports Betting Professor covers the NBA, NFL and MLB and is statistically based, which is right up my street.

Lorient, L'Orient and L. Orient - Vive La Difference

A quieter day than usual with football investments limited to those recommended by Football Elite.

Borussia Moenchengladbach at 2.86 wasn't one of their finest ever picks, going down to a heavy 0-4 defeat at home to Wolfsburg, but in something of a coincidence, their second tip (Bolton Wanderers at 2.08 v Wigan Athletic) won by exactly the same score.

The short-list gave two winners, Mainz at 2.32 and Lorient at 2.08 but the third selection Le Mans at 2.34 did not have a Nice day. The e-mail actually tipped L'Orient, but I finally figured out who was meant, although not before almost staking an enormous sum on L Orient v Walsall. Matt must be a lot older than me. L'Orient was the city's original name in the 1600s, but the football club has never had that name. L Orient, as in Leyton, won 2-0 anyway.

I then spent some time trading the Hull City v Arsenal game for small stakes, and topped up the profits for the day. Arsenal's last few league games look easier than those of Chelsea or Manchester United and at 3.9 look value to me with a view to trading. Interestingly, all three teams still have to visit Blackburn Rovers.

There were a couple of scorelines today that I am reasonably confident the Elo ratings would have missed. Burton Albion 5 Cheltenham 6? Who saw that one coming? Not me - I had it as 4-5... and Gateshead lost 0-8 at Rushden and Diamonds in a low scoring game. That one I had as 7-0.

Finally, for today anyway, here's another quote on value from the world of financial investing that applies to the world of sports:

Like all other variations of value investing, it will almost certainly under-perform for a multi-year period or post significant losses in a given year, meaning that it's not magic in the sense many investors would like it to be. Indeed, Greenblatt's strategy lost a painful 36% in 2008, only beating the market by 1 percentage point. Still, the evidence is strong that even investors who know "what has worked in investing" simply can't or won't stay with simple formulas or will make investing more complicated than it needs to be. This bodes well for those who can stick with a simple value formula over the long haul.

For those that are interested in this stuff, and we all should be, the full article is here.

Betting On Hollywood

Cantor Bets on Hollywood, and Sports Gamblers Bet on Techniques
By Michael Kaplan

When Cantor Fitzgerald's Cantor Futures Exchange opens its online movie futures market next month, Hollywood will become more like the NFL: a sport that gamblers can bet on, with investors placing over/under wagers on box office performance.

Here's how it will work. Say Cantor -- which owns the Hollywood Stock Exchange, used for entertainment purposes only -- sets the baseline for an upcoming action flick at $100 million. If you go long for $100 and the movie grosses $150 million, you earn a $50 profit. Go short, and if the box office comes in below $100 million, you win that way too. Of course, if you predict incorrectly, you lose. Sounds an awful lot like gambling on sporting events.

A few professional sports bettors, in fact, have thoughts on how to be a winner on the Cantor Futures Exchange. "Don't pick the obvious," says Alan Boston, a veteran sports bettor who specializes in college basketball. "If a company is paying a big cat like Tom Cruise to do a movie, you can already figure the movie's going to be pretty special -- and that will be factored into the price. I'd be looking more for the next Donnie Darko: a potential sleeper that looks a little strange and isn't expected to do very well. Or else focus on the cult director who's suddenly been given a major opportunity."

Cult Directors: Go Short

And if you're thinking of betting on such a film, by a cult director like Richard Linklater, Boston suggests going short. "He's an original thinker who just doesn't ever seem to click," Boston says. "Linklater is sort of the movie equivalent of the Minnesota Twins: You root like hell for them, they do everything right, and they just can't get over the hump."

Luke Kim, a Wharton graduate and former Wall Streeter who's found success at poker and blackjack, suggests a more analytical approach. "The first thing I'd do is hire a bunch of MIT guys to model the movie business," he says. Some highly successful sports bettors use computer software programmed with hundreds of thousands of variables and constantly updated, Kim says.

Get In Early

"I'd have the programmers factor in everything from the director to the genre to correlations between the success of certain types of movies and the overall economy," he says. "If the market for this gets big, people will bet on it in a serious way. It might become like weather futures, where it initially seems like a joke but goes on to become a big deal. I can see there being alternative funds that deal in this."

An expert on both financial markets and the gambler's mentality, Kim advises anyone who thinks he has a distinct edge or gray-area information to jump in early, while movie futures remain inefficient and not overly governed. "Before it gets too regulated, you can expect people to rape the money out of it," Kim says. "If this market exists five years from now, I guarantee there will be notable restrictions that just don't exist now." That sounds like something you can bet on.

Sounds an awful lot like gambling on sporting events. Yes indeed. How much longer before the United States gets the message that trading Hollywood movies or sports is no different to trading stocks, bonds, currencies, options and other financial investments, except that trading the former is more transparent?

Some highly successful sports bettors use computer software programmed with hundreds of thousands of variables and constantly updated - except when they fail to back up their data of course...

Buffett Lessons

It makes for depressing reading, but I couldn’t stop myself checking out the latest rankings this morning. Not my important and interesting Elo rankings, but those of the world’s richest people.

It is no longer Bill Gates at the top. A Mexican/Lebanese telecom tycoon called Carlos Slim Helu now leads the way with a net worth of $53.5 billion (give or take a few dollars).

In the last 12 months, Slim’s worth has increased by $18.5 billion! That’s $50 million a day.

The afore-mentioned Gates is ‘close’ behind in second place with $53 billion, although ‘close’ here is relative since $500 million is still a lot to most of us.

Third is investor Warren Buffett at $47 billion. I liked his recent quote in his annual report to shareholders

"We've put a lot of money to work during the chaos of the last two years. When it's raining gold, reach for a bucket, not a thimble"

which when considered with his

“be fearful when others are greedy, be greedy when others are fearful”

makes the point that if you can maintain a clear head in a frenetic market, you can do very nicely.

Value

I’m a big fan of Warren Buffett, and there are a lot that most traders can learn from him, not least his adherence to the philosophy of “value investing”.

“The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.”

Emotions

A big part of successful trading is controlling your emotions. “Don’t panic” as Corporal Jones would say. This is easier said than done of course, and it ties in with investing with stakes that you are comfortable with.

I’ve written before how I don’t have a set figure in mind that I am comfortable risking while trading, but my vital signs know when I have exceeded it! I’ve also noticed that the threshold varies according to my perceived edge. When a market is moving rapidly, it is all too easy to get caught up in the moment and be greedy when you should be fearful and vice-versa.

It’s also all too easy to overstake, because in-play, there is no time to apply the Kelly criterion and calculate the perfect amount to risk, but experience in the markets is priceless.

Warren Buffett also is an advocate of buying stocks that you understand, a philosophy that served him well when the dotcom boom was in full swing. He openly admitted to not understanding these companies, and stayed away despite critics saying he was missing out. When the brown stuff hit the fan ten years ago, Buffett was left looking rather smart.

Specialise

“Wide diversification is only required when investors do not understand what they are doing”.

I’m guessing that all liquid markets have their repeating patterns, but since there are too many for it to be possible to become an expert in them all, focus on a few. While horse-racing offers a huge quantity, they don’t (for me) offer anything like the same quality. Sixty minutes of American Football for example suits me far better than a 5 furlong sprint, or even a 4 mile chase about which others know far more than I can ever hope to know.

Modesty

The final lesson (for now) from Warren Buffett is that for all his wealth, he leads a very ordinary life, still living a somewhat ‘frugal’ lifestyle. He still lives most of the year in the same house that he purchased in 1958. He doesn’t brag about his success, but quietly goes about his business.

Words Of Wisdom

Here are some other quotes that are relevant to some degree:

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it"

"It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction"

"I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over"

Premium Charge Avoidance

Not too much action today, although the Burnley v Stoke City game finished a draw and as I've mentioned before, games between teams in the same group are worth backing as a draw and under 2.5 goals. I'm almost certain the Elo ratings would have predicted a draw for this one too.

It's really rather depressing reading about all the clubs that are folding or in danger of folding these days. Chester City went under, now today Farsley Celtic have gone, and also in some degree of trouble are Cardiff City, Southend United, Portsmouth, and most troublingly of all - Crystal Palace. 

I am too young to remember Accrington Stanley folding, but I do recall Third Lanark and the original Aldershot going bust a few years back. Clubs actually folding used to be something of a rarity, but these days it's one after the other! Relegation used to be the worst that could happen to your team. Not these days.

To cheer myself up, I've been searching around for some workable ideas on Premium Charge avoidance, and pretty much come up empty.

Incidentally, for the person who asked "How much do you have to make to pay the premium charge?" the answer is that the Premium Charge is not related to winning size, but rather the ratio of wins to losses. Unless you are a trader, you will be highly unlikely to ever face this charge, but you can make £0.50 in a week and be eligible for the PC, or you can make £50,000 and not pay it.

Of course, you can make £50,000 in a week and pay 20% and then lose £50,000 the next week, but don't expect a refund. Just one of the unfair things about it.

As of right now, my charges make up 19.91% of my gross P/L, and unless I can get this above the magical 20% figure, I pay each week. On the 3rd December I avoided it when my charges hit 20.01% but it's been under that number again every week since, so the only time I don't pay the PC is if I have a losing week.

On the face of it, it would seem an easy task, but the problem is that if I make £500 in a week, I am 'only' generating about £20 in charges. If I lose £500, I generate exactly £15 in charges. Clearly with a win, the percentage of charges to gross P/L gets lower, but while a loss helps by increasing charges at the same time as reducing the gross P/L, it is not a desirable option unless the loss has been arbed somewhere else, but this is easier said than done. Losing on Betfair, winning on BETDAQ... but how do you know on which site the winner will come?

This is one of the ideas floated on the forums:

"I read about a simple but ingenious way to avoid PC - have a couple of big, big loss on Betfair, which are negated on Betdaq. You lose only the commision paid on Betdaq, and any transaction costs incurred. But your account is in a loss so you have room to win in the markets where Betdaq is no match."

"Unfortunately this doesn't work. On exchanges the price is effectively meant to reflect the real value of an event happening. They make their money off the commission not the odds. So you cannot "lose" in the long run (only via commission). So if you were going to have £1,000 on a 10/1 chance (especially if the odds are the same on another exchange which means the pricing is likely to be correct). You would lose 91 times out of 100, but win 9 times and effectively break even. Although, on reflection this would lower your ROI if you did this frequently which would put you below their threshold."

I have tried some 'almost' arbs using the Handicap and the Match Odds markets to 'almost' guarantee a win, but having nearly had the one margin of victory hit me for a sizeable amount, I decided that method was too stressful.

There are other opportunities in the football markets, for example the 0-0 score can be backed or layed in several markets, but the perfect arb is hard to find.

Besides, when you have been trading for several years as I have, making £100 in one market, and losing £100 in another doesn't make much of a difference to the percentage.

Betfair seem to have worked this one out quite well unfortunately. I'm open to any ideas from sharper minds than mine as to how I can effectively avoid this each week.

"A horse never goes as fast as the money you put on it"

Flash Volatility

The flash drive is (literally) on the road to recovery, I hope, but it'll be a few days before I have the spreadsheet back and the data from last Saturday and beyond updated, but so long as it comes back, I guess I can live with that. Frustrating, but nothing I can do about it other than learn from my laziness and take the time to back these things up more frequently. Someone at work told me I that should do this 'regularly', and had some trouble understanding that being 'regular' does not mean the same thing.

Just had a sneak preview at the Premium Charge for this week, and no respite with the total charges still bubbling at just under the 20% level, but the 'good' news is that the hit is less than usual which probably means the Academy Awards are yet to be included.

Although much of the recent focus has been on football, long-time readers of this blog will know that this sport is just one of many strings to my investing bow. I have a quiver full of arrows that I unleash in various amounts at any number of sports, with the amount determined by the edge I have. The Betfair Premium charge is the price I have to pay for the ability to trade in markets that other sites either do not have at all, or that lack the liquidity I desire. For outright punts I almost always use BETDAQ these days. Having paid the Premium Charge every single week so far this year, there's no benefit in taking slightly better odds on Betfair and then losing 20% in charges!

Speaking of trading, I meant to comment on this weeks ago, but forgot about it. I joined Mark Iverson a few weeks ago now on a live chat for one of the NFL Conference Championship games, and he made the comment that he tended to favour trading in the first half only since the second half is more volatile. I commented at the time that for that very reason, I often prefer to get involved in the second, rather than first half of games, since volatility is the trader's friend. Mark does OK with his style of trading though, and I'm happy with mine although Mark's style might well be less stressful and if he lives to 90 and I drop dead at 53, then I'm prepared to admit that maybe I had this one wrong.

Believe In God? 5000-1 If You Can Prove It

As I struggle with modern technology, and my stupid flash drive, in need of a smile I found this at The Spoof

Sunday, 7 March 2010

Bookmaker Barry Banks is offering odds of 5000-1 if you can prove the existence of God. Barry explained that some people would bet on anything we are not certain about,as well as the daily bets on horse racing,football etc. Barry takes bets on Aliens landing on earth, Katie Price (alias Jordan) to be next Prime Minister, Lord Lucan to be found within the next 5 years.

Current odds if you can prove the existence of God are 5000-1 but Barry said "It may as well be a million to one for this bet, because although I have had a tirade of abuse from religious fanatics they are still unable to give proof of the existence of God and take advantage of odds of 5000-1."

You would think God would come forward and take advantage of such good odds.

Not So Flash Drive

The Elo predictions have come to a grinding halt, due to a malfunctioning flash drive and the (I hope) temporary loss of many spreadsheets including the Elo one. Of course I am kicking myself for not backing it up regularly – the last time was three weeks ago before the Bundesliga was complete, and I’m not in the mood to re-apply all that data right now. Technology can be so frustrating.

The Academy Awards proved lucrative, and an idea from a couple of years ago which showed promise last year with small stakes once again came good. “The Hurt Locker” won Best Picture after drifting out to about 2.4 before the show started, and coming in to about 1.5 at the end. This film also threw up the Best Director award – although this was always a ‘certainty’. It seems I’m not the only one who could care less about sci-fi!

Sandra Bullock won Leading Actress as expected and by managing to avoid the big disaster in markets such as Sound Editing, Original Score, Best Foreign language etc. (markets I’ve learned to avoid after previous mistakes), I had my second best Oscar night ever.

That’s the good news. The bad news is that it was still a loss overall yesterday with Football Elite’s Recommended Bet of Espanyol failing to beat Villareal, and some painful losses in the NBA.

At least the Premium Charge should be somewhat reduced this week!

And The Award Goes To

Between 2006 and 2009, the Academy Awards have added a net total of £169 to the Cassini coffers.

However, there have been some wild differences from year to year with 2007 seeing a loss of almost £2k, and 2008 a profit of £1.4k. I sometimes get carried away with how much I know (or don't know) about these markets!

I can't even remember what markets the big wins and losses were on, but tonight sees the next installment in the series. Which way will it go? While there are some 'definite' winners such as Jeff Bridges (Lead Actor 1.14), Supporting Actor (Christoph Waltz 1.04!), Supporting Actress (MoNique 1.07) and Kathryn Bigelow (Best Director 1.22) the Best Picture Award is interesting. If The Hurt Locker (2.04) wins, it will be the lowest grossing film (in real terms) for many years to win, and it's in a tight race with Avatar. I've not seen the latter since I am not into sci-fi, (never seen a Star Wars movie) but 2.5 seemed a very generous price given it's success at the box-office. It's dropped in price since to 2.24, so I have a healthy green whoever wins, but healthier if it is Avatar.

Leading Actress will go to Sandra Bullock (currently 1.57).

Sunday Morning Coming Down

The following are the teams expected to have a two goal supremacy in today's matches. Everton (1.42) v Hull City; Malaga (1.67) v Xerex; Internazionale (1.45) v Genoa and Palermo (1.54) v Livorno.

Notable (i.e odds against) among those expected to win by one goal are Bari (2.1) v Chievo, Cagliari (2.08) v Catania, Sampdoria (2.2) v Lazio, Osasuna (2.3) v Getafe.

Vive La France

Quite a day in the world of football investing, and a tough ending to the Lens v Paris St Germain game in France. I had this game as a draw, but Football Elite had Lens at 2.36 as their one Recommended Bet for today, and I went with Football Elite and what happened? With the last kick of the game, in the 94th minute, PSG equalised! Ouch.

I really need to have a set plan in place for these situations. I tend to decide on a whim how to play it, and today just wasn't my day.

It was a better day in England, with the highlight being the 3-1 score in the Arsenal v Burnley game coming in at 13.5. West Ham let the side down by losing by one instead of winning by one at home to Bolton Wanderers, and Manchester United at least won at Wolves, even if they fell one goal short of the expected margin.

One of two in the Cup, with a draw at Fulham (3.45) v Tottenham Hotspur ensuring a profit here. Chelsea by 3 over Stoke City tomorrow, after Aston Villa beat Reading by one in the first game.

Blackpool, Cardiff City and Nottingham Forest all won by the one goal expected in the Championship at better than evens, but Bristol City lost. I had no less than six draws predicted here, and while only one was a winner (Plymouth Argyle v Preston North End), the trend of most of these games finishing Under 2.5 goals continued and gave me 5 winners to soften the blow.

The predicted draws in the Premier League also show the Under 2.5 goals as a value bet, with an unsustainable 80% of matches finishing under so far.

It gets worse from here on. In League One I had four teams to win by two, and only one (Charlton Athletic) managed to win as predicted. Swindon Town managed to lose by four, Leeds United were held to a draw, and Norwich City won by an extra goal.

League Two showed why games at this level need more study. Aldershot Town, Port Vale and Rotherham United all lost at home showing that there's a good reason why they were priced so high!

The Conference? Don't ask. Luton won, as did Kettering Town and Stevenage, but the latter two at short prices (but still value...).

In Germany only one bullseye from 7 (Werder Bremen v VfB Stuttgart draw).

In Spain another 3-1 scoreline paid off as Deportivo La Coruna beat Tenerife by the expected two goals. Real Madrid may yet win by two, but currently are drawing 2-2. 1 out of 3 here. Update: Real won 3-2

A bon jour in France though, with 5 bulls-eyes from 7 matches, even if I missed out on the draw at Lens as mentioned above! The ratings had bulls-eyes at Auxerre, Boulogne, Lens, Rennes and St Etienne with only Nice and Sochaux disappointing.

Tomorrow? One goal home winners predicted in the three La Ligue matches at Bordeaux, Grenoble and Marseille. Why are Grenoble available at 2.54? They are at home to Le Mans who won away to Boulogne in their last game, but Boulogne are my bottom rated team in this league and Grenoble's form over the past six matches is better. It looks like a gift, but it's not usually that easy. By way of contrast, Bordeaux are 1.62 and Marseille are at 1.49.

Finally today's two games in Italy, and no joy here. Fiorentina lost, and AS Roma drew.

Elo Predictions: 6.March.10

There are a few teams playing today that look to represent excellent value in comparison to their predicted win margin. A little more research is needed, especially in the lower leagues, but here we go:

In the Championship, I like the look of Blackpool at 2.34, Bristol City at 2.22, Cardiff City at 2.36 and Nottingham Forest at 2.12, all predicted to win their home games by one.

In League One the value bet is Swindon Town at 1.77 v Bristol Rovers.

In League Two, Aldershot Town at 2.1, Port Vale at 2.66 and Rotherham United at 2.12 look good value and all are expected to win by one.

The Conference National throws up Barrow at 2.34, Kidderminster at 2.2 (away to Eastbourne Borough), York City at 2.14 (away to Forest Green Rovers), Luton Town at 2.12 (away to Hayes and Yeading), Histon at 2.16, Kettering Town at 1.34 and Stevenage at 1.55.

Queen's Park 2.48 v Berwick Rangers in Scotland, and across the sea, the top picks are:

Bundesliga: SC Freiburg 2.46 v Hannover 96
La Liga: Deportivo La Coruna 1.75 v Tenerife
La Ligue: Nice 2.26 v Nancy
Serie A: Fiorentina 2.6 v Juventus and AS Roma 2.5 v AC Milan

Dogs Of The Dow

An article on the Yahoo Finance page today gives a good example of an investment “system” that worked, by some measure, for a while, but which ceased to work after a while for various reasons.

Some of you may be familiar with the "Dogs of the Dow" strategy, but basically the idea was to buy the top 10 highest-yielding stocks in the Dow Jones Industrial Average (of 30 stocks) each year, and sell them a year and a day later and start over.

The details of the strategy don’t really matter. What I really want to highlight is the importance of constantly monitoring any systems for signs that they may be losing their potency. Markets do change, and any inefficiency that you may be lucky enough to identify and take advantage of for a while, will almost certainly cease to exist at some point.

However, some methods might simply have a losing run due to statistical variance, something to be expected, so it’s important to recognise this possibility and not pull the plug or start changing something too quickly.

Meanwhile, Back At The Ranch

After a good, and mostly healthy and good natured, debate on whether ‘value’ can exist at any price, I think the verdict is that it can, but it is harder to find at the shorter end of the price range. Of course, if value backing doesn’t exist, then value laying would, so ultimately value exists on one side or the other. The trick now is to find it.

Anyway, back to normal now, and the predictions from the spreadsheet for this weekend’s reduced EPL schedule are:

Arsenal by 2 v Burnley
West Ham United by 1 v Bolton Wanderers
Manchester United by 2 @ Wolverhampton Wanderers

For the FA Cup matches, I have draws for both of the all-Premier League ties, Fulham v Tottenham Hotspur and Portsmouth v Birmingham City.

I’m usually wary in Cup games because I’m never too sure about how committed to winning they are, but I think that all four of the above have something to play for and the ratings should be relevant.

Hypocrite

- a person who acts in contradiction to his or her stated beliefs or feelings.

I shouldn’t, I really shouldn’t, but as I tell my parole officer, it’s so hard to resist…

Nigel Evans posted this comment yesterday on my post about value potentially existing at any price. Missing the point completely, he had this to say:

Anyone backing at odds on is a mug punter, it's no surprise you're losing.

I'm always happy to lay the mugs at odds on thinking they're buying money.

"If Manchester United are priced at 1.99 at home to Burnley, that price is value." whoopdy doo what a convincing argument you put forward. You know as well as I do that just wont happen and if anything the opposite occurs with odds on shots as people like you think you're buying value when in reality you just push the price in even further - mug

Let’s see - “Anyone backing at odds on is a mug punter”?

Tuesday 25th February 2010: “So, it's likely that my main bet will be something like £40 @ 1.92 in the Over 2.5 goals market”

Saturday 27th February 2010: “The Chelsea v Man City game has lots of players who can score goals and the market price for Over 2.5 goals is 1.87 and I have taken it.”

Wednesday 3rd March 2010: “My bets today are to lay England @ 1.42 and back Over 2.5 goals @ 1.91”

What do 1.87, 1.91 and 1.92 all have in common? (For those unfamiliar with the decimal format, they are all odds-on). And from where were those quotes pulled?

Nigel’s own blog! Modestly titled “The Supreme Master of Trading”:

I started trading in 2005 and found that I had a natural instinct for it. Trading comes naturally to me as I have an enormous capacity for mental arithmetic which has served me all my life. Although I possess great gifts. I strive, always, to help others who are less fortunate than me.

Great gifts that don't quite extend to noticing the full-stop after 'gifts'.
Opening post. 21.Feb.2010:

“Ah well ! Here we go ! Up until today I have only tried to have fun with my trading and have been trading on as many as ten events every day. From now on I intend being more sensible and am going to impose a period of thirty days of misery where I must use all of my best brain to try to make money without having any fun.”

For someone who has been trading since 2005, with ‘great gifts’ and apparently multiple brains, I would have to say that progress could be described as slower than expected.

Value Opinion - At Any Odds

Greg said...

Anyone who doesn't bet odds-on is wrong? That goes against the strategy of virtually every long term profitable football investor I know of. It’s a big shout for someone who has no proven record in the game to say that the likes of mike from winabob, matt from football elite, dave regan, mike smith etc are all doing it wrong. I can see the point you are making but that is a very simplistic view of things. This isn't a criticism of you or your blog btw, just disagree with you on this subject. Keep up the good work with the ratings.

Thanks for the constructive, or at least, positively toned, comment Greg. My point about betting at odds-on is simply this. Odds-on is an arbitrary value, one where the implied probability of an event is greater than 50%, and emotionally significant to human beings because it marks the point at which the stake (risk) exceeds the potential winnings (reward).

In mathematics, a probability of an event A is represented by a real number in the range from 0 to 1 and written as P(A), p(A) or Pr(A). An impossible event has a probability of 0, and a certain event has a probability of 1.

There is nothing magical about P(A) > 0.5.

The idea that the laws of probability cease to apply when P(A) > 0.5, or that value ceases to exist here is simply wrong. Admittedly my statistics training was a fair while ago, but I’m willing to bet (at odds-on if necessary) that the laws are the same today as they were n years ago. Mathematics is like that.

It is only the human emotional response to the risk exceeding the reward that makes some people wary about investing, or rather gambling, in this range. It’s this difference between considering a bet an investment or a gamble that is perhaps the key. When it comes to sports investing, the idea of risking more than you stand to win perhaps seems counter intuitive at first, but it shouldn’t be.

I posed the question of backing at odds-on to Matt of Football Elite (I subscribe to his service) at the end of January and here is his reply in full:

The reason I don’t bet below 2.0 is simply that I just can’t make a decent profit doing so!

Year on year I would look at my end of season stats and it would be the bigger priced selections that did the majority of the work. The shorter bets would either be showing a tiny ROI or even a loss some seasons.

I was loathe to make the change for a long while since as you say in theory value should exist at any price but I couldn’t keep ignoring what the stats were telling me.

I wish I had a clever explanation as to why I don’t seem to be able to make a profit at that odds range but I don’t. Just doesn’t work with my style of betting I guess. There are quite a few of the more respected football tipsters that feel the same.

Maybe the market is too efficient at that end of the market?

I have no idea who the other names Greg lists are, but if he can get their input on this debate, I would love to hear their thought.

Matt openly concedes that logically, it makes no sense. “Just doesn’t work with my style of betting I guess”. That’s fair enough, and Matt achieves good results focusing on odds-against selections, but it’s not evidence that value doesn’t exist at odds-on, just an admission that Matt can’t find the value among the shorter prices.

"Anyone who doesn't bet odds-on is wrong?". I am not saying that - I am saying that anyone who rules out betting at odds-on is wrong.

Another Anonymous commenter said this:

It makes no sense for any clued up punter to say they would back an even money shot but nothing less. Perhaps they'd grudgingly be prepared to back a 1.99 but not a 1.98 shot. What about 1.97?

To back at only above evens is simply an arbitrary line in the sand drawn by people who have no concept of value.

If these same people knew, say, that a coin was biased and would land heads 75% of the time, would they still not be prepared to back evens for heads? Presumably not.

Not being prepared to back odds on shots simply shows they have no confidence in their ability to price up a market.

Quite. To me, value potentially exists at any price. If Manchester United are priced at 1.99 at home to Burnley, that price is value.

If Roger Federer is playing Wayne Odesnik and is priced at 1.98, that price is value.

(I'm assuming that Manchester United and Roger Federer are at full strength, and want to win their games).

I could go on, but I think the point has been made.

It’s not the price that you are backing at that is important. It is whether or not that price represents value, and clearly, odds-on can offer value as much as any other range of odds.

"Try not to become a man of success but rather try to become a man of value." - Albert Einstein

Update: With impeccable timing, Matt has just commented further on this subject, and it's worth including his comments here since they can easily be missed otherwise:

For me personally it is simply a case of the profits not being there for me when betting on short prices on football.

Why exactly that is I don't know but going back over my results in past years it was always the bigger priced bets that did all the work and the odds-ons would always make a loss or just a small profit and were dragging the overall results down.

My theory is the general public (dare I say the mug punter) will in general overbet the shorter priced teams as the general public tend to bet on what they think will win rather than what is the value price. There tends to be more mug money in football than other sports and that means most short priced sides are shorter than they should be and so obviously aren't profitable if regularly backing them.

Or it could just be the market is very efficient at that end of the market and the bigger opportunities lie in the more overlooked sides.

Or it may just be I am crap at picking short priced teams!

Obviously it goes without saying that if say a full strength Man U were 1.6 at home to Portsmouth I would be all over it but I do think in general it is harder to find value at the lower end of the market in football and I don't know many that are able to consistently do it.

There comes a time when you have to act on what your past results are telling you and cut out those bets that are not performing no matter if they look value to you or not (bar the once in a blue moon way out of line price)

Thanks Matt.

Show Me The Way

I have had some comments or questions regarding how the Elo predictions can be used to make profits.

The saying “you can lead a whore to culture, but you can’t make her think” springs to mind, but I’m in a charitable mood, so perhaps some of the ideas below will help the less sharp-minded out there.

However, the final decision of whether to use the predictions and how is yours and yours alone. I'm just putting a selection of predictions out there. If you care not to use them, that's fine. I really couldn't care less. If you do care to use them, that's great, but read the footnote to this post first.

As I keep saying, this is a work in progress, my investment style is still evolving, and the strategy varies depending on the league, the sample size, and the confidence I have in the data. There is thus a significant amount of subjectivity involved right now.

Punters have different styles. As I have written before, some people subscribe to the belief that backing at odds-on is a definite no. (They’re wrong, since as I have explained before, value can be found at any price – there is nothing magical about evens). Some punters are happy to have lots of losing bets, with the rare, but long-priced winner. Others, and I include myself in this group, are happier to have a more frequent run of winners, which obviously means shorter prices.

For the Elo predictions, typically (and as I said, this varies from league to league for now), I cover the two or three goal predicted winners on the Correct Score market only. If the price in the Match Odds market tells me this is value, then I will also have an investment there. For example, right now, the price I look for in the EPL for a three goal expected winner is 1.34, and for a two goal expected winner 1.43. In Serie A, the odds needed are 1.34 and 1.54 respectively.

For the one goal selections, it all depends on the odds. When the prices are better than evens as they were yesterday, then I have a bet on the Match Odds market, and smaller bets on the Correct Score market. The Match Odds win will always more than cover the Correct Score stakes.

For draws, I have just been using the Match Odds market with stakes varying depending on the league. With the EPL draw predictions being correct 46% of the time, this has been extremely profitable. I’m well aware that unfortunately this strike rate is most unlikely to continue.

In other leagues, my stakes on the draw are significantly reduced.

Then there’s the laying strategy that I mentioned yesterday. Again, the selections will be limited to one or two per game day and time, and will be based on which league appears to offer the best value.

There are the Asian Handicap markets that I haven't had time to research too much, along with the Draw No Bet markets, as well as the Under / Over markets where some leagues and predictions suggest value.

The bottom line is that there are many ways to use these predictions profitably. How, or even if, you choose to use them is all up to you.

Also, for anyone who is trying to do any analysis on these ratings, bear in mind that I cover 13 leagues and only mention a small percentage of matches, usually the Premier League and one or two other high profile games, or on a quiet night such as tonight, teams such as Histon.

By the way, the screenshot is an extract from the spreadsheet showing my table for the Premier League, with the expectancy along the top and the results below. Bright green is very good. Lighter green / blue is good. Bright Red? Very bad.

Kudos to CLS for correcting his maths error. Check out his blog at http://correctscorelaying.blogspot.com/

IMPORTANT NOTE: Sports investing carries a high level of risk, and may not be suitable for all investors. Before deciding to trade Cassini's Elo predictions you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with sports investing, and seek advice from an independent sports investment advisor if you have any doubts. Past performance is not necessarily indicative of future results. © 2010 Cassini Elo Ratings, Ltd. All rights reserved.

AU - Get Off Of My Cloud

I like getting comments. It makes it easy to find something to post the next day. A couple more hit the blog in the last couple of days.

First, Mr Anonymous writes very constructively:

I think you should drop the AU from the dutching as in effect you backing a whole series of scorelines of which your predicted superiority is probably in the minority (say 4-2 and 5-3 in a 2 goal adv) Also as you discovered in the Chelsea game your also backing the diametric opposite of your prediction which presumably is poor value.

I think I’m in agreement for the most part. For sure I will be giving up a few winners, but the Any Unqutoed price is not looking like it’s value. Looking at Serie A, there have been 31 home teams expected to win by 2, and just 4 have hit the Any Unquoted. La Ligue has 6 of 42, Bundesliga 7 of 41 and the EPL 3 of 14. With the AU typically in the 4.0 to 6.0 range, it’s clearly poor value. However, in La Liga, the AUs hit 10 of 33, most due to Real Madrid and Barcelona who have some big wins at home. Anyway, with the Spanish exception, I think you are right that AU represents poor value.

Another comment was added yesterday to a post of January 17th, and read:

Try looking at the goalscoring abilities of the underdog. I'll try to calculate whether they are capable of scoring 2 goals (underdogs rarely are) in the game then go from there. Have a look at my blog for further discussion on correct score laying strategy:
correctscorelaying.blogspot.com

I'm not sure I really understood what he was saying, and I rather lost confidence in any calculations when I read his latest post, edited here, but available on the blogroll in full:

A while ago there was a correct score laying thread on one of the betting forums by a man called Scotty who successfully layed some 350ish correct scores in a row.

Now a lot of people were in awe of Scotty after this but it really wasn't all that impressive and I'll explain why. Almost all his correct score lays were priced between 100 and 300. If we take the average as 200 then Scotty's expectation is to lose 1 in every 200 times and he actually lost 1 in 350. Good yes but given that it's less than twice his expectation it's hardly amazing. A good analogy would be a gambler getting two winners in a row at evens(2) which is actually more impressive than Scotty’s run of wins as it is running at double the expectation whereas Scotty was just less than double. This is not to belittle Scotty's thread in any way, just to say that it didn't quite deserve the awe it received.

For someone involved in probabilities, the poster actually demonstrates a worrying misunderstanding of how probability works. If Scotty’s winning run was 350, and he was laying at 200, then by my calculations, the probability of going 350 without hitting a loser is actually just 17%. He would be expected to have a loss after 139 bets, and while hitting a 5/1 shot isn’t really deserving of too much awe, it is a little more impressive than winning successive coin tosses at 3/1.

I also disagree with his assertion that “my point is that you should expect to win almost every bet” since expectations rather depend on the price you are betting at, but when he says that “the difference between winning and losing at correct score laying (and gambling in general) is the price you take” he’s correct – it’s another way of saying that you need to find value to be successful.

[Of course, my calculations above could be the ones that are wrong, since two nights ago I couldn’t correctly subtract 9 from 100…]

Finally, a rare prediction from the Conference National where the big game of the night sees Histon v Rushden and Diamonds predicted to end up as a draw at 3.55. Overall these hit at an average 24%, but 10 of the last 22 have been correct, with no less than four 2-2 results (which is of academic interest as there are no Correct Score markets at this level) but it does lead me neatly into letting you all know that Over 2.5 goals at the prices available (2.08+) is value as almost 60% of such games finish this way.