The States of Swing

As long time readers of this blog will know, I burned my fingers not once, but twice, in 2016 betting on politics, but after four years the pain has eroded at least slightly, and the next US Presidential Election is fast approaching in November.

A few days ago, Joe Biden was 2.32 to become the next President, which seemed to me to be quite generous given the polling numbers. As we learned in 2016, being ahead in the polls, and even getting almost 3 million more votes than your opponent, doesn't guarantee anything, but it seemed like the market was overly concerned about the Electoral College and perhaps Joe Biden's age. At 77, six months is perhaps a long time, but the "Winning Party" market had the Democrats at around evens which also seemed a decent value bet.

Looking at the markets today, there has been a strong move against Trump and for Biden so that both are effectively now neck-and neck at 2.15 / 2.17 respectively, while the Democrats have shortened to 1.96 / 1.97 to be the Winning Party. 

As we learned the hard way in 2016, the national polls are interesting but taken on their own can be misleading. As of May 27th, Biden leads 46% - 41% here, but of the 270 Electoral College votes required to win, counting the "Safe, Likely and Leans" for each party, the Democrats lead by 232 - 204.

In the "Popular Vote Winner", Joe Biden is currently around 1.34 with Trump at 5.2, and although there is always the possibility of an Electoral College twist again, I'm not sure it is close to being as likely as implied by the prices available.

The "toss-up" states, in order of Electoral College votes, and thus importance, are Florida (29), Pennsylvania (20), Michigan (16), North Carolina (15), Arizona (11) and Wisconsin (10). (Nebraska splits their Electoral College votes which explains why the total isn't 538).

So the key would seem to be how the polling is looking in these swing states. 

In Florida, polls as of yesterday have Biden leading 49% - 46%. Clearly with 29 votes, this is a must win state for the Republicans, as if they lose here, the Democrats would need just one of the other swing states to push them over the 269 votes needed. 

Pennsylvania has Biden well ahead by 49% - 41%, although the polling data here is eight days old, while Michigan and North Carolina have Biden ahead 49% - 43% and 46% - 44% respectively. Biden also leads in Arizona (47% - 43%) and Wisconsin (47% - 41%) which all means that in a fair election, anything close to evens for the winning party to be Democratic seems great value.

Of course a week is a long time in politics, and five months is even longer, but it's hard to see where Trump is going to start picking up the voters he needs to turn this deficit around. Wooing swing voters doesn't seem to be his strength. 

Having layed Trump at 1.99 and backed Biden at 2.32 I'm happy to let both bets run. The Democrats have traded as low as 1.68 in the Winning Party market, and the current prices look good value to me, but as I mentioned at the start of this post, politics can be a dangerous market and polls can be flawed, so don't go too crazy. 

Lockdown Trading

Yesterday, I mentioned Dr C's plans to go full-time sports trading while unemployed, and from the pages of Yahoo!Finance - occasionally a good source of content, though not as often as in past days - comes this article on day-trading:

Quarantine brings out people’s inner stock trader. Here’s how to avoid their mistakes 

Many Americans, stuck at home because of the coronavirus pandemic, are putting federal stimulus checks and other money into online stock trading. Several leading brokerage firms have reported a surge in new accounts since much of the U.S. went into lockdown in March, and the stock market’s sharp recovery since the March lows, coupled with recent steps to reopen the U.S. economy, only fuels these newcomers’ euphoria.

Indeed, with zero-commissions, day trading seems like an easy way to make a quick buck. Unfortunately, most new traders make rookie mistakes that cost them real money.

Stock trading is a high-stakes game, so if you’re playing at least learn how to improve your odds. Here are seven common trading mistakes and how to avoid them:

1. Big, overconfident bets: Want to lose most or all of your money real fast? Make outsized stock-trading bets, like a roulette player betting it all on red or black. In fact, big trading bets are a form of gambling.

Steer clear by trading in small amounts — 100 shares or less — and, it goes without saying, don’t bet more than you can afford to lose.

2. Overtrading: Many day traders buy dozens of stocks that are moving up, hoping for a quick profit. Day trading too often and with too many stocks is a recipe for disaster.

Trade just one or two stocks a day. Trying to manage anything more is for jugglers, not traders. Although the pattern day trading rule is annoying (you are limited to three trades in a five-day period if you have less than $25,000 in your account), it forces you to trade less but more accurately.

3. Holding losers too long: Knowing when to sell losers takes experience. If you sell too quickly, you miss out on potential profits if the stock reverses. If you sell too late, you incur bigger losses. Most novice day traders typically hold their losers too long, hoping they will get back to even.

Remember, you’re trading, not investing. Don’t hold losers, and rarely keep a position overnight. Once it’s clear the loser is not coming back before the market’s close, sell and live to trade another day.

4. Selling winners too soon or too late: Managing your winning positions is as challenging as managing the losers. Many traders sell winners too early, missing out on bigger profits. Even worse, if they hold some winners too long, a profitable position can plunge to zero.

The solution: Plan in advance for when to sell and stick to it. If you land a big winner, sell it all. If for some reason you have trouble doing that, then scale out of a winning position by selling half of it now and the rest later.

5. Too many technical indicators: Many beginners believe the more market indicators they use, the better, as if indicators will lead you to the Holy Grail. Watching too many indicators is confusing and distracting, and prevents you from focusing on the only thing that counts: the market itself.

The fewer indicators you use, the better. Choose one or two that work best (you have to experiment to find which works for you) and master them. Day traders I know use VWAP (Volume Weighted Average Price), or the NYSE Tick, for example.

6. Panic buying the hottest stocks: Momentum trading has been the rage, and many traders did well with hot stocks such as Tesla, Nvidia, Netflix, and Beyond Meat.

The easy days are over for momentum trading, yet many beginners still focus on the stocks that have had the biggest runs. What typically happens to these momentum stocks is that they stall, then fall, taking day traders’ money with them.

Chasing hot stocks is risky and should be avoided because momentum can quickly turn against you. It’s all right to follow strong stocks whose price is trending higher — just don’t chase them. Day trading is enough of an emotional experience without you buying or selling in a panic.

7. Not enough practice: Read a book or watch a video about day trading and you might think you’re ready to clean up. You’re not.

Too much money and too little experience is a bad combination. Before staking a dime on a stock, practice with a simulated trading account to build your trading muscle. When you do venture in, trade with 100 shares or less until you understand how this part of the stock market works. (See tip #1.)

I'm not sure I understand the "100 shares" recommendation given that all share prices are not equal - there's a big difference between buying 100 "penny" stocks and 100 Berkshire Hathaway Inc. Class A stock - so I'd suggest position size is somewhat more relevant. 

One strategy that has worked well for me is to focus on a handful of stocks, and take advantage of big moves as markets often have a tendency to overreact to news. This can be a risky strategy when market volatility is high, but a semblance of normality seems to have reappeared in the past few weeks, and if you are buying a solid stock, and position sizing sensibly, the risk is fairly small. 

Tesla stock (TSLA) was mentioned here in June 2018 when the price was around $315, and at a little under $800 currently, that has been an excellent investment although I'd like to change my opinion from that post where I said:

I also happen to like CEO Elon Musk's sarcastic, flippant, sometimes rude, approach to those trying to spread a false narrative about him or his company.

Some of his recent comments have been anything but helpful to the stock price and very un-CEO like!  

NHL Playoff Qualifiers

The NHL has announced its plan for returning to play this season, although no dates have yet been announced. 

The Regular Season has been ended and play will resume with a modified play-off format with twelve teams from each conference (Western and Eastern).

The top four in each conference will play a round-robin tournament against each other to determine seedings one to four, and the next eight will play in four "best of five" series with the four winners facing the top seeded teams.

It's a reasonably fair solution. In the East, perhaps the Montréal Canadiens can consider themselves fortunate in making the twelfth spot despite being only three points ahead of both the Buffalo Sabres and the New Jersey Devils having played two games more, while in the West, the Dallas Stars make the top four despite being a point behind the Edmonton Oilers courtesy of their two games in hand. 

The games will be hosted by two cities, yet to be determined, so there will be no home advantage unless one of the chosen cities has a team playing which seems unlikely, and likely in front of empty seats. With all three California teams (Los Angeles Kings, Anaheim Ducks and San Jose Sharks) eliminated, I wouldn't be surprised to see that state hosting the Western matches.

Presumably one this Qualifying Round is complete and the seedings determined, the playoffs will resume in the traditional format. 

From the Eastern Conference, the four teams seeded into the first round are the Boston Bruins, Tampa Bay Lightning, Washington Capitals and Philadelphia Flyers. They will be joined by the winners of the following ties:

(5) Pittsburgh Penguins v (12) Montréal Canadiens
(6) Carolina Hurricanes v (11) New York Rangers
(7) New York Islanders v (10) Florida Panthers
(8) Toronto Maple Leafs v (9) Columbus Blue Jackets

From the Western Conference, the four teams seeded into the first round are the St. Louis Blues, Colorado Avalanche, Vegas Golden Knights and Dallas Stars. They will be joined by the winners of the following ties:

(5) Edmonton Oilers v (12) Chicago Blackhawks
(6) Nashville Predators v (11) Arizona Coyotes
(7) Vancouver Canucks v (10) Minnesota Wild
(8) Calgary Flames v (9) Winnipeg Jets

DH in NL Stadiums - Purists Aghast

Although life is anything but 'normal' right now, the funeral is over and on what would have been my Mum's 92nd birthday, an opportunity to catch up on what's been going on for the last few weeks, which is not a lot as far as sports are concerned.

I did see some news regarding when MLB might return, and buried in the details is one little nugget that may prove useful to investors which is that:

All teams would use designated hitters.

The rationale for this rule change, incidentally one that will upset baseball purists, who at least won't be able to be there in person to witness the abomination, is that this would appear to include matches played in National League stadiums, where pitchers have long hit for themselves and visiting American League sides have had to make the adjustment.

Baseball officials said the idea would simplify things, as teams limit their travel by playing more inter-league games against local opponents. Limiting travel certainly makes sense, but this rule change, if applied, appears likely to favour the American League teams. 

I'm not sure I understand why the current rules for inter-league matches shouldn't continue. The rules are American League rules when an American League team is the home team, and National League rules when the National League team is at home.

The MLB also plan to play in empty stadiums, although as with many sports, the advantage of playing at home has been reduced with the advent of challenges and reviews.

Over the past five seasons, 2015-2019, blindly backing home teams in regular season games (straight up) would have cost you 2.49% versus a smaller loss of 2.17% of road teams. 

I know what you are all thinking, and the numbers in inter-league matches for home teams are even worse with a loss of 6.1%. 

Clearly the edge historically is on the road teams, and especially when the visiting team is from the American League and as mentioned above, at a seeming disadvantage. 

The market doesn't do a great job of accurately evaluating the win probabilities here, because in this latter scenario, the profit on the road team (straight up) is 4.9% and 3.6% on the Run Line.

How will the market adapt to the American League now having an apparent advantage in these games? Something to look for if and when the revised schedule is released and something that will mess up the statistics in future seasons! 

Doctor C, mentioned in this blog a couple of times, tweeted that he had...

As a former contract programmer myself, although many years ago now, I can identify with this unsettling state of affairs, and certainly the income was always relatively high so any interruption in employment, even short-term, wasn't a good position to be in. 

However, I'm not convinced that replacing even half of that income by short-term full-time trading is as easy as it sounds and as I've written before, when you need to win to pay bills, the stress is incredibly high, which leads to poor trading decisions. 

I wish the good Doctor well in his endeavours, and it will be interesting to follow his progress, but relying on trading as a primary income seems like a recipe for disaster. Hopefully he has six months of money put aside to cover expenses during that time and a decent bank for trading. 

Passive Oversight

Readers of this blog will be familiar with the difference between passive and active investing and my preference for low cost index tracking funds, but for one company, this strategy last month turned out to be anything but low cost.

While I wasn't actually copying Bill Gates and reading company reports / financial filings for fun, I did catch this little gem of news yesterday.

Per an 8-K filing, something which is required by law in the US for disclosing a "major event relevant to shareholders", apparently Invesco (a large investment management company) missed the re-balancing date for two of its S&P 500 tracking funds on April 24th costing them $105 million to compensate for the resulting difference in performance:

The Company recently discovered and has corrected an error with respect to two funds: the Invesco Equally-Weighted S&P 500 Fund and Invesco V.I. Equally-Weighted S&P 500 Fund (the “Funds”).

The Funds are passive funds that are managed to track the S&P 500 Equal Weight Index (the “Index”). In March 2020, due to volatility in the equity markets, S&P Dow Jones Indices communicated the decision to delay, and ultimately to separate, the rebalancing dates for its indices and noted some indices would be rebalanced in April and others in June.

The Company noted this delay but not the separation of rebalance dates and omitted rebalancing the Funds on April 24, 2020 when S&P rebalanced the Index.

The Company discovered this omission and rebalanced the Funds on April 29, 2020. The Company will make a contribution to the Funds of approximately $105 million to compensate them for the performance difference that arose from market movements between April 24 and April 29.

Rather a costly mistake by someone there. A whole new meaning to the term 'passive investing' and I wonder if the person responsible was "working" from home. I'm sure a few senior executives weren't too 'passive' about the error when it was brought to their attention.

Dry Lockdown

With no sports, there's not much to write about these days, but I hope everyone is coping with the current situation and aren't too badly impacted financially.

It may not be a common point of view, but for me personally, this 'lockdown' isn't the worst thing. I'm fortunate that my primary income stream isn't impacted, in fact it's effectively increased as I'm not having to spend time or money commuting, although secondary and tertiary income streams have dried up completely.

With no temptations in the form of bars, pubs and dine-in restaurants, I have been dry for over eight weeks now, smashing a record that goes back almost 20 years. Spending on alcohol and petrol totalled zero in April, which must be a first since I turned 15, so there's an additional saving there! I suspect the unplanned dry run will come to an end in a couple of weeks time at my Mum's funeral.

Like many of us I suspect, I have had a lot more time to read over the past few weeks. I mentioned finishing "The Hot Hand" last week, and have devoured Michael Lewis' "The Fifth Risk" since then - highly recommended, as are all of Lewis's books.

I have a tendency to get distracted, and often have several books in progress at any one time, with the result that any one book takes months to complete, and often requires starting over because I've forgotten what I've already read - which is of course terribly inefficient. I justify this to myself by having books of different genres on the go at the same time. It's not unusual for me to have a novel, a book on markets or investing, a sports related book, a social economic book and a historical book all in-play at the same time. An isolation resolution is to be more disciplined with my reading.

The importance of reading has been known for centuries, with innumerable quotes about it. Some of the most successful men of our time have emphasised the importance of reading. Bill Gates reads 50 books a year, and Warren Buffett spends five to six hours a day reading five newspapers and 500 pages of corporate reports. (The latter might be a little dry). 

“In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. ..." - Charlie Munger

“Everybody can read what I read, it is a level playing field.” - Warren Buffett

“Reading is still the main way that I both learn new things and test my understanding.” - Bill Gates

My latest read is "Latticework" by Robert G Hagstrom which I acquired a while ago (it was written in 2000) and for some reason is a copy signed by the author.

In this engaging and challenging book, Robert Hagstrom outlines a new approach to investing based on the ideas of two highly successful investors: Charlie Munger of Berkshire Hathaway and bill Miller of Legg Mason. Both Munger and Miller believe in the latticework approach to investing, one that is based on a working knowledge of a variety of disciplines. Latticework is a true liberal arts approach to investing. It carries the reader from Ben Franklin's vision of education to St. John's College with its Great Books program to the cutting-edge Santa Fe Institute, a multi-disciplinary research center which brings together scientists from a variety of fields to address complex adaptive systems, including markets and economies. In helping readers develop the worldly vision they need to succeed financially, Latticework also points the way to a richer, fuller, more rewarding life.

Before opening it, I saw a question asking "Why does Robert Hagstrom have such a poor investment track record?".

"Poor" here is of course a relative term, but the answer provided was interesting:

Firstly, simply because you understand something doesn’t necessarily mean you will nor can apply it, especially in a (somewhat) competitive manner. I think of pro athletes and their coaches - I think you can see what I’m getting at.

Professors and pundits are another example, and it's the same in sports investing, where experts in the field of probability and statistics whom you would think should easily be able to parlay their expert knowledge into actual financial gains often can't. There's an art to the science, and not everyone has that artistic touch.

April was a record setting month for the spreadsheet, in both actual terms and percentage increase, although still down on the year to date and May hasn't started too well. As I mentioned before, considering we are in the midst of a global pandemic, that I am only down by 8.04% from February 19th and 3.82% year to date is quite surprising. I've done a little trading on some stocks that I am familiar with. Tesla continues to be my best performing individual stock, although CEO Elon Musk's comments don't always help, but there are some good opportunities in solid companies after large one day drops which are often over-reactions. 

I'm certainly pleased that I didn't decide to retire earlier this year with the goal of travelling. I'd have been sat at home with no steady income and no travelling opportunities, rather than sat at home getting paid for honestly not doing very much! It may be too much to hope for, but when this is all over, there may also be redundancy packages offered, which would be absolutely perfect timing for me, but we shall see. 

My July trip to Queensland to watch Crystal Palace has not surprisingly been cancelled, which is a little disappointing, and it'll probably be a few months before I am able to make any more travel plans.

So far as sports are concerned, still no news on when the ones I am interested in might resume, and in what fashion they might resume. For those seasons in flight, I'd suggest that the authorities forget the idea of it being an annual season, and say extend 2019-20 to a 2019-21 season. Finish the schedule when it is safe to do so, and if there are a few weeks left early next Winter or Spring, do like we did in the War (not that I am quite old enough to remember it) and come up with a one-off tournament, perhaps UK wide to add a little interest and the opportunity to visit new grounds. The Covid Cup has a ring to it.

Unfortunately it may well be a while before sports (as well as bars / pubs) as we know it come back.

Finally, many thanks to Ben who sent me the study on strategic and psychological momentum I referenced last month and was too cheap to spend $35.95 on. That will be my equivalent of Bill Gates' '500 pages of corporate reports'.

Stay safe. 

The Null and Void Line 1947

My recent post on sports being interrupted by unexpected events, often weather related, omitted one football season in England which was extended through June 14th, although in the end only two games were scheduled in that month.

The season was 1946-47, the first season of regular league football since the Second World War, and after a "harsh winter and a government push to end midweek sport to drive up post-war productivity" the Guardian reported that:

“The league are asked in effect to choose between abandoning this season’s championship, which would be a sore blow to the clubs at the head of divisions, or playing on halfway through the summer, or (perhaps the best solution) playing behind closed doors the games needed to conclude the league programme,”

In those days, the season started on the last Saturday of August, and the 1946-47 season used the same schedule that had been started in 1939-40 before it was voided because of the War. Many clubs didn't have floodlights at the time, rationing was still in effect, there were fuel shortages and so when bad weather hit in late January, some clubs soon faced a long backlog of matches. 

“Associated with the problem of completing the fixture list – which seems insoluble in the circumstances – is the question of whether to call the big issues of the season – promotion and relegation – off, or whether to award the prizes and hand out the penalties despite the differing number of fixtures fulfilled,” wrote JT Bolton in the Observer. “The null and void line is the one likely to receive the greatest volume of support.”

Nulling and voiding the League would have cost Liverpool the title, although in some contrast to this season, the only time they topped the table was after their last game on May 31st versus Wolverhampton Wanderers.

Had Wolves won that game, they would have been champions themselves, or had Stoke City beaten Sheffield United in their final game, the title would have been theirs. Stoke lost and ended up in fourth place, still their (joint) best ever final league placing. Losing Stanley Matthews during the season wasn't the best of ideas perhaps!

Voiding the season would have meant that promotions for Manchester City, Burnley, Doncaster Rovers and Cardiff City would have never happened, but on the plus side, Leeds United, Brentford, Swansea Town and Newport County would have avoided relegation, with Southport, Halifax Town, Mansfield Town and Norwich City being spared the indignity of applying for re-election.

Breaking Momentum

Back in 2010, I wrote about trading the NBA that:

The thing about runs is that they come to an end. Typically a coach will call a timeout when his team is on the wrong end of such a run, the idea being to break the momentum, and re-group, so if you're on the wrong end of a run, it's important to keep a clear head.

Interesting to see that a scientific study has shown this perception may well be correct. University of Technology Sydney Economics Professor Lionel Page tweeted:

The study was titled Separating psychological momentum from strategic momentum: Evidence from men’s professional tennis with the abstract containing the following:

In tennis, converting a break point potentially triggers both strategic momentum—due to a change in the relative position of the players—and psychological momentum—due to a change in the perception of the players. To distinguish between these two momentum types, we employ exogenously given interruptions. Interruptions are predicted to affect psychological momentum negatively, while leaving strategic momentum unaffected. Using 4,930 game-by-game observations from 141 Grand Slam men’s single matches, we show that the breaking players’ probability of winning a game increases after converting a break point, which provides evidence for momentum. Moreover, we show that this momentum effect is negatively affected by an interruption. Thus, psychological momentum seems to be the main trigger leading to a performance increase after a converted break point.

The study isn't free, and I am too cheap to pay $35.95 for it, but tennis traders might find it useful. I've never been a trader of tennis due to the prevalence of courtsiders, but if this is a sport you trade, it may well be that the idea outlined here is something you have noticed. 

From my own experience of trading NBA basketball, opposing a team that had the "hot hand" once a timeout had been called was a longtime profitable trading strategy.  

Earlier in 2010 I had written:

A similar strategy that I use in a few two-team sports is to lay an underdog that gets off to a strong start. Bettors have a tendency to panic (i.e. overreact, or on the flip-side get greedy - fear and greed drive the market) but in the long run, good teams, certainly in sports where timeouts or built in breaks are a feature, tend to come back.

As it happens, that post ended with a tennis observation, but I'm not sure the statistic would have been useful. When trading in-play, interruptions of any kind were always good opportunities to close out a position or take a new one. Injuries can impact games in a big way, and tactical changes and adjustments are also key. 

While sports such as tennis, baseball and American Football have natural breaks in play, ice hockey and basketball don't. There are actually several types of timeout in the NBA, with different rules for locally televised games and nationally televised games. There are mandatory timeouts, there are "full" timeouts, and there are "20-second" timeouts (which are actually 60 seconds) so not all timeouts are equal. 

Managing timeouts and the clock in the NFL is a key part of the game, while in the NHL, only one 30-second timeout is allowed per team, per game. 

I look forward to seeing a study comparing all the different timeouts!

Flaw in the Fifth Column

A couple of weeks ago, I mentioned that I had just started reading Ben Cohen's 'The Hot Hand'. I rather wish I hadn't, although the book is actually very readable.

The problem I have is with Chapter 7, Section 4, p223 where the author writes about two researchers Josh Miller and Adam Sanjuro flipping a coin and recording the outcomes of a toss 'after he gets a head'. 

They order their beers, read the napkin, check the phone, and study the Hs - the heads after heads. They are shocked to see that their intuitive sense of randomness has led them astray. They realize that the proportion of heads after heads on a coin flip is not equal to the odds of getting heads on any old coin flip.

At this point my brain was struggling, but it gets worse. They then decided that to prove this, they:

...don't have to flip a coin hundreds of times... you only have to do it three times. The short version of the math behind their breakthrough is simple enough to fit on a real bar napkin. Here is every possible outcome in a sequence of three coin flips: 

TTT

TTH

THT

HTT

THH

HTH

HHT

HHH

Now let's take each of those three-flip sequences and look at the flips after heads flips. What percentage would you expect to be heads? It feels like the answer should be 50% - another coin flip. But lets' average the results from the fifth column.

Before I get to the table with the fifth column, yes I would expect the answer to be 50%. I had to read the previous section again to see what I was missing, it's been a rough few days, but this seemed complete nonsense.

Next followed a table with five columns; the three-flip sequence, the number of Flips after a Head, the number of Heads on those Flips, Heads / Flips and the Percentage of Heads after Heads:

I included the two lines of text because I see a flaw here in the logic. Yes, 250% divided by the six rows with data is close to 42%, but this isn't how averages should be calculated. (Simpson's Paradox?) 

The average should be the sum the number of heads divided by the number of flips, i.e. the sum of the third column divided by the sum of the second column, which in this case is 4/8 which is 50%, which unless I am missing something (admittedly not the remotest of possibilities), is the expected outcome. 

The text continues:

Miller and Sanjuro found the proportion of success after a streak is less than the underlying probability of success. If you were to generate a short, finite sequence like this string of coin flips and randomly select one of the heads, then the probability that the next flip would be a heads is closer to 40% than 50%. This is so trippy that Miller and Sanjuro could hardly believe it. Their brains weren't biased. The statistic was. They double-checked and triple-checked and would have quadruple-checked and quintuple-checked if they weren't already sure their careers were about to change forever.

Well, I'm not so sure. Clearly in that example you can see 8 Heads with a subsequent flip, four of which are an H and four are a T. 

Hopefully someone else has read this book, or will read it at some point, and let me know if I am completely mad or if the referenced study indeed contains a rather basic mathematical flaw.

The flawed conclusion was that:

...if a basketball player was a 50% shooter, and he was still a 50% shooter when he was hot, this was evidence against the hot hand. In fact that 50% was evidence for the hot hand.  

I'm not seeing this at all. Streaks will occur whether tossing a coin, spinning a roulette wheel, throwing a die etc., but past events do not change the probability that certain events will occur in the future. To believe otherwise is surely the Gambler's Fallacy which:

occurs when an individual erroneously believes that a certain random event is less likely or more likely, given a previous event or a series of events.

Whether this remains true when you add a human element to it - such as with shooting a basketball - remains to be proven, but this isn't proof.  

Sports: Suspended, Delayed, Abandoned

The current situation regarding the suspension of so many sports at the same time is unique.

While the scope of previous interruptions is limited, most sports have been delayed for one reason or another at some point.

The World Wars saw sport in England suspended or dramatically reorganised, but in the US, baseball and ice hockey continued with minor interruptions and changes although the latter's 1918-19 season fell victim to a pandemic after making some of the players sick, including one who died. 

"The Spanish influenza epidemic forced the Montreal Canadiens and the Seattle Metropolitans to cancel their series tied at 2–2–1, marking the first time the Stanley Cup was not awarded." 

The second time was not until 2005 when a labor lockout resulted in the cancellation of the 2004-05 NHL season, the only time (so far) that a major professional sport in the US has lost an entire season. 

A players' strike in 1992 was settled after 10 days and the season was completed and 1994 saw a lockout which lasted for three months before a 48-game season was started in mid-January. In 2012 a similar lockout delayed the start of the season to January 19th and another 48 game season was completed. 


While baseball played its World Series matches through both World Wars, the 1994 season was interrupted by a players' strike which started in August and the season was not completed. Previous strikes in the 1972 and 1981 seasons saw uneven and abbreviated schedules, but a delayed season was at least completed.

The NFL's 1943 season during World War Two saw the Cleveland Rams suspend operations, while Pennsylvania rivals Philadelphia Eagles and Pittsburgh Steelers combined their rosters to form Phil-Pitt the "Steagles." The Brooklyn Dodgers finished last in the Eastern Division that season. 

It is two other NFL seasons (those of 1982 and 1987) that are potentially the closest to the current situation, or will be should the suspended sports resume.

The 1982 season was a big mess, The season started as expected but:

Players began a 57-day strike following the completion of Week 2 of the regular season. As a result of the impasse, games were simply cancelled until a settlement was reached (ultimately, Weeks 3 to 10). Upon reaching that settlement, the NFL announced that Weeks 11 to 16 would be played as scheduled, and the games originally scheduled for Week 3 of the season would be played following the completion of the resumed regular season as a new Week 17, with the playoffs pushed back one week. Later, the NFL decided to use the final week 17 to hold various intra-division games from cancelled Weeks 3 to 10 instead of merely playing the Week 3 games.

Somewhat similarly, 1987 also completed its first scheduled games before:

A 24-day players' strike was called after Week 2. The games that were scheduled for the third week of the season were cancelled, reducing the 16-game season to 15, but the games for Weeks 4, 5 and 6 were played with replacement players, after which the union voted to end the strike.

The use of scabs would presumably have presented some betting opportunities, but I don't have any data going back that far.

The NBA didn't have any issues until a 1998-99 lockout resulted in a delayed and shortened 50 game regular season, followed in 2011 by another lockout and delayed shortened 66 game schedule. 

So other than the two NFL seasons of 1982 and 1987, it's hard to find examples in the sports I follow of seasons being suspended and later resumed. The 9/11 attacks of 2001 saw sports impacted for a week, although the NFL played seven games just two days after the assassination of President John F Kennedy in 1963, a decision that NFL commissioner Pete...

...Rozelle would later call that the biggest mistake of his 29 years in office.

The 'Big Freeze' of winter 1962-63 saw the Football league schedule interrupted with hundreds of matches postponed, and the season being extended by four weeks. Some lower leagues didn't complete their seasons, and there was no racing in England between December 23rd and March 7th. This was also when the Pools Panel was established. 

Bolton Wanderers didn't play a match from December 8th to February 16th, and other clubs had their fixtures similarly disrupted.

After defeating Millwall on Boxing Day, Crystal Palace (now confirmed as the world'd oldest professional football club) didn't play another home game until almost three months later although in the interim they did beat Brighton and Hove Albion away on January 12th, evidence that some things never change... 

Palace played 14 matches in 47 days once matches resumed, including eight in the month of April.

Bottom line is that we have no recent precedent or data for if the Football League, NBA and NHL resume, but if the baseball starts late, the opening day strategies should apply, just a little delayed!

Learn First, Trade Last

Those of you whose interest in trading extends beyond sports to the more traditional financial markets, will be aware that several companies including Charles Schwab, TD Ameritrade and E-Trade Financial last year reduced their commission on stocks and ETFs  to zero.

This year there has been some consolidation with a Charles Schwab / TD Ameritrade merger expected to close in the second half of 2020 and an agreement in February whereby Morgan Stanley agreed to acquire E-Trade Financial in a $13 billion deal.

Unsurprisingly the move to zero commission meant a "dramatic increase in transactions" although trading revenue declined.

Interest income is the key driver of Schwab's revenue and is even more vital after online brokers slashed trading commissions to zero.

In Asia, new entrants to the markets are signing up in record numbers:

In India, brokerage Zerodha has already opened a record 140,000 new accounts this month - double the average. 

CommSec, Australia’s largest retail broker, said account openings had increased fourfold in March. Brokers in Manila, Hong Kong, Bangkok, Tokyo, Kuala Lumpur and Jakarta reported surges as well.

In Korea, retail investors lifted their broker deposits 53% to a record 41 trillion won ($34 billion).

With much of the workforce now 'working' from home, not to mention a substantial number of people now unemployed, it seems likely that there has been an upswing in day-trading from new entrants into the markets. 

One of the blogs I follow is TraderFeed, written by Brett Steenbarger Ph.D. author of several books on trading psychology. The advice offered to these new entrants into the markets in his latest blog post applies to sports traders as well.

But the risk is that these new traders will start out by trading, not by learning markets. Enticed by self-appointed gurus, teachers, and coaches who offer little more than stale chart patterns and technical indicator readings as "edges", this new generation of traders is likely to take risks with their capital well before they have truly understood and mastered the markets and strategies they trade.

It all sounds very familiar. Learning how markets work isn't very exciting, but when trading with real money, be it in sports markets or financial, it always behoves you to consider when starting out that you are competing against others who have a lot more experience than you, have deeper pockets than you, and may well have more information than you. 

There is no shortcut to success, a fact that should be obvious because if this were to be the case, everyone would be doing it. 

If you get a sales pitch promising big trading success without a rigorous learning curve, know that you're being misled. Those making the pitch are selling hope, not trading expertise. The biggest mistake you can make as a new trader is to take short cuts in your learning process.

The markets are certainly interesting these days, and to my eyes are currently over priced given the uncertainty over when economies might get back to some kind of a new normal. 

For me, April is currently the best month ever in both percentage terms and actual gains, and I am less than 7.5% off my all-time high.

The S&P 500 is just 15.3% off its all-time high, although the FTSE 100 is 25.3% off, but as I told you in January 2018, US indexes are a safer bet for your money right now:

In more traditional financial markets, once again the main US benchmark index outperformed the UK's FTSE 100. Only 4 times in the last 24 years has the FTSE prevailed, and the disaster that is Brexit means the US and Overseas markets are where most of my investments will again be in 2018.

Since then, the S&P 500 'won' in both 2018 and 2019, and is currently leading in 2020 which, if it holds, would make a 23-4 record since 1994.

Mark Littlewood, whose erroneous tweets were the subject of my previous post said:

I wondered last night whether you would cherry pick our tweets and write a blog entry. Well sadly you have done that. Why in gods name would you deem our exchange of views on Nourishment and Covid worthy of a winge on your blog I have no idea.

I suspected I might be accused of cherry picking the Tweets in question which is why I put the two incorrect tweets one out there as screenshots. 

Why I felt the exchange worthy of a post is firstly that I don't like misinformation to go uncorrected, and his claims were clearly false.

• The curve is not flattened by people having a healthy immune system.
• Undernourishment is not an issue in the 'west'.

But secondly because Mark is someone who claims, albeit with no evidence, to be successful at horse betting. 

When evaluating such unverified claims, credibility is an important consideration, and if someone shows a lack of credibility in one area, that should give one pause.

To be clear, I think that what Mark actually MEANT (and I agree with both of these statements) is that a healthy immune system improves an individual's chances of a successful outcome having become infected, and that a 'western' diet can often have nutritional deficiencies.

Unfortunately that wasn't what he actually WROTE, and when you leave people to interpret your words for themselves, that leads to misunderstandings.

While it would clearly have been better to delete the erroneous tweets and start again when the errors were pointed out, it seems to be human nature not to want to admit you were wrong and attempt to defend the indefensible.  

No Immunity, Even in the West

Thank you to everyone who took a moment to send condolences during the past week, especially to those who went a step further and sent a personal message. 

Much appreciated. Before I came out to California and decided to ride out the pandemic in my wife's neck of the woods, I was concerned that my Dad might pass while I was away as he has been steadily declining for a few months, so it was a shock when it was my Mum, who had previously been in reasonable health for a 91 year old, who passed away.

After booking a flight back to the UK, I subsequently cancelled it as there is no date on a funeral at this time and as you can imagine, deaths from COVID-19 have swamped coroners and funeral services, so for now my plans are on hold. Visiting my Dad after a long flight is also not the greatest of ideas, but fortunately I have two sisters who have stepped up to help out. 

Obviously not the best time for a funeral, but we play the cards we are dealt in life.

I've mentioned Mark Littlewood in this blog before, for example last November when I wrote these words: 

This "@SmarterSig" chap (aka Mark Littlewood) might be worth following if you are into horse racing.

A quick look at some of his other posts show some quality content, something that is something of a rarity these days. He appears to be of a similar vintage to myself, although we differ in our opinions of Farage.

Unfortunately, first impressions can be wrong, and in January Mark showed an inability to argue logically, by employing the 'changing the subject' tactic:

Benefit of the doubt was given, anyone can have a bad day after all, but a couple of COVID-19 related tweets today made me realise that while Mark might be a knowledgeable source about horse racing (I really have no idea as I'm not a follower), he really has some confused ideas about COVID-19 and an inability to admit to being wrong.

Mark Tweeted the below:

Two important points here. 

1) The curve, actually the 'epidemic curve' refers to the number of cases.

2) The only way to accelerate the flattening of the curve is to prevent new cases

Unfortunately, while we all agree that it is good to have a healthy immune system, having one does not protect you from becoming infected with COVID-19, in other words your immune system will not flatten the curve since however great it is, it does not offer protection against a novel virus.

I pointed this out, actually giving Mark some help with how an immune system can be boosted, since he thinks it is possible with vitamins:

However, for most of us living in 'western' countries, additional vitamins aren't going to boost your immune system. If you are under nourished, they will, but countries where undernourishment is an issue almost certainly don't include wherever you are reading this:

Pretty clear? I thought so, but instead of admitting he might have misspoken, Mark comes back with:

Oh dear. This is not accurate at all. The United Nations have numbers on this, and I'm not seeing any 'western diet' countries at the top of any undernourished list:

At this point Mark tried changing the subject but the takeaway here is that Mark is clearly not a doctor and apparently incapable of admitting a mistake or two.  

Mark might well be knowledgeable about horse racing as he claims, but when people's claimed expertise in other areas is easily proven false, with no admission of error, credibility is clearly seriously weakened. 

Blog Adjourned

This blog will be taking a break.

My Mum passed away last night, age 91 in her sleep at the home she has lived in for 64 years.

Beryl Gwendoline Coleman b 25.May.1928, d 13.April.2020 

RIP.

Stay well, and stay home.

The Hot Hand

As I write this post, markets in both the UK and the USA are continuing to have a strong week with the S&P 500 almost 28% up from it's nadir on March 23rd and the less broad FTSE 100 up a little under 20%. From their highs, the two indexes are down just 17% and 24% respectively. 

At the end of yesterday my personal holdings were down 11.4% from their high of February 19th, which is a lot better than the 23.4% they were down on that miserable Monday 23rd March. Keeping this in perspective, I'm back to where I was last October. 

I'm one of the lucky ones during this 'lock-down' because I can continue to work remotely and in addition, have little to spend my money on, although when you get to my age and your net worth can move by six figures in one day due to the markets, saving a few quid by not going out for dinner or a few beers isn't exactly impactful although old habits die hard, and I do still track my spending. 

Technically the US stock market is now in a new bull market as it is up 20% from its bottom, but in my opinion there is a significant chance that this rally is a "head fake" and the lows of March could well be revisited. It seems that the market is reflecting a 'best case' scenario, expecting that 'V' shaped recovery and jumping on every bit of good news about the apex but there is a long way to go yet, and the possibility of a second wave of COVID-19 next winter.

Still no sports of course, and while I have plenty of time now for research, with no return date in the near future, motivation is an issue although I've just started reading Ben Cohen's "The Hot Hand" which I'm hoping will give me some ideas.

For decades, statisticians, social scientists, psychologists, and economists (among them Nobel Prize winners) have spent massive amounts of precious time thinking about whether streaks actually exist. After all, a substantial number of decisions that we make in our everyday lives are quietly rooted in this one question: If something happened before, will it happen again? Is there such a thing as being in the zone? Can someone have a “hot hand”? Or is it simply a case of seeing patterns in randomness? Or, if streaks are possible, where can they be found?

In The Hot Hand, Wall Street Journal reporter Ben Cohen offers an unfailingly entertaining and provocative investigation into these questions. He begins with how a $35,000 fine and a wild night in New York revived a debate about the existence of streaks that was several generations in the making. We learn how the ability to recognize and then bet against streaks turned a business school dropout named David Booth into a billionaire, and how the subconscious nature of streak-related bias can make the difference between life and death for asylum seekers. We see how previously unrecognized streaks hidden amidst archival data helped solve one of the most haunting mysteries of the twentieth century, the disappearance of Raoul Wallenberg. Cohen also exposes how streak-related incentives can be manipulated, from the five-syllable word that helped break arcade profit records to an arc of black paint that allowed Stephen Curry to transform from future junior high coach into the greatest three-point shooter in NBA history. Crucially, Cohen also explores why false recognition of nonexistent streaks can have cataclysmic results, particularly if you are a sugar beet farmer or the sort of gambler who likes to switch to black on the ninth spin of the roulette wheel.

Time Slowed

While the dates of 29th June to 12th July might seem a long way off, there will be no Wimbledon this year suggesting the shutdown still has a while to run. Even further out, with a scheduled start date of August is College Football, and the possibility of a cancelled season is now being openly discussed.

What was once unthinkable, even as recently as two weeks ago, is now being discussed openly throughout college sports: coronavirus could force the cancellation of the 2020 college football season.

College football brings in about 80% of the revenue for college sports so the loss of this would have a huge impact to those lower profile sports.

The NFL still plans to start its season in September, with a new play-off format meaning 14 teams will now play in the post-season, up from 12. Wild-Card weekend will now have six matches instead of the usual four. Time will tell whether the season actually takes place as scheduled.

The unprecedented shutdown of all sports and sports betting last month hasn't slowed the number of visitors to this blog, with last month seeing the highest number since October. I know at least two people are using this downtime to read through the blog from the start, which is a very productive way to spend your time in my completely impartial opinion.

For those readers stuck at home with spouses and / or partners, Malaysia's Ministry for Women, Family and Community Development advised the nation's women to help with the country's partial lock-down by not nagging their husbands.

The ministry also advised women to refrain from being "sarcastic" if they asked for help with household chores. And it urged women working from home to dress up and wear makeup.

Not sure that advice is totally PC, but feel free to share it if you don't mind getting slapped. For unknown reasons, the campaign has since been abandoned. 

We're probably all aware that our perception of time changes as we age. A term at school takes forever, whereas a year passes in a flash when you get old (so I am told).

A post from Collaborative Fund suggested that:

Time slowed in March because for the first time since childhood many of us are being bombarded with new and surprising experiences.

The writer goes on to say this:

I’ve heard people say the economic damage this leaves depends on how long the shutdown lasts. The idea is that if, in theory, everything reopens tomorrow we’d go back to business as usual; only if this drags on for another six or 12 months will we be forever altered.

But I think the amount of surprise we’ve all felt in the last month means this is already a life-defining event. The consequences will be different, but I believe more than ever that Covid-19 will end up similar to the Great Depression, World War II, and September 11th in its ability to reshape the world, driven by a generation that will go on to view everything else in life through the lens of their experience. Too many critical assumptions of the future have already been upended for it to be any different.

I have to agree. All of us will remember these weeks and months forever. The Spanish Flu pandemic was something of a footnote to the end of the Great War, and although most of us knew that something similar could happen again, I'm not sure many of us thought it ever would happen again.

My trip to South Africa seems to have marked the end of an era and seems a long time ago now. I returned with a pretty firm retirement date of March 2021 in mind, but after a first quarter loss of 10.2% (a record) and a poor start to Q2, that date is looking unlikely. We'll see. One of the consequences of COVID-19 may well be an appreciation of what is really important in life, and while accumulating money is certainly important, it's only important to a point. It can't buy time.

As bad as March was, perspective is maintained by seeing that I am simply back to where I was last June, and last June I was pretty happy. In other words, things could always be a lot worse.

Those of us who like our numbers and who have been looking ahead will know that April will be a depressing month with the below prediction for the US:  

I have the peak slightly later and slightly higher, but others have better data than me so I'll follow along. I'm not betting on it so my interest is purely academic. 

Stay safe, and stay home. 

Cake or Death?

That poverty, stress and bad lifestyles cause death isn't in question, although the timeline is usually measured in decades rather than in weeks as is the case with COVID-19.

One reader commented on a story out of Italy where some people in the south are becoming restless after almost three weeks of "lock-down". 

As is the case here in California, and it looks like I may well be here for a while, grocery stores remain open, but the south of Italy has a big cash economy of unregistered workers and a higher level of deprivation and unemployment and money might be running out for some.

So while the virus hasn't reached the same crisis levels in southern Italy, hunger and hardship threaten to be problematic.

The comment was:

When the medicine becomes more toxic than the disease.

That logic doesn't hold up too well when the disease results in death, and it's hard to come up with a medicine any more toxic than that.

Trump hinted at this same argument last week suggesting that the country would be opened up in time for packed churches on Easter Sunday. Experts were horrified of course, and the unnecessary lives that would be lost were much discussed. 

Even most Republicans seem to understand that life is more important than money with polls showing 81% in favour of looking at the data and keeping restrictions in place until such time as that data says it is safe to ease up. "The virus sets the timeline". 

A joke doing the rounds here, not in the bars though, is:

What did Trump give up for Lent? Your grandparents.

It's been described as social Darwinism and is a non-starter with even Trump walking back the idea. 

Alabama’s disaster preparedness plan says that “persons with severe mental retardation, advanced dementia or severe traumatic brain injury may be poor candidates for ventilator support.”

This is the same Trump who announced in February that:

"When you have 15 people, and the 15 within a couple of days is going to be down to close to zero, that's a pretty good job we've done."

That would indeed have been quite a remarkable job, but a failure to react to the alarms in early January and ramp up testing have put the US in a bad position, made even worse by Trump's decision to disband the NSC's pandemic response team in May 2018. Despite those facts, he rates his performance as a 10 and takes no responsibility!

Anyway, I digress. After pointing out that we're talking about a deadly virus that can kill in three weeks, I got this response:

Charming. Not sure where 18 months suddenly came from but when you run out of rational, fact-based arguments and turn to abusive language, I guess the argument is won although given the situation we are in I'll put the reaction down to stress. 

While most of us are not expert epidemiologists, anyone who is interested in statistics has an abundance of data and models to look at, and as horrible as the topic is, it is statistically interesting. It was a while ago now, but I remember covering the Spanish Flu pandemic in my Pure Maths with Statistics 'A' level course and learning about CFR and R0.

It is this ever changing data that clearly shows the benefit of social distancing, lock-downs, travel bans and testing. 

With no action taken, viruses typically double the number of infections every six days, a rate of spread that would saturate the health care system in a matter of weeks. States and the UK are responding by building new field hospitals, but unless the rate of spread slows, these efforts will prove futile.

And once hospitals run out of ICU beds, equipment and staff the number of unnecessary deaths soars and it seems there are already serious shortages on both sides of the Atlantic for equipment right now, with staffing and beds to come in the next few weeks.

Stay safe and stay home and look at the data to see what's likely coming. It's not going to be pretty.