Capping Losses

Courtesy of @PremiumCharged, my attention was brought to the announcement in the Sunday Times that PaddyPowerBetfair plan to introduce a £500 monthly cap on losses for younger customers between the ages of 18 and 25.

While details remain unclear, there are a few issues with this approach. 

First of all, the age and amounts are both completely arbitrary. Someone's age is irrelevant and coming up with a one amount fits all approach is ridiculous.

Many young people have larger disposable incomes than older people, and £500 to one person may be a lot of money, while to others, regardless of their age, it means very little. 

The approach appears to make no differentiation between types of bettor either. There's a world of difference between someone who has slowly and steadily built a bank up from a small initial deposit to five or six figures over a few years on sports betting and is paying the Premium Charge (yes, it can be done) and someone depositing £500 each month on pay day and losing the lot over the weekend after playing the Betfair Casino. 

Apparently this £500 limit applies to all under-25s and for traders, would necessarily mean their exposure would be limited to £500. Once you are down by that amount, your trading stops for the month, even if your balance is several times that amount. If you're 24 with a bank of £50,000, that seems rather silly and not close to addressing the real issue they are trying to solve, which is problem gambling, defined as...

an urge to gamble continuously despite negative consequences or a desire to stop. Problem gambling is often defined by whether harm is experienced by the gambler or others, rather than by the gambler's behaviour.

I never knew this was only an issue for under 25s, or that the harm can be determined as being at the £500 a month level.

Nut and sledgehammer anyone? 

Never mind that it's not the business of the sportsbook to tell someone how much they can spend, and in what period. A Big Brother world where my credit card is declined because I've spent more than a certain amount of money on beer or fast-food in a month isn't one I'd imagine many of us would want to live in (although it might be beneficial to my waistline and bank balance).

Fortunately, or unfortunately, depending on how I look at this, my advanced age means that I am not going to be affected, but I imagine more than a few people will find this initiative rather annoying if it is actually implemented as the article says. A more nuanced approach would seem far more sensible.     

August 2021 Review

August is behind us, and as I hinted at in this recent post, the month was a good one for baseball. Excluding the one-off pandemic season last year, Hot Favourites haven't had a losing August since 2010 and the "heart-of-the-season" months of May thru August are also extremely reliable with just two losing months from the last seven seasons:

September is the final full month of the regular season which includes three days in October, and the two months combined are usually profitable with just one losing year (2016) since 2011. 

The Totals systems are currently showing an ROI of 8.5% and a healthy profit with Unders now contributing about two-thirds of the profits from 267 selections versus Overs with 171: 

And while it's early days, the Draw is back in the English Premier League. For those following the 'close matches' system, the results so far are:

Overall it was another good month for the Cassini portfolio, with sports investments up close to 5%. 

Bitcoin continued its recovery, but Boeing and Lloyds Bank lost money for the second consecutive month, joined in the losers column by Berkshire Hathaway which was down nearly 13%. And still CMG hasn't split, although its price continues upward! 

It would be churlish to complain after ten consecutive months of gains though, and as long as the winners amount to more than the losers, I'm good. 

Individual stocks make up a small percentage (~8.5%) of my total investments so the 2.3% gain under 'Pension' is far more important in real terms, but it's so boring to be invested in Index funds. My (and hopefully your) preferred S&P 500 index is up over 20% already this year, while the FTSE 100 is up about half of that.

For most investors: 99% of good investing is doing nothing, the other 1% is how you behave when the world is going crazy. - Morgan Housel

Good luck to you all in September.

An Overrated Variable

The 2021 NFL season is a little over a week away, with a Thursday night opening game on September 9th, a couple of timely articles by ESPN's David Purdum and Kevin Seifer on the decline of home field advantage. 

If you've been following this blog for any length of time, you will know that taking advantage of the market's over-valuing of home advantage has been a nice earner in certain matches in this sport for many years. Since the league expanded to 32 games in 2002, the record is:

In Divisional games, the ROI increases to 6.8% which over a 19 season period is quite remarkable. Of course last season was unique with limited attendance due to the pandemic, but this decline in home advantage isn't new.

Home teams had a .498 winning percentage in 2020, their lowest since the NFL's 1970 merger with the AFL. But even with full attendance in 2019, they had produced the lowest such mark (.518) since 1972, as well as the lowest cover percentage against the spread (.437) since 1967.

According to ESPN Stats & Information research, in fact, home teams have had a losing record against the spread in 14 of the past 17 seasons. That has happened even as the average spread for home teams dropped 18% in 2015-19 (-2.03) compared to the previous five seasons (-2.47 in 2010-14).

The ESPN article in full: 

With stadium crowds limited last season during the coronavirus pandemic, home-field advantage dropped to an all-time low, based on the point spreads. ESPN's Kevin Seifert examined how the return of crowds could impact this season in a piece sports bettors should read.

Home teams were favored by an average of 1.10 points last season, by far the lowest average spread for home teams in the Super Bowl era.

Home-field advantage had been declining for years, even prior to the pandemic. From 2015 to '19, the average home spread was -2.03. In the previous 15 seasons, the average home spread was -2.47.

Home teams are struggling to cover even the smaller spreads. Home teams have had a losing record against the spread in 14 of the last 17 seasons, including six of the last seven, and three straight.

"I think it's the market catching up to home field being an overrated variable," Murray of the SuperBook said. "Look how many NFL teams have little if any home field advantage at all. Washington doesn't have a home field advantage. The Chargers don't. I feel like when I watch a Chargers game there's more fans of the opposing team in the stadium. I'm not sure what kind of advantage teams like the Jaguars, Dolphins, Rams, have either. There are a few teams we would say have a real home field advantage like the Chiefs, the Packers, the Seahawks. But there's just as many teams out there that it doesn't seem to make much difference for."

Although articles such as these draw attention to the market's inefficiency, they seem to have little to no actual impact so let's hope for another winning season, even if the four yearly cycle of losing seasons suggests 2021 is due a loss. There may actually be a reason for this, given that the NFL schedule does rotate on a four-yearly basis. 

Although we no longer have the Killer Sports database which made producing a verifiable record of results so easy, I'm hoping to be able to find the time to keep these numbers coming.  

"True investors can exploit the recurrent excessive optimism and excessive apprehension of the speculative public." - Benjamin Graham 

Statistics > Algebra

Morgan Housel, of whom I have written previously, tweeted:

Wonder if people would be better prepared for the real world if high schools cut back on algebra and doubled down on statistics.

Algebra was perhaps a bad choice of subject to be cut back on since there are other subjects far less useful in the real world, but the point that learning statistics is important remains valid.

As is mentioned in my bio, Pure Mathematics with Statistics was an A-level subject I took at school, a last minute choice necessitated by the blocking of my preferred History option by the teacher who told my parents that I was disruptive and didn't want me in his class. Full details were posted in this blog back in 2009 but the incident's aftermath ultimately proved to be hugely influential in my life.

To Morgan Housel's point, understanding statistics, at least to a basic level, is a subject that should be mandatory in school. 

I learned calculus and passed my A-Level but as Charlie Munger said:

“I never touched calculus, not once, after I was 19 years-old, I’ve lost it. The symbols would mystify me." 

In my case, I was 18 when I had my last dealings with the topic, and similarly all knowledge has long gone while statistics, on the other hand, has proven to be extremely helpful in life, not just in sports investing, but in other areas also. 

In his latest blog post Rules, Truths, Beliefs (well worth a read) he expands a little on the idea writing:

Statistics and probability are the most relevant but perhaps least-taught maths in schools. They have so many real-world consequences about how people think about everyday risk. And yet.

Personal Finance is another real-life skill that should be prioritised in schools, but many institutions make a lot of money out of people's ignorance in this area. I think if people understood compound interest, and how it can work for you (investing) or against you (borrowing), it would change some people's behaviour, though not all. "You can lead a whore to culture, but you can't make her think" is the expression that comes to mind. 

With less than a week to go until September, I'll wait until then before updating how the baseball systems are working for August, but if you are playing hot favourites you'll know you're doing pretty nicely which ever hand the starter throws with.

Perfect Head-Fake

A little over a month ago, I wrote a post about the error made by a sportsbook (Circa Sports) when setting the initial total for the WNBA's All-Star game.

At the time I mentioned that:

A couple of observations I found interesting were that the total was posted for two hours before the first bet was made, a bet on Overs which may well have been a spoof, and how many other books simply copied the line.

An ESPN article today by David Purdum confirms that a syndicate had suspected the total would be wrong, and that the first bet was indeed on the Over.

The full article is here, and makes very interesting reading:

They're called head fakes in the cutthroat world of high-stakes sports betting, and on an innocuous Wednesday in July, one syndicate unleashed an all-timer.

A team of bettors, with associates around the country, had been preparing for the release of the over/under on the total points scored in the WNBA All-Star Game for days. The betting syndicate thought there was a chance an oddsmaker would make a mistake.

The game featured the WNBA's top players against the U.S. women's national team, which was tuning up for the Olympics. The syndicate believed more defense would be played, leading to reduced scoring compared to traditional wide-open All-Star Games.

The syndicate sent one of its members to New Jersey in advance, and on game day (July 14) closely monitored the odds screen, waiting for the first sportsbook to post the total. At 10:29 a.m. ET, the syndicate got its wish. A mistake had been made. Las Vegas sportsbook Circa Sports opened the total at 248, a number reflective of a typical defense-optional All-Star Game, and not an intense, competitive affair featuring a team preparing to win a gold medal at the Olympics.

Everything had played out perfectly. The syndicate was in position to capitalize on the mistake by hammering the under, but the uninitiated might not believe what it did next.

A suggestion was sent to to the syndicate member in Vegas tasked with making the first wager: "Let's see what happens if you bet over."

That's right, believing the total was 30-plus points too high, the syndicate chose to make its first bet on the over. The strategy was not designed to dupe Circa as much as it was to create a smokescreen and not alert other sportsbooks that the number was off.

The head fake worked.

The syndicate partner who made the first wager is sharp, regularly causing lines to move after placing a bet. When the account placed a limit bet on over 248.5, Circa oddsmakers moved the number to 252. Shortly after, sportsbooks from Costa Rica to Colorado to New Jersey to Nevada copied Circa and posted the total at around 250.

The syndicate went to work, this time betting the under at as many sportsbooks as it could. The total got as low as 191, before closing at 197. The WNBA All-Stars won 93-85, with the total staying under by 19 points. The syndicate did well.

"That was just a unique one and not a typical case. It doesn't usually work that way," said a member of the betting syndicate, who spoke to ESPN on the condition of anonymity. "It happened to be the perfect storm."

And perhaps the perfect head fake.

The original ESPN article has more about head-fakes and some entertaining examples and stories about their history including a quote from this blog's friend in Las Vegas:

"It only works if you're convinced other people are going to copy it," said iconic Vegas oddsmaker Roxy Roxborough. "And people copy it."

UEFA Super Cup

Since UEFA's Super Cup went to a single game, the 24 matches have produced 10 draws with a noticeable increase in recent seasons.

Hopefully some of you took advantage of this bias yesterday as the Chelsea - Villareal game became the fourth consecutive Draw in this fixture, the sixth in the last seven, and seventh of the last nine. If any one category is in form for this strategy, this is it! 

I have historical prices for the matches since 2005 and not since 2014 has the game been decided by more than one goal. 

After yesterday's result, the ROI of backing the Draw increased from 116% to 125%. 

The numbers do show that clubs take this game seriously, with English and Spanish clubs making up the majority of appearances. 

It's interesting that adding in the larger sample of UEFA club Finals (Champions League and Europa League) featuring English and Spanish teams, the Draw ROI increases from an already solid 37% to an even higher 69%:

Olympic Finals and Community Shields

Hopefully some of you made a profit backing the Draw in the two Olympic Football Finals, matches which have historically produced Draws at the rate required to be profitable. For the Women three of the six Finals had finished as Draws, with this year making it four of seven, while in the Men's Final three of eight have now finished even.

Excluding the Bronze Medal games where laying the draw is the recommended strategy, (none of the 15matches have ended as a Draw) 36.6% of Women's knockout matches have been Draws, while in the Men's (U-23) the number is 28.6%. 

The Community Shield game is also one where the Draw is historically value and we came close again this year, with the Draw broken by an 89' penalty. Results since prices have been available:

The ROI drops to 32% from this small sample size of matches.