Wednesday 31 March 2010

Sports Intelligence

Thanks to Paul for providing this link giving more details on the Galileo fund and details of the risks, fees and commissions:

This all sounds very clever, but other aspects of the fund aren't quite as reassuring. First, although the group is authorised by the UK Financial Services Authority, it's not regulated by it, so investors will have to rely on Gibraltar Financial Services Commission for protection.

"Investors should only consider this once they are fully aware of the protections they have as it is backed by the Gibraltan government. The total amount of compensation is below UK levels at the sterling equivalent of €20,000," warns Adrian Lowcock, from independent financial adviser (IFA) Bestinvest.

There is also the significant issue of whether investors are comfortable with putting their money in a fund that takes profits from gambling. As well as being high-risk – and, some would say, ethically dubious – the fund is also very expensive to run. It levies a management fee of 3 per cent per annum, a 30 per cent performance fee and stiff early-redemption penalties, starting at 5 per cent in the first year, then falling 1 per cent each year until it reaches zero.

The minimum initial investment of €100,000 (£90,000) is yet another major stumbling block for all but the wealthiest investors, and any additional investment must be the equivalent of at least €25,000.
I now know where they get the name from - the fees. They are astronomical.
Thanks also to Anonymous for providing this link to Centaur's football investment Maxnet fund. The chart looks less than impressive, with the value of an initial 10,000 being lower at the end of the year than after the first week of January!
Three analysts – Mr Sobey, Steve Walton and a third member of the Centaur team – study football form and filter their findings through a risk matrix which points them to either one or two weekly bets.
It is clear that this service is not cheap - in their own words:
In the following example for illustrative purposes MAXNET has recorded an annual profit of 50% i.e 10 points. Over the year there were 8 winning months totaling 16 points profit and 4 losing months losing 6 points leaving an annual profit of 10 points or 50% of bank.

Client has a £10,000 bank.

A – Subscription model-scale fee of £1,995

B – Profit related model

Initial fee 2x £200 ie £400

Profit related payments over the year

16 pts x £500 per point (£10,000 bank has 20x 500 points) = £8,000
profit related fee at 25% = £2,000

Total fee =initial fee of £400 plus profit related fee of £2000 = £2,400
Mr Sobey said: “We make our profits by betting on football teams not to win. In a three-option contest (win, lose, draw) a lose or draw on the chosen team makes the subscriber profits. Our trades are chosen by myself and our analysts in the same way that stock market trades are chosen by stock analysts.” Last year, Maxnet analysts chose 37 games and correctly guessed the outcome of 32, giving their subscribers a growth on the year of 67%.

He said: “Investors are more and more becoming disillusioned with so-called safe investments that prove to not be so. We have seen our investor client base increase by over 300% in the last 11 months and the rise looks set to continue. And because Maxnet is based in the gambling market it is tax free.” He said some clients had already made 20% this year on their stakes.
Keith Sobey, the North East entrepreneur behind Centaur, said: “Currently there are hundreds of thousands of professional and amateur share traders worldwide.

“Sports markets provide a viable complementary alternative with better profit margins and increasing liquidity.

“Turnover on sports markets this year will exceed £10bn and this figure is likely to increase significantly in 2010 when European markets open soon. Should the USA and Far East follow in the next three years, turnover could approach £200bn.” Centaur started life in 2000 as a horse racing services firm and in 2005 moved into sports intelligence and investment funds, eventually building up a portfolio of £5m worth of client funds.
Looking at the results for MaxLay, which works on the same principles as Maxnet, but for rugby, golf, tennis, cricket and horse racing in 2008 (2009's are curiously unavailable) their results are pretty solid overall, although the fund went almost two months without a winner between September 12th and November 7th picking six consecutive losing bets. No doubt, many of us are looking at them thinking "I can do better than that".

85 bets, 55 wins, and £10,000 turned into £12,252.24 in 12 months? Not bad, and I would probably be happy with that ROI on punts, but I would be disappointed if my trading profits were in that range.

Speaking of which, it's the end of the first quarter, and time for the Cassini Fund's Quarterly Report. Although I am up overall 10.49%, the first three months have been disappointing when compared with previous years. Highlights have been the NBA, NFL and the Academy Awards, with Snooker, F1, Rugby, Golf, Ice Hockey and Football all contributing a little. Big losses in the college basketball this month have been a setback and paying the Premium Charge every week bar the last two makes a direct comparison with previous years a little unfair. April and May are my worst, and next worst, months of the year historically, but I have some ideas for baseball this year which may help. Early season form - unpredictable. More in a future post.

Runaway Gaps

One of the problems that most bloggers must face at some point is that of finding new and interesting topics to write about. It’s not so much of a problem if your blog theme is a little broader than that of sports investment, but for me it can be a challenge. When I started thinking about my post yesterday, I was pretty much drawing a blank, but there in the comments section was something that made it easy to post.

Again today, another comment, asks about something that certainly does mark a difference between most of the markets on the betting exchanges and those on the Financial Exchanges.

Stop losses. Defined by Investopedia as “An order placed with a broker to sell a security when it reaches a certain price”

The question asked by Dave is this: Do you think we will ever see the day when Betfair will introduce the facility that allows the trader/ investor to set a stop loss?

It’s a good question. It gives me something to write about, but this is also a topic that I have pondered myself in the past…

Technologically, it wouldn’t be that difficult for the exchanges to allow stop-losses to be entered, (getting them matched is quite a different problem), but I’m not surprised that they haven’t introduced it yet. More on that later.

First, let’s be clear what a stop-loss is. In investment terms, a stop-loss “is an order to buy or sell a security when its price surpasses a particular point, thus ensuring a greater probability of achieving a predetermined entry or exit price, limiting the investor's loss or locking in his or her profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.”

However, and this may well be why the exchanges have not implemented the technology, stop-losses are not a 100% guarantee of getting the desired entry/exit points. For instance, if a price gaps down, the trader's stop order will be triggered (or filled) at a price significantly lower than expected.

I suspect that Betfair etc.have no desire to introduce stop-losses and set expectations which are unlikely to be realised in most markets.

The problem with betting exchange markets is that “gapping” is the norm. 

Prices on the winner do not slide gently down to 1.01 in the minimum increments. In some sports the descent is smoother than others, but in general they gap frequently. These are called “runaway gaps” – which are best described as gaps caused by a sudden increase/decrease in interest, as information reaches the market, and a stop-loss would not be exercised.

In my futures trading days, the massive liquidity in the market offered some protection against gapping, but there was always a risk, especially if you were in a position while the market was closed. Buy Orange Juice at 50, put a stop in at 40 and you might be unlucky (a sticky situation one might say) and get stopped out at 35, still a bad loss, but not a wipeout.

How could the exchanges allow stop-losses?

Currently, if you Back at 2.0, your imaginary stop-loss (a Lay) might be desired at say 2.2. The problem is that if you enter a Lay at 2.2 when the current price is 1.99 / 2.01, it will be matched immediately – at 2.01. Not the desired effect.

What the exchanges could do, is to allow you to put in what I shall call a ‘ghost’ Lay of 2.2 - ‘ghost’ meaning it is there in the system, but it would only get exercised, or become ‘live’, once the Back price hits or exceeds the Lay price. Betfair already have the concept of ‘persistence’ on bets, i.e. they can differentiate between bets to be cancelled and bets to turn in-play, so the idea of a ‘ghost’ bet shouldn’t be insurmountable.

This might be useful in some markets, not so useful in others. More often than not, I suspect the stop-loss would be passed, but it could be a useful feature in some markets.

Galileo - Pisa Cake

A sensible comment on my last post drew my attention to this recent article in the Financial Times:

Regulated sports betting fund unveiled
By Steve Johnson

Published: March 28 2010 10:29 | Last updated: March 28 2010 10:29

Investors seeking uncorrelated, “economy-proof” returns are being offered a new asset class – trading on sports betting exchanges.

The Galileo Fund, which will be launched this week by London-based Centaur Corporate, claims to be the world’s first regulated such vehicle.

Tony Woodhams, managing director of Centaur, likens the strategy to derivatives or foreign exchange trading – with the benefit that many participants are driven by emotion rather than cool-headed logic.

“It’s more an entertainment for them. This provides a great opportunity for a clinically minded group,” said Mr Woodhams, a former derivatives trader with Cargill and floor trader on the London International Financial Futures Exchange.

Centaur already operates five unregulated funds, with assets of about £15m (€17m, $22m), which it says have produced average annual returns in excess of 40 per cent.

The Galileo Fund will be an experienced investor fund regulated by the Gibraltar Financial Services Commission.
It's a cool name, but the last syndicate that attempted to make money on Betfair didn't fare too well when Rangers won in Lyon a few years back. £500k lost in total if the comments on the forum are to be trusted. (Usually they are not, but this amount was generally accepted as about right).

I'd be interested to know what the fees and commissions are though, and where they are recruiting their trader(s) from so if any of you sign up, keep me informed.

In other news, unrelated except that this story also comes from an esteemed financial paper, and the Italian connection, here's a familiar story on late season football in that great country:
Just two weekends ago, seven bookmakers, including Ladbrokes and Paddy Power, suspended betting on a soccer match between Italian clubs Chievo and Catania, suspecting it might be fixed after bettors wagered more than $2.98 million the game would end in a tie. (It did: the final score was 1-1.) On Sunday, gamblers again appeared to be unusually confident Chievo's match with Parma would result in a draw, and several bookmakers stopped taking bets on that particular wager. Sure enough, Chievo blew several chances to score, and the match finished 0-0.

Tuesday 30 March 2010

Similar, Not Identical

Anonymous needs a quick lesson in logical thinking.

Apparently, because "I accept that I will never have an edge in trading stocks or bonds or options or futures or anything financial", and because I have said in the past that certain aspects of financial investing and sports investing are “similar”, the logical conclusion is that I “do not have an edge in sports either”!

Similar does not mean identical. In fact, the dictionary definition of ‘similar’ makes this very clear:

“Related in appearance or nature; alike though not identical.”
A marathon runner and a sprinter could be described as similar in that there are clear similarities. Both are athletes, both are runners, both need to train, albeit in different ways, but they are by no means identical.

Financial markets are similar to sports markets, but by no means are they identical. The time-frame for one is a big difference. Take a position in BP and you can choose to hold it for years if you wish. Options markets are shorter-term, but still longer than most sports markets, but all markets are similar in that they have prices which fluctuate. BP finding a new oil field will affect their share price. A snap of cold weather in Florida will affect the price of Orange Juice futures. And a go-ahead goal in the 90th minute of a Premier League game will affect the price of that game’s outcomes, and the prices in other related markets.

When I say that I will never have an edge in trading stocks or bonds or options or futures or anything financial, what I mean is that I am never going to be the first to learn that BP has struck oil. By the time I hear that there is a frost likely in Florida, the price of Orange Juice futures has already reacted to the news. There are people whose lives are spent focused on these things. It’s not realistic for me to think that I can ever have an edge in these markets.

Even Usain Bolt is unlikely to delude himself with thoughts of having an edge in a marathon, but he certainly has an edge in his specialist events.

The sports markets on the exchanges offer a far more level playing field for investors. We all see events unfolding at (more or less) the same time. The markets are not dominated by huge corporations – my competition on the exchanges is not “mega-institutions that are trading in hundredths of a second” but other individuals like myself. Surely even Anonymous can see that even if this does not necessarily result in an advantage, it is at least not an insurmountable disadvantage. Price in any market is a matter of opinion, and my opinion is more likely to be correct if my competition is a few people sitting in their bedrooms than “mega-institutions”.

I have been trading sports for close to six years now. In some, I have an edge. In others, I clearly don’t. I have spoken before about horse racing, which is more ‘similar’ to the financial markets as far as I am concerned, given that my competition here is not other individuals like myself, and so I leave those markets alone. I have no edge. I probably never will have, and that’s fine – there are plenty of other markets for me to trade in, markets where the numbers show I do clearly have an edge. After six years, and thousands of events in the spreadsheet, the probability that my profits are down to chance becomes somewhat small.

To draw the conclusion that having no edge in one market means that you can’t have an edge in another, is plainly nonsense.

Monday 29 March 2010

Small Fish, Big Pond

The Yahoo! Finance pages today contain another interesting article, this one on the subject of day-trading. Although this is obviously written from a stock trading perspective, many parts of the article seem to me to be relevant for sports traders. The description of the “virtual shoulder” service reminds me somewhat of the recent trend towards live discussions of certain markets, but I doubt that many people would pay $199 (₤130) a month for a real-time view of an experienced trader’s screen. Perhaps I’m wrong. A look at the trading of the great Adam Heathcote, who has been rather quiet of late, or Dr. Psychoff might have been worth the money.

The subject of commissions is interesting too. For those of us who like to moan about the Premium Charge, perhaps we should count ourselves lucky. The article mentions commissions twice:

"Up $210," he says, removing his headset. Factoring in commissions, he's made $60 (₤40).
And later:
By the end of the day, Mr. Lindloff has traded 60,000 shares and is up $165. It would be a satisfying return, but commissions on those trades cost $300.
Ouch. How much do these traders make? The ‘better’ of the two "says he has averaged somewhere between $100,000 and $120,000 a year for the last 10 years" – that’s close to ₤300 per trading day. Not too shabby, but as the article goes on to say:
“It is, to be sure, an odds-defying performance. The great mass of studies point to the same conclusion: trading is hazardous to your wealth, as an academic paper memorably put it. The losers far outnumber the winners.
Exactly how far is clear from one of the most comprehensive looks at the subject in a yet-to-be-published study conducted in Taiwan. (The country is ideal for this kind of research because all trades go through one place, the Taiwan Stock Exchange, which is willing to share the information.) The authors sifted through tens of millions of trades, from 1992 to 2006, and found that 80 percent of active traders lost money.
"More importantly, we found that if you were to look at the past performance of these traders, only 1 percent of them could be called predictably profitable," says a co-author, Brad M. Barber, a finance professor at the University of California, Davis. Everyone else, it seems, was on a short-term winning streak. Even those who did modestly well found that their profits were wiped out, and then some, by transaction fees like commissions and taxes.
"It's not impossible to make money actively trading," Mr. Barber continues. "There are slivers of people out there who are quite good. And everyone thinks they will be in that group of 1 percent."
There’s those commissions and taxes again, and how many newcomers to Betfair think they will be in the top 1%, or at least profitable? And how many actually are? 15% is the oft quoted figure, significantly higher in no small part due to the lower commission that sports traders are paying.

Back to Mr. Lindloff, and his $199 a month service, the article says “If Mr. Lindloff is earning steady six-figure returns, he is squarely in the rarefied 1 percent of winners. But for $199 a month you sort of expect a man with a mansion, a hot tub and hyperbolic claims of double-digit returns. Why do a few dozen subscribers pay to watch these quite appealing but hardly world-beating guys at work?”

The answer given – “Eighty percent of it is camaraderie". That’s a lot of money for a virtual social gathering.

Other than the camaraderie, what are these subscribers getting for their money? What great advice on trading? Apparently not much.

It seems the ‘experts’ really don’t have much to offer other than the advice that “the trend is your friend” or that "the only thing you can control is your attitude. Not looking back, not kicking yourself for not catching the whole move. You're never going to be perfect. Nobody is going to be perfect."
Asked about the Today Trader method of buying and selling, both men seem momentarily stumped, as if they never saw the question coming. Then they talk about the search for "set-ups," which seems to translate roughly as "golden opportunities," but they struggle to put a finger on what set-ups are, or how to spot them. 
It has something to do with tracking trading volumes of stocks and buying heavily traded stocks as they rise in price. But how to know a stock will keep rising? Intuition, they say. It tells them whether they've arrived at the party too late (in which case they won't buy), at the right time (in which case they buy), or just before it ends (time to sell).
"A common phrase in this business," says Mr. Lindloff, "is 'the trend is your friend.'"
The more you listen, the more you realize that for all the high-tech gadgetry behind Today Trader, at its core is a Newtonian principle formulated more than 300 years ago: a body in motion tends to stay in motion.
The article then mentions another aspect that has some relevance to the sports markets, that of bots:
The problem is that stocks aren't bodies and their motion is subject to forces Newton could never have fathomed. Some of those forces are hard for the Today Trader duo to fathom, too. Mr. Gomez says that day trading has become far trickier in recent years because of the rise of robo trading -- the use of computers to automatically buy and sell huge numbers of shares in superfast bursts, based on algorithms.
I have written before about my acceptance that I will never have an edge in trading stocks or bonds or options or futures or anything financial. As the CEO of Charles Schwab says about day-trading “it's a tough gig. You're competing against mega-institutions that are trading in hundredths of a second."

An interesting piece, which should make all of us thankful for the advent of the betting exchanges, their leveling of the playing-field and their (relatively) low commission rates.

NBA Review

Another loser for the Sports Betting Professor last night with the Oklahoma City Thunder failing to beat the Portland Trail Blazers, never mind covering the spread. This was an important game for both teams, as Portland is now tied in sixth spot with Oklahoma City.

The NBA regular season is entering its last couple of weeks, and as with other sports entering the final weeks if their season, I’ve noticed before that some strange results occur at this time of year. There are a number of reasons why. 

Some teams are already eliminated from the play-offs and on the face of it have nothing to play for but pride. Some teams are guaranteed a playoff spot, but want to avoid a specific opponent in the first round of the playoffs, and some teams have their playoff seeding established and can afford to either rest players or human nature being what it is, the players rest themselves during the games.

The bottom line is that form can be unpredictable.

Miami Heat (currently 6th in the East) will not want to face the Boston Celtics (currently 3rd) and if they slip a place of two in the standings, it would not be a surprise to me.

One of the teams I like best in the NBA are the Golden State Warriors because I like the teams that can hit three-pointers and come back from big deficits. They are also capable of giving up points in a hurry, which is ideal for momentum trading. Although they are eliminated from play-off contention, their coach, Don Nelson, needs just another three wins to break the record number of wins for an NBA coach. 

Although the Warriors are the third worst team in the NBA, on their day they can be exciting and with another game to come against the Los Angeles Clippers, who they defeated last night by 18 after spotting them a 13 point first half lead, (Clippers were as low as 1.3) on the second leg of a back-to-back, and I think they will get these wins before the team is sold this summer.

Looking at tonight’s schedule, there is a huge game in the East, with Toronto Raptors playing at Charlotte Bobcats. The Raptors have lost three in a row, and the Chicago Bulls are nipping at their heels for the final playoff spot. Charlotte themselves aren’t exactly secure just three wins ahead in seventh spot and this should be a close game with the Bobcats winning.

In the West the eight play-off teams are all but assured, but only the Los Angeles Lakers know their seeding for sure. The second through eighth seedings are anyone's guess! The Los Angeles Lakers are one of these teams with a tendency to play to the level of their opponents. They usually find a way to win, at least at home, but on the road they can often be opposed. Not tonight though - they play at the already eliminated New Orleans Hornets and should win.

The Denver Nuggets play at the Dallas Mavericks for the second spot in the West, with Dallas the pick here. Denver’s form has been spotty of late, and they seem like one of those teams that are maybe coasting a little, and Dallas at home are pretty good.

The Utah Jazz should be much too good for the eliminated New York Knicks as should the San Antonio Spurs at the New Jersey Nets although the Spurs did play last night, and the Nets are trying to avoid the worst ever record in the NBA so this is one of those games that could be close.

Sunday 28 March 2010

Name Dropping

Football Elite had a Recommended Bets winner today with Villareal easily beating Sevilla 3-0 at 2.3. The two short-list bets both finished 0-0, Espanyol v Gijon and Siena v Genoa.

Since enrolling, to a level 10 points and assuming 5% commission, the Recommended Bets are down 15.39 and the short-list bets are up 64.07.

I am still receiving the Sports Betting Professor's NBA tips, and last night Dallas easily covered the -3.5 point spread, although the update this morning confused them with Detroit which didn't look very professional.

I am recording the results of these selections for as long as I continue to receive them, but I am not acting on them, although another system I use also had the Mavs yesterday so I was actually invested.

Another selection from them tonight, but again I already have his selection.

One thing that I found quite amusing was this passage from his update on Saturday:

"Well I gotta be honest, I thought our bet on Sacramento was a goner last night. They were losing by 24 towards the end of the 3rd period and I thought we were done for. So what did I do?

I took my girlfriend out for a nice steak dinner and didn't worry about it. Then my bartender friend came over and told me the final score and I was doubly happy. As we were finishing up dessert Rajon Rondo and Marquis Daniels (a couple of the Celtics) came into the restaurant to boot! No, I did not tell them I was glad they managed to not cover the spread..."
But I am glad that I can share with you all that I make so much from your subscriptions that I can live the same lifestyle as these stars.

Perhaps Matt of Football Elite would like to share a similar story with us?
"Well I gotta be honest, I thought our bet on Mallorca was a winner last night. They were drawing by 0 towards the end of the 1st minute and when they hit the post early on I thought we were in the money. So what did I do?

I got into my private jet and flew my supermodel girlfriend out for a nice paella in Magaluf and didn't worry about it. Then my bartender friend came over and told me the final score and I was doubly unhappy. As we were finishing up dessert Zlatan Ibrahimovic and Lionel Messi (a couple of the Barcelona players) came into the restaurant to boot! They saw me sitting there at the best table smoking one of my Cohiba cigars, finishing my bottle of 1995 Forbes Krug Clos du Mesnil, and they came over to ask for my autograph. I waved them away, and no, I did not tell them I was glad they managed to beat us..."
Just kidding Matt.

Believe The Spin

I should just ignore the Anonymous comments, I really should, but some are so amusingly ridiculous, that they really deserve a bigger audience. Besides, it makes it easy to find a theme for the next post.

Today we have several gems starting with this one:

Casinos are happy to let punters martingale because the edge is in their favour and the house limit will always catch people out not or they run out of money not because martingale doesn't work. You need to understand probabilites of expected winning/losings runs before spouting your usual crap of I'm right you're wrong
Apparently someone missed that I did in fact say that casinos have no problem with, and in fact encourage, Martingale bettors. I assumed that the reason was too obvious to mention, but for anyone out there who is unaware of the fact, casinos typically limit the maximum stake to 500 times the minimum so that after a run of eight losers it is impossible to bet the 512 units required.

Then we have this:
Whereever there's money they'll be professional players so to say there are no pro roulette of craps players is laughable, I guess they're aren't any pro blackjack players either as the edge is always with the house
Since games such as blackjack and poker are games of skill and strategy, of course there are professional players. However, roulette and craps are games where the expected value of every bet is negative.

Anonymous continues:
Sleazynick haven't you heard of Kim Larsen or Christian Kaisan.

If anyone has devised a system to beat roulette, a game that has been around since the 18th century, then this would truly be an achievement. Basic mathematical laws would have to be turned on their head, and such an achievement would be more deserving of a Fields Medal than scepticism. The only explanation must be that Kim Larsen and Christian Kaisan are over the age of 40, and are thus ineligible. Perhaps they will be recognised later this year, or will be awarded next year's Abel Prize? Somehow, I doubt it.

Perhaps their claimed 'skills' are that they can rapidly assess the location and speed of the delivery of the ball and the speed of the wheel and rapidly compute where the ball will approximately land, but even if that were true, they would be limited to real casinos (rather than online ones) and with a limited number in the world such a talented individual would soon find themselves banned from all. In fact, Kim Larsen claimed to have been banned from four Las Vegas casinos in a 2005 news 'release' (news released by himself!) - not to be confused with news 'fact'. In fact, no evidence of such a ban has been verified.

Finally, for now, we have this:
Incidentally, did you know Swansea's last 21 (more in fact, but can't be bothered to check) have all gone under 6.5 goals. I'm happy to go with the flow on this and play the under 6.5 every time as there's probably a reason for it. If someone's prepared to oppose me on the exchanges then all the better.
Indeed, if such a market were available, this could very well be a profitable strategy. In a slightly sensible comment, Anonymous does mention the importance of value, perhaps thinking that I would momentarily forget this key point in my haste to back Unders at any price, but strangely enough, even after a run of Unders, the price on Under 2.5 goals never hit 1.01 (or even close). Had it done so, I would be on Over 2.5 goals, confident that despite the current run, I would have value on my side.

The 100,000 hits has been reached! If I only had £1 for each hit...

Eudaemonic Comment?

Moronic more like. A recent post on the Betfair forum offered this advice for using Martingale:

Once you have a sequence of around 7 or 8 in a row, that’s when you go in with the money as they are due to hit the opposite .... only a few teams in the time I researched reached around 12 in a row but that would only be 4 chases so you would be fine if going in on match 9. Also depends on the fixtures as well, I was avoiding the likely score-lines i.e. top club v bottom club, so as well as the sequence you have to sometimes avoid certain fixtures. Good fun, but lot of work keeping on track of all results.
I am sure all readers of this blog can see the fundamental flaw in his logic, so I shall spare the poster’s blushes by not naming him, but no doubt his wife, Mrs. Schalke 04, was more than a little embarrassed to see her husband make such a fool of himself on a widely read forum.

Very recently in fact, as some of you are no doubt aware, Swansea City recently went nineteen consecutive League matches finishing Under 2.5 goals. The run came to an end last Tuesday with a 5-1 defeat at Blackpool, but prior to that their last Over 2.5 game was a 2-2 draw back in early December. Of the nineteen matches, 3 finished 0-0, 8 finished 1-0, 5 finished 1-1 and 3 were 2-0.

After seven or eight matches, is the logical answer really to go with the opposite because it’s due, or is the logical answer to go with the flow, because there’s probably a reason for the preponderance of Unders? For me, a run of this kind tells me the team is tight at the back, and not too strong up front, and that the trend is more likely to continue than to come to an end, but if someone is happy to oppose me on the exchanges, then all the better.

The use of Martingale is also seriously flawed. Assuming the bettor jumps in on match nine, that's eleven losses before a winner - 2,048 points on the 12th bet?

Incidentally, Swansea City returned to form yesterday with a 0-0 draw v Ipswich Town.

The poster attempted to justify his logic giving the example of roulette, and his success with a system of waiting for a sequence of say, red winners before backing black. Not that any further evidence as to his cluelessness was needed, but he provided it by saying that casinos do not like the Martingale bettor. Really? That’s not what I’ve seen, with casinos happy to hand out pencils and paper for any fool wishing to track the numbers and look for patterns. There are none. The wheel has no memory. The probability of a red is 18/37, the payout is evens. The mathematics tells me this is not value. Casinos are fun for a little entertainment, though I prefer playing craps over roulette, (much more exciting and a low house edge if you play correctly) but there’s a reason why there are no professional roulette or craps players.

Australian Grand Prix

I'm not an expert on Formula 1 by any means, but I enjoy watching the races and often have a small financial interest in it. Small because there are many who know far more about the sport than I do.

I layed Sebastien Vettel at 1.88 yesterday, and he is now drifting like the proverbial barge, currently out to 2.26 - presumably because the rain makes the result that much more unpredictable. He was odds-on literally five minutes ago!

£500k traded on Betfair, £110k on BETDAQ but some strange discrepancies in price. I just backed Vettel at 2.26 on Betfair and immediately layed him at 2.12 on BETDAQ.

Race is starting.

Update: Vettel is out, so a loss on Betfair, (good for the PC), but a win on BETDAQ.

Saturday 27 March 2010

Cake Or Death?

A decent day on the football early on undone by an ill-timed dabble in the Bolton Wanderers v Manchester United Under/Over 3.5 goals market. Where was the discipline I mentioned a couple of days ago? The bet was made for no reason other than trying to nick a few quid while I fill out spreadsheets and research the basketball games starting later today. Idiot.

Football Elite had a losing Recommended Bet in Mainz (L 0-2 v Wolfsburg) and one match to come, but their two short-list selections both won - Hull City beat Fulham 2-0 at 2.54 and Roma beat Internazionale 2-1 at a decent 2.78.

I am still receiving the Sports Betting Professor's tips despite not paying for them, so I will continue to report on these. Tonight's selection would be a Bet A for me in his staking system of Bets A, B and C, with bets B and C only if the previous bet didn't win.

A brief word about my last post. I didn't mean to imply that bloggers only give up blogging because of a bad patch. A bad patch is one thing we all have to suffer through from time to time - I'm in the midst of one myself right now - but there's also this thing called life that often gets in the way of the free time you need to blog. I just happen to be at a time in my life where I have a job that allows me to work strange hours, many of them from home.

Ceád Mile Fáilte

The counter on this blog shows almost 100,000 hits. In a little over two years, that’s a lot of eyeballs, but no doubt Anonymous will suggest that the counter was initialized at 99,000 or that my son and I account for 99,000 of the hits, but in truth the counter started at zero and although I confess that I am a regular reader, (there’s some good stuff here from time to time), I am not sad enough to pound the F5 button 100 plus times a day.

Nor am I sad enough to have spent the past two years making stuff up as Mr Misery Anon pretends to think. I’m not quite sure what that would achieve for one thing, but the truth is that human nature means that we are more enthused by positives than we are by negatives.

Like many of us I suspect, if my sports investing wasn’t profitable, then I would move onto something else, and my blog would just quietly die.

There are not too many bloggers out there who have it in them to write about losing for a long while. Many blogs come, but many are soon abandoned as the apparently easy pickings on the exchanges turn out to not be quite that easy.

Just look at all these challenges which start with great fanfare and enthusiasm, but when it turns out that the person has no edge, and the laws of probability catch up with them as will always happen, they slip away into the night, usually without so much as a farewell, although some become so bitter and envious at the success of others that they show up as Anonymous commenters who don’t read the blog in full and have nothing positive to offer. At least they keep the hit count moving and their self-evident jealousy is entertaining. Seriously, do successful people in life go around with a negative attitude or are the bitter and twisted people in the world those who are less successful?

Human nature is like that I guess.

Now my turn to be negative - the Sports Betting Professor (SBP), and I have to say that I consider myself lucky to have had my payment declined. It’s really not a very good system. Now some readers of this blog will no doubt disagree, but in a nutshell the system seems to me to be flawed.

First of all, the selection process is based on the fact that over a number of years, 15 I think it is, certain handicaps statistically show a trend that (presumably) is statistically significant, but no actual numbers are revealed and no explanation offered as to why these handicaps should offer an edge. With handicaps ranging from 1.5 to the occasional 30 or so, there are always going to be a few anomalies, but I would be happier if there was some reasoning as to why that might be, and why they might continue to be, rather than simply regress to the mean.

Handicaps are set so that (ideally) the price will be 1.9+ on each side, i.e. a 50/50 shot. The SBP had a winner tonight, following two losers, but the winner was at 1.75 on the exchanges. With a Martingale based staking system (maximum of three losers) you will not get too many sequences of three losers, but they will come along and when they do the loss will hurt. I missed out on the winner today, but then I missed out on the two previous losses. I’m uncomfortable with the selection process and the staking, but it was interesting to find out more about the system and to get it all for free was a break.

I read about a baseball system from someone with a similar sounding name (could be the same guy) which operated on similar lines. He would pick a team that was much stronger than its opponent in an upcoming three game series (the baseball schedule works in series if you are unfamiliar with it) and the staking would be 1 point on the first game, and if it wins, the system had a winner. If it lost, then triple up on game two, and if that won, the system recorded a win. If bet 2 lost, then triple the stake again (triple because many baseball favourites start at 1.4 or less sometimes, and doubling just wouldn’t cut it) and hope for a win there. Not surprisingly the system had a high number of ‘system’ wins, but those bet threes would be too much for my liking.

Finally a comment from Mark Davies’ blog about Betfairs pricing structure, which makes perfect sense with regard to the Premium Charge:

The answer, of course, is that we price our product like any successful business venture: we charge the price that attracts the largest number of our target customer as we can, while extracting the best commercial return we can in exchange. Primark sell cheap clothes in both senses of the word; Armani sell at a premium to a specific type of customer. In Jim's terms, the Telegraph sells for £1 a copy; the Sun sells for 20p. They have different types of customer, and the arrival of the Sun brought a whole new set of people to newspaper readership. But having got them on board, if you now sold the Sun for the same price as you can sell the Telegraph, you wouldn't increase your profits five-fold; instead, you'd lose most of your customers.

Thursday 25 March 2010


Another thought provoking article from the finance pages of Yahoo!, this time on the topic of rejection, although for my purposes here I suggest that the article could also be considered to be covering adversity in general.

When a system stops working, or Lady Luck simply deals you one of those long losing runs, how do we react? How do we deal with our bad decisions? Do we really learn from them as we say we do in our blogs and postings, or are we creatures of habit destined to repeat our errors?

I'm still learning. I've learned not to drink and trade, and I've learned not to trade when I'm tired. Discipline of that kind is one of the easier lessons to learn.

I've learned that it's better to specialise than to try and master everything, and I've learned how to accept that a trade isn't working and bail out with no regrets, whether the original trade goes on to win or not.

I've learned that stats and spreadsheets motivate me. I keep good records.

What have I not yet learned? My biggest problem is that I still have a tendency to overstake. If there's 5/2 on a coin toss, I lump on, to use the common parlance, with little consideration of Kelly.

"The truth is, everything that has happened in my life ... that I thought was a crushing event at the time, has turned out for the better," Mr. Buffett says. With the exception of health problems, he says, setbacks teach "lessons that carry you along. You learn that a temporary defeat is not a permanent one. In the end, it can be an opportunity."
The mention of health problems is a reminder that, however important investing and making money may seem, even the biggest loss pales into insignificance when compared with real life and death issues. Keeping everything in perspective is essential.

Wednesday 24 March 2010

Perhaps Not All

A very good comment from Anonymous about the Premium Charge.

I think what you and the "go purple" people fail to understand is that for Betfair's business model and 99% of it's customers it isn't a monopoly - Betfair is in direct competition with other online bookmakers to offer prices on events. Profitiable trading is a by product of liquidity and more importantly losing liquidity.

This 99% who lose in the long term couldn't care less about the premium charge, the reasons they gamble is complex, but costs or commission is probably down the list (look at Betfair TV adverts). Betfair need to attract these people for their own business, but by doing this leg work they create more opportunties for their profitable punters to make more money, hence the premium charge to contribute more to this - I find that a fairly sensible argument especially for those with a relatively low risk strategy.

Whether there is another "trader viable" betting exchange would be dependent on the losers moving to it (if we presume that all traders are profitable and I'd say almost all those driving the monopoly narrative are). Traders moving over to BETDAQ would be like a bunch of hungry dogs fighting over a piece of gristle, they'd soon be eating each other until theres no dogs left. Commission might be low but BETDAQ wouldn't be able to attract new meat - low commission isn't enough.

I do think traders are a hostage to fortune to Betfair, but as trader's can't exist independently then the monopoly argument doesn't wash. Traders don't have a right to have a platform to make money, the way inciting the wrongs of a monopoly would suggest.

If you want an example of ultra competition then look at the rest of the bookmaking industry and let me know how successful you would be if you made consistent money from them.

Some excellent points. Do 99% of Betfair's customers really just use the site to get better odds, and not with a view to trading? I wouldn't have put the number at anywhere near that high, but I can't say that I have seen any reliable numbers. Clearly outright punters would have no concerns about the Premium Charge since even the most successful have an ROI of less than 10%.

Traders are a hostage to fortune, but the author is right that traders have no right to exist and cannot exist independently, i.e. without Betfair. Why the complaining? For me, it's partly because for years I was perhaps spoiled, and made good profits with just a small percentage going in commission, but practically overnight this small percentage became a lot more significant. 4.3% to 20% is a big jump. For me it's just an irritation, but presumably some traders are full time, and finding your pay cut by such an amount could have had serious consequences. Of course the way that Betfair went about implementing the charge I disagreed with also. To effectively back-date it and 'give' you an allowance that was already used up by the time the e-mail was sent out was just bad PR. Short notice was given, and the 20% wasn't phased in gradually as it could have been. Betfair knew we had no viable alternative, and cashed in, but I am nevertheless extremely thankful for Betfair's existence. The playing field has been well and truly leveled, and with in-play trading and a solid strategy, it is very possible to make profits with little risk, as evidenced by the approximately 0.05% of Betfair customers who pay the Premium Charge each week.

As Anonymous pointed out in his last sentence, it's not easy to win consistently from the bookmakers. I remember Ladbrokes closing my credit account down in the early 90s when I would manually review the Racing Post and cherry-pick from all the bookies, and from what I read and hear, anyone achieving even modest success today is turned away. At least with the exchange business model, Betfair have no need to go to that extreme. "We Welcome Losers Only" is not good for business.

Anyway, the comment was a good one. Thank you.

The Big Short

Michael Lewis, author of the previously recommended baseball book “Moneyball”, has a new book out about finance called “The Big Short”. According to the reviews I have read, Mr. Lewis has “produced what is probably the single best piece of financial journalism ever written” and “a fascinating, edge-of-the-seat read. It's also a gold mine of valuable insights about how the modern economy really functions -- and what you need to watch out for.” “If you read only one book about the causes of the recent financial crisis, let it be Michael Lewis's, "The Big Short."”

High praise indeed, and my copy has been ordered.

Based on the reviews from Barnes and Noble it resembles Moneyball in many ways, for example “not everybody will understand the grittiest of the details, of course: that's inevitable. But everybody will be gripped by the book's narrative, all the same.”

Key takeaways that have some relevance to sports betting for me include:

1. Never, ever invest in something you don't fully understand.
2. Protect your bank.
3. Don’t trust the herd.

“If there's a conspiracy in the markets, it's neither bullish, bearish, right wing nor left wing -- it's simply to support the consensus.

Human beings are social animals. There is a powerful, built-in bias to want to agree with those around you. The most striking thing about Lewis' story is that many more people on Wall Street should have seen this coming. The data was available, the analysis relatively simple to those employed in finance. But among the tens of thousands of overpaid whiz kids at all the hedge funds and big banks around the world, only a few actually got it right all the way along. They were generally oddballs who were able to distance themselves, emotionally, from the crowd.”

That last sentence could describe many of the winners on the betting exchanges!

Michael Lewis writes about men whose “social skills are all but nonexistent; they live in a world of arcane financial analysis which might as well be a different planet for all that it has any bearing on the way that most of us live our lives; and they made their outsize profits by wagering hundreds of millions of dollars on the proposition that Americans across the country would end up being thrown out of their homes after they found themselves unable to make their mortgage payments.”

At least the traders who make their money from the betting exchanges aren’t as wicked as that! As much as some may try to manipulate the betting markets, and assuming they are not fixing the results, anyone who tries to shift the prices too far, i.e. to the point where they become value for a sharper mind, will get their fingers burned in the long-term.

I’ll probably post again on this book when I have read it.

50? Not Yet

Who needs a Purple Betting Day anyway? For the first time in 2010 I have managed to hit the magic 20% level on my charges, (see screenshot above) albeit with the 'help' of a big loss on the NCAA tournament (buzzer beaters, love 'em or hate 'em) which single-handedly all but wiped out the rest of last week's profits. The silver lining of that loss does at least mean that I dodge the Premium Charge for once. Since its inception I have been hit exactly 49 times with it and I am not in a hurry to complete the half century.

The Sports Betting Professor went one out of two on Sunday for an overall record of 4 of 8, but with the winners coming in at between 1.8 and 2.0 so far, this is not yet proving to be a viable proposition. When commission is factored in, the outlook becomes even less rosy. Assuming an average price on these selections of 1.9, the selections need a strike rate of 53.73% to make a profit. Other negatives with the service are the steady flow of e-mails recommending various sports books, sports information services, football systems etc. but most worrying of all is the e-mail from PayPal advising me that they believe an unauthorized person has attempted to gain access to my account. Since this account is seldom used, and the transaction to SBP was the first PayPal transaction in several months, that was rather a concern. The good news is that, as a result, PayPal are reversing the transaction with SBP, so it looks like I’ll end up with a free trial, to last as long as it takes SBP to realise they haven’t been paid!

Football Elite had a disappointing weekend with two winners from five recommended bets, Mallorca won at 2.2 which was again a generous price for a team with their home record, and Sampdoria were a nice winner at 2.6 but a net loss overall for the service. I have mentioned Mallorca’s home record before, and 2.2 was a very generous price. Football Elite’s short-list bets were disappointing, with just one winner from five.

Some intelligent comments from Matt and Unprofessional Gambler related to my post on the Purple Betting Day campaign. Consensus is that although the site does contain some affiliate links, they are nonintrusive and acceptable. Also, the Betfair website is the best of its kind out there. I agree. I find the BETDAQ interface a little ‘clunky’ to use, at least for in-play. It’s fine for punting, but for in-play it somehow seems cumbersome. Add to that the fact that the liquidity is much poorer and the selection of in-play events is much reduced, and there’s the reason why most people who trade have no real option than to use Betfair right now. Both Matt and Unprofessional Gambler agree that Betfair needs real competition. Monopolies are not good for the consumer. For example, it’s difficult to imagine that Betfair would have introduced its Premium Charge had their market share of the exchange betting business not been as dominant as it is.

I think this campaign would be better served by selecting certain events where traders would be encouraged to move to BETDAQ, rather than switching for an entire day. Something like nominating the FA Cup semi-finals as a BETDAQ event perhaps? Maybe BETDAQ would consider lowering the commission rate as an additional incentive? One of the problems with selecting a 24 hour day is that many markets don’t exist on BETDAQ and not too many traders are going to forsake profits to make a point. BETDAQ really could help themselves a little more. They had a golden opportunity to capitalise on Betfair’s misstep, but other than offering a reduced commission rate for a few months, really didn’t embrace the opportunity.

Tuesday 23 March 2010

Sound Investment

This arrived in my inbox today, and I thought I would post it since it is another view on 'investment versus gambling' that provoked some debate last week, and mentions my old friend Warren Buffett. It's written by Rich Allen, aka the Sports Betting Professor:

And yes, you read that headline right: betting on sports is a sound investment. I actually prefer to use the term ‘investing’ as opposed to gambling. When I hear the word gambling I have an image of somebody filling out a parlay card and donating $20 or $50 to their local bookie because they haven’t got a clue what they’re doing.

If you invest in something, you do so after you’ve done research and due diligence. The best stock picker in the world, Warren Buffett, won’t invest in a company unless he knows exactly what they do and how they make their money. You should never invest in something that you don’t understand.

Another key to sound investment strategy is to stay diversified. That means you shouldn’t have all your money piled into one asset class. Be it real estate, the stock market, your piggy bank, etc. it doesn’t matter: all your money should never be in one place.

And I feel that ‘investing’ in football and basketball games can be a legitimate way to diversify the money you have to invest. Let’s face it, most of us can’t analyze the financial statement of a business and make a lot of sense out of it. BUT, most of us can look at a point spread and understand its meaning.
More on the SBP later when I have time (life is busy right now) but bottom line is that my enrolment fee has been refunded due to 'suspicious activity' on my PayPal account. I wonder how long before they notice.

Sunday 21 March 2010

Flying Donkeys

At the end of last season, in early May, I wrote a post about the Piacanza v Bari Serie B match.

Jamie passed on to me that today's Serie A match between Chievo and Catania also had the draw at odds-on pre-game, and again the outcome was a draw. The match finished 1-1 with Catania equalising 17 minutes from time with a penalty.

Purple Betting Day

Too much going on this weekend for a long post, but I thought I would do my little bit and raise some awareness of the Purple Betting Day campaign.

Basically the campaign is a protest against Betfair, who are abusing their position as a de facto monopoly (however much they pretend they are not) and giving:

" appalling customer experience with a hefty price tag on it. Some examples include:

Ever increasing charges - both the Premium Charge and higher demands for points discount

A total PR disaster with the introduction of the Premium Charge and the way Betfair went about doing it. There was no way of checking whether you will be liable and how much you are likely to pay. Even nowadays its extremely complicated to find out exactly how much you are likely to pay. Just shows they treat customers like dirt.

Banning users from the forums for a lifetime for the slightest offence

Probably the worst customer service not only in the betting industry

Too little investment in technology compared to what other exchanges working in competitive markets spend (e.g. futures exchanges - CME, Eurex, Liffe) which shows in many horrific market failures costing some customers massive amounts. It also shows in how slow API is compared to how for example futures markets operate."

Personally, I can't say that the API issue concerns me too much, nor do I tend to read or post too much on the forum, since there are very few threads that actually have something sensible to say. My complaint is with the Premium Charge as I might have mentioned before. It targets traders like myself who have no viable alternative, and here's where BETDAQ could help themselves. For example, I like the NBA, but BETDAQ don't turn these games in-play. Why not? They don't need to be actively managed as the football markets do. The result is that if I want to trade the NBA, I have no alternative than to use Betfair. WBX do actually have these games in play, but liquidity is poor, or was last time I checked, which thinking about it was quite a while ago.

Until there IS a viable alternative, Betfair will continue to tax people like myself, because they can. In my opinion, the competition missed a golden opportunity to offer the same markets in-play when the Premium Charge was first announced, but if this campaign can work on that aspect as well as drive business to BETDAQ (or even WBX) then it has a chance to succeed. Monopolies don't last forever.

Friday 19 March 2010

Turkish Delight - Sweet-Pie

Some of you may recall Psychoff, his challenge and his sudden departure from blogging and I received an interesting comment about him which deserves a bigger audience than it is likely to receive hidden in the comment section of an old post. So here it is, in its entirety, courtesy of Lucky Strike:

Hi there all,

I understand your doubts about the genuinity of Psychoff challenge.

Personally, I know this guy from a Turkish betting forum for more than 3 years. The sad truth (that he made more than 100.000 in half a year) is he did not even know a single word about BF trading-scalping till 2008. Then somebody in the forum opened up this subject and Dr.Guven (Yes, his name is Ersen Guven and he really is a doctor) invested in this after 6 months of discussion going on..

Many people in the forum tried some strategy and at the end Dr.Guven took all this information and he built up his way.

FYI, Betfair is illegal in Turkey and nobody can manage to use it.
He is located in Sweden, he got 7 different dishes to scan all the live football broadcasts all around the Europe + a Dreambox receiver to decode the encrypted channels.

As I am living in Hungary and I can watch the local games, I can honestly tell you that when you can follow the low leagues + eastern european games, even if the liquidity is low, there are couple of hundreds to make per game since nobody is Tevez, Rooney, Drogba, Henry or Messi to change the destiny of the game in 3 seconds...

The reason why he does not give any ideas about his methods is quite simple, there is a certain amount of sweet pie to eat, why would he create competitors?

For all that doubt about P&L screenshots, I have seen the screenshots about the markets when he posted to the forum about some of his unlucky losses, they are all true.

He got a brand new Audi Q7 for 40.000 euros in 2009 :)

I am trying to follow his way somehow since I think I got better football knowledge compared to him. But he had the edge with the capital and technology invested in this.

I hope I can manage,

GL to all.
So there we have it. There are indeed some postings in Turkish on some betting forums (a Turkish friend verified that for me) so that part at least is true. If you speak Turkish and have time, search for “drguven” and you’ll find him. Be sure to let me know if there are any useful insights posted.

Always Look On The Bright Side

St Patrick’s Day might have been a good day for the green, but the day after certainly wasn’t. The record of run of paying the Premium Charge looks likely to stop at eleven after a heavy loss on day one of college basketball’s end of season tournament, known as March Madness. Unfortunately playing in illiquid markets can be a double-edged sword. It’s arguably easier to find the value (less competition), but it’s then harder to trade your position, and whereas in an NBA game, I would have been able to trade out fairly easily, doing the same with a four figure sum in a college game is a different proposition. Lesson learned, I hope. A poor start to an event that has served me well in the past, but on the bright side, still 47 more matches to go (16 tonight).

In the NBA, Round two for the Sports Betting Professor was a lot more successful, with two winners from two selections paying out at 2.0 and 1.9. One winner looked good from the start, while the second was down by 21 points in the third quarter, before rallying to win by 10 in the end, and easily cover. I am backing these to level stakes right now rather than using the three step progressive staking system he recommends. Fancy staking systems tend to be a common way of hiding the fact that selections aren’t value and for me, the only true test of a system is the return to level stakes.

More bad news from yesterday was on the data recovery task, with the specialists reporting that they are unable to retrieve the data, so I now have to go back in time to February 16th and re-enter the results from there. Oh joy.

Wednesday 17 March 2010

St Patrick's (aka Green All Over) Day

The Sports Betting Professor had his first selection in the NBA last night, and it would be hard to imagine how this system could have made a worse start, missing out on a ‘debut’ winner by no less than 25 points. Not the start I was looking for, but a marathon isn’t won in the first 100 yards so we shall grit our teeth and hang in there, at least for a while.

I may have joined in the midst of a bad run, based on what I’ve read in a couple of places, but sunshine always follows rain. I just hope I’m not flooded out before the sun pokes through the clouds. Almost as annoying as the loss is the fact that I have had no less than 14 e-mails since subscribing on Sunday, and I hope this average drops down to just one a day soon.

Also, please understand that my posts about this service are in no way to be considered touting, recommending or promoting it in any way. It is just something that caught my eye, and that 'appears' to be reasonably successful, and thus piqued my curiosity. 

If it's a winner, then great, if it's not, then no big deal. Nothing ventured, nothing gained as they say. As with JP and others, I shall simply be reporting on their results, good, bad or indifferent.

Posts will be a little briefer and/or less frequent for the next few days. My daughter is staying with her old Dad for a few days as he gets even older, and blogging and investing will be taking second place in my life.

No news from the Data Recovery company yet, and no charge to my credit card, which I hope means that they are busy rather than that they are unable to recover the data.