Friday 27 August 2021

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.

Monday 23 August 2021

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."

Thursday 12 August 2021

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%:

Sunday 8 August 2021

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 15 matches 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.

Wednesday 4 August 2021

Olympic Football

At least one reader has been paying attention this summer to the Knockout Draw System in International tournaments, which is good to know. Whether Hareeba has been investing or not I have no idea, but he's been taking an interest in the Olympic Football competitions currently being played in Tokyo.

Hareeba noted that in the Men's tournament, 4 of the 6 knockout games have ended as Draws, as have 3 of the 6 in the Women's competition. Since the Men's tournament became an Under-23 event in 1992, the 56 matches have produced just 12 Draws before this year, while for the Women there have been 11 Draws from 40 matches. 

While backing the Draw in third-place playoff games isn't usually a good idea, it might be logical to think that with a Bronze Medal at stake, these games in the Olympics might be a little more competitive compared to what might be considered a meaningless inconvenience, but the results suggest this isn't the case. 

The Women have never seen a Draw in this match, and the Men not since 1972 when East Germany and the Soviet Union were both awarded Bronze medals after a 2:2 draw in the time when Eastern European countries dominated Olympic football from 1952 to 1980. Apparently the attraction of a Bronze medal isn't strong enough to overcome the disappointment of missing out on Gold in football. 

Unfortunately I have no historical prices for any of these matches, but other than backing the Draw in the Gold Medal game, aka the Final, there was nothing to get too excited about. Of the 13 finals to date, five have finished as Draws and none have been won by more than a single goal. Sweden play Canada in the Women's Final while Brazil play Spain in the Men's.


Monday 2 August 2021

Buying the Farm

On May 5th 1978, a young Warren Buffet (age 47) skipped the annual celebration of Cinco de Mayo to attend a seminar at Stanford Business School which was held as part of an Investment Management course being taught by Professor Jack McDonald. As of 2016, McDonald was still teaching the class.

I was reading through some notes from that day, and some of young Buffett's thoughts from that event seem to me to apply equally well to sports betting markets as they do to the financial markets that were being discussed that day. For example, his opening statement:

The game of making money in the stock market is deceptively simple. It is one of the few businesses where one makes offensive decisions and is not forced into making defensive ones. You play the game only when and where you wish to. You need only swing at the fat pitches which are over the plate and belly-button height.
In other words, be patient. Wait for the market to offer value and only play when it does. As punters or investors, we have the huge advantage of not having to bet in every event. Buffett gives an example of a farmer, who...
only sells or buys a farm once. Therefore, he must be right when he does. In contrast, the stock market gives tremendous choices. Most people turn this vast array of choice into a disadvantage rather than an advantage. Be patient and wait for the right buy.
In a theme which has recently been well documented by Morgan Housel in his excellent book The Psychology of Money which I mentioned in my last post, Buffett touches on the fact that when it comes to investing:
There is absolutely no correlation between hours worked or intelligence and money management success, but that there is a tremendous correlation between approach and temperament, and investment success.
As Housel puts it:

In what other industry [finance] does someone with no college degree, no training, no background, no formal experience and no connections massively outperform someone with the best education, the best training, and the best connections? I struggle to think of any.

Buffett lists four basic rules: 

1) resist the temptation to be in every game all the time 

2) maintain an even temperament 

3) have a reasonable knowledge of the subject and interest in it and 

4) be disciplined 

There are other nuggets hidden away in the notes, including the advice to "learn what you can’t value" and that he "would absolutely never invest in any of the largest 50 companies in the U.S. The market is incredibly efficient at this level."

When it comes to sports betting, I think the lesson is that accurately valuing the outcome of an event is very difficult, and when it comes to football or big sporting events, your opposition includes some highly sophisticated participants with access to far more useful data than yourself. 

One Tweet appeared on my timeline at the weekend from an account claiming to offer "Powerful tools for experienced players" and these words:

In the Advanced Goals Statistics module, select a live game then the score and the minute will be taken over automatically and used to calculate the next 5 minutes percent to see what happened on previous seasons similar games

Further, you can also apply other complex filters

Who knew that investing was so simple? I won't give any publicity to this vendor - you can find the thread on Twitter if you are interested - but of course the idea that this kind of thing is useful is based on the flawed logic that what happened in previous seasons has some kind of bearing on future matches and similar games. 

Common sense should tell you that Manchester United v Liverpool in August 2020 has no relevance to the same fixture played in May 2022 due to, for a start, the fact that players, tactics and sometimes managers may all be quite different a week apart and certainly a season apart.

So I asked the question:

Help me understand how what happened in a previous season with different players, managers, weather etc. has any predictive value?
It will come as no surprise that what followed was not an answer, but deflection - "I will help you if you tell me why for a given event (even live event) the odd 2.10 may be good to play and let's say 1.90 may not be good."

Oh dear. Expected Value is a basic concept for anyone taking betting seriously, but in exchange for my answer giving a clear example of why 2.1 might be value and 1.9 not, I never did get an answer as to how a game from a previous season could be relevant in any way to a current game. 

The software can be licensed for just 27 for 3 months and apparently lets you enter a game state and in return will give you historical outcomes, which might be interesting as a curiosity but is absolutely useless as a predictor for how a current match might play out. 

A couple more thoughts and observations. Entering the number of minutes elapsed is meaningless, because what is important is how many minutes remain in a game, not how many have elapsed as I have explained before. The 90th minute in a game with several minutes to be added on is quite different to the 90th minute in a game with none.

There's also the problem with these in-play bets that you are competing against some extremely sophisticated models which actually are profitable. The money they are consistently winning is the money from those who think that matches from previous seasons have any relevance. If profitable betting was really this easy, we'd all be millionaires and Premium Charge payers, but this use of historical data is not an approach that will get you to that point.     

Sunday 1 August 2021

July 2021 Review

July is now in the books, and another profitable month in the MLB for 'hot favourites' although for left handed starters, some regression to the mean has not unexpectedly taken place this month.

Overall the system was up another 23.55 units taking the season total so far to 82.95 units, recovering nicely after a shaky start in April. 
The return for left handed starters is now at 22.5% on the Money Line, and 26.7% on the Run Line after a small loss in July. 

The T-Bone System had a losing July, dropping 1.87 units from 64 bets, and is now currently down 6.05 units (ROI -2.8%) on the season. 

The Totals Systems are now both in profit for the season although Unders is contributing 85% and for reasons previously discussed, this percentage will likely continue to drop.  

I've already covered the Euros, the Stanley Cup Finals and the NBA Finals which reached their conclusion last month, and advised that the Gold Cup was not a place to try the knockout Draw system. 

With all six knockout matches so far being won by the favourite, anyone looking for Draws would have been out of luck, but all competitions are not created equal as I cautioned.

The final, for the seventh time, is between Mexico and the United States with Mexico shortening from around 2.71 when the finalists were known, to a current price of ~2.32. Across all international tournaments, when the fair probability of the favourite is less than 0.5, backing the Draw has an ROI of 27% which initially makes this a tempting proposition, but in Final matches the ROI is only 6%, and in Gold Cup matches is negative, which makes it far less tempting.

As previously mentioned, sports investments now make up a very small percentage of my income, and as would be expected for someone of my age, my monthly spreadsheet update is far more about pension and property investments than the outcome of a few football or baseball games. 

Some of the individual stocks I've mentioned in this blog are included (left) but in real terms, 1.18% of my pension is far more than 2.36% of sports profits. 

One company I've not mentioned before is $CMG (Chipotle Mexican Grill) which I bought last September, primarily because I suspected a stock split might be imminent. 

Only five companies in the S&P 500 have higher share prices but no split has yet been forthcoming. 

While stock splits don't, in themselves, create any value, "a stock split can influence share price and valuation in a number of ways. The action signals management's confidence in the company's growth outlook and it can be viewed as an indication that they believe the business is in position to expand in a way that will push the stock back up to its pre-split levels." This benefited my holding in Telsa last year, and similarly Apple although I don't directly hold any of that company's stock.

Given that the stock is up 55.75% since I invested, I'm happy to wait this one out.

Tesla had a flat month, while my Bitcoin investment remains in the red despite a decent July.

"Investing becomes so much simpler when you're willing and able to measure progress in years and decades instead of weeks or months." 

Overall July was the ninth consecutive positive month, but wasn't quite up to the numbers from March to June. 

As Morgan Housel puts it in his excellent book The Psychology of Money "Two topics impact everyone , whether you are interested in them or not: health and money", and on that theme what wasn't so great in July was a 10.6lb gain in weight. After breaking my leg, I dropped 27lbs in the first quarter of the year, but since then 14.5lbs has been regained. Walking again is great, but perhaps my destination shouldn't be the pub so often! 

Making money is great, but without good health it's all rather pointless, so a new month and some new health and exercise goals.

Good luck to you all in August.