Thursday 28 March 2024

Daniel Kahneman RIP

I've often mentioned here the importance of psychology in investing, and probably the top expert in "the field of psychology of judgment and decision-making" passed away yesterday.

I've mentioned Daniel Kahneman him several times over the years, and if you haven't read his book Thinking, Fast and Slow, you should.

It’s a book that will take some effort to read because the ideas are dense, and even though they are well-presented, they’re not cloaked in the clothes of story. If you’re willing to do the work, though, Thinking Fast and Slow may be one of the most important books you ever read.
His Prospect Theory explains why investors typically consider the loss of a specific amount twice as painful as the pleasure received from a gain of the same amount.
When they made decisions, people did not seek to maximize utility. They sought to minimize regret.
Michael Lewis wrote a great book about Kahneman's relationship with Amos Tversky, called "The Undoing Project: A Friendship that Changed the World" which I also recommend. 

Some light reading for you while I am away for six weeks as I mentioned a few days ago. 

Although I have yet to receive a response to my mentioning that I might be open to a voluntary severance agreement should one be on offer, I have been immersing myself in the topic of retirement finances by listening to podcasts on my daily walks and reading while less active and I suspect much of my time away will be spent on this topic. 

One of the more interesting papers I've come across on the topic of how retirement funds should be invested (many experts say that one should move from stocks to bonds as you get older) is a recent one (October 2023) titled "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice" by Aizhan Anarkulova, Scott Cederburg and Michael S. O’Doherty which suggests that a 100% equity allocation may be the safest asset allocation even in retirement.

I've always been of this mindset myself, although my more risk averse wife is not, but fortunately I make the financial decisions. Yes, the 38% expected drawdown would be emotionally challenging, but I've been through a few of these in my time, with the lessons of Black Monday (October 18th) 1987 coming at a very good time in my life. More recently, on March 23rd, 2020, I was down 23.4% but never sold a single share and markets have bounced back as they always have done.

The odds that my next post will be penned as a retiree have moved to slightly odds-on, with an announcement coming on April 18th if rumours are to be believed, but once I've got my head around the sequence of return risk, the 4% rule and switching my mindset from accumulation to decumulation, I should be good to go. With Bitcoin halving around that date, it could be an interesting week.  

Enjoy Spring. All being well, I shall be back on May 8th after my third Total Solar Eclipse, either employed or retired. How boring life would be if we didn't have such uncertainties in front of us. Stay safe and stay lucky. 

Saturday 23 March 2024

Towel Throwing

Back in November, I mentioned a fairly well known tipster who, during a poor run of results, suggested that increasing stakes might be a good idea.

We're currently a few points down for the season with both official and unofficial picks, so if you've been thinking about upping the stakes at some point, this should prove to be a great time to do that.
I pushed back on this idea for what I hope are obvious reasons, but if anyone did actually follow this poor advice, they would be seriously regretting that decision. Hopefully many took a 'good money after bad' approach and scaled down the size of their investments. 

The ill-advised recommendation was made after 10 bets and a manageable loss of 4.02 units, while the subsequent 27 selections have now resulted in further losses of 14.76 units, a total ROI for the season of -50.8%.  

These are the 'official' bets with the towel having been thrown in this week on the 'unofficial' bets after 82 selections and a -24% ROI.  

All this is to point out that chasing losses is not a smart strategy rather than anything else, but with the National League less than four weeks from concluding, a losing season is now guaranteed.  With the acknowledgment that the edge has gone for unofficial picks, I'm sure some subscribers must be licking their rather deep wounds and wondering whether the edge has gone for official picks also. 

It happens. Markets are Darwinian - rather than Newtonian - in nature, and they evolve, and it's quite likely that the increased interest in the National League has sped this process up. We'll see how the remaining weeks go, but end of season games can be tricky with the motivation for teams ranging from nothing to play for to must-win for a play-off spot or to avoid relegation. Chesterfield have now won the League and promotion, but eight teams are realistically in with a chance of making the six club playoffs, while at the bottom Oxford City have gone with a tight battle between several clubs to avoid filling one of the other three relegation places. 

Friday 22 March 2024

16 Down

This blog is now into its 17th year, and not too many sports investing blogs can claim this longevity. 

Matekus' Sports Trader blog has been going since September 24th, 2009 which by some incredible coincidence is the exact same date as Steve Mullington posted his first entry on the Horse Racing oriented Mull it Over blog. The latter is updated almost daily while Sports Trader is a little less frequent with his posts.

Wayward Lad began posting in March 2010, with his Pension Builder blog making its debut in August 2013. There may be other long-standing blogs out there, and if you know of any that should be added to the blog roll here, let me know, and check out those long-runners I've linked to. 

Not so much these days, but in the past I would regularly receive requests along the lines of "Hey there, I've started a new blog. Please add me to your blog roll" but my experience told me that almost all of these would dry up in a very short time, so I would politely decline until a significant amount of time had passed. 

Whatever happened to Steve at daily25? With the benefit of hindsight, his last post is a bit concerning since he seemed to have fallen for the NFT scam. Perhaps 'scam' isn't the right word, but very few people have made money from NFTs. The idea always seemed a bit silly to me and I've never been tempted to go anywhere near these, and I'm still on the fence about crypto although I do have a fairly small FOMO investment in Bitcoin as I've mentioned. Hopefully Steve is doing well as he was one of the good guys and I still remember him sending me a Xmas hamper back in 2012 after my XX Draws had made him a lot of money. Steve wasn't shy about betting big, which is why the NFT thing is a little worrying.

I'm pretty certain the blog won't last for another 16 years given my age, but I still enjoy writing and, as I mentioned the other day, the challenge of finding edges. I'm still working, with nothing yet from my enquiry into a voluntary severance package, but I'm not in a hurry. My suspicion is that cuts are coming and by broaching the subject I've pretty much guaranteed I'll be included in the next round. 

We are off to Arkansas next week for the Total Eclipse on April 8th, the third one I will have experienced following Cornwall 1999 and Idaho 2017. Hopefully the skies in Russellville will be clear. The next one on my list is August 2026 in either Spain or Iceland, and if you have never experienced totality, you really should make sure to add this to your bucket list. 

Thursday 21 March 2024

Seoul Split

Major League Baseball is back, sort of, with a couple of games this week in South Korea before the season starts for real next Thursday with all 30 teams in action. With the recent rule changes, years of data has become pretty much valueless, and the last couple of years have been challenging to say the least. 

The totals markets are the ones where the most disruption would be expected and the table below shows the results over the past ten seasons for a couple of Totals systems (one Overs, one Unders) that, once upon a time, were good:
2020 was the shortened COVID season, but the golden years of 2016 - 2021 are clearly over. 

We do have two full seasons of data from the new world, which is a little over 5,000 games, and there are a couple of edges that seem to be showing themselves so far.  

The two games in South Korea between the Los Angeles Dodgers and the San Diego Padres were split.

Wednesday 20 March 2024

39 Months of Imminency

On September 21st, 2020, I bought some stock in a company called Chipotle Mexican Grill at a little under $2,000 per share ($1,196.45 to be precise). As I explained almost a year later:

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.
Finally, it was announced yesterday that the stock would indeed by splitting, at 50:1 no less, the largest ratio I can recall, and as you can see from the Tweet below, it has been worth the wait:
Up another 4% on the news today -  
and up 143.3% since I bought it, the stock is the second biggest individual gainer I have behind $TSLA which continues to lead the way at +718% despite a poor start to the year. 

The loosest of definitions for 'imminent' are unlikely to include a wait of almost three and a half years, but it's an investment that has been worth that wait, and I'll probably not be selling any time soon. 

Patience is sometimes rewarded, and as I mentioned in that August 2021 post:
"Investing becomes so much simpler when you're willing and able to measure progress in years and decades instead of weeks or months."
No news from Berkshire Hathaway on something similar for their Class A stock which currently trades at a mere $622,777.12 a share...

I've owned their more reasonably priced Class B stock since 2020 also, and this investment is up 84% right now, and sits fifth in the table of best performers.  By way of comparison, the S&P 500 is up by 38% since the end of 2020. 

Tuesday 19 March 2024

For Only Metal, What a Bore

I also took a further look at how Big 6 matchups played out when the teams meet in the late stages of domestic cups (FA Cup Quarter-Finals, Semi-Finals and Finals, League Cup Semi-Finals and Finals, and Community Shield games) and the Draw over 76 matches has an ROI of 39%. Manchester United host Liverpool in the FA Cup Quarter-Final this weekend, with the visitors currently odds-on favourites.
Once again, the Big 6 produced a winning Draw for us on Sunday, taking the ROI from now 77 matches in the above categories to 43%

For the 2023-24 season, in all competitions, the ROI is an incredible 173% (41.45 units from 24 matches):
There are another nine Premier League games this season between these clubs, as well as at least one FA Cup tie, probably two, and possibly a pair of Champions League semi-final games. 

These results aren't normal I hasten to add. The same strategy last season would have lost 9.83 units, although in 2021-22 it would have been up 6.83 units. The Draw is a fickle fellow, but 

My last post about Anonymous Fan being inspired to dig into the data and find a nice NHL system triggered a subscriber to the Sacred Manuscript to write:
Hi Cassini!

Hope you are doing well. I was quite inspired by your last post and no, I am not writing to ask about the query that was sent to you :)

But I might have found another good one and was interested in your opinion. * If it is as good as it looks, please don't share the details of it on the blog right now. *
I don't have Excel at home (using Open Office) so I can't put it through Joe Buchdahl's system to test its validity.

But unless I have done something wrong, it shows a 13.21% all time ROI over 1123 bets since 2006 with only 2 seasons resulting in a small loss.
If we include the 2023 season although it is not yet over, 10 of the 18 past seasons show double-digits ROI, including 6 above 20%.

Once again, it was very encouraging to hear that this blog, the manuscript or perhaps a bit of both have inspired someone to do some research.  

For the record, the probability that these results were from luck as generated by Joseph Buchdahl's spreadsheet was just shy of 1 in 50 million, i.e. very unlikely, and the best part of it is that the market bias it takes advantage off also applies in the NBA, which is similar to the NHL in many ways, including often shared arenas. 

I must admit to being somewhat inspired myself, and was happy to exchange ideas and observations.  As I've mentioned many times, it's not the money so much as the challenge of finding an edge. For only metal, what a bore. RIP Steve Harley, another teenage legend gone. 

Friday 15 March 2024

Neutral Nuisance

A unique scenario in the Europa Conference League last night as Olympiacos became the first team in European Competition spreadsheet history, i.e. since 2004, to overcome a three goal deficit from the First Leg.

It's not uncommon for a team with a comfortable lead from the First Leg to lose, but previously losses have never prevented the team from advancing.     

Maccabi Tel Aviv were handicapped by having to play their "Home" Leg in Serbia and after winning the First Leg 4:1 in Greece, they proceeded to lose 1:6 at "Home" in the Second Leg after extra time - the score was 1:4 after 90 minutes.

Backing the draw following a goalless First Leg is usually a bad idea, but the Viktoria Plzeƈ and Servette Second Leg also finished 0:0 and these results meant that the Rounds of 16 across all three tournaments resulted in a loss of 0.82 units although some subscribers may have skipped the Neutral venue game, a scenario I'm ashamed to admit the Sacred Manuscript author didn't consider.

After a rare visit to my Spam folder, I found a very pleasing email from someone who calls himself 'Anonymous fan.' My bad that the email was sent almost one month ago, but he wrote:
Hey Cassini,

Thank you for your work and your blog. I really appreciate everything you do. I have been messing around with killer sports since you introduced me to it and I have a lot of fun thinking about things that may matter for the sports I enjoy.

I think I may have found an intriguing one for NHL.
I won't reveal the find, which does look very interesting, but the most pleasing part of it is that this blog apparently does sometimes achieve one of its objectives, i.e. encouraging readers to explore ideas of their own.

I haven't talked about NHL much this season - the systems in the Sacred Manuscript are both boringly in small profit territory, the Basic by just 0.2% and the Premium by 2.5% - but Anonymous fan's discovery blows these numbers away with an ROI of 17.8% this season, and all time of 8.7% since 2006 and a total of more than 1,000 selections. 

Anonymous Fan explained his rationale and concluded his email with:
It seems to be steadily profitable year after year, present a solid number of plays, and the games that meet the criteria are typically quite enjoyable to watch. I am not very good at math or statistics though so maybe it is too small a sample? Either way I was curious to get your thoughts.
I ran the numbers through Joseph Buchdahl's "Testing Your Betting Model" spreadsheet:

and the 1-in-x probability came out to 8032. Very impressive, and with a selection last night I dipped my toes in the water and was rewarded with a winner. 

Thursday 14 March 2024

Second Legs and Big 6 Cup Ties

I mentioned on Tuesday that:

The Champions League Round of 16 closes this week with four second leg matches remaining, and to date, fewer than 17% of these matches end as draws, an implied price of 6.07. In matches where both clubs are from one of the Big 5 Leagues, the numbers are fewer than 15% and 6.69.
The strategy for the Round of 16 matches in the sacred manuscript made a profit of 2.01 units and while Laying The Draw isn't one of my usual strategies, in certain Second Leg matches in European competitions, it's a profitable way to play. 

Here are the numbers for backing the Draw in the Second Leg of the the early rounds of the knockout stage for the three tournaments:
Things change as the tournaments progress however, and Laying The Draw is not a strategy to follow in the next rounds. 

The markets for Second Leg matches also appear to offer value when the First Leg finished 0:0. We only have 84 such matches in our European sample from 2004, but backing the Draw has a negative ROI of -43%. This is also a trend that is seen in the English domestic game with the 19 games here showing an ROI of -47%

I also took a further look at how Big 6 matchups played out when the teams meet in the late stages of domestic cups (FA Cup Quarter-Finals, Semi-Finals and Finals, League Cup Semi-Finals and Finals, and Community Shield games) and the Draw over 76 matches has an ROI of 39%. Manchester United host Liverpool in the FA Cup Quarter-Final this weekend, with the visitors currently odds-on favourites.

In earlier rounds of the FA Cup, there have been 20 Big 6 ties since 2004-05 and not a single Draw which is quite surprising. I've not looked at the League Cup earlier rounds, but I suspect the big clubs don't take this competition too seriously until they get close to the Final, but I'd have thought the FA Cup would be given a little more respect!  

There have also been 27 all-Big 6 matches in Europe, and the ROI on the Draw here is 11%   

I plan to expand the European Club Competition section of the Sacred Manuscript with my Second Leg findings, and anyone subscribing at this late stage of the 2023-24 season will automatically get the updated document for the 2024-25 season for free. 

Tuesday 12 March 2024

Big Draws, Second Leg Draws, and Bitcoin

As I mentioned last week, backing the Draw in "Big 6" matches this season has been rather rewarding, and the Liverpool v Manchester City game on Sunday boosted the bank even further, with the biggest surprise perhaps that the starting price was around 4.0 on Betfair, although I could 'only' get matched at 3.95. Pinnacle's Closing Odds had the Draw at 3.9. 

In the "Big 4/6" era, the league matches between these two clubs are the best of the 15 combinations for the Draw historically with an ROI of 50% from the 30 games played. Chelsea against Manchester United is second at 43% with Arsenal - Liverpool games next at 27%. With an ROI of -51%, the Manchester Derby is the worst bet. 
Of the 30 Home / Away combinations, the single best fixture is Manchester City v Liverpool at 58%, closely followed by Chelsea v Manchester United at 56%.

As most readers will be aware, the European Club tournaments next season will use a Swiss system format in place of the traditional Group stage. In a cosmetic change, the UEFA Europa Conference League will drop the 'Europa' from its name, but the knockout stages will remain in place almost unchanged. I say almost, because the Champions League will have an extra knockout round for a place in the Round of 16.

All this is good news as my data goes back to the 2003-04 season, and as I only get interested once the knockout rounds begin, the changes should mean that the data should continue to be valid. It would be a shame if 21 years of data (1,968 matches) were to become worthless due to a format change, but this shouldn't be the case.

The Champions League Round of 16 closes this week with four second leg matches remaining, and to date, fewer than 17% of these matches end as draws, an implied price of 6.07. In matches where both clubs are from one of the Big 5 Leagues, the numbers are fewer than 15% and 6.69.

It's been a good year for Bitcoin and this month it's up another ~15% so far and setting new highs. Unfortunately my purchase timing - almost two years ago -  wasn't great, but my patience has been rewarded and I have no plans to sell. 

The approval of the Bitcoin spot ETFs appears to be the main driver of this current run up, but there's a second event coming up that is also likely having an impact.
Inflows to the ETFs hit an all-time high last week, seeing nearly $680 million of inflows in one day. This means that the funds are buying more Bitcoin every day, which is eating away at the liquidity provided by sellers.
The second event is the imminent 4th Bitcoin halving (expected date is April 19th) which doesn't refer to a halving of the amount of Bitcoin in circulation and therefore has no effect on the balance on any wallet but refers to the reduction of mining rewards for adding a new block to the blockchain.
At this point in time, there are about 19.5 million Bitcoins that have already been mined, while the maximum supply is fixed at 21 million Bitcoins. Considering all upcoming halvings every 210,000 blocks (~ 4 years), the last Bitcoins will be mined around the year 2140. Consequently, in the next 16 years only 1.5 million Bitcoins will be created, which underlines that the remaining inflation is very marginal from a technical standpoint.

Hopefully I'll still be around in 2140. although this blog likely won't be! 

Thursday 7 March 2024

Shadow Chasing and Mindset Shifting

I'm a little bit late with this update, but February was an interesting month. It had the extra Leap Day this year, which to salaried employees like myself is a slight irritation as it's a day we don't get paid for, but that wasn't what made it interesting.

As I mentioned before, I started the ball rolling on one of life's big decisions, i.e. retirement, and March could be an even more interesting month, although I'm not sure how quickly such a ball gathers momentum, nor which slot on the wheel of life it will ultimately land in. 

Given a few recent issues with the company - there are significant "cost pressures" and "financial headwinds" and the share price, which had its first annual loss in 15 years in 2023 is already down almost 10% year-to-date - as well as contractors being let go later this month, it doesn't seem too far-fetched to believe the rumours that some full-time employees are also likely to be made redundant in the not too distant future. Best case scenario is that I can negotiate an enhanced individual severance deal sooner rather than be one of many lumped together in a layoff deal later in which the terms are unlikely to be open to negotiation. 

I first entered the workforce on 11th August 1975, which I don't need to add was a very long time ago. One of the places my work has taken me over the years was the state of Arkansas where I spent a few years in the 1990s, and I shall be returning there later this month for a five week visit. 

The primary reason is to be in the path of totality for the total solar eclipse on the 8th April, but I shall also be meeting up with my son who has a work trip in Wisconsin which overlaps, and he's keen to visit the area where he spent a few of his early years before moving back to the UK. 

In addition, I still have a few good friends in the area and it will be fun to catch up with them again, and I also plan to rent a bike while I'm there as cycling trails are now plentiful there. This blog will therefore have its longest sequence of silence since its debut in 2008, also a long time ago, at least as far as sports investment / betting blogs go.  Whether the trip ends up being a workation or a vacation remains to be seen but having heard today that there has been a significant number of resignations follow the annual reviews, though none (yet) from my team, I rather suspect that I shall not be receiving an offer.

As for February, well in sports investing it was rather a quiet month. The NBA season had its usual interruption at this time of year for its All-Star Break but when there were games, it was a good month overall with a 41-28-1 record ATS for the basic system, which is a 59.4% strike rate and for the season to date the percentage is 52.2%. The Overs had a small loss, but at 53% overall for the season, we're still in good shape here too, with the number to beat 51.2%.

Disappointingly, after a strong January, the NHL system dipped into the red after their All-Star Break and is now down 3.43 units, an ROI of -0.9%. February is usually a strong month but this year was the worst since 2007. It happens.

The "All-Big 6" League Cup Final was a winner of course and for those of you backing the Draw in "All-Big 6" League matches also this season, at the two-thirds point of the season there are worse things you could be doing since this is now +28.87 units (144%) and the strategy is guaranteed to finish the season in profit. 
Note that the Pinnacle overround is creeping back up again as it did in the COVID affected 2019-20 season, a number that is higher in matches involving a Big 6 club than in those "Little 14" games. 

The small number of matches each season means there will be some big winning and losing ROI percentages, but overall a 12% ROI over the last ten seasons (with ten matches to go) is very good.

Meanwhile over in Italy the Serie A System is performing well and while the ROI is "only" 8.4% from 720 games, it's worth paying attention to.
We're getting close to some more big games. The European Knockout rounds are here, and the end of season Finals and playoff games aren't too far off either with the Euros the icing on the cake.

Overall February was a good month for the main spreadsheet, with a new end-of-month high ending the 23 month wait. March hasn't started particularly well, but it's early days and a drawdown of 0.4% is nothing compared to the 23.4% from March two years ago. Bitcoin set a new all-time high this week, and is currently up 72% this year.  Tesla isn't. 

As for health and fitness, without which there is no point being concerned about money, it's mostly good news. I joined a gym at the start of February (good news) and have been there just three times since (not so good news). I much prefer being outdoors and have been out on my bike a few times and my walking / running still exceeds six miles a day on average. Dry January was followed by an almost Dry February with just one drinking day, and the pounds have been falling off - hopefully fat rather than muscle - and I am now down by more than five and a half stone (78.4 lbs to be precise) from my high in 2019. 
Similar to the financial mindset change needed to adjust for a move from earning and accumulation to retirement and decumulation, so I need to figure out how to adjust to the idea of maintaining a healthy weight rather trying to attain it. Nice problems to have though. In another commonality with building wealth, losing weight (by which I mean fat) isn't hard, but it's slow and it's boring. The simple chart above shows where I got bored! The longer downward slopes are where I was more focused, and the instance starting around 380 days was when I was laid up in bed with a broken leg - zero alcohol and my wife had total control over my caloric intake - and I couldn't weigh myself daily for 11 weeks.