[cont.]...I do know this. Most casual gamblers,*who are the majority of the money spent,*go to vegas expecting to lose money. It?s part of the entertainment experience. *People put money in mutual funds and in their brokerage accounts and pick stocks expecting to make money. They don?t find any value in losing money on a stock, fund or other traditional investment. That changes the opportunity completely.
How efficient can a market be when the majority of investor expect to lose money? The sportsbooks know this. They know the difference between smart and stupid money.*
They set odds in order to attract as much emotional, stupid money as it possibly can.*It also knows that this*emotional money will skew the odds and bring in the ?smart money?. As a result, they have learned to lay off their investments so that they are*just taking their cut off the dollars invested rather than trying to outsmart the smart.
To me, this suggests the smart money is better than just good. It?s very good.
Which raises the question of ?How did the smart money get smart ?, and do they get better returns on their bets than investors can buying the S&P500? Can it significantly outperform the S&P as this new fund would be expected to do?
The smart money doesn?t brag about their results, but in the minimal reading and conversations I have had, it?s the same people coming back over and over again. The smart money people are doing something right on a repetitive basis.
When you think about betting on sports, there really is far better information about your local sports team than there is about any local business in your market.* The local papers cover the team every day. The local*TV station gives a report about every game. There are*radio stations who cover them for hours at a time. That?s far more information than you get about*Tyco or*Computer Associates*or NFI.
In sports, when someone does something wrong, they pretty much tell you the next day or two. Someone suspended ? You know it. Someone hurt ? They report it, and do a better job of policing that than any industry watchgroup.
And stats? my goodness. There is no comparison. You can tape everything and create your own stats, which I?m sure every ?smart money? gambler does.* There are public play-by-plays of every game.*There are websites that analyze every which way from sunday every action and inaction of every player in the game.
There also is no such thing as insider information either.*Player and team reps can?t talk to known*gamblers, but do they really need to?
Reporters are there after every practice to interview the players and coaches. They ask the same questions that every gambler wants to know, if only so they know who to pick for their fantasy teams.* They also get to see and report on who is there and who isn?t and who is limping and who isn?t.
That?s far better than we get from public companies. Not only can they not disclose material information on a daily basis, they*try their very best to hide their actual performance when they are required to supposedly disclose all information.
Public companies play so many games with their numbers it?s ridiculous. Should they expense options or not? Per forma vs GAAP? One time write offs? Buying company after company? Writing down inventories then reselling them?
My favorite is beating the estimates by a penny quarter after quarter. Could you imagine a team that beat its competition by 1 point every game? Business, like sports, is not that predictable.
That?s not to say that the information is so good that this is a slamdunk investment. Sales don?t get closed, product cycles get pushed back, drugs don?t work as expected and players drop passes, miss shots and get hurt.
The argument can be made that this is much riskier than a bond, where unless the company goes out of business, you get paid the interest rate. Pick a strong company or the government and you are relatively safe. All true. That?s why i love bonds .
You could also make the argument that when you buy a stock, you own part of a company.*Legally it?s true. In practice it?s not.*For non-dividend paying companies, you have nothing but a piece of paper. The only hope you have if that company starts to*decline is to find*someone who*will buy it from you.
A sports or blackjack or poker bet doesn?t have value beyond that game or hand. In that respect it?s just like the hundreds of millions, if not billions ,of options that are traded, but never converted, on stocks, commodities and other assets around the world every day.
Just what hedge funds do on a daily basis, and just what I plan on doing.
How efficient can a market be when the majority of investor expect to lose money? The sportsbooks know this. They know the difference between smart and stupid money.*
They set odds in order to attract as much emotional, stupid money as it possibly can.*It also knows that this*emotional money will skew the odds and bring in the ?smart money?. As a result, they have learned to lay off their investments so that they are*just taking their cut off the dollars invested rather than trying to outsmart the smart.
To me, this suggests the smart money is better than just good. It?s very good.
Which raises the question of ?How did the smart money get smart ?, and do they get better returns on their bets than investors can buying the S&P500? Can it significantly outperform the S&P as this new fund would be expected to do?
The smart money doesn?t brag about their results, but in the minimal reading and conversations I have had, it?s the same people coming back over and over again. The smart money people are doing something right on a repetitive basis.
When you think about betting on sports, there really is far better information about your local sports team than there is about any local business in your market.* The local papers cover the team every day. The local*TV station gives a report about every game. There are*radio stations who cover them for hours at a time. That?s far more information than you get about*Tyco or*Computer Associates*or NFI.
In sports, when someone does something wrong, they pretty much tell you the next day or two. Someone suspended ? You know it. Someone hurt ? They report it, and do a better job of policing that than any industry watchgroup.
And stats? my goodness. There is no comparison. You can tape everything and create your own stats, which I?m sure every ?smart money? gambler does.* There are public play-by-plays of every game.*There are websites that analyze every which way from sunday every action and inaction of every player in the game.
There also is no such thing as insider information either.*Player and team reps can?t talk to known*gamblers, but do they really need to?
Reporters are there after every practice to interview the players and coaches. They ask the same questions that every gambler wants to know, if only so they know who to pick for their fantasy teams.* They also get to see and report on who is there and who isn?t and who is limping and who isn?t.
That?s far better than we get from public companies. Not only can they not disclose material information on a daily basis, they*try their very best to hide their actual performance when they are required to supposedly disclose all information.
Public companies play so many games with their numbers it?s ridiculous. Should they expense options or not? Per forma vs GAAP? One time write offs? Buying company after company? Writing down inventories then reselling them?
My favorite is beating the estimates by a penny quarter after quarter. Could you imagine a team that beat its competition by 1 point every game? Business, like sports, is not that predictable.
That?s not to say that the information is so good that this is a slamdunk investment. Sales don?t get closed, product cycles get pushed back, drugs don?t work as expected and players drop passes, miss shots and get hurt.
The argument can be made that this is much riskier than a bond, where unless the company goes out of business, you get paid the interest rate. Pick a strong company or the government and you are relatively safe. All true. That?s why i love bonds .
You could also make the argument that when you buy a stock, you own part of a company.*Legally it?s true. In practice it?s not.*For non-dividend paying companies, you have nothing but a piece of paper. The only hope you have if that company starts to*decline is to find*someone who*will buy it from you.
A sports or blackjack or poker bet doesn?t have value beyond that game or hand. In that respect it?s just like the hundreds of millions, if not billions ,of options that are traded, but never converted, on stocks, commodities and other assets around the world every day.
Just what hedge funds do on a daily basis, and just what I plan on doing.
