7 Lessons Football Gambling Can Teach You About Investing
posted on: October 01, 2007
More than a few times when I've told someone what I do for a living, they've scoffed and called me a "professional gambler." And while I hope few people really think of Wall Street as nothing more than a giant casino, there is an inescapable link between investing and gambling. I have yet to find a trading desk where the betting action wasn't rampant. Hell, the most famous book about the bond market is titled "Liar's Poker" and features a story about John Meriwether playing a game of liar's poker for $1 million.
It isn't hard to see why a professional securities trader would have the same psychological profile as an avid gambler. You have to be decisive. You have to accept risk. You have to understand that luck will be a big part of your success or failure on any given bet.
I myself was very much into gambling on NFL games as far back as high school. While I never had a large amount of money on a game, and it was mostly just in the form of a pool among my friends, I learned a lot about investing and trading through gambling on football.
1) Focus on the primary factors, and don't get distracted by secondary and tertiary elements. By this I mean, focus on which team is more talented than the other. Only if you think the talent level is very close should you start drilling down to stuff like matchups and weather conditions and minor injuries. Sometimes the secondary and tertiary factors can talk you out of making a good bet, or talk you into making a bad bet.
Same goes in investing. Focus on the fundamentals of a company. Only after you've completely analyzed the fundamentals should you drill down to things like technicals of the trading price or potential EPS surprises. The firm with better management and a better business model will win out most of the time, even if you completely miss-time the trade. Just as the more talented football team will win most of the time.
2) Filter out irrelevant information. All the time you hear about how this team has beaten that team 6 out of their last 9 matchups or some such. But in the NFL, non-division teams don't play each other every year. So 9 matchups might be over a 12 year period. Is there any relevance to the fact that the Raiders beat the Colts several times in the late 90's?
Similar crapola gets thrown out in the investment world. Back in 2000, I remember people claiming that technology stocks do well in recessions. So while every one saw the economy was slowing in late 2000, technology was supposedly a "defensive" way to play the recession. Mmmmm... didn't work out too well. The fact is that each recession plays out a little different, just like each boom plays out a little different. The economic fundamentals are never exactly the same. Just like the Colts are a very different team today vs. 1995, the economy is different today than the last time we had a recession.
3) Ignore the media as best you can. This is really a corollary to the first two points, because the media loves to focus of secondary factors and throw out meaningless statistics. Watch any NFL pregame show this Sunday. 80% of the talk will be focused on worthless banter about who wants it more or what stadium is tough to play in or which player is a great leader or who's mentally tough or who owns who or who is inspired by some personal problem or which coach is a genius or who's reeling from their last loss etc. etc. Remarkably little time is spent talking about who is more talented than who.
They'll also vastly overweight what just happened last week. If a good team starts 2-1 then loses in week 4, invariably there will be a story on ESPN about whether its time for that team to panic. Meanwhile if an average team starts 1-2 and wins in week 4, invariably ESPN will do a story about whether that team is a legitimate title contender. Especially if the average team beats a pretty good team. You just wait: this Sunday is week 4 and I promise you both stories will run on Sportscenter or one of ESPN's other NFL shows at some point this week.
The financial media is similarly obsessed with the recent past. Since the dollar has recently been dropping, there's also been a rash of stories in the press about how to play a falling dollar. Its possible articles like this have something to do with why retail investors are constantly getting whipsawed.
When someone like CNBC interviews a PM, they will invariably ask what stocks the PM likes "in today's market." Of course, CNBC means literally today's market. And yet if you listen carefully to the answer, the stocks and reasons often have little to do with today's market. Just the other day I was listening to Squawk Box and some PM said he liked pharma stocks because of demographic issues. Well that probably means the guy has been holding those stocks for years. Today's market? Very few PM's buy stocks or bonds based on where they think the market is going this week.
4) Forget about what's possible, concentrate on what's probable. Is it possible that the Rams will upset the Cowboys later today. Sure, its possible. Anything is possible. But if you go through the scenarios of what it would take for St. Louis to score that upset, you'll realize the odds are low.
Similar with investing. You can talk yourself out of good investments by over-weighting disaster scenarios. Investing and betting are both about probabilities.
5) When you lose, understand why you lost. Sometimes you are just unlucky. In fact, you'll wind up being unlucky a lot if you hang around either the investing or sports gambling game long enough.
So when you make a bet or a trade that doesn't work, first figure out if you were just unlucky. If whatever went against you was a possibility you considered, but estimated to be a low probability, maybe its just an example of things not breaking your way.
Remember that the point of examining your mistakes is to learn from them. So don't stop at small picture reasons why the trade didn't work. Often times the more specific your reasons the less applicable to other trades. Take Enron. But that's not too applicable to other trades, because it's extremely hard to detect. Or you could conclude that you need to look harder at off-balance sheet funding. Better. But even better would be to watch out for aggressive management. The more aggressive managers are more likely to push hard for better quarterly numbers. The harder they push, the more tempting it becomes.
6) Don't get lured by the big spread. Whether its a team favored by 16 or an A-rated bond with a 250 spread, it can be tempting to conclude that the spread alone makes the bet worth it. That kind of thinking leads to lawyer analysis. Lawyers are charged with representing their client, and therefore they gather and/or interpret evidence which supports their client's position. The truth isn't a lawyer's problem. People all too often make betting decisions with a conclusion in mind at the beginning, then overweight evidence that supports their decision and ignore contradicting evidence. What a great way to lose money!
7) Remember the point is to make money, not to be a hero. People love to make bets that, if they pay out, make the better look like a genius. But usually these bets are highly risky. Like taking the 30-1 shot to win the Super Bowl or betting on an 11 point underdog to win outright. Or buying a deep out of the money option. Or buying a bond with a $50 price. If you want to make a bet like that, fine, but make sure you are doing it because you've completed an exhaustive analysis. Not because you want to be a hero.
By the way, I like the Bears laying 3 this weekend.
Fair disclosure: I have the Bears laying 3 this weekend.
seekingalpha.com
Negative effects could accompany fantasy sports' big-time growth
September 20, 2007
With 0-2 starts staring at me in two football leagues (thanks so much, Donovan McNabb and Larry Johnson), I'm trying my best not to focus on the fantasy details.
Sometimes, it's worth standing back from the hurly-burly of whom to start and sit in a given week. When I think about how far fantasy sports have come from the homespun baseball and football leagues I started with school friends in the early 1990s, I'm amazed and perhaps a little aghast.
More than 19 million people participate in the United States and Canada, according to the Fantasy Sports Trade Association. Almost one-quarter of American males between the ages of 18 and 49 play fantasy sports. High-level fantasy footballers gather in Las Vegas every September to draft teams in hopes of winning a $300,000 grand prize at season's end.
I once had to explain fantasy baseball every time I told an adult it was among my hobbies. Now, I'm much more likely to hear a 10-minute dissection of the person's team or to face requests for a few sleeper picks.
When I attempted to interview fans at Cal Ripken Jr.'s Hall of Fame induction in July, an alarming number wanted to discuss their forthcoming football drafts more than the Iron Man.
Given how far the industry has come, I sometimes wonder where it's going and what unintended consequences we might encounter.
I'm quite certain that within five years, we'll be offered some hybrid of a television channel and Internet site that will be completely tailored to our fantasy teams. Some fans won't bother watching the Ravens vs. the Steelers or the Redskins vs. the Cowboys. They'll simply be whooshed from game to game as their fantasy players near the end zone in cities around the country.
We already watch football differently from the way we did 15 years ago. Even on basic network broadcasts, individual statistics scrawl constantly across the bottom of the screen. The NFL offers a channel that flashes nothing but box scores during play on Sundays.
As part of its Sunday Ticket package, DirecTV offers cumulative stats at the touch of a button and customized "Big Play" alerts for individual players. So a viewing experience driven completely by fantasy is right around the corner.
Is that a good thing? I've always thought of fantasy sports as a way of enriching the real thing. But when it actually drives the presentation of football or baseball, has it gone too far?
I don't have strong moral feelings on the subject. I figure people have a right to buy their entertainment how they want it, and if the market dictates such changes, so be it.
But I certainly sympathize with those who grew up watching "just the game" and want to keep it that way.
Fantasy's growth has led to other unanticipated consequences. Web-based giants such as Yahoo and ESPN.com generate so much traffic on their fantasy sites that they're able to offer free scoring and league setups for fantasy football. That might imperil the small businesses that helped the game grow into such a leviathan.
Such mom-and-pop services rely on subscriber fees, but how many owners are willing to pay an extra $25 or more per league out of loyalty? So far, interest in fantasy football has surged steadily enough that most ships have risen, but the market will plateau at some point.
Major League Baseball, realizing the value of fantasy information, has tried to charge licensing fees from stats services that use player names and statistics. Judges have so far agreed with the small business owners, who say such information exists in the public domain. But appeals are pending, and if baseball officials get their way, licensing costs could drive many smaller stat services out of business.
The possibility also looms that government regulators could treat fantasy sports as gambling. Already, fantasy football has developed stronger ties to Las Vegas, where the World Championship of Fantasy Football and other events are held. And whether it's provable or not, anybody familiar with fantasy sports knows that money is at play in many of the leagues run by stat services spanning the nation and globe.
I don't think fantasy sports is exactly the same as sports betting or poker or blackjack. It lacks the element of instant gratification and doesn't allow players to continue raising the stakes at one sitting. In fact, it might be less like gambling than one of our great institutions - the stock market.
But there are many players who get no charge from the fantasy game if significant money isn't involved. And as long as that's the case, the specter of being lumped in with illegal gambling won't disappear. I wonder if, as the game becomes more widely understood, moral opposition will grow.
Anyway, I'll get back to writing about players next week. But expect more detailed columns on some of these issues. We shouldn't forget the whole muffin just because we're enjoying the crumbles on top.
childs.walker@baltsun.com
ON FOOTBALL: Pre-season mysteries
(AP) - Career backup Damon Huard will start this Sunday for Kansas City after second-year-man Brodie Croyle failed to beat him out. The Chiefs hoped Croyle would earn the quarterback's job.
The Texans will start Matt Schaub, who had just two starts in three NFL seasons with Atlanta.
Add the raw Tarvaris Jackson (Vikings), struggling Charlie Frye (Browns) and 37-year-old former CFLer Jeff Garcia (Bucs) to this week's starters and you wonder why Byron Leftwich, a 27-year-old who was the seventh overall pick in the 2003 draft and is 24-20 as a starter, has been looking for a job.
Leftwich's release by the Jaguars was one of a number of unusual doings in the pre-season. Such as Randy Moss' continuing absence from the field; Michael Strahan's no-show at Giants training camp; and the Raiders' decision to cut a player they took with the first pick of the third round, something very rarely done.
The way the Jaguars dealt with Leftwich is the most puzzling.
Yes, he's immobile and injury prone, and he would have cost more than US$5 million against the Jaguars' salary cap this season. Football people also question his ability to grasp an offence and his long windup that, combined with his lack of mobility, make his an easy target for defenders.
But his agent, Tom Condon, suggests that Leftwich's troubles with coach Jack Del Rio stem from a basic difference in philosophy. Del Rio, an ex-linebacker, is defence-oriented, and Leftwich would love to throw deep as often as he can.
Certainly, no one has ever questioned Leftwich's toughness. He played on a broken ankle at Marshall, getting carried down the field by teammates after a completion during a late drive. And immobile QBs have succeeded in the past - both Drew Bledsoe and Kerry Collins got teams to Super Bowls.
His stats are certainly decent: 51 TD passes to 36 interceptions, and a respectable passer rating of 80.5.
So if Del Rio, who used his first draft pick as Jaguars coach on Leftwich, wanted to dump him and install David Garrard at QB, why did he announce in February that Leftwich was his starter? He could have anointed Garrard and tried to trade Leftwich - maybe not for a first-round pick, but perhaps a second or third from quarterback-starved teams
Think Chiefs, Vikings and even the Ravens, who need a young QB when Steve McNair retires because Kyle Boller is a free agent after this year.
In fact, by cutting Leftwich now, Del Rio may have disrupted his team.
"When something like that happens, it's something that you can't even put into words," receiver Matt Jones said. "When it happens that late and nobody sees it coming, you can't even describe it."
Condon says at first there were seven or eight teams interested. Right now, the Ravens or Chiefs seem the most likely - Croyle doesn't appear to be the future there and Huard certainly isn't.
Jacksonville might thrive with Garrard. But now there's no one except the untested Quinn Gray behind him.
Strange timing.
Some other offbeat doings around the NFL:
RANDY'S ROLE: Much was made of Randy Moss's acquisition by the Patriots for a fourth-round pick. But Moss has yet to get on the field because of a leg injury. Will he play on Sunday against the Jets? Bill Belichick gives his usual murky reply when he's asked about Moss' availability. Moss practised this week, but even if he's out there, how good can he be?
"I've been in situations before where a certain guy's been in the offence for at least five or six years and really didn't practice that much because of an injury, but came out and knew exactly what he was doing," another new New England wideout, Donte' Stallworth, said during camp. "But if you're a new guy not really familiar with everything, it will be a little harder."
Look for more from Stallworth and Wes Welker, the other new acquisitions, especially because the Pats cut Reche Caldwell, last season's leading receiver.
STRAHAN SHOWS: Michael Strahan finally deigned to show up in the Giants' camp this week after missing the entire pre-season. The betting line in New York is that he'll suit up Sunday night in Dallas.
But how much do the Giants really want him? He's 35 and he's played well when healthy the last few years. But he missed half of the 2004 and 2006 seasons with injuries and he plays a position at which the team is well-fortified.
Why did he stay out until now?
-He really did contemplate retirement. The talk around the NFL was that his father wanted him to quit, something he confirmed when he finally spoke to the media on Tuesday. Strahan suggested that until this week, he didn't know if he still had the desire to play.
-Money. He's due to make "only" $4 million this season and wanted to renegotiate.
-Two-a-day practices. Strahan says that wasn't a factor. Most veterans say it always is.
-Pride. Coach Tom Coughlin apparently told him he was likely to be put in a rotation that included the much younger Osi Umenyiora, Justin Tuck and Matthias Kiwanuka. Kiwanuka is now at linebacker, but will still be a DE in passing situations; Tuck had an outstanding pre-season in Strahan's place; Umenyiora was an All-Pro two years ago and is one of the NFL's best young defenders.
Why did he come back?
-Pride and records. He thinks he still can play at a Pro Bowl level. And he shares the Giants' sacks record at 131 1/2 with Lawrence Taylor, although Taylor had 9 1/2 that don't count as a rookie in 1981, the year before they became an official stat.
-A Super Bowl ring, or so he says. It's very unlikely he'll get one with this team, this year or next, when there may be a new coach intent on rebuilding. On the other hand, in this NFL, you never know.
UNKIND CUTS
Why did the Raiders cut Quentin Moses, a defensive end they took with the first pick of the third round last April? That's a high pick to dump - even if he wasn't ready yet, anyone taken that high normally has enough potential to make it at some point.
One theory is it was Al Davis' choice, not the decision of Lane Kiffin, his 32-year-old head coach. Not surprising for Davis, although he had been leaving Kiffin alone for the most part. But history says it happens, because that sort of meddling cost the Raiders Mike Shanahan nearly 20 years ago and Jon Gruden more recently.
Overall, more draft picks were cut this year than usual. About 75 per cent made teams on cutdown day as compared to more than 80 per cent since the salary cap took effect. Remember, rookies are cheaper than marginal veterans and more willing to sacrifice their bodies on special teams.
The highest picks to be released were Moses, 65th overall; linebacker Buster Davis, the 69th overall pick by Arizona; and running back Antonio Pittman, a fourth-rounder by New Orleans. The Cardinals claimed Moses, Pittman went to St. Louis.
Seven teams kept all their draft picks: Baltimore, Indianapolis, Kansas City, Miami, San Diego and the two New York teams. The Dolphins, who had 10 picks, also kept three undrafted free agents on their 53-man roster, giving them 13 rookies.
Copyright (c) 2007 The Canadian Press. All rights reserved.
NFL contest winners get treats, more
Football season is here, and so is our annual NFL Forecast contest.
Every Sunday, starting next week, the Times Heraldwill offer our readers a chance to show they know more about the NFL than this avid fan, and one will be rewarded for it.
How? Well, each Sunday, I will try to beat the oddsmakers by picking the winners of five NFL games against the Las Vegas betting line, which runs in the Times Herald.
Your task is to try to beat my record by also picking the winners of five games, which do not have to be the ones I chose.
Anyone who beats me will get their name published in the following week's column. The readers with the best records also will be entered into a drawing from which one name will be picked.
Last year, the lucky winner received a dozen doughnuts. This year, we've expanded the prize to breakfast, lunch and a little entertainment.
Now, the prize is a dozen doughnuts, courtesy of the Port Huron Pastry Shop on Lapeer Road, and a large pizza with one item, courtesy of Casey's Pizza & Subs on Huron Avenue in Port Huron.
Full Quiver and More - located on Webb Road in Goodells - also is donating a round of open-shoot, which is good for any Wednesday, Saturday or Sunday, to the winner of every other week's contest.
If none of the readers beat my record, which happened a couple of times last season, the prize goes to the Jakacki family and my three hungry children, Liam, Cameron and Zoe. So you know I'm going to research my picks.
(Last year, I finished one game over .500.)
Entering the contest is easy. Just email your picks to rjakacki@gannett.com or leave them on my voicemail (810) 989-6266 before the opening kickoff of the first Sunday game.
I look forward to hearing from - and beating - you.
Fantasy help
Involved in fantasy football? Need a hand figuring out which players to put in your lineup?
We're here to help.
Every Thursday, starting this week, the Times Heraldwill give fantasy football advice offered by an area expert.
Port Huron's Tony Jacobs, who is a member in about 20 leagues - no, that's not a misprint, and yes, he still is married - will write a weekly column giving his insight from the fantasy perspective. He will tell readers who are the best players to put in their lineup, which players to sit and and which players are potential sleepers.
Jacobs also will answer whatever fantasy questions you have.
Contact Rick Jakacki at (810) 989-6266 or rjakacki@gannett.com
Copyright (c)2007 The Times Herald. All rights reserved.
Giants WR Burress returns to practice for first time since Aug. 2
ALBANY, N.Y. (AP) -New York Giants receiver Plaxico Burress practiced on Tuesday for the first time since spraining his right ankle on Aug. 2.
"He looked pretty good," coach Tom Coughlin said after the workout at the University at Albany. "It's good to have him on the field working with the quarterbacks, and I think he feels pretty good after practice."
Burress, who had 63 catches and a career-high 10 touchdowns last season, made a nice one-handed reception of Eli Manning's pass midway through the workout. He also showed good agility, catching another Manning pass and getting past cornerback Gerrick McPhearson with a quick cut and run.
Pro Bowl tight end Jeremy Shockey didn't practice because of tightness in his hamstring, and Coughlin didn't know when he would return to practice.
Second-year receiver Sinorice Moss is going to be sidelined until at least Thursday. He sprained an ankle last week and didn't play in the 13-12 win over Baltimore on Sunday.
Rookie Steve Smith returned to practice Tuesday despite suffering a concussion while catching the only touchdown pass Sunday. He was elbowed in the head on the play.
"I remember going to the sidelines and talking to the guys," said Smith, this year's second-round draft pick. "I remember the catch, but nothing after that. I don't remember how I got to the sidelines."
With starting cornerback Sam Madison sidelined with a hamstring injury, Corey Webster worked with the first team and top draft pick Aaron Pierce continued as the nickel back.
Seven-time Pro Bowl defensive end Michael Strahan is still deciding whether to play or retire after 14 seasons, his agent, Tony Agnone, said Tuesday in an e-mail.
Strahan has missed 26 days of camp. The NFL's single-season sack record holder is being fined $14,288 for each day missed. His total is now $371,488. AP NEWS
The Associated Press News Service
Copyright 2006-2007, The Associated Press, All Rights Reserved
Packers formally cut ties with executive Jones
MILWAUKEE (AP) -The Green Bay Packers cut ties with former executive John Jones on Friday and began their new search to replace longtime Packers leader Bob Harlan.
Jones is expected to receive a seven-figure financial settlement from the team, but officials said in a statement that the terms of his departure would remain confidential and no further comment would be made on his resignation.
In a statement, Jones said he was resigning because of health concerns - even though Packers executives cited vague "management concerns" that didn't seem to be health-related when Jones took a leave of absence from the team in May, just days before he was to take Harlan's place as the Packers' top executive.
Jones had open-heart surgery in June 2006, but had gradually returned to his duties as the Packers' No. 2 executive by the end of last season. Jones said he had an aortic dissection, a previously undetected rare birth defect of the heart.
"I am grateful that I survived," Jones said. "However, like many heart surgery patients, I have found that the residual effects of the surgeries have made it difficult to continue my current job."
Jones, whom Harlan hand-picked to groom as his successor in 1999, said he was proud of his accomplishments in Green Bay and said he appreciated that the Packers were "fair" to him in his departure.
"The Packers mean so very much to me, but my family means more," Jones said. "I need to put my health and continued recovery above everything else."
Packers executive committee chairman Peter Platten said that it "has become clear" that Jones' leave of absence was caused by his medical situation.
"Both John and the Packers wanted to take the necessary time to evaluate the appropriate course, and we appreciate the professionalism with which he has handled this matter," Platten said in a statement. "At no time have we questioned his integrity or character."
But concerns about Jones' health didn't seem to be on Harlan's mind in May, when he said that several Packers employees had come forward with concerns about Jones in recent months, both from the team's administrative and football staff.
"I had had some incidents myself with John, so I knew that a problem existed," Harlan said in May. "But I wanted the staff to let me know what its everyday workings were, and when those problems continued to exist, I thought it was time to go to the executive committee."
But if any such concern was reiterated on Friday, it wasn't in public.
"We thank John for all his contributions to the Green Bay Packers, and we wish him and his family well," Platten said. "We want to emphasize that John's departure from the Packers is a result of his medical situation. The team accepts his resignation with regret, understanding that family and health must come first. The Packers will always value John for his character, his integrity and his many accomplishments during his eight years of management leadership with the team."
AP NEWS
The Associated Press News Service
Copyright 2006-2007, The Associated Press, All Rights Reserved
Broncos sign fourth-round pick Thomas
DENVER (AP) -The Denver Broncos signed fourth-round draft pick Marcus Thomas on Wednesday to a deal that will pay him $3 million over four years.
The defensive tackle who had 14 sacks in 41 games for the University of Florida likely would have been selected much higher than 121st in the NFL draft in April were it not for the trouble he got into last year.
Thomas was suspended from the national champion Gators last season by coach Urban Meyer after failing two marijuana tests. He was reinstated but then kicked off the squad permanently in early November for violating curfew and drug rehab class provisions of a contract he signed to remain with the team.
"Marcus was hands down the best football player on our national championship team. He's definitely a top-10 pick in my eyes," said defensive end Jarvis Moss of Florida, whom the Broncos selected with the 17th overall pick in this year's draft.
The Dallas Cowboys had their eyes on Thomas when the Broncos moved up in the draft to select him, sending Minnesota their sixth- and seventh-round selections along with a third-rounder in 2008 to pick a player that coach Mike Shanahan agreed had first-round potential.
Thomas, 6-foot-3 and 296 pounds, has said he appreciates the Broncos giving him a second chance and will repay them by staying clean. On the day he was drafted, he said, "I feel like I'm already on 2.9 strikes. Anything else I'm out."
"I'm going to make a good story out of it. Happily ever after - that's what I'm going to try to do; (make a) Cinderella story out of it," he said. AP NEWS The Associated Press News Service Copyright 2006-2007, The Associated Press, All Rights Reserved
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