Stock Market vs Sports Gambling >>

[SECprophet]

I agree with your earlier comments Raiders. Anyone who doesn't think there are at least "some" similarities between gambling (touts) & stock market (investment firms) obviously has never seen the movie "Boiler Room". Which, BTY, is a kick-ass movie that all should see!

I could go on and on about the Stock Market (SM) Vs Sports Gambling (SG) argument, but I would just like to make a few points:

Everyone here knows that sports gambling can be beat, period! Vegas will tell you the exact same thing. If it couldn’t be beat -in the long term- then why are any of us here? If this is true then why cant SG be an investment strategy just like the SM?

People do bet on sports for a living & some do quite well.

The Stock Market is volatile and is over-loaded with crooks and shysters. And for every degenerate gambler who has lost his paycheck, mortgage payment or kids college fund betting on Jim Feists' "lock of the millennium"...there are AT LEAST as many people who have lost there entire life’s savings on the SM from Merryl-Lynchs "insider Stock tip of the millennium". An extreme example, but you get the point.

There is no such thing as a lock in SG or in the SM. With recent major scandals from some of Americas top blue-chip companies (e.g. Enron, Xerox, 3M, Kmart, WorldCom, Tyco) investing (even in the 'surest of companies') is certainly a "gamble".

And all this talk of 'zero-sum' and 'accountability' issues. Do you think, for a second, that there are not people out there hyping stock for a company that has absolutely Zero-Value in actual real-world assets, as we speak? The recent boom of "dot com" investing is a great example. Four computer geeks start a company selling widgets on the internet, everyone thinks it will be the "next big thing" or a 'lock' as us gamblers call it), Mr. Dot Com goes public & raises 2 billion with its IPO, two months later theyre bankrupt. Someone got rich here, while many, MANY others got poor! Where’s the accountability and 'zero-sum' game in that? Money (just like all matter) can neither be destroyed nor created. And, yes, even in the stock market, somewhere, somehow, people are getting rich while others get poor.

Im sorry but there are many similarities between sports gambling and investing and the stock market. Since I do both (while certainly not an expert in either) I’ll gladly discuss this further with anyone interested.

GL!

__________________________________________________________________________

Don't sweat the petty stuff...pet the sweaty stuff!!

 

[altice]

Sec Prophet,

You should read a book called "When Genius Fails". It is a pretty cool book. It is about a group of quantitative traders who figured that they had the holy grail on investing bonds.
The hedge funds were filled with Nobel Prize winners and hotshot traders from Wall Street traders. Anyways, they lost their fortune. Funny thing is in the stock market when a fund makes money it is investing. When a fund blows out like the fund in When Genius failed, they were gambling with people's funds. I do think there is a higher percentage of people who make money in stocks than in sports, but maybe some people who do both could clarify it. Also, when a fund manager blows up, he can start a hedge fund under a new name, just like people like the Aces and Camelots off the world could start under a new name. One could also argue that gambling in Costa Rica is like investing in the market of a country which is not as easily regulated but offers greater rewards than say investing in the more regulated markets in England and Australia. i might be stretching on that one though. Good topic by the way.

 

[SECprophet]

Altice >>

Who’s the author? Ill have to check that book out.
I agree 100% with you: "I do think there is a higher percentage of people who make money in stocks than in sports…".

In the long-term I don't think that anyone would argue that 'investing' in the stock market is far less volatile than 'gambling' on a sporting event. The difference in the percentage of "winners" in the sm vs. sg, also might have to do with the "typical" investor in the two areas. I think it takes far more discipline to be an effective gambler. Most people that invest in the stock market, generally, have long-term goals in mind. Therefore they can withstand much of the ups and downs that the market brings them. The gambler has more of the prototypical "day-trader" mentality -- Immediate risks for immediate rewards--. Many of these people risk higher %'s of there allotted capital to invest in a much more volatile market (i.e. football game). This, of course, can be a recipe for disaster.
It’s been said a billion times, but fallen on so many deaf ears: "To make money in sports gambling, you must, MUST, use an effective money management strategy!" Many more SG's abandon that advice when they hear of a "lock of the year" than do, say, a seasoned stock investor. Believe me, I’ve learned (and had to relearn) the lesson: not to risk an insane amount of my bankroll on a single game, no matter how sure I am of the outcome. This is a very hard (if not impossible) lesson to learn for most sports gamblers.

Another factor in considering success rates between the two would have to be "education" and "income" levels. Lets face it: Most stock market investors are more educated and have a higher overall net worth. Therefore they are much less likely to take the high risks that a SG might. Ask yourself, "What’s the ultimate in high risk, high rewards gambling?" Answer: State Lotteries. And who plays state lotteries? The poor and uneducated. This is a fact. Of course, upper-middle class Americans buy lottery tickets, but they have no real expectations of that ticket changing their lives. The lower-income Americans (who overwhelming spend more (% wise) of their total income on lotteries) DO think that way. The poor and ignorant DO go to their local convenient stores and DO spend 1/3 of their paycheck on lottery tickets. Wealthy people, of course, do not.

The problem with much of the arguments I’ve read in here are using the 'lottery mentality' to base their arguments against sports gambling, and this is simply not the case! In the eight or so years Ive been gambling seriously and in the five or six years I’ve had my Ameritrade account, ive certainly had a lot of successes and a some considerable failures. Is one system "better" than the other?...I haven't come to a conclusion yet. I’m still young & new at this. But when I hear this statement: "If you were a great handicapper who could pick 55% winners in the long run, then why would you need to sell your picks?" I have to laugh and say “see above” ^^^

In a word.... STABILITY. Me starting a "tout" service has nothing to do with the fact that Im trying to support a bad gambling habit, or swindling suckers...It has to do with the fact that I love the action. I love the industry. And I love the game. I know that there is instability in both the stock market and in gambling. So I would like to do something in the industry that I love that isn’t so volatile. A beneficial service that I can offer to the community and at the same time help stabilize my income. I will have losing days, weeks, months and in some extreme cases... years. I know that in the long run, that with hard work and dedication (the same that Ive put into it for close 10 years) I will come out ahead in the long run. As will those "investors" that make up our "clientele".

GL!

__________________________________________________________________________

Don't sweat the petty stuff...pet the sweaty stuff!!

 

[altice]

The author is Roger Lowenstein. I would also say there are more checks in investing. While there are syndicates, I would say a far higher percentage of investments, people are working for other people. So they might not be able to make a trade without clearing it through several people where I think a great deal of sports gamblers don't have the kind of checks. Could you imagine every time you bet on a game you had to explain someone the reasoning of your play to someone you cannot stand? And yes, the typical sports bettor doesn't think long term. Also anticipating the public psychology helps. I don't profess to understand what the big movers in the sports gambling world do, but in both you have big shots with huge bankrolls who can manipulate the markets for profit.

 

[lakerfan]

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR> In a word.... STABILITY. Me starting a "tout" service has nothing to do with the fact that Im trying to support a bad gambling habit, or swindling suckers...It has to do with the fact that I love the action. I love the industry. And I love the game. I know that there is instability in both the stock market and in gambling. So I would like to do something in the industry that I love that isn’t so volatile. A beneficial service that I can offer to the community and at the same time help stabilize my income. I will have losing days, weeks, months and in some extreme cases... years. I know that in the long run, that with hard work and dedication (the same that Ive put into it for close 10 years) I will come out ahead in the long run. As will those "investors" that make up our "clientele".
<HR></BLOCKQUOTE>

Great post. I have freely admitted that because I play so many different sports I use some "touts". I could post for days on reasons that some touts aren't crap, but I think your statement is where a lot of the people I use are coming from. They are good handicappers and they want to make a large part of their income from this industry which they enjoy so they diversify by betting their picks and selling their knowledge.

This is a new generation of "touts" who don't come from boiler room, telemarketing scam, and various cons background, but come from a handicapping background. The web has allowed some of them to get clients when in the past only the previous generation of LOUD TOUTS could.

Excellent post.

altice - I have done seaches on Amazon, the web, and even called my book dealer about When Genius Fails. I remember reading a book like this, but could the title be different? I also would be interested in reading it.

 

[lakerfan]

Cross posted. Sorry. Just after I posted, I found it.

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
Random House, September 2000, 264 pages

 

[altice]

Lakerfan

Here is the book. When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
Random House, September 2000, 264 pages

I am not overly experienced with the market, but the thing I could not believe about this book was it was true. Reminisces of a Stock Operator is another great book. If you have any recommendations, please let me know.

 

[lakerfan]

altice,

I am no expert in the market. I have had a couple of sucessful strategies based on friends in the industry, but as a rule I invest in index funds. SP 500 and foreign index funds are where most of my money in the market is.

One books I enjoyed reading on a financial related topic was

DEN OF THIEVES by James B. Stewart

Not a new book but covers one of the bigger periods of craziness and fraud in the 80s incluging inside trading incidents and junk bonds. Includes the interesting characters Boesky and Milken among many others. Well written and interesting book.

 

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by SECprophet:
I agree with your earlier comments Raiders. Anyone who doesn't think there are at least "some" similarities between gambling (touts) & stock market (investment firms) obviously has never seen the movie "Boiler Room"<HR></BLOCKQUOTE>

Prophet:

The movie "Boiler Room" deals with scums selling stock on companies that don't even exist. So it's hardly a comparrison to the stocks listed on the DOW JONES.

Nonetheless there will always be people working above the law.

Unfortunately there will always be the existence of the ENRON'S and the likes of Michael Milken.

For arguments sake lets compare a Investment Advisor to a TOUT.

If you decide to Invest 10K In the market, you are able to meet face to face with the advisor, to discuss your risk tolerance level, long term goals etc.

When you deal with a TOUT, you never see him face to face, he Is always under a alias, working behind a fake numbered company and a 900#.

If your Investment advisor rips you off, you can always report him to the proper authorities. Hence it's a regulated Industry.

If your TOUT rips you off, you are basically shit out of luck. Where will you repoart a Scamming TOUT?.

 

[FunkSoulBrother]

SECprophet? Is that the SouthEastern Conference, or the Securities and Exchange Commission?

 

this might be a little off topic.

this is how me and my partner ran are service.

first off if you where not at least playing a nickel. we were not interested.

pay after you win subtracting juice first

we get you up 3000 we get 500.

anyone that was in it to make money paid off the rest were just cut off with their gift.

from that point on we get 20% of the winnings on a monthly basis

imo anyone that asks for money up front is a fraud

good luck

panther

 

[SECprophet]

Laker >>>

Its nice to see someone who will honestly admit to having used a service and not completely bash them for a losing week or two. I know the stories of the telemarketing 'handicappers' who are 99% marketing and 1% handicappers (and thats being generous). But I agree, the internet will (or has) revolutionize(d) the industry. With monitoring sites becoming more common place and word of mouth from great information sites like this one, eventually the cream will rise. While it seems that the worst offenders in the 'tout' industry seem to have the loudest voices... eventually people will see that there is a "new generation" of services and the industry will take a turn for the better.

Vegas >>>

When I started this thread I had just read this post by Journeyman about working for telemarketing scamdi-cappers. Read it here:. An interesting read.

When I read the aricle I immediately pictured a scene from "Boiler Room" You have to admit they do seem hauntingly similar. So I was going to compare these "touts" to their high-pressure stock-hawking counterparts. My post took a decidely different direction in the end. No, Im not comparing the movie "Boiler Room" to the "DOW Jones". I hope thats not what you took from it.

FSB >>>>

LMAO

I think it stands for South Eastern...but the way the conference has been treating me this CBB season im not really sure I want it to be!

GL fellas!

__________________________________________________________________________

Don't sweat the petty stuff...pet the sweaty stuff!!

 

[ATX]

Altice,

I believe you are referring to the group who engineered the algorithm to beat options. They did very well for 2 years, I believe, and really cleaned up. What they failed to realize was that they soon were causing such massive money movements that the logic behind their moves actually caved in on itself, taking away any value that the algorithm once had. Somewhat of an example would be moving a pointspread by 7 points, but continuing to hit it even more after the value is obviously gone. I forgot the name of the guy that headed the group, but they had close to 10 "wise-guys" that all were experts in different financial fields. Am I referring to the same group?

Vegas,

"the proper authorities" dont do a DAMN THING! They will make an example out of someone from time to time, but those people have already made so much that the attorneys they get will usually get them a sentence of less than 7 years so they are out in less than 2. Look at the fallout from Enron and Global Crossing. I'm sure you realize how many lives were ruined by those two companies, and how much money the crooks made off with. The punishment meted out doesnt come close to atoning for the crime. Very few people are ever caught, even fewer are prosecuted. It's simply mind boggling how much money some of these people make off with.

 

[altice]

ATX,

Yes, you are referring to the same group. The name was John Merriweather who was featured in Liars Poker and the Nobel Laureates were Merton and another guy whose name escapes me. They built up a ton for like four years and lost it in two months almost and it hurt the stock market and might have stopped the bull in its tracks. There is another book that was written that contains more technical, but probably a lot tougher read for me as I am fairly inexperienced. If you want the name, I can post the book. What is funny relative to your point was most in the media blamed the stock market's woes on the Clinton-Lewinsky scandal that was taking place simultaneously even though it was Long Term Capital and how bad the investment banks would hurt if the firm went bankrupt which was really hurting the market which supports your point that the spin that the media puts on things is quite powerful.

 

[SECprophet]

ORIGINALLY POSTED BY ATX

<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>"My point Is that there Is a major difference In stock market Investing and selling phucking "SPORTS PICKS"."

Actually not a whole lot. Both financial advisors and touts dont really sell a tangible item, just opinions. If you own a stock you dont really own anything but an expectation, similar to sports. There are arguments both ways, but for simplicity's sake I am referring to a share of a failed company. Supposedly it WAS worth something, but was it REALLY? Depends on opinions, the reason it's actually called speculation. Oh sure, the company usually exists and there are items of value such as the office building itself etc. but same with a sports team. If a pro team played in an unheated high school gym on Tuesdays would it have an effect on the spread/market price? Companies with motivated employees generally produce a better product and have a higher stock price, same with sports teams. There are thousands upon thousands more corrupt financial advisors, accountants etc selling bogus investment strategies and cheating clients than there are touts giving out both sides. I guess my point is that if you wager recreationally then you dont take anything in this industry as seriously as someone who views this as a highly profitable market worthy of actual risk. So most touts are viewed simply as scumbags. But on the flip side, I have seen a lot of the corruption in the stock market first hand, so I play that market only a bit more than recreationally and I view a lot of financial advisors as criminals. The thinking is different. I just like to put trust in myself and limit as many intangibles coming from other people as possible. I know it will sound strange by saying that I have more control over a sports team's performance than a stock, but think about it. There are fewer wheels in the sports market, you know who all the players are, there is pretty accurate information posted each day about them, whereas in the stock market???? Noone can investigate all of a company's vital employees to see who is working or what agendas they have. There is so much going on behind the scenes that only key players know about. Many studies have been done showing that throwing a dart at the stock page and investing in the random stocks that the dart hits will consistently outperform the top advisors. There hasnt been an algorithm engineered that can consistently predict stock value without affecting the market in such a way that the algorithm itself has the effect of reducing value. In the sports market many people have.
<HR></BLOCKQUOTE>

I thought this fit in nicely with this thread.

 

[mjred]

borrowed from one of dem wall street rags
------------------------------------------------------------------
AFTER 14 YEARS AND HUNDREDS of attempts to pick winning stocks, Wall Street Journal staffers are putting away their darts.

The darts had a good run, even if they didn't often win. More than 200 investment professionals good-naturedly pitted their stock-picking skills against the results of a portfolio assembled by throwing darts at the stock tables, as well as the performance of the Dow Jones Industrial Average. But the contest is now going to be retired.

It was all a light-hearted test of the efficient market theory. That theory, popularized by Princeton University economics professor Burton Malkiel in his 1973 book, "A Random Walk Down Wall Street," holds that since all available information is quickly factored into stock prices, all stocks present equal chances for gains.

"Taken to its logical extreme," Dr. Malkiel wrote, the theory "means that a blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts."

The Wall Street Journal never used monkeys, and the dart throwers weren't blindfolded -- too risky, perhaps -- as they threw the darts at stock tables posted on our office walls. But in the end, after 142 six-month contests, the pros came out ahead, racking up an average 10.2% investment gain. The darts managed just a 3.5% six-month gain, on average, over the same period, while the Dow industrials posted an average rise of 5.6%.

The pros also outperformed Wall Street Journal readers , who were invited to join the fray in 1999, although Journal readers narrowly beat the pros in the contest just ended.

Journal readers , whose picks were selected from e-mail submissions to The Wall Street Journal Online, have posted an average 4% loss over 30 six-month contests. That compares with a 7.2% average gain for the pros and average declines of less than 1% for the darts and the industrial average over the same period. But in the latest contest , readers chalked up a whopping 39.1% average gain in the period from Oct. 17, 2001, through March 28, 2002, narrowly beating the 38% average gain for four pros. The darts lost an average 17.8%, while the industrials rose 12.7% during the same period.

The readers ' big winner in the latest contest , the selection of C. Brooks Hoffman, a commercial lender in the Boston office of Comerica Bank, was Ariad Pharmaceuticals Inc., a Cambridge, Mass., biotechnology company that soared 80.3% during the October through March period. But a pro pick did even better. Daniel G. Bandi's selection of Ucar International Inc., a Nashville, Tenn., company that produces graphite electrodes used in making steel and aluminum, surged 84.4%. Mr. Bandi is portfolio manager of Armada Small-Cap Value Fund in Cleveland.

What do 14 years of throwing darts prove? Not much, says the man who inspired the competition. Dr. Malkiel, who gamely threw the first dart when the competition began in October 1988, said from the outset that this contest wasn't a fair test of the efficient market theory. The reasons, he maintains, are the small number of stocks involved in the contest and the fact that the "publicity effect" of an article in The Wall Street Journal might make the stocks selected perform better than others, at least temporarily.

"The darts were a nice metaphor, but four darts were not what I recommended," Dr. Malkiel explains. The idea of the efficient market theory, he adds, is to buy a broad cross-section of stocks.

He also says that the pros tend to pick stocks that are riskier, and thus rise faster when the market is going up, as it was for most of the 14 years of the competition. Still, he says, the contest "was fun."

The Wall Street Journal isn't declaring a winner. Indeed, the decision to wind down the Investment Dartboard competition has nothing to do with the results. "The Dartboard feature has been an entertaining way for readers to learn about picking stocks, and about broader market theories, too," said Lawrence Ingrassia, Money & Investing editor of the Journal. "But 14 years is a long time for any newspaper feature. Retiring the Dartboard will free more resources to satisfy our readers ' growing appetite for a range of vital financial stories -- not just about stocks and bonds, but corporate finance, mergers and acquisitions, banking, accounting and mutual funds, as well as the names and faces behind the news."

The Dow Jones Industrial Average stood at about 2100 when the competition began in 1988, with publication of the Money & Investing section as a separate, third section of the Journal. It started as a one-month contest , with four investment professionals and four dart throwers each picking one stock and the Dow industrials as the benchmark. In part because of the possible publicity effect, the contest was extended to six months in 1990. For years, there was a waiting list for investment professionals who wanted to participate, although interest has tapered off as the market has been beaten down in the past couple of years, and picking winners has become tougher even for pros.

In the contest , the starting price was the price at 4 p.m. Eastern time the day before publication and the contest ended on the last trading day of the sixth month. Under the most-current rules, the minimum market capitalization was $50 million and the minimum price was $2 a share. Average daily trading volume had to be at least $100,000.

Some of the biggest winners later took the biggest falls. The pros' all-time top performer was Quarterdeck Systems, a computer-software company that soared 244% to $11.625 in the first six months of 1995. By the fall of 1998, it was trading at 37.5 cents and in 1999 it was acquired by Symantec Corp. for $65 million.

The pros are ahead of the darts and the DJIA when wins and losses in the 142 contests since 1990 are tallied. The score is 87 to 55 when the pros are compared with the darts and 76 to 66 in favor of the pros against the Dow industrials. The five contests still in progress will continue to the end. Results will be reported at the conclusion of each contest , at the end of each month, both in print editions and in The Wall Street Journal Online.

Results of the 14-year competition haven't changed the opinion of at least one well-known investor. "I have no intention of abandoning my personal investments in index funds," says John C. Bogle, founder of Vanguard Group and a longtime advocate of index-fund investing. The pros' "gains are short-term," trading costs aren't reflected in the results and "tax-efficiency is horrendous," he adds.

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the last quote from john bogle really draws the comparison to sports touts quite well. their gains are also usually short term and the trading costs (vig and the cost of their services) are often not factored in.

imo the comparison between stock touters and sports touters is a pretty good analogy even if the analogy of the 2 markets is less so. personally in the past 2 years i have lost nearly as much in the stock market as i won in the sports market and that number is in the mid 5 figures. go figure.

 

[ATX]

I didnt have time to re-read everything written in this thread before I posted this link, but this may fit. Looks like somebody else sees things similarly to the way that I do (they are slightly misinformed- they should use Donbest instead of jimfeist.com)

http://faculty-gsb.stanford.edu/wolfers/POLECON527/documents/0.%20Syllabus/P527%20Sports%20betting%20syllabus%202002.htm

I am curious as to how good this class would be. Does anyone know someone who has taken it? This syllabus seems to concentrate more on the market as a whole, I dont see any quality time spent on TEAM TENDENCIES or HALFTIME LINES- two of the better angles, IMO. But I would LOVE to investigate the PSYCHOLOGICAL aspects of the market, esp. in-depth at the collegiate level.

 

[SECprophet]

Now this thread is a blast from the past...

"Finance, Behavioral Economics, and Sports Betting"
Damn, I knew I should of went to Stanford

Suggested sites for students to visit:

www.sportsbook.com: A large Caribbean bookmaker catering to US clients
www.willhill.com: One of Britain’s largest bookmakers
www.centerbet.com: One of Australia’s largest bookmakers
www.betfair.com: A rather unique two-sided betting forum. No bookmaker is involved; rather the site matches those wanting to wager for a team with those wanting to wager against. This firm was started by a GSB alum.
www.biz.uiowa.edu/iem/: Iowa electronic stock market: Betting on elections: A so-called “electronic stock market”, allowing one to bet on elections, Federal Reserve policy, movie releases and a range of other events.
www.wsex.com: World sports exchange: Includes sports futures markets.
www.jimfeist.com: Shows current betting information at a dozen leading books. Click on “betting lines” to compare odds across several books.

...and not ONE single mention of the RX in the entire syllabus...lol.


Someone should email the prof and ask if he could share some of his findings with us. Help out some of us degenerates...


gl

 

[lakerfan]

I have emailed this prof in the past. Very nice guy; he even took the time to send me the scan of an entire book that I needed but that I was not able to get my hands on as it was out of print.

Sport betting markets without a doubt can be used to consider economic principles. His class is less about beating the books (although it is obvious some of the excercises are aimed at that) and more about understanding the sports betting market.

Would be fun class to take, but one would have to first get into the Stanford MBA program which is no easy task.

 

[ATX]

Lakerfan,

Which book is out of print?
I think this class would be interesting from the psychological standpoint- one of my theories is that the sports market is beatable because of the psychological profile of those who invest in this market, there are many, many recreational players (who "invest" based on macho opinion/NCAA team support etc. as opposed to using solid numbers and the multitude of other angles that are present). And the line itself can lead many into a "trap" (historically negative expectation bet). It also seems certain numbers (lines) actually generate one-sided business independent of the two teams, I dont have a solid sample size yet, but things are looking that way. Time for happy hour, more on this later.