Wednesday, December 21, 2011

"Secrets of Professional Turf Betting"

Interesting observation from Speculative Investor, in reference to the book Secrets of Professional Turf Betting, regarding the analogues between investing and betting on horses:

The principle of only putting money at risk in cases where there is an attractive overlay applies perfectly to stock market speculation. An "overlay" in the stock market would, for example, occur if the stock of a company is dramatically under-valued based on the cash that it is currently generating or is likely to generate in the future (the market value assigned by the public is low compared to the company's intrinsic value).
Well said, and the analogy seems apt. The turf betting book looks like it would be good although it seems to be out of print.


Stagflationary Mark said...

I'm a believer in the horse race analogy idea. Check out one of the first posts on my blog (September 2007). It involves my experiences at the local horse track in the 1980s.

The "Sure" Thing

CP said...

Yes, that was a good post.

At least you know your algorithm worked!

Stagflationary Mark said...


It was definitely a good experience to have with small sums of money.

As a side note, I've made roughly 20x my money at Reno's casinos. I'm done.

How did I do this you might ask? I got lucky as a teenager.

My family was on vacation and we were staying at Circus Circus.

As we walked through the lobby I put a dime in a slot machine. It paid me $2.10.

The manager walked over to my dad and asked if I was old enough to be playing slot machines. My dad said I was.

The manager asked if I was planning to play any more. My dad said that I wasn't. The manager said, "Good."

My dad knew what he was asking, the manager knew my dad knew, and my dad knew he knew, lol.

Here's the funny part. I never did play any more. Hey, I'm up 20x ($2, lol). I'm done!

Seriously. I'm done. :)

Stagflationary Mark said...

One more thought.

Here's a universal truth from my experiences at the race track.

*NEVER* bet on the horse that everyone agrees is the worst horse in the race.

I think it paid about 10 cents on the dollar on average.

It was by far the worst bet you can make. That was true even after the jockey scandal. I can't say that it is true today, but I strongly suspect that it is.

I think there's a certain group of people who want to earn the most money possible in a race and therefore put it on the one with the highest payout if it wins. The odds are never even remotely good enough though.

My system had me betting on the 6th through 9th worst horses in the race in a 10 horse race (never the 10th worst horse though).

I remember one race in particular. One of the horses had a bit of a limp to it that even I could spot. I watched its odds of winning fall and it entered my supposed sweet spot. It made me a bit nervous. I didn't really want to bet on it. Its odds kept falling though and eventually it became the 10th worst horse. My system no longer wanted me to bet on it.

Needless to say, the horse did not win the race.

The "herd" of gamblers is not always wrong. Sometimes they just don't determine the odds that well though. That particular horse should have been a million to one based on what I was seeing. I think it would have taken every other horse keeling over from a heart attack in order for it to win.

And yet, somebody clearly bet on it. Wasted money.

Stagflationary Mark said...

Yet another thought.

When factoring in the track's take, the favorite to show wasn't actually all that bad of a bet.

Over the long-term, it gave you your money back if memory serves (which is far better than the typical gambler does at the race track).

I think it came down to this. People don't gamble for the excitement of seeing the favorite come in 3rd (winning 20 cents on a $2 bet is hardly a thrill).

Too much money went on the 2nd and 3rd best horses instead as an attempt to eek out a bit more profit. It didn't tend to work out that way though.

CP said...

AAPL is sort of like the favorite. The favorite usually wins. You just can't make any money betting on it.