The System

I have been a pretty big sports better most of my life. Most of the time, I analyze the match-ups, and come to a solid decision on what side to bet based on my sports knowledge. I have also employed betting "systems" in the past. One of the betting systems that I used in the past was for baseball, and it worked really well. I have not used this system in about 15 years, but I see no reason why it would not continue to work. Since IMO the system continues to work, yet I have not chosen to use it in a long time I have no problem revealing it here in detail, for someone who wants to take advantage of it. The system is basically an arbitrage system that takes advantage of the fact that Baseball is thinly bet compared to other sports, and has a very low house edge. The edge from arbitrage can easily out way the house edge, and lead to long term profits for the user of the system. Once you have convinced yourself statistically that the system works, you can ramp up the amounts you are betting and make some significant money on it. When I was last using the system I was betting between 2k to 5k a day as an unemployed UNLV student.

Baseball Betting

There are three main ways to bet on baseball. There is the money line which is a bet on who will win the game. There is the over/under line on what the total combined score will be. There is also a line called the "Run Line" which is a line with the favorite -1/2 run (The favorite to win by 2 runs or more). The system exploits the information from the over/under to find arbitrage opportunities between the Run Line and the Money Line. Arbitrage is simply a way of exploiting inefficient markets. The baseball betting market is inefficient because it is thinly traded. An example of arbitrage would be buying goods in the United States, transporting them to Europe and reselling at higher European prices. If the market is inefficient allowing for price disparity between two markets, and the cost of transport is less than the price disparity, guaranteed profits can be made. Guaranteed profits can be made betting baseball using arbitrage.

The System

So lets take a hypothetical game like the Yankees vs. the Red Sox. Lets say that Beckett is pitching for Boston and Boston is the favorite. The money line might be -145 (bet $145 to win $100) for Boston, and +140 (bet $100 to win $140) for the New York. If the house can get equal money laid on both sides they make a small profit by taking in $145 for every $140 that they pay out. The run line for this same game would be something like -145 for N.Y., and +140 for Boston. While Boston is favored to win the game outright, they are not favored to win the game by two or more runs. In this case, they are the underdog on the run line. Lets also say that the over under for this game is 10 runs. In nearly all cases the favorite on the money line is the dog on the run line unless they are huge favorites. The system is based on the fact that Boston will not win this game by exactly one run more than one in five times. I take $100 and bet it on Boston to win the game (money line), and $100 and bet it on N.Y. to either win the game, or lose by less than one run (run line). So I am betting $200 and will get back $240 if Boston does not win by exactly one run. As long as this happens less that one in five times I will collect $200 in profit before I lose both sides, and lose $200. I am looking for an average win of at least $40 in this case, so you shop sports books for lines like this. You also shop multiple sports books to find the best possible lines for each side. Because baseball is thinly bet, the lines are often different at different sports books. You identify the games you are interested in, and find the best lines to make your bets against. A lot of the time you will be able to do better than a $40 average win on a $200 in total bets if you shop around, but that is the minimum acceptable amount.

Before I started the using the system, I studied it against past games for several months to verify that it worked. What I found is that it works for American League games and was close to break even for National League games. Rockies home games were an exception to the rule for the National league. I also looked at the correlation between the over/under line, and the success of the system. I found that the higher the over/under on the games selected, the more successful and profitable the system is. All of this makes perfect sense. High scoring American League games are less likely to be decided by one run, while low scoring National league games, where they like to manufacture runs, are more likely to be one run affairs. So you can use the over/under line as a first screen to select American League games, and then make sure you can earn at least $40 on average based on a $200 successful bet. The higher the over/under, and the higher you can make on average per success helps to increase your profitability. In practice I like to use the system on about 5 games each day. That way you either made a nice chunk of change if everything works out, or you will break even if one of the five games is a one run game won by the favorite. The disaster scenario is losing two of the games, but I think that was so rare it only happened to me once or twice as long as I used it.

You will end up making huge bets with the system, and winning smaller amounts, but that is fine. You will be a high volume player, so you may be able to get rakeback or deposit bonuses at online sportsbooks while using the system. Back before the UIGEA when I was sports book bonus whoring it was not baseball season, so I was using football. This system would have cleared bonus requirements faster than you could blink, so there is some additional money to made there as well. Another great thing about this system, is it is purely analytic. You don't need to know anything about baseball to profit from it. Let me know if you have any questions or plan on trying it out.

Vegas Trip Report

I'm back from a quick trip to Vegas over the weekend. It was a interesting weekend that went something like this. I rolled into town Friday night, and headed over to the Rio. I found Dr. Pauly in the press area, and we had a nice chat about Fantasy Sports Live's plans for the next year including a new and improved Sunday's with Dr. Pauly coming this September. I also asked him about his 30 day break from the WSOP to travel the country following a concert tour. To me a nice break from the grind of the WSOP would be several weeks in Maui, vs. a travel heavy concert fest, but to each his own. I like Pauly's idea of coming back fresh for the 50k horse and Main Event, vs being burned out by the time the biggies roll around. I don't know how some of the bloggers can get through the grind of an ever longer WSOP schedule. I watched a bit of the 50k HORSE which is always cool because the field is small and the tables are star-studded. Phil Helmuth was not in the HORSE event, as he was still playing in an earlier event that was down to the last few tables. After that I headed over to Slots-a-Fun for a quick $3 craps session and off to the MGM for poker.

I put my name on the list, and was looking around the poker room, when I noticed Hoyazo, Chad and CK playing at a $1/$2 NL Holdem table. I asked to get moved over there, and after about 20 minutes I was seated. Hoy said the table was tight and they could use me to liven up the action a bit, lol. I played a pretty long session with them, and watched Chad put on his usual cash game clinic, and CK accumulate over 1k in chips. I was horribly card dead, and did not get my first pot until about three hours into the session. A couple interesting plays from Chad were as follows. Someone opened to $13 preflop and there were a couple of callers, so Chad raised to $152. I said something like "Don't you think that is a bit excessive?". It folded around until a guy with QTo stated he wanted to gamble and made the call. Chad's JJ held up. There was also this really young looking guy who thought he was some sort of poker genius. Chad and him were going at it constantly. At one point he opened to $17 preflop, and I said "that's one dollar for every year he is old." Chad called with a low suited 5 gapper, and after hitting the flop slightly took down a massive pot from the child prodigy. I love watching Chad play cash, because he plays pretty much exactly opposite of how I play, and still has success.  I was folding away with bad cards and not catching any flops as well. At one point, I had K9o and had limped from a blind in a four way pot. It checked through to the river, and I had nothing, but took a $5 stab at the small pot. I don't mind taking down the orphan pot, but I also don't mind getting called down for image purposes. As tight as I play preflop, I like to get caught bluffing once and a while so that people will think I am a bluffer in the back of their minds. Hoy made the call and dragged the pot with a 3 for bottom pair. I said "you better not make a play like that tomorrow (in the WSOP)". Eventually, I would win my first pot with a Jack high hand, and then shortly later, I would call a $13 open in a four way pot with KQo, and spike two kings on the flop. Hoy would stab at the flop, and I called. On the turn Hoy check folded to my bet. It was getting close to three in the AM at this point, and Hoy, CK, and Chad called it a night. The table got much easier immediately so I hung around for a while. Sometime after 4 AM I packed it up myself, and quit a 5 hour + session where I won just two pots and was down $150.

I slept in till about 1PM the next day, and got back the the MGM shortly after 3PM for another session. It was another card dead nightmare. Two hours into another session, and I had not won a pot yet. I had not seen a single hand like AK, AQ, AA, KK, QQ, or JJ in over eight hours of poker. It really starts to wear on you after a while, and I was even starting to make some bad plays which is not acceptable. I ran into Russ Fox and Weak Player who were at the MGM for the Clapton concert that night. Later on Chad would show up, and commented that I looked depressed. I pretty much was. I came out to Vegas to play a bunch of live poker, and was simply getting crushed. In this session, I finally started to catch some middle pairs like JJ, TT, and 99. I would raise preflop, and get a bunch of callers. The flop would come with one over, and it would check to me. I would stab at the pot and get pushed off by an immediate reraise. Basically, the medium pairs were just accelerating my losses. Eventually, I would just get up to clear my head after a three hour+ session with just a single small pot won and loss of $190. I knew things would turn around eventually, but I was not in the right mental state. I split the MGM and headed over to the RIO were I ran into Mr. Al Can't Hang. We talked for a while in the press booth, and then I headed over to a Final Table with Lee Watkinson.

I then headed over to Casino Royal for a $3 Craps session, and ended up back at the MGM around midnight. I could not find any bloggers (Hoy was off making a big score at the Venetian), so I sat down for some more $1/$2 NL and started running like a God. Second orbit I picked up KK and dragged a $320 pot. I would also pick up AA, QQ (2x), and AK (2x) during the session, and run my $200 buy-in up to about $530 over 3 1/2 hours. The session would come close to squaring my losses from the previous two horrible sessions. I called it a night. Sunday morning, I was feeling a bit burned out and decided to head home earlier than planned.

Fed Can't Have It Both Ways

The Fed just completed their recent meeting with a statement that they are seeing signs of the economy improving, and are going to leave overnight rates at 0%-0.25% for the indefinite future. On one hand they are saying the economy is improving. On the other hand they are saying the economy is crap because they need to keep rates at historic lows for an extended period of time. Many people do not understand how fiscal policy works, but the Fed. should. When the Fed. adjusts their rates there is a 9-12 month lag before the rate change takes full effect in the economy. Because of this huge lag, the Fed. needs to stay ahead of the curve, and try to anticipate where the economy will be in a year. Keeping rates too low in a recovering economy leads to inflation, and was a big cause of the current financial crisis. Had the Fed. kept rates higher prior to 2008, it would have helped to prevent, and/or deflate the housing bubble. It would have been harder for people to qualify for even the sub-prime type loans if rates were higher, and if less sub-prime loans were made, the housing bubble would have been less severe. The Fed. was essentially enabling the housing bubble through fiscal policy. If the Fed. really thought the economy would be recovering in the next 12 months, they would need to start moving rates up now. How about just moving the rate to 0.25%, instead of a range that includes borrowing money for free? The fact is that there are no green shoots, and the Fed. is well aware that Obama's policies, if enacted, will crush the economy for many years to come. They want to be a team player so they are talking the economy up, but their interest rate policy speaks for itself. Holding rates at historic lows for an indefinite amount of time, means that in their opinion, the economy will not be improving for an indefinite amount of time plus 9 to 12 months.

Last Minute Vegas Run

It does not appear that there will be an organized blogger gathering this summer. That's no reason for me to not make a Vegas run though, is it? I got a bit of business to attend to, and the WSOP is a great place to promote Fantasy Sports Live, so I am going to pack up and head out this weekend. My only plans are to spend some time in the Amazon Room promoting FSL and meeting with some of the bloggers reporting on the event. Also, I am going to play as much live poker as possible (probably at MGM). I don't believe there are any organized blogger events Friday-Sunday, so I am going to play it by ear I guess. I don't plan on playing in the WSOP, but that could change if I go on a heater Friday night. Good luck me.

Too Big To Fail

Nothing makes me cringe more than when I hear the words "too big to fail". Too big to fail is a new and horrible concept. It basically says that there are certain companies that pose systemic risk to the United States economy if they were to fail and file for bankruptcy. Obama's new regulatory plan addresses companies that are too big to fail by regulating them in new ways, while leaving out new regulations for Fannie Mae and Freddy Mack. The new regulations also fail to address the fact that the FHA has become the new sub-prime lender of choice with 3.5% down loans to people with poor credit in a crashing housing market. I guess we never learn a thing do we?

I have a better idea about how to deal with companies that are "too big to fail". The answer is not regulating them. The answer is not letting them exist. Why does America need companies that are too big to fail anyway? What purpose do they serve to us? We should have been thinking about this one a while ago when we let them merge into the size they are now. So rather than regulating them, I say we figure out what companies are already to big to fail and break them into smaller fail-able pieces, and stop letting companies merge into massive too big to fail size. I would say that AIG, Fannie, Freddy, Citi and B of A are in the too big to fail camp and need to be dealt with sooner rather than later. So how about just taking care those five, and then saying that the United States will never bail out a company of any size again, so don't come asking. Capitalism requires that weak companies can fail so that their workers and assets can be recycled by better and stronger companies. This way the overall economy grows as productivity is increased. Artificially keeping failing companies alive can only lower productivity, because resources are not being allocated properly. To grow the economy companies must be allowed to fail big or small. All this government intervention disguised as helping the economy can only do harm.

This all gets down the the flawed notion of growth through acquisition. Small companies usually can grow fine on there own. Medium sized companies can grow on their own, and can also pick up some efficiencies through acquisitions. For fortune 500 companies it starts to get pretty hard to grow at any kind of pace on your own due to their sheer size. So to satisfy the board and stock holders many try to continue to grow for the sake of growth and go out and buy more and more companies that are less and less a good or productive match. The CFOs love this because it allows them to cook up the books during the acquisition period and during the wind down period later on (when the acquisition officially fails), smoothing out earning as required. The ability to take liberties with your financial statements has got to be one of the main reasons big public companies continue to acquire. I do not think that it is a highly profitable or efficient thing for a company to become massive for the sake of being massive, so lets just stop that notion now. Not in America. Stop approving mergers for companies that are trying to become to big to fail, and the problem is solved and capitalism can do its work.

Economy Much Worse Than What Is Being Reported

Lets face some facts here.  The government loves to manipulate economic data to serve their own purposes.  According to the government GDP was down about 6% in Q4 2009 and Q1 2009.  Q2 2009 numbers have not been released yet (quarter is not over).  I started thinking about ways to estimate GDP without relying on bogus government numbers, and also get more granularity than a quarterly report.  It turns out that you can easily back your way into GDP by using Hauser's Law.

Hauser proposed a law that total U.S. Federal tax revenues hold constant at about 19.5% of GDP based on the above chart.  The law was proposed about 15 years ago, and most economists did not believe it could be true.  It has continued to hold since that time even though individual income tax rates have varied wildly.  It basically proves that you can't soak the rich with higher taxes as a way to increase tax revenues.  Unfortunately, the concept of soaking the rich to pay for new expansions of social programs is the key to Obama's plans.  This law will need to be broken for Obama to succeed and it has held for 60 years now.  It is actually pretty easy to explain.  If you raise taxes on the rich for example, GDP will contract as a result of the higher taxes, and you end up getting a larger percentage of a smaller pie for a wash.  The reduction of the top bracket from 90% to 70% in the 60s did not hurt tax revenue at all as a percentage of GDP.  When Reagan reduced it again from 70% to 50%, again no reduction.  Even the Bush tax cuts to address the economy after 9/11 did not reduce revenue as a percentage of GDP.   Since Federal tax revenue is a fixed percentage of GDP, the only way to increase it is to grow the economy.  Tax cuts can grow the economy, and as a result increase Federal tax revenues.  Tax increases, shrink the economy, and as a result lower federal tax revenues.  If Obama really wanted more money for the government to spend he should be looking at tax cuts to grow the economy, vs. tax increases that have never worked in the last 60 years.

So if Hauser's law continues to hold today, which I am assuming it does, then changes in tax revenues are directly proportional to the underlying GDP growth.  You can simply look at monthly tax revenues and back your way into GDP.  Below is a scary chart showing 12 month percentage change in monthly Federal Tax Receipts.

As you can see Federal Tax Revenues have fallen off a cliff in 2009, and if Hauser's law is holding the GDP growth chart would look identical to the chart above.  Through the first 5 months of 2009, tax revenues are down 22.7% indicating a GDP contraction of 22.7% which is much higher than the 6% number that is reported.  A contraction of this size puts us easily in the area of a depression.  I used a three month rolling average to pinpoint the start of the depression at February 2008.  The contraction has accelerated in Q2 to twice the level of Q1. Even the Governments bogus numbers should show a GDP contraction of at least 10% in Q2 when reported in July.  This is a massive acceleration of the economic decline.  There are no "Green Shoots" and the economy is not getting worse less fast as reported.  The downturn is accelerating in Q2 2009, and when the stock market gets wind of this, watch out.  

Since Obama's entire economic plan is based on a false premise, the damage can't be undone, unless there is a radical change in policies towards promoting  economic growth.  I doubt that will happen, so we will be waiting until 2012 to start undoing the damage to our economy caused by the Obama administration.

RIP GameDayDraft and FantasySportsExchange

Two more FantasySportsLive.com competitors have disappeared recently. Game Day Draft which was the first site to launch under the UIGEA exemption no longer exists. They launched with a confusing web site and a strange pick from player pools structure. They were also located off-shore in Costa Rica which seems a bit shady for a "legal" fantasy sports site.  They tried to reinvent themselves by copying our contest lobby, but their site continued to be a confusing mess, and they have finally thrown in the towel.  RIP Game Day Draft.

Fantasy Sports Exchange was a sister site to the large offshore sports book World Sports Exchange. They launched about 5 months after us, and clearly used our site as a basis for building their daily fantasy sports site.  They threw a ton of money at the software and did a pretty good job with it.  I told our partners after they launched that our site would look and function very similar to theirs if we had an unlimited software budget.  Their draft interface was more advanced than ours at launch, and we copied some of the things that they did to get to where we are now with FSL's draft interface.  Since I can't win prizes at Fantasy Sports Live, I have had my eyes out for a similar site where I could play at and Fantasy Sports Exchange was the best I have seen.  Unfortunately, they are an offshore sports book so they can't be funded by PayPal or credit card. I have not had a way to fund offshore accounts since the UIGEA passed, so there was no way for me to open and fund an account with them.  They also did not attempt to fully comply with the UIGEA because they did not need to, leaving them with a fantasy sports gambling site per U.S. law.  I think the account funding issues are what ultimately killed them. Why play at an offshore sports book when you could play on a legal U.S. site like ours. RIP Fantasy Sports Exchange.

It appears from the rumblings around that interweb that both companies are making it hard for players to get funds out, which is unfortunate.  It leaves people with a bad taste in their mouths for daily fantasy sports.  Fantasy Sports Live is here to stay though, and we welcome any users from GDD of FSE who would like to play daily fantasy sports on a site that is here to stay. With the departure of GameDayDraft, FantasySportsExchange, InstantFantasySports, and DraftMix from the scene, we are left with just SnapDraft as a major competitor, and a handful of smaller copycat sites with little to no traffic.  None of our competition is over a year old now. Our fees are less than 1/2 the fees at SnapDraft, and our structures and transparency is much, much better than theirs.  If you want to profit from fantasy sports, we are now the only game in town as Snap Draft is more of a lottery style site that can't be beaten long term.  Our decision to profitably grow the company has been key.  We are no Facebook.  We have a solid business model and are already profitable giving us staying power for the long haul.  Check out Fantasy Sports Live if you are ready to profit long-term from your sports knowledge.