Double Blind

Carole James is going to face a tough battle this election. Unlike her predecessors (Ujjal Dosanjh, currently the federal Minister of Health and Glen Clark, who single-handedly won the election for the NDP in 1996), James does not possess natural charisma, which puts her equal with the equally uncharismatic Gordon Campbell. Thus, the NDP are likely to fight on issues instead of personalities, which is probably going to be the only thing required to seal their fate to opposition this election. If they nominated somebody with Glen Clark characteristics, except without all the baggage (mainly being a union hack) that the NDP is traditionally known for, the NDP would have had legitimate chance of winning this election. Ironically, if somebody like Christy Clark ran for the NDP, Campbell would have a tough battle on his hands. Not so with James!

The real question, however, is how many seats the NDP can capture in this election campaign. Their campaign must be optimized towards winning at least 25 seats in the Legislature – anything more would be gravy. They will then have four years to rebuild the party and be in a decent position to take the election of 2009 if the BC Liberals screw up. You can be sure that Gordon Campbell will still be running the show for that election. Although Carole James is a shoe-in to win her seat, she will stand zero chance of being the opposition party leader for those four years – she’ll step down for “personal reasons” sometime in 2007. She’ll likely receive a plush government job if the NDP wins in 2009.

Carole James has received some good advice from her advisors, however. Earlier on she said that the party will announce their platform after the budget is released. Now they are saying they will release their election platform in the month of April – I forgot what their official excuse was, but the party executive has obviously read Julius Ceaser – always be the last to speak in a debate if you can choose to. This is shrewd politics, as the NDP can adapt to the last second what their election campaign is going to be about.

There are already some hints as to what their platform will consist of on their main website – about health care and campaign finance. The health care issue has been hammered into the ground politically for the past decade in the country, so there is going to be no more room for either party to expand their supporters. Campaign finance is an interesting angle, however, since the NDP could exploit the fact that businesses have been overwhelmingly the main contributors to the BC Liberal party, while labor unions have been the main contributors to the NDP. However, the BC Liberals get significantly more money than the NDP, which is why the NDP want to use this issue to their advantage to claim that the BC Liberals are in bed with “Big Business”. Smart strategy, although I don’t think the Canadian public is too impressed that $1.70 for each Federal vote goes to the political party that you vote for.

I also wonder how long it will be before the NDP point out that Gordon Campbell was arrested and guilty of drinking and driving in Hawaii in January 2004. Introducing this into the campaign I think would be an act of desperation, so if I saw this in the television advertisements, it’s practically a guarantee that they think they’re losing the election. There is nothing to be gained from any political party from bringing this up.

One large concern for the NDP is the Green Party – it is absolutely vital for the NDP that Adriane Carr loses her bid for the legislature in the Powell-River Sunshine Coast riding. It is less of a concern that the Green party suck up 5-8% of the popular vote that would otherwise go to the NDP, but it’s more of a concern that they don’t win seats and continue to be a marginal party for the left wing voter. Correspondingly, it’s up to the BC Liberals to encourage the Green Party candidates to do well in their ridings, to split as much of the NDP vote as possible. The only way that the NDP can do damage control with the Green Party is to come up with a comprehensive environmental platform, something I haven’t seen from them since Mike Harcourt was in office in 1992!

Should the NDP support the referendum on electoral reform? They wrote a report outlining what they wanted in 2001 – Mixed Member Proportional representation, which further reduces the influence of elected officials and moves that power to the party executive. With the Citizen’s Assembly recommending the Single Transferrable Vote (which is a voting system which only loosely enforces party discipline), the NDP are probably going to remain silent on this issue. I don’t think it matters to them one way or another – they will have members in the legislature for the next 20 years whether the referendum passes or not.

Sidetracking on the referendum issue, I am still puzzled by the Green Party’s stance on the referendum, however – Adriane Carr was initially against a system that would have probably secured her a seat in the legislature. Now they are neutral, even though they should be fully supporting STV.

To conclude, if I was running the NDP, I wouldn’t want to sacrifice long-term objectives to try to win this election – the economy (despite what they are currently claiming) is doing very well, and Campbell’s strategies with the economy appear to have worked. Most of the moaning about health care has been elevated to the federal and not provincial stage. Unless if there are some hidden skeletons in the BC Liberals’ closet, the NDP currently has too much going against them. Instead, the best strategy would be to build some public goodwill and form a strong opposition. The local candidates would get four years of political experience, which they need since the NDP got wiped out in 2001. The 2009 election is the crown jewel – becoming Premier then guarantees you the rights to the best seats in the house of the 2010 Vancouver Winter Olympics.

Whenever you have a government in power facing an election, they will do everything to ensure that they present a state of the country (or in this case, province) as good as possible. The BC Liberals are no exception to this – unfortunately it’s political suicide to point out things that you screwed up on even if you say that you will correct these mistakes. The public expects perfection out of their governments, and if they deliver anything less than perfection (which the laws of large numbers of people say they will), then the media and opposition parties go into a feeding frenzy. Thus, rule one when you are within 12 months of an election is to not let any bad news out the door. Paul Martin got completely blindsided on this one in the 2004 Federal election, and he paid the price with a minority government. Gordon Campbell is too smart to make this mistake.

The next volley of gunfire in the election campaign starts with the Throne Speech, which is an outline of what the government intends to achieve during the legislative session. You really should read the whole thing, since the media and opposition parties take it completely out of context. However, if you are lazy, you can just read the warm and fuzzy feel-good highlights.

The focus of the Throne Speech wasn’t reduced taxes, or the balanced budget. The bulk of the speech was on the health of the province, both in terms of health care, physical fitness and the environment. My guess is that this was designed to completely take the wind out of the sails of any prospective NDP campaign designed towards that direction. A very smart move by the BC Liberals.

The next weapon that the BC Liberals have is the 2005 Provincial Budget, which is due to be released on February 15, 2005. Look for massive increases in health and education spending, and an increase in the basic exemption (the level of money you can earn without being taxed on it) which will make it difficult for the NDP in the next election when they claim that “Campbell’s tax cuts for the rich did nothing for the province”.

My car insurance was due to expire in a week, so I decided to send my car to Air Care. Thankfully it passed, although I always get worried because the car’s temperature goes fairly high when I sit idling before they let you into the building where they do the tests. After that torture was completed, I went to my local insurance dealer to renew my insurance. Since (in the eyes of ICBC) I have been a safe driver, I am eligible to receive 43% off of the regular rates. So this brought the costs of basic (mandatory) insurance down to $739. I also have 1 million dollars of liability insurance which is another $122. I consider this cost to be reasonable in that I would judge the chances of me being in an automobile-related lawsuit to be approximately the 1:8200 that was quoted. The other component of insurance which I had before was comprehensive which had a $300 deductible ($200 for the windshield). Comprehensive covers vandalism, theft and miscellaneous types of perils. The cost of this was $110.

I asked what the book value of my vehicle was. The insurance agent pulled out a book and said that my car had a book value of $1500. This means that if some punk decides to steal my vehicle and drive it off Horseshoe Bay and into the ocean, the most that ICBC would give me would be $1500 minus the $300 deductible. So instead of deciding to spend $110 on comprehensive, I decided to just get rid of it. The risk-reward just wasn’t there for me to accept that option as the value of my existing vehicle is too low to justify the cost. The only time that I have used the comprehensive option in my life was two years ago when some punk decided to throw a rock at my front windshield. Without insurance, the cost of replacement was $450, while with insurance the cost was $200. I don’t think punks will be throwing rocks at my windshields more than every two and a half years, so I think this decision has positive expectation. So when you add everything up, it cost me $914 to renew my insurance for another year, which is not bad considering that two years ago I was paying $1196, albeit with only a 35% discount then.

I did take the opportunity to ask the agent how much insurance costs for other types of vehicles with a person of my driving record (i.e. 43% off the price). The only other parameters I asked him to do was to add comprehensive and collision with a $500 deductible. For a 2005 Buick Century (a car which I have rented in Los Angeles), the cost was $1687. For a 2005 Pontiac G6, the cost was $1812. For a 2001 Toyota Camry, it was $1732. I found the last result interesting considering the car is 4 years old.

This reinforces the decision for me to continue to spend money on my old vehicle to keep it in relatively good shape – not only would buying a new car suck up more capital than I would like to spend, but also insurance costs would suck up any savings that I would get by not having to spend as much on maintenance. Considering that cars built today are only marginally more economical with fuel than ones built 15 years ago, I wouldn’t use fuel savings as an excuse to buy a new vehicle either. I would only buy a new car if my existing car got totaled – the most likely scenarios that would happen would be if somebody stole my vehicle, or if some drunk driver crashed into me. Then I would have to seriously investigate my options.

So I made a whopping $2.45 betting on the Super Bowl using my system, mainly trading single contract lots. I didn’t even watch the game past the first touchdown scored, so I’m sure if I concentrated further I would have made more money. My only losing bet was the $1 that I spent at 90:1 odds that there would be no touchdown scored in the game. I originally wanted to liquidate the contracts at 5% (which would have been a good price assuming nobody scored a TD in the first quarter) but some guy scored before then, ruining my perfect record. There were four contracts in particular that caught my interest and exhibited curves that matched my expectations and will probably lead to money-making opportunities next year.

I will list them as follows. Note that the graphs use UTC time, but the game started at 6:30pm EST.

No overtime. A range of 70% to 99%. Traded at around 91% before the game started. When the game looked pretty even in the last quarter, the contract traded down about 20 points. 1642 contracts were traded, which was the highest volume prop bet for this Super Bowl.

No special teams or defence scoring a touchdown. Note the constant decay of the chart as nobody scored throughout the game. You literally make money every second the game clock ticks down. Range was 60% to 66%, so liquidity was very poor – 279 contracts traded.

No two point converts scored. I thought this contract originally was under-priced at 78%. There were 269 contracts traded and the probability became higher as it was clear there was not an 8-point difference between either team at any time, which is the only time a team would try for a 2 point convert. (either that or having a 5 point lead directly after a touchdown is scored).

Three unanswered scores by any team during the game. This is the most interest chart of them all – originally trading at about 57% before the game began, it dipped as low as 24% and as high as 75% over 1056 contracts, making it the second most traded prop contract of the game. This was easy to see, as it is inevitable that any team will get close to performing this and is easy to trade the volatility.

I am clueless about the Super Bowl. I only know the teams that are involved in the game, but I do not know anything about them other than that the Patriots are a better team. I know the game (of football) very well, however. Also, I know when the game starts: 6:30pm Eastern time.

Now given that, what possible advantage could I have over the rest of the sports futures market? The answer is that I know how to trade. Here is my “Super Bowl Futures Guide for the Clueless” and it will come with some bets that the mostly clueless like me can profit from – I’m sure these types of bets will work next year as well. I’m certain that these types of bets will work for the next Super Bowl as well. The only requirement is that you be glued to your television screen while the Super Bowl is running – don’t get too drunk and know what your pre-defined trade parameters are. That way you won’t have to waste money making any stupid snap trading decisions. In fact, if you are totally lazy you can infer some events happening just by reading the quotations on your trading screen, so you don’t even have to keep your television set on if you’re a little cavalier about it.

So, let us begin the Super Bowl Futures Guide for the Clueless!

Concept number zero: Never bet at Vegas. I illustrated this in my previous post, but it needs emphasizing again. You should only be betting on a marketplace that allows you to liquidate your bet at any point in the game, especially before it ends. This way you can extract value out of the component of the game which nobody cares about until two minutes before the game ends – the clock. The only establishment that does this is the Tradesports Futures Market. Another way of looking at this concept is that you should always force somebody to buy your bet on the marketplace and you should never buy somebody else’s bet on the market place. It’s much cheaper to make your own odds and have somebody play you instead of playing at expensive Vegas odds.

Concept number one: It’s not up to you to predict the game result. Since we have no idea as to the composition of the teams involved, we are not to guess which team is going to win, and this includes all point-spread type bets and the over-under bet. There is no point betting here unless if you feel like gambling. Good futures traders never gamble, they simply accept probabilities that are better than what is to be expected and backup their opinion with money. The only bet that we are remotely interested in is the over-under, but because of the nature of how scoring happens, it’s not worth skimming the time component of scoring volatility within the game. If you must bet on the game result and have a strong opinion about it, do it after half-time, because at least that way you’ve watched both teams play. The point of this concept, however, is that since one billion eyeballs are looking at the score, you can be sure that 10,000 of them will be making the existing market too efficient for you to take advantage of.

Concept number two: Prop bets are your friend. There are loads of bets on individual circumstances in the game. Some of them are stupid, but some of them you can make money trading. For example, you can bet who will score the first touchdown. You can also bet whether there will be a field goal longer than 44 yards scored in the game. You can even bet on which side the coin toss will land on (the statistical cost of doing this at the quoted odds of 50.1% is 1 penny on a 10 dollar bet!). In these markets are hordes of inefficiencies because nobody looked for correlated bets other than having to do with score. What do I mean by correlated? Take a look at the probability that each individual quarterback will throw an interception vs. the chance of no interception being thrown at all. Take a look at the probability that there will be a safety in a game compared to whether there will be 4.5 sacks in a game (a safety requires a sack). I won’t cite my favourite examples, since I don’t want the opportunities priced away for me to take advantage of – I’d have to ask you to pay me, but I’m not into that kind of business.

Concept number three: Understand the impact of the clock. There are some prop bets that have a heavy time dependence – for example, the “will there be X event in the game?”. As time goes on in the game, the odds for such an event happening over time exhibit exponential decay. I’ve said enough here – this is the most powerful sentence on how to make money betting on the Super Bowl.

Concept number four: Statistical flucuations in game score will happen. This makes the “Score 3 Unanswered” an interesting contract – currently trading around 57%, do you think there will be at least one point in the game where one team will have scored twice and will take possession of the ball? Just those circumstances alone will warrant at least 80% odds. They might not actually score, but by then you’ve already cashed out.

That completes the guide.

Now if you want specific bets, I’ll relent and say what interests me here:

a. No touchdown will be scored in the game (at a price of 1%). There have been 38 Super Bowls played prior to this game, and thousands of NFL games played before that. The probability of no touchdown being scored is better than 100:1 of happening. This is probably the highest expectation bet you can make on the Super Bowl, but just like betting on a single color in routlette, you won’t be cashing in very often. But if you hit, you’ll be cashing out big-time. Due to the nature of the odds, it’s difficult to find somebody else to hit your orders, but just float it out there and be patient. There are convienent exit points at roughly 2%, 5% and 25% after the 1st, 2nd and 3rd quarters, respectively, if a touchdown isn’t scored. So in theory if you loaded up on a thousand contracts (net price is $100), you could liquidate for double after 15 minutes of no-touchdown football.

b. Scoring three unanswered will probably trade for higher than the 57% it’s trading at right now at some point in the game. Now whether it will be liquidated at 100% or not is random, but the goal would be to skim 20% off the contract.

c. Predicting the coin toss. If you want a little risk and assuming your cost of trading is zero, get some contracts long at 49.7%, while some contracts short at 50.3%, and try to liquidate them before the actual coin toss. If you actually manage to keep some contracts, you’ve made a slightly positive expectation bet on the Super Bowl.

d. Will there be no overtime? If you can short this at 93% or better, then it’s probably a good bet – the bet would only start to lose if one team were ahead more than 14 points. You’d have to pay attention for multiples that would be convinent for overtime (3, 7, 8), but the contract would stand to appreciate greatly if it went down to the last five minutes, and one team were only three points up over the other. Ideally you would not liquidate until then.

e. There will be no safety in the game at 92%. As you can see in previous Super Bowls that 5 out of the last 38 had safeties scored. That’s about 87% of games that have not had safeties out of a reletively small sample size. I have no idea what the average number of safeties scored, but I do know that there will be one point in the game where one team will start behind the 10 yard line. The odds for a safety will shoot up from 8% to 20% and that’s the point where you would want to liquidate.

f. Finally, the “Russian Roulette” bet is the special teams, or defence scoring a touchdown in the game. Right now the contract is at 61% that a defence or special team will NOT score a touchdown, but as the game progresses this will increase. The element of risk here is obvious – when a special team scores, it will be a QUICK event – there will be zero notice. One interesting bet you can make is to pick up all the contracts you can before the game starts, and liquidate immediately after the first kickoff – assuming there’s no touchdown, you can probably get a quick 2-3% return on your money. Certainly faster than sitting in a year in your ING Direct bank account.

This should be enough to get your mind rolling. Just remember to apply concepts zero to four and you can make it a profitable Super Bowl. I’m not talking about thousands of dollars here, but if you’re shrewd enough about it, you can probably pay for all the beer you can drink that night, as long as you can stay sober while betting.

Sports betting is probably the most popular activity this weekend in Las Vegas, due to the Super Bowl. The only problem is that betting in Las Vegas is probably one of the worst things you can do in terms of the return you get on your money, due to something called the spread. Let me give you an example.

First of all, the two teams in the Super Bowl (for those completely unaware of what’s going on) is the New England Patriots (Pats) and the Philadelphia Eagles. The Pats are the favoured team to win.

Last weekend when I was in Las Vegas, at the Mandalay Bay sportsbook, the odds quoted on the game were the following:

Pats -300
Eagles +220

This means that in order to win $100 on the game, you would have to risk $300 on the Pats winning. Likewise, if you bet $100 on the Eagles winning, your reward would be $220 if they won. Notice that if you bet $220 on the Pats winning and $100 on the Eagles winning that you would have no chance of winning money no matter which team won – you would break even if the Eagles won, but you would lose $27.66 if the Pats won. Likewise, if you bet $300 on the Pats and $100 on the Eagles, you would win nothing if the Pats won, but you would lose $80 if the Eagles won.

The “line” of -300 equates to a team having a 75% chance of winning. +220 equates to a team having a 31% chance of winning. So to bet the entire sum of probabilities (i.e. either the Eagles or Pats winning) costs you 106%, when in theory if the market was efficient would cost 100%.

The disparity of the odds between these two is called the spread. Some casinos have narrower (tighter) spreads than others – I noticed that the Orleans offered tighter odds than most of the casinos on the Strip.

However, all these odds pale in comparison compared to sports betting online. On Tradesports, the asking price for the Pats to win is 71.3%, while the Eagles is 28.8%, making the cost of gambling (assuming the actual probabilities of the team winning were actually what were quoted) a whopping 0.1%. This makes sports betting SIXTY times cheaper online than betting in Vegas, which is why I will never do a sports bet in Vegas.

This will be a rare piece of spam on this weblog, mainly because I endorse the product due to its ruthless efficiency: If you’re interested in opening an account, use my referral code of “D8378245405S” – if you deposit $250 or more, you will get a $50 trading credit which narrows your cost of trading to zero for the first 1250 contracts that you trade at the market with. What happens is that after you open up your account and deposit more than $250, then I will receive a $25 trading credit as well – although I don’t do sports betting, there are other political contracts offered which I do have an interest in, and I’m running out of commission-free space on the site.

Just a friendly reminder that the UBC Election Stock Market is open for trading. The way they have structured the market is very close to a futures market, but not quite – the primary difference is that in order to short the market, you have to synthetically create it by buying all possibilities for a given market and then selling the particular party you want to short. It’s functionally the same thing.

I primarily intend to trade the Majority Government market and the seats market. I don’t really care about the popular vote in the election (other than the obvious correlation between popular vote and seats in the BC Legislature). I care about the referendum on the Single Transferrable Vote, but currently I do not have many metrics to work with other than a few historical events which shall go unnamed here.

In the BC 2001 election (which the result was a foregone conclusion even before the election was called), there were 74 traders that had $20,693 in the marketplace. In the Canadian election of 2000, there was 445 traders that had $113,215 at stake. For this election, I’m expecting approximately 125 traders and about $30,000 in the marketplace. My goal is to suck up 1% of the net capital in the market, not including my own investment.

As I am expecting the market to be relatively illiquid, the amount of detailed commentary I can give behind my trades will be limited.

I will divulge, however, that because the ESM is not open during the day of the election, this should alter people’s trading strategies compared to how the US Presidential Election was traded.

I recall that on his About page, there used to be a mention that Richard drank a litre of Coca-Cola a day. Now he’s quitting, cold turkey. While I think the horror stories about Coca-Cola rotting your teeth is unfounded, I think the primary negative health aspect of the drink is that your typical 355mL can of Coca-Cola has about 40 grams of sugar, which equates to about 150 calories per can (this information was taken from Coca Cola’s own website and extrapolated from their 8 ounce figures). If you drink a litre a day, you’re taking in about 450 calories. Since the typical metabolic burn rate for an average male is 2000 calories a day (I have no idea how active Richard’s metabolism is which would highly affect this figure), that would represent about 20% of your average daily intake.

Clinically speaking, the caffeine intake of a litre of Coca-Cola is about equal to a cup of well-brewed coffee. Since the drug is second on earth to alcohol in terms of how many people it has been clinically tested on, there doesn’t appear to be any adverse effects when taken in moderation over long periods of time. Even Coca-Cola, as a whole, has endured about 80 years without any significant horror stories. The worst of their public relations disasters was of course when they switched to the new Coke formula.

I wish Richard the best of luck, although I don’t think Coca Cola is that bad of a habit. Personally, a few years ago I switched my primary ‘sugar drink’ from soft drinks to juices (I love cranberry juice), but I don’t have any adversion to drinking pop when it’s served at parties. Just that I’m painfully aware that the caloric cost of all these drinks, both fruit juices and Coca Cola, is quite high.