I talked about my new NFL betting strategy the other day. As those who have read my blog in the past know I do like to trade in stock options-basically if I think a stock may be headed lower I buy puts and in it and if I think it will rise I buy calls.
What I've found when I tell other people about this is that most have a reflexive fear of 'gambling.' I think there's also a notion out in the popular consciousness that it's ok and in fact good to 'invest' but 'betting on stocks' isn't investing. Of course, when you talk to an economist the confusion builds as while some might call buying or selling stocks-or the related options-'investing' and most others may call it 'betting' and 'gambling' economists might actually call it 'saving' or perhaps 'speculating.'
When I think back to my initial foray into the market back in 2007, I think what drove me there to begin with was that I was struck by the fact that the yield on savings accounts were so low-ironically comparing the interest rates on bank accounts back then to today that now looks like a Golden Age of yield.
We can debate what the meaning of 'Secular Stagnation' is-a big part of which is an alleged drop in real interest rates. However, one thing I tend to think the SecStag group has right-and even Sumner seems to somewhat be on this train-is that we may be in for a long period of low rates.
On the other less gloomy hand David Beckworth has argued that there has not been a long term drop in interest rates.
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/14/heres-why-larry-summers-is-wrong-about-secular-stagnation/
This seems wrong as back in 2007 I was frustrated that you could find no rates more than 4% and now you're lucky if you can find a 1% rate. It sure seems like this will be the case for a long time-part of this though may be what Keynes talked about; our tendency to assume the future will be like the present and recent past.
However, when you remember that these are nominal rates, you see that real interest rates have not dropped quite as much as nominal rates make it seem though they have still dropped. In 2007 if the nominal interest rate was 4% so was the inflation rate so that there was basically no yield. Now with basically a zero nominal rate and an inflation rate of about 1.5 we actually are paying banks to hold our money.
So my initial interest in stocks was for higher yield which would seem to lend some validity to economists calling stock investing or 'speculating' saving. If buying a stock is saving though what is buying say 10 calls on it? Is this now speculating? With options you risk your entire principle but don't have to put such a large absolute amount as you do for buying the stocks outright.
My move into options was caused by the 2008 recession and bear market-these actually started in late 2007-and my realization that the plum days for buy and hold were over. Of course, once I realized how much I could make in options my interest in buying and selling stocks waned. I felt like I wanted more than just a high yield savings account. I was now entranced by the idea that it's possible to make money into more money when it's laying idle-maybe even especially when it is. Here at least Piketty is right: the goal of capital is to hit that Zarathustrian point where the Spirit of Gravity that says 'what goes up must come down' is reversed and where passive money multiplies itself. I don't agree with those though who feel that wealth should solely be a product of one's own savings however.
So now I've dipped my toe into a new way for passive money to grow-betting on the NFL; I'll probably try the NBA when it starts.
So how did it go? It actually went swimmingly and I have to say in achieving this I was both lucky and good. I was good in that I got all three of the games I was looking at right: Seattle over Green Bay, the Eagles over Jacksonville and the Steelers over the Browns. I only ended up betting on the first two games and actually made a mistake in that I had meant to only bet straight up in these two games and I actually mistakenly bet the spread.
Seattle, however, had no trouble beating a 5 and 1/2 point spread against the Packers blowing them out 36-16 and the Eagles actually fell behind 17-0 in the first half at home against the Jaguars and yet somehow managed to not just rally in the second half but beat the 10 and 1/2 point spread with under two minutes left returning a Jaguar int for a TD.
Of course, as usual, when things go well, I can't quit while I'm ahead and did what I had promised myself I wouldn't: put money on the Giants tonight. I managed to stop myself from betting the G-Men will win outright-though I think they might, but simply have money down that they will beat the 6 and 1/2 point spread. What I'm thinking is that this spread is absurd.
I tend to think that the Giants are at least a little underrated-though I'm biased of course and I know this. However, looking at the Lions, I feel like they're definitely overrated. Everyone seems to be forgetting that this is a game between two 7-9 teams in 2013-everyone acts as if the Giants are the only 7-9 team-some act as if they were 3-13-while acting as if the Lions were 13-3.
To top it off, the last game for both teams was a 23-20 Giants win over Detroit to end last season. So have the Lions now gained 10 points over since then? I very much doubt that. I notice that when you ask people why the Lions are such big favorites then answer 'Matthew Sheppard...' but wasn't he here last year and the year before that? How good were the Lions then? It reminds me when people year after year thought Dallas would be great because well, 'Tony Romo...'
Incidentally, no one ever seems to remember that Brady won't be in NE forever. I was not surprised that they lost yesterday as they are not a great team at all on the road; they are only a great team at home; they were 4-4 on the road last year and 8-0 at home. Besides that, games with the Dolphins are exactly the kind of volatile long time rivalries where anything can happen regardless of who may be better or worse in a particular year and the Dolphins often have the Pats number in Miami-much as the Jets often have the Dolphins number, etc.
I was surprised though that they went from a double digit half time lead to losing the game in the second half by double digits. This is very out of character by them and we'll have to see if this is a sign they're finally losing their mojo-it's very early of course but that was very unusual.
I wouldn't touch their game this week in Minnesota with a 10 foot pole and notice that they are only3 point favorites-the odds makers must realize how poor a bet they are on the road.
The games I am looking at this week are: the 49ers easily over the Bears in San Fran, the Seahawks over the Chargers in SD-though of coruse I want to see how the Chargers perform tonight and I do think they are pretty good, the 'Hawks are the 'Hawks. They are just a very good bet to win any game wherever they go.
On the other hand I have the Bengals who are a very good bet to win a game at home-8-0 last year but 2-6 on the road.
What I've found when I tell other people about this is that most have a reflexive fear of 'gambling.' I think there's also a notion out in the popular consciousness that it's ok and in fact good to 'invest' but 'betting on stocks' isn't investing. Of course, when you talk to an economist the confusion builds as while some might call buying or selling stocks-or the related options-'investing' and most others may call it 'betting' and 'gambling' economists might actually call it 'saving' or perhaps 'speculating.'
When I think back to my initial foray into the market back in 2007, I think what drove me there to begin with was that I was struck by the fact that the yield on savings accounts were so low-ironically comparing the interest rates on bank accounts back then to today that now looks like a Golden Age of yield.
We can debate what the meaning of 'Secular Stagnation' is-a big part of which is an alleged drop in real interest rates. However, one thing I tend to think the SecStag group has right-and even Sumner seems to somewhat be on this train-is that we may be in for a long period of low rates.
On the other less gloomy hand David Beckworth has argued that there has not been a long term drop in interest rates.
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/14/heres-why-larry-summers-is-wrong-about-secular-stagnation/
This seems wrong as back in 2007 I was frustrated that you could find no rates more than 4% and now you're lucky if you can find a 1% rate. It sure seems like this will be the case for a long time-part of this though may be what Keynes talked about; our tendency to assume the future will be like the present and recent past.
However, when you remember that these are nominal rates, you see that real interest rates have not dropped quite as much as nominal rates make it seem though they have still dropped. In 2007 if the nominal interest rate was 4% so was the inflation rate so that there was basically no yield. Now with basically a zero nominal rate and an inflation rate of about 1.5 we actually are paying banks to hold our money.
So my initial interest in stocks was for higher yield which would seem to lend some validity to economists calling stock investing or 'speculating' saving. If buying a stock is saving though what is buying say 10 calls on it? Is this now speculating? With options you risk your entire principle but don't have to put such a large absolute amount as you do for buying the stocks outright.
My move into options was caused by the 2008 recession and bear market-these actually started in late 2007-and my realization that the plum days for buy and hold were over. Of course, once I realized how much I could make in options my interest in buying and selling stocks waned. I felt like I wanted more than just a high yield savings account. I was now entranced by the idea that it's possible to make money into more money when it's laying idle-maybe even especially when it is. Here at least Piketty is right: the goal of capital is to hit that Zarathustrian point where the Spirit of Gravity that says 'what goes up must come down' is reversed and where passive money multiplies itself. I don't agree with those though who feel that wealth should solely be a product of one's own savings however.
So now I've dipped my toe into a new way for passive money to grow-betting on the NFL; I'll probably try the NBA when it starts.
So how did it go? It actually went swimmingly and I have to say in achieving this I was both lucky and good. I was good in that I got all three of the games I was looking at right: Seattle over Green Bay, the Eagles over Jacksonville and the Steelers over the Browns. I only ended up betting on the first two games and actually made a mistake in that I had meant to only bet straight up in these two games and I actually mistakenly bet the spread.
Seattle, however, had no trouble beating a 5 and 1/2 point spread against the Packers blowing them out 36-16 and the Eagles actually fell behind 17-0 in the first half at home against the Jaguars and yet somehow managed to not just rally in the second half but beat the 10 and 1/2 point spread with under two minutes left returning a Jaguar int for a TD.
Of course, as usual, when things go well, I can't quit while I'm ahead and did what I had promised myself I wouldn't: put money on the Giants tonight. I managed to stop myself from betting the G-Men will win outright-though I think they might, but simply have money down that they will beat the 6 and 1/2 point spread. What I'm thinking is that this spread is absurd.
I tend to think that the Giants are at least a little underrated-though I'm biased of course and I know this. However, looking at the Lions, I feel like they're definitely overrated. Everyone seems to be forgetting that this is a game between two 7-9 teams in 2013-everyone acts as if the Giants are the only 7-9 team-some act as if they were 3-13-while acting as if the Lions were 13-3.
To top it off, the last game for both teams was a 23-20 Giants win over Detroit to end last season. So have the Lions now gained 10 points over since then? I very much doubt that. I notice that when you ask people why the Lions are such big favorites then answer 'Matthew Sheppard...' but wasn't he here last year and the year before that? How good were the Lions then? It reminds me when people year after year thought Dallas would be great because well, 'Tony Romo...'
Incidentally, no one ever seems to remember that Brady won't be in NE forever. I was not surprised that they lost yesterday as they are not a great team at all on the road; they are only a great team at home; they were 4-4 on the road last year and 8-0 at home. Besides that, games with the Dolphins are exactly the kind of volatile long time rivalries where anything can happen regardless of who may be better or worse in a particular year and the Dolphins often have the Pats number in Miami-much as the Jets often have the Dolphins number, etc.
I was surprised though that they went from a double digit half time lead to losing the game in the second half by double digits. This is very out of character by them and we'll have to see if this is a sign they're finally losing their mojo-it's very early of course but that was very unusual.
I wouldn't touch their game this week in Minnesota with a 10 foot pole and notice that they are only3 point favorites-the odds makers must realize how poor a bet they are on the road.
The games I am looking at this week are: the 49ers easily over the Bears in San Fran, the Seahawks over the Chargers in SD-though of coruse I want to see how the Chargers perform tonight and I do think they are pretty good, the 'Hawks are the 'Hawks. They are just a very good bet to win any game wherever they go.
On the other hand I have the Bengals who are a very good bet to win a game at home-8-0 last year but 2-6 on the road.
I don't touch football betting early in the year. I wait til week 4 or 5 to get a sense of various teams strengths and weaknesses, but if pressed I would take the points and the Giants as well.
ReplyDeleteAs far as buying options, I actually think that might be the best way to play the stock market..... but it isn't investing at least not in the sense of C+I+G=Y. Of course neither is a buy and hold of stocks or mutual funds. Investment means providing the means for creation of NEW product. Playing the stock market in any fashion is simply reshuffling already created wealth and putting a new price tag/owners name on it. Its a reallocation of savings as Cullen Roche calls it.