The Stalwart

Yep, Intrade Pretty Much Missed The Palin Pick, But...

Barry Ritholtz is so sharp, but when it comes to event contracts or "prediction markets" like Intrade, he seems to have blinders on. Today he takes on Intrade's failure to accurately predict the Republican Veep nominee. Yep, up until yesterday it was all Romney. Then last night Pawlenty soared. And it wasn't until Sarah Palin was all but confirmed by the news media that her "stock" started to soar. True: Intrade didn't predict anything.

But if Intrade was so "wrong" and so consistently wrong, then why isn't Barry Ritholtz an avid participant in these markets. Seriously, he should be making a downright killing, cleaning up on these know-nothing traders.

The problem is that Intrade isn't "wrong" and it's not a prediction market, a point that Eddy at CrossingWallStreet has made several times. The site (and others like it) put a price on the information that's out there. Right now, the site is basically a gambling site, but theoretically this could be useful if it were more liquid and totally legal in the US.

Intrade is what it is. But it's not what it isn't: an oracle. For that, you'd probably need to consult a crystal ball. But the notion of putitng a price on information is an important function of markets, and these sites do that just fine, especially given the limitations. Again, if they didn't, Ritholtz and others would be fools not to be crushing on them.

This Isn't Satire: Congress Holding Hearings On Thoroughbred Steroids

Oh jeez... just like something out of The Onion, Congress is actually holding a hearing on the use of steroids in the world of thoroughbred racing. The Kentucky Herald-Leader says the hearing is scheduled for the 19th. It's not really surprising, given the death of that one horse at the Derby, the collapse of Big Brown, the controversies surrounding Big Brown trainer Rick Dutrow and all the steroids stuff.

What's Congress' prerogative for getting involved? The  Interstate Horseracing Act, it seems. Apparently the law has enabled the big-money simulcast industry.

It's kind of the way the anti-trust exemption for Major League Baseball allowed politicians to justify getting involved in the steroids stuff.

At least with MLB steroids, you could contort logic in such a way, so as to justify making it a public issue. Kids look up to Mark Magwire, and if he's using steroids, then won't they? It's rubbish logic, of course, easily debunked by a freshman philosophy major, but, it's soundibite-y, which is what counts.

What's the argument with horse racing, that yearling horses will see the success of Big Brown and demand horse steroids? And though it's understandable that Congress wants to look out for kid health, but do they care about horse health?  Who gives a shit, really.

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In related news, today might've been the last day of OTB betting in NYC. I think, though not totally sure.

The 'Peppers Pride' Asterisk

For awhile they talked about putting an asterisk next to Roger Maris' name in the record books. Sometimes they talk about it with Barry, cause of the roids. Some suggested that Ichiro needed one when he broke the hits record. So will we need one in thoroughbred racing?

A horse called Peppers Pride has matched the consecutive-races-won streak, 16, held by Cigar and a couple of others. So how come you've never heard of Peppers Pride? From Bloodhorse:

All of her victories have come against New Mexico-breds at distances between 5 1/2 furlongs and one mile.

In other words, all of her wins have come against seriously limited competition. So a Peppers Pride asterisk? Normally I' m against 'em, but I think in this case, it'd be clearly deserved.

So There Are Horse Hedge Funds

Several months ago I mentioned that I once had done a small bit of research into the feasibility of launching a hedge fund that traded horses, as in thoroughbreds. It wasn't so much about getting one off the ground, but to see if there were any known inefficiencies out there in the market for racehorses that might be explored. Not having spent a whole lot of time on the project, nothing was readily obvious.

But there are such funds, or so it seems. NYT reports on a fund with the fittingly boring name of International Equine Acquisitions Holdings (their website is here), which has invested in horses that it hopes will one day win the Kentucky Derby. Its structure is very much like a hedge fund, right down to the fees. Basically, it's a horse stable organized as a horse trading hedge fund (which, btw, was how I concieved of my imaginary fund... I also thought it might be funny to eschew horse naming, and just give them all functional names, like numbers, just to show that it was all about the $$$)

They already have some holdings and they're out raising $100 million. The article also states that they hope to take the fund company public before the end of the year, though I don't know what that means. Is IEAH really going to be a publicly traded stock.

Judging by the bios of the company's principals, it looks as though they've got a mix of horse and finance guys. One real standout though: Mike Jarvis, the former St. John's basketball coach, is their VP of public relations. How odd is that? Apparently he's a racing enthusiast.

It's not clear what their strategy is, other than "invest in good horses that win." I imagined a fund that coldly exploited inefficiencies, like a tendency of market participants to overpay for winners, but I don't know if they're doing anything along these lines.

Speaking Of The WPT

Re: The last post on the World Poker Tour, check out how badly World Poker Tour Enterprises has done as a stock since its debut in 2004. After peaking in the hi-20s in 2005, the stock is currently languishing at $1.56 per share.

Doyle Brunson Plays Beer Pong

This'll probably be the trashiest post you'll eve find on The 'Wart. But it's too awesome not to share. Doyle Brunson, king of poker, plays beer pong, for what I'm guessing is a lot of money (via Wicked Chops):

Are People Getting More Rational?

Slot machine players are always the most depressing folks in the casino, bar-none. Even the drunk guy hitting on 17 when the dealer is showing 16 is probably having more fun. But are people wising up? That would be hard to believe:

Bear Stearns analyst Joseph Greff said in a client note that the difficult economic environment will likely pressure International Game's replacement unit sales this year and next.

International Game may also see lower results from its installed base on decreased spending at slot machines in most gaming markets, Greff added.

Does that mean casinos are spending less on slot machines or patrons of casinos are getting their rocks off playing other games? Not clear. Either way, a good sign.

Free Startup Idea: $1 Million Wagers

From time to time, I like to mention ideas I have for startups that I'm never going to get around to launching. In this particular case, it's cause it'd probably be illegal in the United States, so I don't feel qualms about suggesting someone else doing it.

It was inspired by my recent post about the gold bet, and that guy who wanted to bet anyone $1 million that gold would hit $1650 by the year 2011. Obviously, even if I wanted to take the bet, I don't have $1 million lying around to do something like that.

But it would be fun if rich loudmouths could put out $1 million bets on some event occurring, and then 10,000 or 100,000 people could play the role of counterparty, collectively.

So, for example, someone like Mark Cuban could offer $1 million that HDTV doesn't hit %xy penetration on the web by the year 20xy. It'd be fun for him, cause he could put his money where his mouth was and get a lot of attention, and it'd be cool for his fans and haters, who would probably love to bet Mark Cuban on something.  The company hosting the bet could just take a small vig either way, natch.

Anyway, in the US, this would probably fall squarely into the realm of illegal gambling website. But in Europe, where they're more broadminded about such things, it'd be a big hit, no? So someone start this, and then fly me over as an occasional consultant. Please.

"21" Was Bad, Which Is Too Bad

When I heard that they were making a movie out of Ben Mezrich's brilliant Bringing Down The House, my only wish was that they stuck to the book as much as possible. Even if the acting and filmmaking had been bad, a movie that was actually based on the book would have been fine.

Unfortunately, 21 wasn't based on Bringing Down The House. Well, other than the fact that it was about some MIT nerds who "take" Vegas. That's about it. Otherwise, the plot is totally different, and everything that made the book fantastic -- the thrilling intensity of liberating chips from the casinos, and the fantastically intricate process of doing so, was expunged from the story.

In a way, the plot of the movie was actually more plausible than the book (how it actually happened).

Anyway, I could go on and say it was "paint by numbers", which it was, in spades, and talk about all kinds of bad points. But, if you've never read or seen either, read the book and skip the flick.

The Lottery Winners

The husband and wife that won the $270 million lottery the other day... they must've been totally bewildered and dumbstruck, because their reaction was so muted. Something that's come up before, this issue of people being tickets for the chance to dream. One thing I wonder is whether these buyers buy earlier in the week than later. After all, if your primary motivation is to lay back in your La-Z-Boy and fantasize about having $100 million, then there's no reason to buy your ticket the second before they pick the balls (unless, of course, you know you're going to buy one and can start dreaming before the ticket is in-hand. Possible).

Another question is whether these people buy more than one ticket. Some folks, as you know, buy $50 worth. Hard to imagine them just wanting a license to dream at that price -- they're really playing to win.

So if you accept a couple of tenuous premises, does it stand to reason that people who buy tickets earlier in the week also buy smaller numbers of them?