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Veil of Deceit


What if everyone is unconventional?

Conventional wisdom is insidious. Similar to a bad song heard in an elevator, it slowly seeps into our subconscious, unannounced, only to show itself later at an awkward moment, say during the middle of a eulogy. Conventional wisdom, on the other hand, likes to show itself when money is at stake.

Financial market panics have been well documented. And conventional wisdom has them well covered. "No one has ever made money selling in a panic," they say. Never mind the fact that during a panic, almost by definition, rational responses go out the window. Psychological responses relative to financial decision-making are easy to plan, difficult to execute. For that reason, I find it helpful to evaluate situations that are analogous to market circumstances, but which don't shoulder the weight of the excess baggage we carry with us to the markets each day.

Yes, financial market panics have been well documented. Horseracing panics, to my knowledge, have not. The turf race switched to the main track is perhaps as close as the races come to a panic. And naturally, with the racing panic we find plenty of conventional wisdom eager to assist us in doing the wrong thing.

Conventional wisdom: Never bet turf races that have been switched to the main track. Who came up with this maxim, and for what purpose, and what deceit is involved since deceit lies at the heart of most racetrack maxims, and who benefits from it, and who are the people who ignore it? Are they the ignorant of the ignorant, hopeless losers, professionals in disguise, spies, stewards, jockey agents, grooms, track maintenance supervisors, or degenerate teams of meteorologists secretly plying their lone angle against the herd?

At Saratoga Race Course in the summer, hours and hours of handicapping are lost on those afternoons when thunderstorms slip in from the West and pour rain down on the track, often just after 3 p.m. when the atmospheric conditions turn just so. Panic. Pick Three wagers are lost as trainers rush to scratch their horses from turf races that will be moved to the main track. The scratched horses become post time favorites for the unlucky gamblers whose Pick Three tickets included the fleeing horses. The storm changes everything. It can change the distance of the race. In New York it opens the race for the MTO (Main Track Only) entered horses, horses whose trainers, one imagines, must surely be in cahoots with the meteorologists who earlier in the day played down the likelihood of the casual, late afternoon wash out.

Meanwhile, all around the betting windows, handicappers scribble furiously on rain-soaked racing forms, marking out the defectors, re-formulating the probabilities of pace and speed based on the surface switch and condition changes, re-thinking the new horses as the minutes to post scream by. During this market panic the seemingly interminable minutes between posts collapse into small chunks of time like only Einstein could have imagined. One more glance toward the tote board and now there's only three minutes to post, the lines have formed at the windows. And then some bettors give up, resigned to their fate. Others vow to stand on their pre-panic opinions regardless of the new conditions. Still others head for the bar to toast the foolishness of those reckless enough to go against the conventional wisdom and play a turf race that's been suddenly switched to the main track. Raise a glass: "Here's to breakfast in hell for them, boys, breakfast in hell."

So on this Tuesday evening my son and I are at Colonial Downs for twilight racing. The crowd is small. The earlier thunderstorms have passed and we find a full card of turf races has been switched to the main track. Looks like we'll be eating ice cream and just watching today, I tell him. "Never play a turf race switched to the main track." We follow the races from our bench near the rail and listen as the track handicapper announce his picks while the horses are saddled in the paddock next to us. We take in the late afternoon sun as it draws the moisture from the track and raises it skyward in a mist, truly the veil of deceit.

By the seventh race we have moved on from ice cream to peanuts. By now I've seen enough that I can't stand it. In the sixth race I listened patiently as the track announcer identified a 10-1 shot as his choice in the field of six and then watched as the odds plummeted from 10-1 to 8-5. In this seventh race, a tiny field of 6 thanks to the surface change that has been whittled down from the original 14 entered for the turf, the top two choices are weak by any measure. The announcer puts his kiss of death on a third horse while mentioning the top two so that before the next race he has a 50% shot of having favorably mentioned the winner of this race; like the market commentator who observes that the S&P 500 will mark the remainder of the year range-bound, finishing somewhere between 1130 and 1260. The only difference is that the track announcer has only staked out 50% of the field in his subtle grit, not the full 99.9% range the market commentator has stolen.

Back to the seventh race. The 8 is a 1.50-1 favorite. And the 3 horse
2.50-1. The 3 horse, based on my methodology has never run a performance figure off the turf anywhere close to what I project is
necessary to win the race. The 8 is a broken horse going the wrong way.

The 9 is the crowd's 4th choice in a field of 6 and should be 6th choice. That left just three horses that were not outright short sale candidates. In other words, we kind of fell into a $59 exacta and $380 trifecta through the lesser of evils process of elimination.

After it was over we agreed that it was truly one of the least exciting races we had ever seen. Sometimes race tickets get chased with a sense of inevitability meshed with surprise that crosses over dangerously close to outright entitlement, not hubris mind you, but... puzzlement soaked in banality.

We collected our winnings and left for the 20-minute drive home while it was still daylight out. The lad quickly fell asleep in the back and I was left to my own thoughts, bothered by the fact I had played a race I knew I shouldn't have, and totally ignored the conventional wisdom. "Never bet turf races that have been switched to the main track." I thought of the many other times I had played similar main track races that had been switched off the turf, again violating a well-known money-making precept. I remembered some of the hits I had made on those races as well. And then I heard for the first time the bad song that had been playing over and over in my head all along. This song, this conventional wisdom: Never bet turf races that have been switched to the main track.

Once at home, going over my records, I discovered a new category I had never bothered to investigate, turf races switched to the main track. Imagine my surprise to discover two important things. One, year-over-year I have played far more off-the-turf races than I realized: 23 in all. Two, my ROI on those races is enormous.

The financial markets also have their share of turf races that have switched to the main track: the trading day before major holidays, the half-day trading day, the opening 30 minutes, the closing 15 minutes, the East Coast lunch hour, contra-hour, or maybe just any day that the professional warns is a day only for the amateurs to play.

Many good things in life hide behind a veil of deceit, the conventional wisdom that warns us to stay away. Take from it what you will, but investigate it for yourself.
No positions in stocks mentioned.

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