avargov
Posted by avargov
Jul 30, 2012

Final thoughts on ROI, investing, existentialism, and fine wine.....

One of the positives about my line of work, is I get plenty of time to think through things. But after 733 miles of driving today, I don't know how clear my thoughts will be. But I will give it go.

We all know that ROI=(Gain from Investment - Cost of Investment) / Cost of Investment. In my opinion, Steel is using one metric to determine cost and a different metric to determine gain (loss).

As I see it, each individual bet is an individual investment. The ROI is realized as soon as the final out is made. The wager slip has absolutely zero value until the bet is resolved. Either a -100% ROI, or a positive ROI based on the odds (ML bets in baseball, generally 50 - 200%). If you lose the wager, you lose the $100. Period. There is no way on God's green earth that you can ever, ever, ever hope to have a return on THAT money. Ever. It is gone. However, you can dig into your pocket, produce another $100, and make another "investment". Again with zero value until the bet is resolved. If you happen to win, let's say $200 in this example, you now have $300. Your ROI for THIS investment is 200%. And the money goes into your pocket. Investment done, ROI filed away, game over. But you want to make another wager, so you dig out another $100 bill, give it to the friendly slip writer, and off you go, will $200 in your pocket, and a slip worth exactly zero dollars at this time. Well you lose, lost $100, -100% ROI. End of THIS investment. And the story continues, with many different SINGLE investments of $100, each being won or lost, at it's own given odds, for hundreds or even thousands of wagers.

See, many other investments, let's use property for example, I can rest easy knowing that there is a VERY small chance that I will wake up in the morning and it has a value of zero ($0). As a matter of fact, I would wager with anyone, that if I bought a house tomorrow for $100k, for as long as I own this house, it's value will NEVER drop to zero. Therefore, it is very easy to use the very remedial formula of ROI to determine what my rate of return is off of my $100k. Yes, Rate of Return (ROR) is also known as Return On Investment, Rate of Profit, or just "return". (The preceding statement was stolen from Wiki.) If in one year my house is worth $110k...voila, a 10% ROI, or ROR, or return. Same holds true for a $1000 investment in a good mutual fund. I, again, can sleep easy knowing when I wake, my shares will not be worth zero. Same for gold, futures, pork bellies, etc.

Not so much for sports wagers (ml). I have a 50% chance of losing ALL of my investment. It would be great if they offered a season long wager, say on the Yankees. I invest 10k, and every win boosts my gain 200 bucks, and every loss reduces my "winnings" be 200 bucks. And I could cash in at any time during the season. Or even better yet, a money line bet that allows me to cash at any point in the game that my team is winning. Yankees up 5-2 in the sixth, I can cash in for $67 since the are winning 2/3 of the way through the game. But that isn't so. Nope. The paper is worthless until the game is resolved.

Which is why starting capital isn't the proper data to use in figuring ROI of sports wagers. Cost basis is the proper way. Capital is fine if you want to see the ROI of your bankroll. Hey! I started with $1000 and now I have $1200. WOOHOO!!!! 20% ROI! Cost basis, because every single bet, you have to dig into your pocket and invest $100 to make that wager, and it is never the same $100. 300 bets, $30000 invested. Because if you lose, than money is GONE. If you win, well, that money is not invested anymore. It is merely money sitting in your pocket, WAITING to be invested.

So, Steel, using ROI on your bankroll will show a % profit/loss, it can not, and will not, ever show if your formula is successful, or just a dud. It won't show that if you keep doing what you are doing, you can EXPECT to win X amount next season. All it will show is that you forked out up to X dollars to keep betting and at the end of the day you are either up or down. Big deal. Using (Total Wager Winnings - Cost Basis of ALL Bets) / Cost Basis of ALL Bets will show you what you can expect to earn (lose) from upcoming bets, thus giving an apples to apples comparison to other investments in your portfolio. You can then extrapolate your winnings (losses) per bet (unit, whatever) into larger sized wagers to see if you can really make money.

Example:

500 bets at $100 each $50,000
Winnings from all wagers $52, 750

ROI 5.5%

Bankroll Method:

Starting roll (most out of pocket "invested") $1000
Bets $50k
Winnings $52,750

Ending Roll $3750

ROI a whopping 275%

I think the above example pretty much sums it all up.....

And please, please research ROI.

Keep in mind that the calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measure the profitability of an investment and, as such, there is no one "right" calculation.

Read more: http://www.investopedia.com/terms/r/returnoninvestment.asp#ixzz22AHWEszK

But you have to use apples to apples. If you are going to use the wins/losses from ALL your bets, then you must compare them to the cost of ALL your bets. Not just what you have bankrolled out of your pocket, bank account, slush fund, whatever. The way you are doing it, although technically correct per the ROI formula (see above paragraph from investopedia), it only shows a VERY small view of the picture. By using cost basis of all your bets, you can then see the "true" ROI of ALL of the "investments" in your wagering portfolio.

Again, fellow board members who muddled through my thought swamp, I apologize for my incoherent rambling. I hope it made at least a little sense. If not, oh well, I have been drug through the mud on here before.

Goodnight friends.....

Comments

odiousgambit
odiousgambit Jul 31, 2012

I didn't think any of that made sense except about the part about the fine wine ok just kidding. It seems we tend to judge from our starting payroll and rarely consider how much we actually bet, which has to be correct for ROI. Advantage players only, though? Speaking for myself, what I am doing in a casino is not an investment.

buzzpaff
buzzpaff Jul 31, 2012

I can not believe a man with this much intelligence could not find a bowling alley in Kansas.

avargov
avargov Jul 31, 2012

Buzz, my friend, you give me way too much credit!

avargov
Posted by avargov
Nov 06, 2011

An insidious plot

I never would have thought in a million years that the Wizard and my 13 year old son would find themselves in cahoots plotting my untimely demise. But alas, this is true. Please let me describe the incident and you can decide for yourself.

On Saturday, my son and I met the Wiz and his son for a nice little walk. It was a glorious day in Las Vegas. Not a cloud in the sky, and the temperature was hovering around 50 degrees, again, just a perfect day. We agreed to meet in the Albertsons parking lot around 1100. Not being too familiar with the area, I ducked into what I thought was the proper lot, only to find that there is another Albertsons half a mile away. Needless to say, my son was a little aggravated by this, I suppose it is because of the life insurance policy that he is named on was not going to be cashed if we didn't find the Wizard. Well, we found the proper lot, and pulled up behind the Wiz and his son. As they walked up, I am sure that a saw just a hint of a demonic look on the Wiz's face (sorta like in the movie Devils Advocate when the homeless people killed the office manager fellow), but I shook it off as remnants of last nights libations, and we started our day.

We they made our way to the red rock canyon. It may be the most beautiful place in all of the valley. What a wonderful place to die, if that is what friends and family are hellbent on doing to you! We parked on a pulloff, grabbed our packs, and started our "leisurely" climb to reach the summit of Red Cap (or Red Hat, I can never remember). Let me take this opportunity to say the the Wiz did forewarn me that this was a "strenuous climb" and was "steep in places". I have always felt that in a murder plot such as this, honesty is always the right policy, and if the Wiz isn't honest, then he is nothing. The first few moments we very easy, as a matter of fact, there is even a picture of my son and I at the bottom, and I must say that I am looking rather happy at this point. I would post the pic here, but I am too stupid to figure it out. Then the climb began.....

To make what is becoming a long story much shorter, I think I was nearly dead from over exertion no less that 8 times. The climb was gorgeous, but good gosh! Not let me explain that I have only been a non smoker for 5 months, after 27 years of heavy smoking. That I now carry the equivalent of a Backstreet Boy in extra weight since I was in my early twenties was no help at all. All that being said, I feel that my son was prodding me to go further, and the Wiz set a pace that a Kenyan marathon runner could not have kept up with. I was "allowed" to take all the breaks I needed to catch my breath, get rid of the pain in my side, and rest my burning legs. But I think that was just to prolong my agony before I begged them to kill me and leave me behind.

After what seemed to be an eternity, we finally made it to the summit. There is a little jar there with a pad and pencil to record success. I have never been so proud in my life for doing something so difficult. We ate lunch there, well, I didn't eat anything at all for fear that I would lose it on the way back down, so I drank plenty of water, rested heavily, and tried to get warm. I did have a small piece of celebratory cheese that we brought along.

I am not sure that I would have made it on my own, actually I would have never even tried if not for the Wiz inviting me, and my son really wanting to go. I have a picture of the Wiz and I at the top smiling, or course I look like death warmed over, and you just see the silhouette of a horn coming out of his forehead (again I can't post because I am stupid). I am also not sure, now that I am looking back on it, that my son and the Wiz were trying to kill me. I would, however, like to take the time to thank our host for the invite (taking a relative stranger and his son to a remote place), and for the chance to accomplish something that was completely different for me, and forced me out of my comfort zone.

Thank you Mike, it was a wonderful time, perhaps we can do it again sometime. And I am not even all that sore this morning ;-)

Comments

teddys
teddys Nov 06, 2011

Awesome!

Scotty71
Scotty71 Nov 06, 2011

Good deal, before you know it the Wiz will have you doing some 3 pitch sport climbs in the Red Rocks. Biking is a great for weight loss and maintenance too and it is easy on the knees.

odiousgambit
odiousgambit Nov 06, 2011

I have had these sort of experiences wiht my brother who would seem to be a lot like the Wizard.

rdw4potus
rdw4potus Nov 07, 2011

I'm glad that you survived the trek! Also, it's very gracious of you to spare the Wizlet from your accusations:-)



How was the view from the summit? Other than the feeling of accomplishment and burning legs, was it worth the journey? I don't see anything about the trip down, and it seems like that's sometimes more challenging than the trip up. How was the descent from Red Cap?

avargov
avargov Nov 08, 2011

It was easy to be gracious, i don't think the young Wizlet was in on the plot. However, I did find it odd that he was always bringing up the rear. Maybe he had a shovel and I didn't see it ;-)



The way back down was pretty easy, compared to going up. We had a rest of about 30 minutes or so.

avargov
Posted by avargov
Jul 03, 2011

Almost done....

We are here. Everything is moved in. Putting things away. Think we will go to Caesar's tonight for the fireworks. Tomorrow at GVR for the Station firework show. Have enjoyed my first weekend here. No gambling at all. Just hanging with the family. Here longer than I thought this week, $2500 brake job on my truck that won't be done until Tuesday at the earliest. Also have a line on a couple of local jobs. Maybe I will be home everyday...quite a while since those days....anyway....more boxes to unpack!

avargov
Posted by avargov
Jun 26, 2011

The week is finally here....

Well, the last that I knew, my wife and son are heading out tomorrow to trek to Vegas. They will be meeting me on Wednesday at The Orleans. Have the movers lined up for Thursday morning. Guess I will only have to make sure there is cold water and iced tea for the fellows. I, or course, am way too lazy to unload anything, so a couple of hundred to have some pros do it is great.

So, kinda like last time, I have a couple of days to kill before anyone gets here, so, I am guessing some craps is in my future.

Edit: I gotta say, there.are.some very colorful people out and about at 3am. I am at the intersection of Main and Charleston. Sorta reminds me of where I grew up. Man, I am really gonna like living here :-)

Comments

Ayecarumba
Ayecarumba Jun 27, 2011

It's Electric Daisy Carnival spillover. Enjoy the parade.

DJTeddyBear
DJTeddyBear Jun 27, 2011

>> It's Electric Daisy Carnival spillover. Enjoy the parade.



I was gonna ask, but Googled it instead.



http://www.electricdaisycarnival.com/LasVegas/

avargov
avargov Jun 27, 2011

I was at the track this morning at sunrise when it let out. Gotta say I wouldn't have minded being in there for a few hours. Was a real freak show!

avargov
Posted by avargov
Jun 02, 2011

Hiccup in the move...

Well....sheesh.....my wife informs me today that we are not moving until June 27th. I asked her why, she told me some baloney about my son having some performance in Dallas on June 20th or some such. Oh well, a couple of weeks really won't matter in the long term, but I am ready to get this over with!

Comments

Ayecarumba
Ayecarumba Jun 03, 2011

Well, that gives you more time to win that bracelet at the WSOP...



Stock up on the Powerade... It's going to be mighty warm at the end of June.