Notes for Chat with Traders, Episode 105

Added on July 11, 2017 by C. Maoxian.

Episode 105 ... Brendan Poots (58:00)

Family in Perth, but he's Irish
Bet size versus volume of bets taken per match very important (bet sizing)
English Premier League match has average pool of $10-$20MM , AFL (Australian Football League) only $300,000
Bet size must be proportional to pool, must focus on liquid sports
There are only a few global sports betting exchanges
Advent of in-play sports betting, basically real-time now, not a binary outcome anymore
Win lose draw ... must consider the draws in many sports
Money comes in towards kickoff, odds tend to be farther off before then
"Having a bet" is an Irish tradition, "the joys of punting"
Studied chemical engineering in University
Played cricket in England, his sponsor was a bookmaker. he worked nights for him
Couldn't cut the mustard as a cricketer, switched to investment banking
2006 got scholarship to Columbia U., got his MBA
Didn't want to be lackey at age 33 in investment banking [also true for me with an MBA at age 30 after dot com bust]
Plus no jobs after Great Financial Crisis
Understood BetFair, 2008-2009 started building his own sports betting business
Made money on his own with sports betting, built short track record
2010 raised some money and started his "sports hedge fund"
Individuals now give him several hundred thousand dollars a pop to manage
Started out as a punter but quickly morphed into strategic betting
"Betting" "Gambling" "Investing in Sport"
Has offshore office in Gibraltar, AIFMD regulated
Australia-based fund, small fund, number of investors limited, investors must have $500K+
Everyone got hit in Global Financial Crisis, but sports betting uncorrelated, immune to crisis
Lot of smart people in financial world, tough to compete, esp. if you lack passion
He lacked motivation and passion for finance, but loved sports
He's obstinate and likes proving people wrong
He's good at compartmentalizing his loves, driven by numbers and opportunity, not emotionally invested in any one team
First investors were friends, but still had to capital-guarantee their investments
Sports betting is no longer a binary outcome
Betfair, Matchbook
Bad month -1%, good month +4%, he has taken the volatility out of it
Cherry picks the trades he makes, only acts when he can capture big premium
95-97% of his trades are hedged, will act in real time to offset bet
Typical trade lasts 15 or 20 minutes, by end of game he's long gone
Psychological aspect of taking your profit and running, plus the risk/reward ratio changes after first goal (for example)
Doesn't touch basketball (injuries throw off data)
Markets overreact to injured players, presents opportunity
European fund denominated in GBP
Need more than a smart statistician or mathematician, need one with an innate understanding of the sport
Need to understand momentum shifts in sports
AFL too small a market, just can't play it, liquidity isn't there, can't hedge, can't exit
His analysts don't trade and his traders don't analyze
American gamblers used to binary outcomes, don't get the hedging concept
Needs at least 25% premium (his price vs. market price) in marketplace for him to get interested, a.k.a., Ben Grossbaum's "margin of safety"
Trials trading strategies, builds database, backtests it against old results
Historical sports data is a commodity, easy to build a model
Real-time data you have to subscribe to
Ball possession used to be considered a useful statistic, not true anymore, just noise
People want to see volatility-adjusted returns, "number of negative months"
Match fixing, spot fixing still happens ... incentives not there at high levels of sport, just low levels
"Tennis players at low levels scratching around for a living"
Three things you need to know to get into sports betting:

there's always another race
bet what you know and understand
if you want to make money, do it in a boring way, slow and steady

His typical bet size is very small -- single trade max 3% funds under management (bankroll), typically 1 to 1.5%
Hit singles, not home runs (which are hard to find)
www.priomha.com
Twitter: @priomha

Life Without Global Internet Unimaginable

Added on July 10, 2017 by C. Maoxian.

China Tells Carriers to Block Access to Personal VPNs by February

“Beijing has ordered state-run telecommunications firms, which include China Mobile, China Unicom and China Telecom, to bar people from using VPNs, services that skirt censorship restrictions by routing web traffic abroad”

I lived in Beijing from May 2005 to July 2015. The main reason we left was the deadly air pollution, but a contributing factor, and not an insignificant one, was the tightening grip the State had on the Internet. I first began using a VPN in China after Twitter got blocked in June of 2009? (if memory serves). More and more sites got blocked over the following years making it essential to have a VPN, with Gmail being "the last straw" for the few remaining VPN holdouts when it got blocked in early 2015? (again if memory serves).

I cannot imagine living in China and not being able to access the global internet. I certainly wouldn't consider living there now, or even doing a semester of study abroad there, without unfettered access to the global internet (via a VPN). Maybe that's what Xi wants?

Notes for Chat with Traders, Episode 106

Added on July 10, 2017 by C. Maoxian.

Episode 106 ... Turney Duff (76:04)

Wrote a book called "The Buy Side" in 2013
Consulted on the TV show, "Billions," tries to make dialogue and situations more authentic
"A Story of Spectacular Excess" the subtitle of his book
Grew up in small town in Maine, wood-stove heated house, in the 1980s
Three older sisters, simple way of life
Went to Ohio University, journalism major, 970 SATs
January 1994 moved to NYC, $1,400 in the bank
Thought he'd get a job at a magazine
Thought Goldman Sachs was a fancy department store
Had an uncle (Tucker) in the business, got him 10 job interviews
Had one suit from Filene's Basement
Interview at Lehman, saw the trading floor, reminded him of a casino, it was intense, he was hooked
Got an offer at Morgan Stanley, PCS, Private Client Services, sales assistant job
Lots of admin bullshit, but learned a ton, loved his job, there for five years
Bulk of clients were high net worth individuals ($10MM-$100MM)
[Duff has a great smoker's voice, wonder how many packs he smokes a day? Newports, he says]
Got a call from Galleon Group because they needed a sales assistant, they knew him from Happy Hour
$300MM hedge fund in 1999
"Expect to be fired every day; it's a good day if you're not"
Low man on the totem pole
Insider trading was the norm in 1999
First year Galleon up triple digits
Wouldn't take the time to get to know any new analyst since most would leave within two weeks
Gary Rosenback head of trading desk, #2 behind Raj Rajaratnam
David Slaine, "dream informant" ... took down 30+ people in insider trading scandal
Raj was happy-go-lucky, but capable of extreme wrath
Raj would create rivalries between two like individuals in the firm
Raj arrested Oct. 16, 2009, sentenced in 2011
Appease the public after Wall Street bailout by taking down insider trading rings
Galleon's phones were tapped
Drugs and alcohol consumed his life, he was "all about the party"
One and half year's into Galleon, went from assistant to head trader
Later went to Argus
He was good at gathering information, making new relationships
Take emotion out, you become a better trader
First big trade -- shorting Sepracor (buying puts) on generic Prozac news
Made a million in 20 minutes in Sepracor
Analyst told him hospitals don't hire nurses anymore, it's all contract work through staffing companies
Bought a slew of staffing companies, then told handful of buddies about the trade
Lots of upgrades, made a ton of money, made sellside guy a hero (he was ahead of the Street)
Fellow buyside buddies also made out -- general good cheer all around
2003, he's 33 years old, doing $50-$60MM a year in commissions, sellside anxious for a share of it
Sellside had unlimited expense accounts, any restaurant, any bar, any sporting event, any film festival, any private jet travel
Scoring drugs or hookers together with a broker is a bonding experience
Spend $10K on the kid [him] a couple of nights, it's worth a million in commissions
Do entertaining off the books, no paper trail
Thought if he had one more steak dinner or martini, he'd explode
Would buy 200,000 SPYs from someone just to get out of going to dinner with them
Life of the party, a fun guy
First time he did cocaine, he was thrilled (but sensed it could become a problem), felt that good
Drugs, sex, money, alcohol, power -- all mixed into a cocktail that's hard to refuse
Took two years before he was using cocaine weekly, then later it became daily
Cocaine mainly came from sellside, only had to pay $200-$300 a week out of pocket
Hookers once a week, $400-$2,000
Born in 1969
"Black hole of addiction"
Oct. 2006 feigned mugging by throwing self into puddle until bloody to miss work without getting fired
Made $1.9MM in his biggest year
Made $10MM over seven year period, mostly bonuses
"Jump ball" -- 15% of bonus pool up for grabs
Went from Golden Boy to forced into rehab
Hungover you don't "pick up as many lights" (answering calls)
Doing cocaine, you can't sleep, you can't stop
"New York, the city that never sleeps. Miami, the city that can't sleep"
Can never match high of first line, feel fantastic for 15 minutes
Can never get feeling back later no matter how much you snort
Stored his coke in his sock drawer
Had a daughter with his girlfriend
Lives in middle of Long Island now, two miles from daughter, sees her daily
Pays $1,300 a month in rent, just getting by, trying to stay sober
Fatburger investment of $1MM a zero
Bought house at peak in 2007, $2.1MM put in $500K more, sold for $1.2MM
His old Manhattan apartment was 2,700 sqft, paid $9,300 a month in rent
Basically pissed away all his money, "living like an asshole for many years"
Made $22,000 a year at Morgan Stanley, thought if he made $50,000 all his problems solved
When he made $2MM a year, thought if he made $3MM all his problems solved
Money makes life easier, not happier
Look at your intentions versus your actions [sounds like rehab talk]
www.turneyduff.com
Twitter: @turneyduff

My First Successful Uber Drive

Added on July 9, 2017 by C. Maoxian.

As I mentioned before, I have begun to drive for Uber, sort of as an experiment in sociology and economics. I'm not sure how long this research project will last, but I'm willing to give it a few weeks or months of very part-time attention.

I turned on the driver app for the first time yesterday and accepted a request. When I arrived at the pick-up point, the kids said they had cancelled the Uber, but I said go ahead and get in since I was just learning the ropes. Uber charges people $5 for a cancellation, and the driver collects $3.84? of that (will have to check the exact number).

Today I turned on the app and accepted a request, which again got cancelled just as I arrived (and a cab pulled up) -- another $3.84. The next request I accepted, I messed up starting the journey on the app at the pick-up point, and totally botched that trip which resulted in *no* money, but it was a short jaunt and a small price to pay for figuring out how to operate the app in real time.

The third request I accepted, I worked the app correctly, and took some kids from the airport to a rental car office. The details from that trip are in the screenshot below ... it looks like you get around $1 a mile, which ain't great, certainly less than I expected ... I will have to collect a larger data sample before I can conclude that it doesn't make economic sense to drive for Uber.

TV Shows Watched -- Gypsy

Added on July 3, 2017 by C. Maoxian.

Another Netflix Original Series. I love Naomi Watts, always have ... she's another super-talented Aussie actress. She's exactly my age (ok, two years older) and still looks great, usually ... I mean from some angles, in some lighting, she looks her age, but generally she looks good.

She plays a shrink here ... a bored shrink, with a boring fake sociopath lawyer husband, and troubled elementary-school-aged daughter. They live in Westchester or Rockland county and commute into the City for work. Big house, fancy clothes, "upper middle class white people." Naomi pops anti-anxiety drugs and steals prescription pads from her doctor friends (she's a Ph.D., not an M.D., so not a real drug-dispensing shrink, more of a cognitive therapist). Her husband may or may not be diddling his secretary (he isn't of course, because he's boring).

She gets involved in her patients' lives in weird, inappropriate ways. She's a nutcase in short, you know, this is a "psychological thriller." Anyway, I don't know where this show is going, it's ten episodes long ... again, I would probably instantly drop it if it weren't for Naomi Watts, who is just *so good* (remember Mulholland Drive? Yes, Naomi Watts did that breakdown scene at the end, where you realize it's all a dream, which still sends shivers down my spine just thinking about it).

In episode two we learn that Naomi drives a Volvo SUV, masturbates, and can't pronounce "Rorschach," which makes me wonder about her psychoanalytic capabilities. She gets closer to the girl who has such power over one of her customers, er, clients. This is some kind of feminine power play thing I'm not terribly interested in... paid attention to the credits this time to learn that the show was "created and written by Lisa Rubin." Uh oh, a C.W. By thing. I'm not sure if I can keep my interest up for this ... I may be too much of a manly man to deal with this bullshit for much longer.

In episode three we learn that they live in Fairfield county, CT, not downstate NY. Naomi pops some pills she stole from one of her Stepford wife (Soulcycle wife?) "friends," and plans a brilliant birthday party for her kid. But she has a blow-up with the same Stepford wife at the party, very embarrassing. Will lead to permanent ostracism, but Naomi sort of wants that. And there's Blythe Danner, playing Naomi's mother ... she's now the go-to actress for evil WASP moms in their 70s.

This show will appeal to women and homosexual men, but not so much straight guys. Beautiful bored Gen-X women, popping pills in posh suburbs, pursuing lesbian relationships with someone half their age, pining for their lost youth or looking for some excitement in middle age ... I'm not sure how interesting this really is. But Naomi Watts *is* very attractive and talented so I will soldier on.

On to episode four, I really don't know what's going on. Nice to see a Zippo lighter being given as a gift, and I was wrong about Naomi driving a Volvo; it's an Infiniti QX60. Oddly they obscured the front badge of it, I guess there are no freebies in Product Placement Land. The hot black (light black) secretary is starting to make a move on boring old married-to-Naomi guy... will he crack? We also learn that Naomi has a degree from Johns Hopkins. Her weird meddling in her patients' lives seems less sinister in this episode ... it's more like unconventional problem solving now. Anyway, will I be able to get through eight or ten of these episodes?? Not sure.

Drawn in then kicked to the curb, but who will be doing the kicking?

On to episode five ... ok, this is basically a midlife crisis story, but instead of a middle-aged married man having a fling with a younger model, it's a middle-aged married woman having a fling with a younger model. Naomi sneaks off again and has dinner at this hippie-dippie commune place (where I wondered who's paying for the wine?) ... she decides there and then to go all-in on the young lass from Sussex. Hubby left at home with idiot football buddies and a sad bag of ancient weed. There was a really good shot of the Infiniti QX60's grille with the brand obscured ... nearly looked like a Chinese Chery!

Boring hubby tries to rekindle things with Naomi via a night of hot sex in a swank hotel in episode six. All I could think during the sex scene was, "don't pinch your fingers in the door! don't pinch your fingers in the door!" And of course since both these actors are approaching 50 years old, the scene was totally unrealistic.

Boring hubby is going to Texas for two nights (with hot secretary, so maybe he'll crack there), which gives Naomi a chance to plan something big with the lass from Sussex. Oh, I almost forgot, but the episode ends with Naomi having a panic attack. Blurred vision, rapid breathing, fear of death, the whole thing -- not fun.

Naughty, naughty and twenty plus years her junior

Episode seven ... I *loved* this episode, great, great stuff, and not least because of the music. Booze, pot, Blue Is The Warmest Color style sex, infidelity ... it just captured the mood and feelings really well, the pacing was great, I thought. Spoiler: Boring hubby did not crack and give in to the offer from his beautiful black secretary, which was truly dumb, er, heroic behavior. As I said, after the hippie dippie dinner, Naomi *knew* she was going to hook up with the lass from Sussex, there was no stopping her, no second thoughts.

Why they had the black secretary coming out of the other lawyer's room at the end of the episode, I don't know, I thought it was unnecessary, it just makes her out as a slut, which she isn't really, or wasn't ... it makes boring hubby's decision look like the obvious one in hindsight, and it shouldn't be ... he should be second guessing himself about that one into the grave.

Naomi should know that the pot the kids smoke today is nothing like the stuff from our youth (Louis CK has a very funny bit about this).

Poor bastard looks tortured, doesn't he?

Episode eight ... I waited quite a while after episode seven before watching it, since I didn't want to ruin the high of that episode ... and now I can't remember what happened, other than boring lawyer Dad's name is mud at the firm, everybody thinks he slept with his secretary even though he didn't. Also we learn that Naomi keeps an apartment in the City under her maiden name (Hart) and her alias "Diane." Her husband doesn't know about this place. Naomi lets her druggie girl patient stay there (see below). The druggie girl repays the favor by digging through all of Naomi's locked-up stuff and discovering some of her many secrets.

Episode nine ... The lass from Sussex posted the surreptitiously snapped photo of her kiss with Naomi on Instagram ... this news oddly doesn't freak out Naomi ... she knows Sam has a gun, but apparently isn't that worried that he'll go nuts ... Blythe Danner does a beautiful job playing WASP Mommy Dearest and reveals that it is she who pays for the upper west side apartment, and that Naomi never went to Stanford, while sticking the knife in in multiple other ways during their pleasant family meal. Writer Rubin no doubt sees WASP family life as incredibly tortured and twisted, which it is only some of the time; I can report from experience.

Weird scene with Boring Lawyer Dad and his beautiful secretary (see below) ... "I care about you but nothing's gonna happen," what's that all about? Naomi is popping pills trying to hold everything together. The school shrink thinks their kid should be put on Ritalin or something (more Mercedes payments for him!), but Naomi, a PhD psychotherapist, isn't so quick to accept the prescription. The lass from Sussex takes the train out to Darien (we've narrowed it down to the town in Fairfield county now) to pout in Naomi's Infiniti QX60 with obscured badge ... a "Mom car." Next episode is the final episode ... no way they can wrap this all up, must have been angling for a multi-season deal from the start.

Not going to fall in love with her, he repeats to himself while beating off in the shower

Episode 10, final episode of the season ... I've decided that Gypsy belongs in the "Slick but Dumb" file ... the production values are great, the acting is decent, wardrobe, make-up, lighting, sets -- all the technical details -- are very good but the story itself is DUMB or worse, BORING.

Beautiful Naomi may be leading a sort of double life, and messing with her psychotherapy patients in weird ways, but who really cares? Episode seven was good, but one episode does not make a great season, and I certainly won't be watching the next one.

I felt pretty weepy myself by episode ten, crying for the lost time

ETF Trading Portfolio Update -- End of June 2017

Added on July 2, 2017 by C. Maoxian.

Instead of posting every week, I'm now posting the ETF Trading Portfolio update at the end of every month, based on my monthly trend following system. I've also changed the terminology from "up" and "down" to "long" and "short," which I hope is less confusing.

ETF Trading Portfolio Update -- July 3, 2017

Added on July 2, 2017 by C. Maoxian.

One change this week, covering the QID short and getting long.

This is the last weekly update I will make for my ETF Trading Portfolio. In future I will be making a once-a-month update based on the monthly trends and will keep the weekly trend changes to myself (because they're just too valuable, ha!).