Latest Cases - April 2013

Why you can't take 'steamers' at face value...

Good afternoon, friends,

In this issue of Punters’ Verdict

  • Early morning markets – fraught with deception…
  • Traders and shrewdies…
  • The snowball builds…
  • A single opinion can shift the market…

Early morning markets - fraught with deception...

Where horse racing is concerned the money talks loudest in the moments leading up to the off. That's the most significant time in the life of a race market. Plenty of traders make their daily bread by reading the signals and acting accordingly.

Friendless horses - those being laid at any price - are ripe for opposition in exchange win and place markets. Such horses do occasionally make the frame but generally they do not. Negative market sentiment is generally accurate – particularly at smaller meetings. 

However, when it comes to backing horses a 'follow the money' strategy is not without pitfalls. The markets can be deceptive – particularly early morning markets.

On any race day, about 11am, log on to the Oddschecker website and take a look at the day's 'steamers'. By mid-morning there's usually a long list of horses which have contracted since early prices were released – some of them significantly.

Horse A might have opened at 20s. During the course of the morning literally every firm on the block has cut the animal down through the prices to 12s. In some places it might even be 10s. Exchange prices will mirror this activity.

To the untrained eye this market activity suggests that there's some real, wide and deep market optimism about Horse A winning the race.
The contraction suggests that the market knows something significant that you don't.

Sometimes that might actually be the case. But more times than not this market activity is the work, or more accurately, the consequence of a single punter. One man can shift a market - if he's the right man.

Traders and shrewdies…

It won't surprise you to learn that the people who work the trading desks for the bookmakers like a bet themselves. And they occupy a privileged position in the information chain – something they take advantage when the opportunity arises.

One element of privileged information they get access to is the betting records of the bookie's own clients.

Every bookmaker has a list of punters who are unprofitable to do business with. These are the shrewdies, the people in the know, the connections with valuable inside information, the good judges, the astute and the downright clever. These are the punters who the bookmaker doesn't really want to bet with. These are the punters the bookie takes great pains to identify, 'mark-up', monitor, limit or exclude.

That's the bookie's prerogative. We punters don't like it. But a bookmaker exists to profit. That's a fact of punting life.

As far as the bookmaker's employees are concerned these shrewdies offer a fabulous steer. Whenever the 'marker' gets on the phone or places a bet over the Internet, traders are instantly alerted to his opinion. Given the fact that this marker is profitable, it will come as no surprise to learn that plenty of traders and the bookmaker's other employees are happy to follow his money.

It might be, for example, a punter who shows long-term profit on Irish racing. He might have a particularly good record with the runners of a specific trainer, or a specific group of horses, or runners in specific types of races - maidens or Hunter chases, for example.

The bottom line is that when the 'marker' gets active in areas where he has proven profitable over the long term, plenty of traders working for bookmakers are going to be on the phone - snapping up the best prices about that selection wherever they can get them – or on the exchanges taking the best prices available there.

The snowball builds...

Once the ‘marker's money’ is down you'd find it amusing to see what happens at the bookmaker's head office.

Traders will disappear out into the car park or into the bathroom to 'make an urgent call'. Text messages will be sent to pals in and out of the building. Within ten minutes bookmakers all over the country are taking bets on the single 'marker's' selection.

Some of the people placing these bets will be 'markers' themselves with other bookmakers - not surprising when you consider the kind of privileged information their bets are based on. As such, traders working for other bookmakers will take an interest too. Now they'll be on their phones. Now they'll be alerting their pals to this good thing. More bets are being placed. Prices are being snapped up on the exchanges and with the bookies. The snowball builds.

The upshot is that the price of the horse has to be cut - all across the board. One after another the bookmakers will cut their prices as more and more punters - some of them 'marked up' - get involved and try to get on at the biggest price. And, if the snowball effect gathers enough momentum, the price will have to be trimmed again and again.

Now we have a 'steamer' on our hands. And this phenomenon both attracts and sucks in the legions of ordinary punters who take their betting cues from market movers. They see the price of Horse A shortening and they follow the money - getting their own bets on what shows every sign of being a good thing.

A single opinion can shift the market...

Not all gambles on horses develop in the way outlined above. But plenty do. In these instances the 'market' isn't really speaking at all. One man is. One man's opinion or expertise is at the root of the market activity. But, unless you know how the momentum behind the gamble originated, you're faced with a scenario where it looks like the 'collective' opinion of the market is giving you a steer.

In matters of speculation collective opinion is generally more accurate than individual opinion. Based on the gamble outlined above you could make the mistake of getting involved because you think you're seeing the effects of collective opinion. But you'd be wrong. The gamble originates with an individual opinion. And that's a problem for the lemmings in the market.

Sure, our original punter - the 'marker' - is profitable. But that's over the long term. He won't get it right every time. Nobody does. You'll only profit like he does if you place ALL the bets he does - over a sustained period.

Traders - in their privileged position in the information chain - stand an excellent chance of profit. They can take a price early in the snowball and then trade out on the exchanges as more people get involved and the price starts to really contract - both on the exchanges and with the traditional bookmaking firms.

But the ordinary punter - who gets on late in the cycle or who isn't in the habit of laying off again at shorter exchange prices – takes a financial bath more often than not. Because he's getting involved in what is ostensibly a one-off, ad-hoc basis, he'll be backing as many losers as winners - and probably more.

The Judge sums up…

One man can move a racing market. But following his money - knowingly or not - will not always lead to winners and profit.

Picking the true collective gambles from those based on individual opinion is not easy. Nothing is simple or straightforward when it comes to race-betting.

Only one thing is certain - following the early morning money is fraught with danger. The market can easily mislead.

If 'following the money' on the horses is your game then you'd be well advised to focus on the market movements in the minutes leading up to the off - when most betting is done and price movements reflect collective market opinion.

The horse attracting money at that point in the cycle really is the pick of the collective market opinion. Leave the early morning markets alone - following the early money is not referred to as 'the road to the bankruptcy courts' for nothing.

I’ll be back with the Verdict next week.

The Judge 

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