Daily Speculations

June 3, 2003

The second most incisive insight of all time into market behavior (the first, of course, being his Principle of Ever-Changing Cycles), consider Robert Bacon's description of the tyro bettor in Secrets of Professional Turf Betting:

He gets caught in every wrong switch. It's the switches, and not the races that beat the public play. First there is the switch of position. The pro bets straight to win, only, because there is the least unfavorable take and breakage against the straight position. He never bets place or show. The amateur bets to win only to have the horse run third. He best for third, but the horse runs second. He bets for second only to have it run third. Then when he switches back to third again, the horse wins and pays $28.70 straight, $7.90 place, but only $3.80 for show. Besides sticking to wins, the pro always makes bets of even amounts. He isn't like the amateur who lets greed or fear change the size. The beginner plunges on a favorite, then loses, then bets lightly.

One hesitates to add anything to the master's thoughts. but I believe I know almost as much about racket sports as he does about racing, and the switches hurt most when you get off to a bad start. The pro plays a steady game, balancing risk and reward of all shots at all times. The amateur starts by going for risky winners at the beginning. His balls go out. Then he plays a defensive game, only to have the pro rush the net and make some easy winners. Finally he mixes them up, but by this time the pace has increased and he loses each game by a point.

I believe the same thing will happen in the market this year. The trendists, i.e., the fixed-system amateurs, are on the ropes this year. They got off to a terrible start. Bought first day of year, lost big in January, then rebuilt their shorts. Lost 25% in May and now June. Now they're long--my gosh, what a perfect opportunity for the market mistress. They got very short bankroll. Their customers are screaming at them. They go short. On a small 4 or 5% move from here: "We were right all along." Then they're ready to pony up their last chips.

Query: How to take advantage? A humble stab: Wait for them to come barreling in on the down side in July or August, then go against. And sell it back to them when they cover 10% higher.

Sadly, Secrets of Professional Turf Betting is out of print. However, we have posted our favorite Bacon quotes here.