Betting – the New Investing

Our sister site, Wakuba – http://wakuba.com – has been getting some press recently. We see it as a genuine way to make money – an alternative to investing in stocks and shares (and we all know how that’s ended up!). With carefully researched selections, and researchers highlighting relevant trends/issues around players, teams and games, is it really that different from a stockbroker analysing macro and micro economic factors? With a strong track record that you can see here, are we right?

Here is a detailed exploration…

What do you associate with City Traders? Fast cars, rich boys, proud mothers. ‘Little Jonny’s gone to work in the City’, the ultimate success story, the boy done good. It has a kudos, it is a boast, a brag, an honour – it is success.

Contrast that with the sports traders – flat caps, cheap cigars, angry wives. ‘Derek’s gone round the bookies again!’, the bet you can’t afford, the patriachal betrayal. It’s a vice, it’s illicit, it’s shunned, tutted at, looked down on – it is seedy.

Perhaps it is the names in the city, the Merrill Lynchs, JP Morgans, and Goldman Sachs. The fact you need extensive qualifications, an excellent education, and a lot of the time a good network of contacts. Very different from wandering into your local Ladbrokes or logging into your Internet betting account.

But ultimately, what is the difference? City traders factor in macro economic factors like the price of oil, the conflict in the middle east, the presidential election, acts of terrorism, and speculate on how they affect shares on the stock exchange. They garner the information, assess the information, then use the information to ‘take a position’ – basically have a bet. They bet that a stock will go up or down, and profit or lose by the result.

How is this different from trading on sports? Punters assess team information, assess fixtures, form, injuries, priorities, playing styles, and how they will affect teams’ performances. They garner the information, assess the information, then use the information to ‘take a position’ – make a bet. They bet that a team will win or lose (or goals will be over or under, and so on), and profit or loss by the result.

As the current economic climate, the credit crunch, illustrates – traders get it wrong. Just like sports punters, they make the wrong selections, pick the wrong thing – but for them the risk is bringing down whole economies – whole countries – rather than losing the dinner money.

Yes, the stock exchange is more of a macro concept; bear markets and bull markets, recessions and booms triggered by changes in the oil price, natural disasters, trade embargoes – but this is not so far away from sporting ’seasons’; patches of form, good or bad runs triggered by players in a purple patch, defences keeping clean sheets, players getting lots of bookings.

Although you could contrast ‘trades’ and ‘bets’, they are essentially the same; broken down, a ‘trade’ is simply a position one way or the other, a win or lose. The degree of movement dictates your win or loss, creating a ‘fixed odds’ scenario, where your win is multiplicative of your stake.

In this respect ‘betting’ actually has an advantage – you know how much you could lose, you know your risk, your exposure. With a trade (bar the stop loss) your loss is potentially limitless – your whole stake can be wiped out in one earthquake, tsunami, or terrorist attack.

Not only is your stake limited and defined, it is also much smaller. Where in trading can you make a 10 or 20 fold profit without taking a huge position? A ‘long odds’ winner in sports betting is – relatively – a for more frequent occurrence than a stock increasing twentyfold in value.

So why the stigma? Why is trading admired, lauded and aspired to, whereas betting is criticised, sniffed at, and seen as the prevail of the working classes?

Why indeed. There is no reason, with extensive research and analysis, with effective use of information and resultant ‘positions’, sports trading cannot be as – if not more – profitable than ‘trading’.

A good return right now is 5% – over a year of constant ‘betting’, with researched and evaluated bets, we can make more than that – potentially much more.

And that is the aim of Wakuba – making money by betting on sports. A 5% return would be disappointing over a year – we are aiming for 10-20%. We are betting on outcomes and results that are directly related to the information we gather – exactly the same as a ‘trader’.

You talk about investing in the stock exchange – we are investing in sports. Wakuba – not betting, investing. And we won’t bankrupt anyone.