Traders Gonna Trade

Your brackets should be in by now. The 2014 NCAA Tournament gets underway in earnest in less than an hour. I think it’s the best three weeks of the sports year. As always, I picked my Duke Blue Devils to win in our family bragging rights bracket. Doing so has served me well in the past.

This year, Quicken loans is offering $1 billion for a perfect bracket, with the prize insured by Warren Buffett’s Berkshire Hathaway. But you probably shouldn’t play, and not just because your chances of winning are so slim. Even so, the lure of playing in a tournament pool is very strong. Millions play — even President Obama plays, if not for money (since it’s actually illegal to do so) — and lots of workers will be less than fully productive for the next couple of days as they try to keep up with what’s going on.

But today I am reminded of 1991. UNLV was the defending champion and came into the Final Four unbeaten and unchallenged. In the national semi-final, the Runnin’ Rebels met my Blue Devils, a team UNLV had destroyed the previous year, 103-73, in the most lop-sided championship game in NCAA Tournament history.

It was U-G-L-Y in 1990 and most people expected more of the same in 1991. Happily, that wasn’t what happened.

But my story today isn’t about the game itself or even the tournament, exactly. In those days, Wall Street trading houses had big tournament pools that featured high entry fees (and thus big prizes for winners) with serious bragging rights at stake. Significantly, because there were lots of traders involved, lots of trading went on. You could call most any major shop and get a two-sided market on any team to win the tournament.

This fact is noteworthy because one particular trader was absolutely convinced that UNLV was going to repeat as champions. More particularly, he was convinced that Duke would not win the tournament and shorted the Blue Devils big without hedging — expecting to profit handsomely when elimination ultimately came. In other words, he was looking to make big money on the trade and not just on the spread. Moreover, losing would mean not just lost potential profits — he would have to ante up real cash. As the expression goes, he was picking up pennies in front of a steamroller.

Wish GrantedOur poor schlub was pretty nervous on the Monday after the UNLV upset, but Duke still had to beat Kansas that evening(ironically, it was April Fool’s Day) to win the title for the trader to have to cover his shorts. He feigned confidence, of course, but nobody was fooled. When Duke prevailed over the Jayhawks, 72-65, the fool was six figures (plus) in-the-hole.

The trader made good — sheepishly and painfully — but the brass learned a lesson. Thereafter, the big firms no longer allowed employees to organize tournament pools and trading on the pools that existed was strictly prohibited. It was even enforced. Rumor has it that this was part of a quiet agreement between regulators and internal compliance officials, who were understandably concerned about what had gone on. Wall Street pools still existed after that, of course, but they were now run exclusively on the buy-side; we on the sell-side still played, but it wasn’t the same. There wasn’t any trading that I’m aware of. And that’s a good thing.

Traders are going to trade. And without careful oversight, position limits and careful hedging, it’s inevitable that people will get in big trouble. That lesson applies to NCAA Tournament pools and to any security you might want to name. It applies to your personal portfolio too.

Good luck to your favorite teams.


Big Buy Signal

Now marketing himself as a “rogue economist,” Harry Dent is forecasting “gold down to $750 an ounce, housing down 35%, oil down to $10 a barrel, the Dow down to 6,000, [and] a war between inflation and deflation” this year. The headline is indeed shocking:

If Only HALF of Harry’s Forecasts Come

to Pass, the American Life We Know Will

Disappear for Good!

DentSo is the headline immediately above (from his personal website — the brazen self-promotion is shocking too).

Of course, Harry can show you how to avoid and even profit from this impending catastrophe. Amazing. More importantly, unlike most of his ilk, Harry has perhaps offered something actionable, if not in the way he intended. You don’t even need to buy anything to learn what to do.

 Let me explain. Continue reading

Friday Fun

Arbitrary Power Rankings: Dukes

1. Mayo
2. Ellington and His Orchestra
3. Neely O’Hara–era Patty
4. Blue Devils football
5. Randolph and Mortimer
6. Of Hazzard outhouse destruction scene
7. Edinburgh

Source: Grantland

Watch Jabari Parker go coast-to-coast here and dream about next season here.

Since The Big Game is this week-end, here’s “The Play” from 1982, the most famous play in the history of college football, with Joe Starkey’s remarkable call.

And how about a rousing pre-game speech?

Enjoy your week-end.

Joy in the Unexpected

Stewart Mandel of Sports Illustrated described the unlikely scenario beautifully. Duke Football

My Dukies, an astonishing 8-2 on the year, bested Miami on Saturday, after beating Virginia Tech in their previous game, to gain control of their own destiny. If they win at Wake Forest next week and at Carolina thereafter, we will have earned the “honor” of getting crushed by Florida State in the ACC Championship game. But it would be an honor and we’re even ranked today (#25 AP; #24 Coaches’ Poll). Mandel’s take on the Duke win is linked below.

Baylor and Duke go from worst to first

The Washington Post‘s John Feinstein, a fellow Duke alum but a long-time Duke football critic, has even issued a full-throated mea culpa. Add in an expected Duke basketball win and an unexpected Carolina hoops loss (to Belmont!) and it was a pretty great sports week-end. And, finally, the best college football story I’ve read recently follows. Please read it.

Tuesdays with Ross

Let the Games Begin

CraziesAll is right with the world — the college hoops season opens tonight.  In that spirit, I want to link an old post about Mike Krzyzewski’s first Duke win back in 1980. I was in the stands.

Duke Athletic Director Tom Butters insisted that he was getting the “brightest young coaching talent in America” to lead his basketball program (video from the hiring news conference here – notice how “Krzyzewski” is repeatedly mispronounced in the report) when he hired Coach K.  Wags had suggested that Bob Weltlich of Ole Miss or former Foster assistant Bob Wenzel were likely to get the job.  But Butters hired Coach K, then 33 years old and coming off a losing season at Army.   Butters had ultimately listened to Bob Knight, who told him that Krzyzewski had his own good attributes without the bad.  The headline in The Chronicle (Duke’s student newspaper) was “Krzyzewski: This is Not a Typo.”

I also wanted to highlight this video clip, which provides a bit of insight into being a student watching your classmates (and in the case of at least a small school like Duke — friends) compete on the biggest stage for a national championship. On her first day as a freshman at Wake Forest, my daughter had lunch with Chris Paul, then a sophomore. My son sat in classes at Cal knowing that many of the students sitting around him (and professors too) would be in the stands to see him play football on Saturdays. The relationships between college sports teams and their fellow students can be very special indeed.

When Kobe Bryant is asked if he ever regrets not playing college basketball, he replies, “Every March.” The journey toward March Madness begins tonight. Let the games begin.


Red Sox Celebration“Expert” forecasting is generally terrible. Beyond terrible, actually. As if it were needed, here is some more evidence to add to the huge, steaming pile that already exists.

ESPN employed 43 alleged baseball experts who predicted the 2013 play-off teams, division winners, league champions and World Series champions. These are all people who are well paid to follow baseball closely — all day, every day — in order to report on it. You’ll recognize many of the names. 

How did they do? Dreadfully. Of course.

Of the 43, eight thought the Cardinals would win their division and 10 more thought that the Cards would get to the one-game play-in as a wildcard team. But none had St. Louis in the World Series. Not a single one. But that’s a really, really good record compared to what they thought about the Red Sox.

No “expert” thought that Boston would win the American League East. Four of them thought the Sox would squeak into the post-season as a wildcard team. Not a single one thought that the Red Sox would even make the Fall Classic, much less win it. None.

Think about that the next time you consider putting Series serious money to work based upon a market or economic forecast. Not one of 43 full-time, highly paid “experts” called for either the Cardinals or the Red Sox to be in the World Series.

Zero. Zip. Nada. Squadouche.

“Just your basic 8-2-5 double play”

The Red Sox dispatched the Cardinals last night to win the World Series. It was also Tim McCarver’s swan song as a big-league broadcaster — a career that spanned three decades. You can see his touching farewell here. McCarver has gotten more than his share of (often deserved) criticism in recent years, but I remember his early work, particularly as a local Mets broadcaster on Channel 9 in the 1980s, quite fondly.

My favorite McCarver memory is from August 27, 1986. For some reason I was up (very) late to see a West Coast Mets match-up with the San Diego Padres. Ironic now, I know.

The Mets built a 5-0 lead for Dwight Gooden before the bullpen blew it and the game went into extra innings. Tony Gwynn had three hits, threw out 3 baserunners, stole two bases and made an unbelievable diving catch at the wall in right. Darryl Strawberry hit his 100th career home run. Goose Gossage pitched for the Padres and took the loss. Besides Hall-of-Famers Gwynn and Gossage, Steve Garvey was also in the San Diego line-up that night. The 1986 Mets were, of course, to go on and win 108 regular season games, the National League pennant in an epic NLCS versus the Houston Astros and the World Series in a famous 7-game stand-off with the Red Sox.

In the 11th inning, Gossage — in his third inning of work — gave up two singles and then a sacrifice fly to Keith Hernandez, giving the Mets a lead. Garry Templeton led off the bottom of the 11th with a double for the Friars. Pitcher Craig Lefferts hit for Gossage and struck out. But Tim Flannery came up and ripped a base hit to center. Enjoy McCarver’s call of the game’s very unusual ending.

“Just your routine double play.”

The full bottom of the 11th follows.

“Just your basic 8-2-5 double play.”

Enjoy your retirement, Tim.

Game 6

Game 6 of the World Series is tonight in Boston.  I was in the stands down the third base line for this World Series Game 6 at Shea Stadium in Flushing, Queens, New York on October 25,1986 as the Mets held off elimination by the Red Sox. It’s a wonderful memory and was a birthday gift from my lovely bride. Play ball!

The Beatles Live (50 Years Ago)

BeatlesFifty years ago, on October 24, 1963 (h/t to The Atlantic), the Beatles played an electric seven-song live set for Swedish radio in Stockholm. They were already huge in Britain, but were still unknown over here. But not for long (“I Want to Hold Your Hand” and With the Beatles were about to be released), and the following recordings show why. Here are those seven songs, in order of performance. Listen to the greatest rock-and-roll band of all-time live and in great form. Read this terrific commentary from Colin Fleming too. Wow.