Start Bank: $198,00
Mr. Kelly's Bank: $103,23(+ 416,20% profit)
Mr.Kelly's Start Bank: $20,00
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Mr. Kelly had another usual wild day, up and down 50% of his bank, ending up at + $0,48. A wild roller-coaster of a day!
Mr. Kelly's bets yesterday:
Runner Stake Odds Liability Result
Woodlands Gem $0,26 2,98 0,51 $0,26
Aquasulis $8,83 2,4 12,36 $8,83
Sagunt $17,55 1,55 8,95 $17,55
Rawaaj $11,42 2,36 15,53 $11,42
Moral Issue $9,69 2,9 18,41 $9,69
Dubai Glory $12,20 2,47 17,93 -$17,93
Dubai Miracle $9,03 3,35 21,22 $9,03
Dressing Room $16,86 1,84 14,16 -$14,16
Romantic Wish $8,21 3,95 24,21 -$24,21
I pressed ahead with a bankroll increase of 2,3%. My bets were as follows:
Runner Stake Odds Liability Result
Aquasulis $24,17 2,38 $33,35 $24,17
Kadouchski $25,43 2,34 $34,08 -$34,08
Bavarica $19,28 3 $38,56 $19,28
No Larking $17,75 4 $53,25 $17,75
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Preparing the demon
I withdrew $565 (half of my bank of $1130) from my Betfair account yesterday and began to prepare an investment plan. The idea is this:
You should not leave half of your bank in Betfair if you are using a half-bank, half-Kelly staking plan. The reason is simple, this money is completely idle. It won't be used. The Half-Kelly staking plan will only ever use the top half of your bank. In fact, it mathematically guarantees that you will never use the bottom half. That's the beauty of it. Bankroll protection. Guaranteed.
So what to do with that idle cash? The bottom half of your bankroll? I plan to put it to work by investing it in an investment plan known as Shannon's Demon, invented by this guy, Claude Shannon,
who wasn't some sort of satanist, but rather an information theorist. And a damned good one at that!
How to set up your own demon.
I looked around the investment markets yesterday and found an ideal stock fund. This crazy fund (I won't say which) has been both UP and DOWN 0ver 90% in the past 5 years. I don't know what these cowboys have been smoking while they are investing the fund's money, but they sure have generated a lot of volatility (up and down results) if no profits. And THAT is exactly what I am looking for. Volatility, and lots of it.
Why? Most investors would flee in panic from these cowboys. How would you like to face a 90% loss in your investment? For most people, this stock fund is too wild, but for my demon, it is perfect. I plan to harvest the volatility of the market, the up-and-down, the back-and-forth random walk. This demon eats volatility, the more the better!
So, to start with I will put a quarter of my bank in this crazy stock fund ($282) and a quarter in a nice, safe, boring bond fund ($282). This is equal to exactly half of my betting bank. The half that will never be used. The stock and bond funds are free from transaction charges and all taxes are deferred, so except for an annual charge of 3% on the stock fund and 1% on the bond fund, there are no other fees. And this is important - the transaction fees and taxes would sink most investors trying to build their own demons. (This is why Claude Shannon himself never did it.)
Each week I will keep the fund balanced at 50%-50% on each side, and add half of the profits from the betting half of the bank. The effect is that the profits will begin to grow in a compounding fashion, just like in Kelly Staking. Essentially, I am going to begin compounding the profits from my own compounding profits... ("Money for nothing...squared!")The idea is that if the stocks rise, you should sell some of them to return your portfolio to that 50-50 balance again. When the stocks fall, you buy more, again rebalancing everything to 50-50%. Over time, like a snowball, your quantity of stocks and bonds will have increased, like a snowball rolling downhill.
I will provide more details and results when the demon is set up and running. I am confident that this plan will outperform putting the money in a bank account or a bond fund...and it is certainly better than leaving it to rot in The Royal (Bankrupt) Bank of Scotland, earning interest for Betfair, not me!
Anyway, it is fun to do and I hope that everyone can learn a bit about investing and Shannon's Demon and see if Claude Shannon can help me to get to Florida!