TheSnapper

Current Bank: $1112,82 (+ 462,03% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $85,26(+ 326,30 % profit)
Mr.Kelly's Start Bank: $20,00

------------------------------------------------------------

The Snapper's Demon

I now have my reserve bank set up. It is running as an investment rebalancing system known as Shannon's Demon. YOu can see I took half of my bank ($567,65) and split it into 2 investments: stock and bonds.
The stock fund is run by what I can only describle as a crazy wild group of dope-smoking Dutchmen. They have a crazy track record of +90% and -90% profit/loss within a few years!

I expect this value to continue to fluctuate wildly over the next few months. Each week or so I will add funds (hopefully) from Betfair and rebalance everything back to 50-50%. This will form my "reserve bank", because it won't be used for betting. Stay tuned and check the progress of the "Demon" as it makes sinister profits from the market noise that my hapless Dutchmen are creating!

         Units            Value    Fund %    Model %    Difference
                   
Stocks    3,307768    $283,82    50,00%    50,00%    $0,00
Bonds    3,062763    $283,82    50,00%    50,00%    $0,00
                   
        $567,65           
-----------------------------------------------------------

Current Bank: $1080,73 (+ 445,82% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $74,68(+ 273,40 % profit)
Mr.Kelly's Start Bank: $20,00

Ouch! We got smacked pretty hard yesterday. I lost 4/6 lays and took a -7% loss on my bank. Mr. Kelly also lost 5/9 lays and took a brutal loss of -27% to his bank.

Like I always say, if you want the ups, you have to take the downs. This game is easy when you are winning, but what separates the winners from the losers is handling the inevitable losing streaks and protecting your bank for the long run.

onwards to the races today.

Current Bank: $1160,51 (+ 486,12% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $103,23(+ 416,20% profit)
Mr.Kelly's Start Bank: $20,00
--------------------------------------------------
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

---------------------------------------------------------------
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!

Current Bank: $1133,39 (+ 472,42% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $102,76 (+ 413,80% profit)
Mr.Kelly's Start Bank: $20,00

---------------------------------------------------------------------
A profitless weekend for me, as I went down a bit under 1%. Mr. Kelly got blasted and lost a staggering 42% of his bank, losing 9/18 bets. A clear illustration of the advantage of half-stake Kelly betting v.s. the full stake. How many of you would enjoy losing 42% of your bank? Not me...



---------------------------------------------------------------------
MANSION FOR RENT

I have been busy looking around in Florida for what Mr.Kelly and I can get for our $1200 bank  and check this out. A complete mansion for rent for 1 week for $1200! This includes:

    * Bedrooms 3
    * Sleeps 9
    * 3 Bathrooms, 1 Half Bath

Rates (USD)
Per property (USD)

    * Per week $1,200 - $2,000






Description House, 250 m²

Super exclusive private mega mansion with freestanding guesthouse and separate guest-wing on large 6 acre private estate and gorgeous resort style pool area. Large backyard with numerous decks. We are in a 24 hour security staffed gated community, very secure and private yet centrally located with short distance to Grocery Stores, Restaurants and Shopping Malls. Only a few minutes away with your car from quiet and exclusive white sandy beaches. Exactly located between Boca Raton for shopping and dining and Delray Beach Ocean access for Beach vacation and more dining options. Numerous Parks as well as a huge variety of different sport offerings are within a short driving distance. Rental Cars can be offered, e.g.4 passenger 2008 VW Rabbit, automatic, for 35 USD/day including miles and insurance, 5 passenger 2010 Jeep Wrangler automatic for 45 USD/day, 10 passenger 2008 Mercedes Sprinter Van automatic also available.

I don't get it...3 bedrooms, and sleeps 9? Hmmm...anyway...could be a wild 7 day party followed by a return to the cardboard box under the freeway? Would it be worth it? Hell yeah! Sure would be a lot of fun!

Current Bank: $1164,87 (+ 488,32% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $179,19 (+ 795,95% profit)
Mr.Kelly's Start Bank: $20,00
--------------------------------------------------------------
Mr. Kelly went nuts yesterday, winning 7 straight, jamming his bank up to an new high of $179,19. He is now almost where I started from ($198). We are both getting high! I hit 2/2 winners for a profit of $38,97. Mr. Kelly was the winner on the day with a bankroll gain of 55,7% to my paltry 3,4%.
Stomped me pretty good again.
--------------------------------------------------------------

Half-Kelly Stakes -  The big advantage.

I was thinking this morning while I was out on the boat catching my daily fish, that the interesting statistic is that every full-Kelly staker has a 1/3 chance of losing 1/2 his/her bank before he/she doubles it. That's the math.
But someone using half-Kelly stakes has only a 1/9 chance of losing 1/2 their bank before they double it. What's the catch? Well, the half-Kelly staker will have 1/4 lower profit than the full-Kelly staker.
A fair trade off, most gamblers would say...an awful lot less DOWNSIDE in exchange for a little less UPSIDE.
That's why I recommend half-Kelly stakes.

I am using half of bank, however, not my full bank. It occurred to me that this means that there is NO RISK to half of my bank. Half of my bank is never going to be used FOR ANYTHING.

So, why am I keeping it in Betfair? They take our deposits and put them in the dubious, taxpayer-bailed-out,shaky, shameful, bankrupted institution known as the Royal Bank of Scotland...Betfair collects interest on my bankroll, not me.
So why am I doing it this way? I am thinking that a much wiser option for me is to take that half of my bank and set up a Shannon's Demon, to gather interest and profits instead of sitting in my Betfair account at 0% interest.

It should be a way to boost profits, over and above the daily grinding race between me and Mr.Kelly.
I think in this way --- half of the bank that Mr.Kelly and I draw from should be set up in s Shannon's Demon scheme (see my previous posts on Shannon's Demon)> The profits will be fed in to the demon, which will be working on compounding the unused half of my bank which is now idle.

The problem is that i may have to wait until the bank grows a bit more to bother investing. After all, half of $1200 is only $600, which would be a very small demon, to  be sure!

Still, this is something that everyone using betfair (or other bookies or exchanges) should consider. But it is especially attractive to a half-bank, half-stakes Kelly investor (like myself) because there is no chance of ever using those funds. (even the most brutal losing streak you can throw at this bank can only ever cost it 50% -- thanks to the beauty of the Kelly Criterion).

Current Bank: $1126,32 (+ 468,85% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $114,70 (+ 473,50% profit)
Mr.Kelly's Start Bank: $20,00

------------------------------------------------

After riding a 17-straight win streak, it came to its (inevitable) end yesterday with a loss on Odins Ravin.

My lays yesterday were as follows:

Runner    Stake    Odds    Liability    Result
Morermaloke    $25,36    2,28    $32,46    $25,36
The Blue Dog    $28,35    2,08    $30,62    $28,35
Arizona John    $20,18    2,98    $39,96    $20,18
Odins Raven    $27,39    2,04    $28,49    -$28,49
Tranos            $22,22    3    $44,44    -$44,44
Luska Lad    $16,95    3,5    $42,38    $16,95
Prince Of Thebes    $20,64    3,1    $43,34    $20,64

A profit of $38,55 and my bank increased by 3,5%. My bank is again at another all-time high thanks to this streak, so no complaints about that. Please remember, my friends, I know nothing about horseracing, and I don't pretend to. These bets are nearly random. They have only one characteristic - a crappy price.   


--------------------------------------------------------------------------------

Mr. Kelly took it on the chin yesterday: He won 5/9, but ended up down -$25,49 for the day (-18% of bank).

So, anyway... another day done and we press on towards our goal of a home in the Florida sunshine. Stay tuned as I will be looking around for what I can now afford in Florida...$1200 buys a fair bit more than the cardboard box I started out with!





------------------------------------------------------------------------------

Current Bank: $1088,29 (+ 449,41% profit)
Start Bank: $198,00

Mr. Kelly's Bank: $140,19 (+ 600% profit)
Mr.Kelly's Start Bank: $20,00
--------------------------------------------------

Current Bank: $1030,29 (+ 420,35%)
Start Bank: $198,00

Mr. Kelly's Bank: $112,39 (+ 461,95%)
Mr.Kelly's Start Bank: $20,00

A milestone day yesterday. 2 bets, 2 wins and a profit of $60,74 (+6,4%), driving my bank into 4 digits for the first time. A new all-time high, and I'm currently riding a hot streak of 11 straight winners.
Couldn't be better...all I need now is some Florida sunshine!

My lays yesterday were:
Runner    Stake    Odds    Liability    Result
Juarla    $25,20    1,94    $23,69            $25,20
Magical Star    $35,54    1,52    $18,48    $35,54


Mr. Kelly is also smiling. He went 5/6 yesterday, a profit of $32,11 (+39,9%) hitting an all-time high of $114,37 before falling back to $112,39. (Notice also that Mr.Kelly's percentage cumulative profit of 461,95% growth has now passed my growth percentage of 420,35% for the first time.)

Again, who was the winner? I won $60,74 and Mr. Kelly won $32,11, but in percentage of bankroll, Mr.Kelly won 39,9% to 6,5%. Which is more important? To a Kelly Staker it is clear -- Mr.Kelly crushed me. All that really matters in the long-term is the percentage of bank growth, and you can clearly see the advantage that a full-Kelly staker enjoys over a half-Kelly staker.
-----------------------------------------------------------------------------------------------

In my case, for example, the difference between using level-stakes, half-Kelly and full-Kelly stakes has been dramatic:

Bets: 175
Wins: 119
Losses: 56
Points Profit at Level Stakes: + 37,85

Hypothetical Level Stakes Profit (using $4 stakes) : $151,40
Actual half-Kelly stakes profit: $461,89
Hypothetical full-Kelly stakes profit: $923,78

There you go, ladies and gentlemen, the figures are clear. OK, you will do just fine at level stakes...$151 profit is great, better than a loss, some would say...but wait, look at how far you would be behind TheSnapper (half-Kelly stakes) at $461 and Mr.Kelly (full Kelly stakes) $923,78... for THE VERY SAME BETS!

So, if you are struggling in your betting, you need to look again at 2 things: 1) your edge and 2) your stakes, because, as the song goes..."Nothing else matters...", 

Money for nothing, my friends...




---------------------------------------------------------------------------------

Current Bank: $969,55 (+ 369,87%)
Start Bank: $198,00

Mr. Kelly's Bank: $80,28 (+ 301,40%)
Mr.Kelly's Start Bank: $20,00

Our combined total is now into 4 digits for the first time at $1049,83. Mr. Kelly has tripled his bank for the first time, and I have hit another all-time high after going on a 8-win streak.

The sun is shining again. You have to enjoy it while you can!

------------------------------------------------------------------------------------------------------

Here's my theme song for this blog --- I think you know how it goes...


MONEY FOR NOTHING



Yeah, money for nothing. That's what we are all seeking. Not just on Betfair. Everyone, everywhere. Markets, investors, workers, unions, bums, thieves, bankers, gamblers, retirees, governments... everyone.

But is there such a thing as money for nothing? I mean, really, money for absolutely nothing? And why would that be? Economists are rather split on the topic. Personally, my view is that there isn't money for nothing, at least, not often and not for very long, and there are a lot of people looking for it!

There really isn't money for nothing in gambling. Someone has to win, and someone has to lose. It's a zero-sum game. If I'm winning, someone is losing. But who? The answer must be that the source of funding is coming from punters taking bad odds. There's no other way to explain it. Even "risk-free" arbitrage is not really totally "risk-free", there are always "black swans" lurking around ---things you hadn't thought of being possible just might actually be possible after all.

There is just "redistribution for nothing" in this game, but that doesn't quite have the catchy ring to it as "money for nothing", does it?

Current Bank: $906,35 (+357,75%)
Start Bank: $198,00

Mr. Kelly's Bank: $77,40 (+287%)
Mr.Kelly's Start Bank: $20,00

A solid weekend drove both Mr. Kelly and I to new all-time highs. Mr. Kelly doubled his bank by increasing over $40 (+108%), and I increased by $99,79 (+12,7%). In dollar terms, you might say that I was the winner on the weekend - I won $59 more than Mr.Kelly, after all, but a Kelly Staker would say that Mr.Kelly crushed me ...108% to 12,7%. Who would you agree with? Who won this weekend? (...a hint...it was the guy from Texas.)

-------------------------------------------------------------------------------------


Viewers might note that I am emphasising the percentage returns these days. There is a reason for this. If you are a serious Kelly staker, then you have to start viewing the world in percentage terms. The reason is simple, Kelly stakers are only interested in using the percentage return to steadily compound the profits.

-------------------------------------------------------------------------------------
Here is a screenshot from Sunday. Only 6 bets, all winners. (Sorry, but the screenshot turned out a bit small, I have pasted the data from you records below so you can see better.)



TheSnapper
Runner    Stake    Odds    Liability    Result
Requinto    $13,17    3,45    $32,77    $13,17
Sir Cool    $14,90    3,2    $32,78    $14,90
Daring Man    $15,21    2,92    $29,20    $15,21
Oracle Des Mottes$34,58    1,43    $14,87    $34,58

Mr.Kelly
Runner    Stake    Odds    Liability    Result
Requinto    $4,82    3,65    12,77    $4,82
Are You The One    $5,36    3,15    11,52    $5,36

I want you to take a close look at Oracle Des Mottes in these figures.. It was a horse running at 1.43 in the place market against a weak field. Look at the liability I placed against it - $14,87. Compare that to the liability I placed against Requinto - $32,77. Kelly Staking requires larger bets when the event is more likely to occur...for layers, this means you need to stake more against outsiders and less against favourites, as I have shown in this example. Why? Well, it is clear. To compound your profits quickly you should be interested in winning often, not making bets on things which will only payoff once in a thousand times. Both might be fine bets, but the high-probability bet is the one which should interest Kelly betters, due to the higher compounding possible.