Thursday, August 28, 2014

To all of you who have ever been ripped off by online gambling sites, a friendly reminder: Winning is the best revenge! And if you like to bet on horse-racing, I can show you how to make a long-term profit.


After five years of doing this (this is #250!), I have reached the point where I don't post to these pages unless I am confident that what I have to say will be of interest, and hopefully some value, to at least a few of the readers who click this way day in and day out.

I have taken a critical position against online "casinos" a few times in the past (see the long-standing note at the bottom of every post) but gave up the campaign as a lost cause when it became clear that politics and vested interests will never make the bet-from-home process fair and safe for players in the USA.

What follows is a restrained, corroborated rant about the hypocrisy of the term licensed and regulated outside of our borders.

But first, I'd like to offer an analogy to help illustrate misconceptions about what public protection safeguards are likely to amount to once large sums of money have legally changed hands.

It's Main Street in Anytown, Anywhere, and a fancy new restaurant has just opened in an area where eating out options were once bland and boring, and a menu offering items more exotic than burgers and hot-dogs or fried chicken and pizza has been eagerly awaited for years.

The place gleams with newness and cleanliness when the doors swing open, and a big official certificate out front confirms that the kitchens and dining areas have been thoroughly looked over by professional health inspectors, and everything is A+ perfect.

For the first few weeks, critics rave about the quality and freshness of the food, word of mouth spreads, and the new joint is filled to bursting point night after night.

Then someone reports seeing cockroaches scurrying under the tables, and soon after that an entire family has to have emergency treatment for food poisoning.

More horror stories are reported, and pretty soon everyone in Anytown knows someone who has been to the Fancy New Place and regretted it, sometimes after getting very seriously ill.

But miraculously, the local health department's A+ accreditation stays on display by the restaurant door.

As a result, people from out of town who don't know better keep ordering food and putting themselves at risk, thinking that the meals must be fresh and the kitchens clean because a respectable regulatory body says so.

Anyone who thinks to jot down the health department's phone number and put in a call to complain is given the same official explanation.

The A+ rating was posted right after the owners of the restaurant paid a $250,000 licensing fee, and submitted a food safety report from outside inspectors who were hired by...the owners.

The rigid official position turns out to be that regular spot-checks on health and cleanliness standards are never carried out.

And remote health department updates occur on a prearranged schedule just once a year, a few days after a renewal application (and another $250,000) is received.

Again, inspections are not carried out by the public authority, which instead supplies guidelines to an authorized sub-contractor, and rubber stamps a fitness report paid for by the restaurant operator.

Crazy stuff, right?

I mean, what regulatory authority charged by legislation to protect the public would put its own reputation at risk, let alone the best interests and safety of the public it was created to protect, for a measly few million dollars?

Here are a few names:

The (UK) Gambling Commission
Alderney Gambling Control Commission
Government of Gibralter Remote Gambling Commission
Isle of Man Government Gambling Supervision Commission in association with
Malta Lotteries and Gaming Authority

Early this year, an opportunity came along for me to spend an indefinite amount of time in England, and I jumped at it because it would give me access to online betting services that, officially regulated under the terms of a 2005 gambling law as they are, are certain to be honest and upright.

Or so I thought.

But here's the way it really works.

Because the British Government doesn't want to soil its pristine image by being directly involved in something as seedy as gambling but needs all the tax revenue it can get, it dodges the dirt by creating outside bodies to get the gambling money machine rolling.

Lotteries have been running for years in the UK, but what some people see as a tax on stupidity (and I'll admit, I buy lottery tickets most weeks!) has somehow become respectable the world over, and Britain offers games that are almost uniquely fair.

All prizes are free of income tax, hallelujah!  And a very large percentage of lottery revenues go to a variety of good causes without affecting government contributions (unlike in California, where the billions in lottery bucks that go to schools have enabled the state to pare its general fund education allocation, and squander our tax money elsewhere!).

So, schools in California are worse off than they were when the state lottery was launched for their benefit, while in England, stupidity taxes keep countless good causes and public projects running with more grant money than they ever saw before.

The UK Gambling Commission that was created in 2005 to oversee online "casinos" and bookmakers apparently didn't want to get its hands dirty either, so it promptly handed the groundwork over to a number of "approved regulatory authorities," most of which are listed above.

Not one of those bodies has any kind of mechanism in place to ensure that, in between licensing applications (and payment of fees ranging from more that $120,000 to $500,000 depending on anticipated revenue), its approved licensees actually run straight games.

There are rules that must be followed, and one of them at least is a huge improvement on the experience many of us can expect when we try to withdraw winnings from unregulated online operations in America.

In the UK, withdrawals from an online stash are credited to your bank account almost instantly, only very rarely taking longer than a couple of hours.  Imagine that!

My primary interest in British gambling sites, including those run by High Street bookmaking giants who have been in business for decades, is centered on home-based horse-race betting, which is made almost unworkable in the US because it is only offered as an afterthought.

I apply a variation of the Target progressive betting rules at the track, and focus entirely on favorites and second favorites, filtering odds without reference to any other data.

And because online bookies accessible back home provide very little information about changing odds going down to the wire, a 3-1 second favorite five minutes before the off can dwindle to 3-2 or less before the gate goes up.

That makes life tricky indeed for a betting strategy which relates next-bet (NB) values to a specific goal or target.

For example, if I'm down $500 and a qualifying entry—one that meets my odds requirements—presents itself at 4-1, I might trim my bet to $150 in anticipation of a little bonus on top of my win target, only to have the payback drop to 5-2 and leave me still in the red after a win.

The result in short, as Dickens would put it: Misery.

Another win will come along to mop up the red ink eventually, but delayed and unreliable information makes off-track horse-race betting in your underwear (or whatever) a frustrating business.

First-rate online tote-boards at some of the top US tracks take some of the anxiety out of the process.

But overall, there is a shortage of data that makes it smarter on the whole to stick with props in which the odds are relatively stable.

At one point, I was reasonably confident that shrinking odds after a bet was placed could be compensated for with frequent adjustments in the loss to date (LTD), but in the end I had to accept that flying at least partially blind was a problem.

I also had to concede that America's unlicensed and illegal online bookies had too much power on their side, able to stymie horse-race bettors by forcing them to wear blinkers, and even manipulating the odds on events that had more comprehensive coverage.

The UK's online bookies offer a veritable horse-race punter's paradise in comparison.

No-strings free bets abound.

Winnings are handed over almost as quickly as they would be at a High Street bookie's counter.

And most books offer a "best odds guarantee" that gives you absolute certainty not only that the odds when you placed the bet won't shorten, but that if the price actually improve before the start, you'll get the higher payback.

On top of all that, you can back either the Unnamed Favourite or the Unnamed Second Favourite, which is a big help if the odds on two or three entries are close,and it's hard to guess which of them will end up matching Target's filter requirements.

Target HR is anathema to horse-race purists who, like sports bettors everywhere, believe in stats analysis and "educated" betting.

They react with horror to the heresy that picking winners is all about numbers and only peripherally linked to form, pedigree, trainers, jockeys, track conditions and other variables.

Never mind that in 8,000 or so races in the UK and Ireland so far this year, favorites won 35% of all races and paid an average of 1.8 to 1 (9/5 or +180), second favorites won 21% at 3.6 to 1 (+360), and the bottom-line numbers for 2013 are almost identical.

At some point, I will have multi-year data covering starting prices on the four shortest-odds entries in every UK/Eire race for the past decade, but that's going to take a while.

In the meantime, consider a recent analysis that looked at more than SIX MILLION races in the USA and concluded that flat-betting favorites has a long-term disadvantage of better than -6.0%, or nowhere near the -30.0% negative expectation suggested by simply looking at the number of wins versus the number of losses.

Betting flat or fixed amounts or determining bet values randomly will still result in a long-term loss, but Target applies a modified set of its long-published progressive betting rules to make betting on both favorites and second favorites consistently profitable over time.

Information about the Target HR methodology is available elsewhere, so let's get back to the topic of UK-licensed casino-style games which all the gambling regulatory bodies above say with hand on heart have an average house advantage of not more than -4.0% (the minus sign indicating negative expectation for the player).

Years ago, I played several hundred hands of blackjack on the Bodog (now Bovada) website and discovered a house edge of close to 60.0% overall, about 60x the NE in a real game and plainly as crooked as a dog's hind leg.

Here's some recent UK data:

SkyBets "SkyVegas" craps, 62 rounds, 19 Wins, 37 Losses, House Advantage 29.0%
SkyBets baccarat, 143 rounds, 51W, 92L, HA 28.7%
SkyBets blackjack, 270 rounds, 85W, 185L, HA 37.0%

SkyBets all games, 475 rounds, 155W, 314L, HA 33.5%

As it happens, I play blackjack strictly by the book and I am a very disciplined, consistent player—but I would have to be very lucky indeed to beat a house edge of 37%.

Baccarat and craps demand no player choices at all if you always back the same proposition (player at baccarat, the field at craps).

So the only legitimate reason for results like those I saw is an exceptional run of bad exceptional that it happened three times in three separate sessions, then twice more.

There's a more likely explanation than bad luck when the unexpected happens again and again, and that dog's hind leg I mentioned before comes back to mind.

A couple more "casino" sessions in the UK:

Betfred blackjack, 40 rounds, 11W, 29L, HA (also expressed as actual value or AV when a sequence has been logged) 45.0%
William Hill blackjack, 45 rounds, 9W, 36L, HA 60.0%

The amounts of real money involved in these transactions are completely irrelevant, but every one of the examples quoted is backed up with account data downloaded from each of the "casinos" involved and available for verification.

We're not talking about a huge number of bets here, less than 600 in all.

But the pattern is crystal clear: five sessions, five losses, with a combined house edge vastly larger than the 4.0% claimed in filings that boast a 96% RTP (return to players), a figure that the "regulators" accept without question.

Not one of the five sessions with three different online casinos saw a house edge of less than 28.0%.

And, of course, the gouge in each and every session bears no resemblance to the numbers that apply to the actual games these robbers are imitating: craps, blackjack and baccarat.

Oddly, if you click up a demonstration version of any of the games on these websites, you will encounter conditions about the same as those you would find in a bricks-and-mortar casino.

You won't win every time, but if you use Target rules against games that mostly have a house edge below 5.0%, you will do well.  You just won't have any cash to show for it.

The very significant difference between the house edge at free-play games and what happens when you switch to real dough should be enough of a red flag to get the online regulators rushing to our rescue.

But wait...they weren't set up to protect players, were they?  Their function was, and is, to give the illusion of careful oversight while collecting millions in fees for doing nothing at all.

The official position of the "regulatory bodies" responsible for assuring fair play on the part of licensees paying up to $500,000 a year for government permission to steal from their customers is that casino software is merely required to prove an acceptable RTP over millions of outcomes.

The figures are never checked.  They are taken at face value.

And as long as complaining customers are clearly informed by a licensee that whatever their experience, it is "statistically insignificant," the casinos' humble servants in Alderney, Malta, Gibralter and the Isle of Man will consider the matter closed, time and time again.

It's simple enough to create a random-number generator that will simulate a house edge at different levels of player pain.  And if the authorities were truly concerned about regulation and control and the protection of trusting gamblers, they would do it themselves.

If they did, they would find that in order to get repeated numbers of the order I saw from consecutive sessions totaling 600 rounds, the simulation's HA must be permanently set at 20.0% or higher.

Of course, the only sure way for an "oversight body" to truly oversee gambling operations is to spot-check games by actually playing them.

And it has been made very clear to me that no such thing is ever going to happen in the UK.

Pity the poor rubber-stampers in Alderney, a tiny island in the English Channel with fewer than 2,000 inhabitants.

They pull in close to £20 million a year in license fees from gambling operations in exchange for cloaking them in fake legitimacy, but 90% of the loot is grabbed by nearby Guernsey, the local authority that brokered the cozy money-for-nothing rubber stamping deal with the UK government.

No wonder the six employees (four part-time) of the Alderney Gambling Control Commission couldn't care less about fairness!

As for the arithmetic of games of chance, it may be true that anyone who bets on a simulated game that does not include actual cards, wheels, balls or dice may deserve to lose.

And if that's the case, then regulation of online games is not needed at all, and supervisory bodies that give the impression that Internet "casinos" are properly monitored and controlled are operating under false pretenses.

My guess is that the only way the integrity of online games will ever be properly tested is if thousands of players get together, log their bets, download casino-generated account records for corroboration, and share their experiences.

But that's not going to happen either, because gambling is fundamentally a solitary pastime, even when 30 players are elbow-to-elbow around a craps table, all yelling their heads off.  The fun is shared, perhaps, but the wins and losses are not.

That leaves us with online betting propositions that can't be rigged, fixed, fiddled or faked, and horse racing is in my view the best of them all, at least in the UK.

Just remember, bet only on favorites and second favorites, and apply Target HR filtering and betting rules with absolute discipline, knowing that while the result of individual races may be unpredictable, and long-term numbers barely change from year to year.

Purists may hate to hear it, but like every other betting market in the world, horse-racing results are in the long run random.  So while experts, including the stewards, may do their best to predict the outcome of any one race, no one really knows a damn thing about what's going to happen.

We know that in 1,000 races or so, favorites will win x% and second favourites will win y%, but that is not much help if we are setting bet values randomly and behaving as erratically as the stats themselves.

That's why, as with all games of chance, it is essential to apply a progressive betting approach that exploits winning trends and limits the damage from prolonged losing streaks as much as possible.

It is mathematically impossible for random betting to win against a large sample of random outcomes.  And because their egos drive them to bet emotionally, the only experts who are certain to win in the long run are those with inside knowledge that is unavailable to anyone else.

Then, of course, they wouldn't be gambling.

Target HR is not for sale, but I will gladly give it away to anyone willing to help me expose online casinos—the dark side of book-making operations that have no choice but to be honest and accountable when it comes to sports betting—and the august public bodies that pretend to regulate them.

At the very least, I will need a log of bets clearly copied from a genuine "casino" website, along with proof that a complaint has been made to, and rejected by, the operator.

I'm willing to bet that if we pool all our data and analyze it with strict, verifiable accuracy, we will see a twisted house edge much closer to the 33.5% I experienced than to the 4.0% that "regulatory bodies" are naively bamboozled into believing...if in reality they believe them at all.

It's possible, I suppose, that an unbeatable algorithm has been secretly incorporated in the game software by its designers and that the "96% RTP" often quoted by commissioners actually includes a hefty skim to pad the percentage of the take paid to the game runner.

The online casinos would then be horrified to discover that nobody can win at their friendly games, and refunds in the millions would be dumped back into bank accounts all over the UK.

Duck, everyone...there's a flying pig headed our way.

_ An important reminder: The only person likely to make money out of this blog is you, Dear Reader. There's nothing to buy, ever, and your soul is safe (from me, at least). Test my ideas and use them or don't. It's up to you. One more piece of friendly advice: If you are inclined to use target betting with real money against online "casinos" such as Bodog, spend a few minutes and save a lot of money by reading this. _