Friday, August 17, 2012

Seasons Greetings

London 2012 was a terrific spectacle (albeit one I only experienced on TV), but whilst it had its memorable moments it also reminded me that football really is a uniquely attractive spectator sport (not the Olympic sort admittedly which was garbage).

Football’s fast pace, continuous action, crowd involvement, variability and low-scoring nature all compare highly favourably with say handball (too high-scoring), hockey (too disjointed) or volleyball (lacking variety).

I completely share the sentiments that many players could learn something from the humility exhibited by our Olympic winners, but it would only be fair to acknowledge that much of what passes for typical footballer arrogance or aloofness may simply be a pre-requisite given the toxic atmosphere that many must perform in (particularly away from home).

Chelsea or West Ham away on a wet Tuesday night is no place for shrinking violets.

Compare this to the generally supportive atmosphere at any given swimming, rowing or cycling event and it is immediately clear that any direct comparision is unfair.

Anyhow, we probably won’t experience another home Olympics games in our lifetimes so let’s give our heroes their dues but refocus back on the far more important matter of the new football season.

I will hopefully be able to provide more colour on the strange goings-on at Charlton this summer in due course, but one would have to be an eternal optimist or at least an extraordinarily strong believer in the type of ‘Moneyball’ theory I’ve espoused on this blog, to conclude that four signings (three of them free agents) was all that the squad needs to be competitive in the Championship.

I’m particularly concerned about the Charlton midfield which often struggled to control matches even last season, and which has a decidedly laboured feel to it.

More generally the new 4-year parachute payments awarded to relegated clubs puts the likes of the Addicks at a meaningful disadvantage, because as is already clear the likes of Blackburn, Bolton and Wolves can afford to ‘gamble’ for at least a season (if not two) before the reality they need to realign their cost base with non-Premiership revenues sets in.

It is perhaps no coincidence that the three relegated clubs from 2010/11 (West Ham, Blackpool, and Birmingham) all managed a top six finish last season – certainly no Charlton-esque post-relegation collapse here, and I expect the aforementioned trio of new Championship arrivals to perform well too.

Meanwhile we must also compete with several clubs with strong fan bases and now wealthy foreign owners, each with their hearts set seemingly on a rapid promotion (eg. Leicester, Hull, Forest, Cardiff).

Even the less well-supported likes of Watford have new owners and in their specific case, a unique opportunity to draw upon some raw talents across their European portfolio of clubs.

Now of course as Portsmouth have proved, new owners can be catastrophic in the medium to long-term but they are rarely so in the near-term (Blackburn perhaps being a rare exception) and Charlton must compete in the here and now, and we appear to be starting the season from the back of the grid as it were.

Whereas League One was chock full of frankly tiny clubs trying to compete with us despite a fraction of our resources, now we find ourselves in the same boat – we might even recognise some names on the opposition teamsheet too.

On a related topic, last season I explained a theory I use to assess the total points ‘spreads’ which the likes of Sporting Index offer, and which served me well last season.

The three outstanding bets I identified last season (in League One) were to SELL Rochdale at 62 (actual: 38), BUY Notts County at 58 (actual: 73) and SELL Brentford at 68 (actual: 67).

On an equal-weighted basis, these would have earned profits of 40 times the unit bet per point, which not surprisingly gave me the impetus to conduct the same assessment again.

The first part of the process seeks to predict how many points each club would generate ‘on average’ if the season was played out say 100 times (based on current information on squads, managers, finances etc.).

This essentially sets out a prediction of a ‘typical’ league table at the end of the season. Hence what follows is my current expectation for this season’s Championship – the actual spreads offered by Sporting Index are listed to the right.

One might narrow down the possibilities by starting with a simple rule to buy any spreads where the average expectation is at least two points higher than the spread, and sell any spreads where the average expectation is at least two points lower.

The results of that simple rule are shown above below and it already rules out betting on exactly half of the clubs because in short, if you can barely be confident in being ‘right on average’ then it is unlikely to serve as the foundation of a profitable strategy:

Leicester 82 70.5-72.5 BUY
Bolton 82 73-75 BUY
Blackburn 75 67.5-69.5 BUY
Wolves 74 71.5-73.5 NO BET
Hull 72 63.5-65.5 BUY
Leeds 72 67-69 BUY
Cardiff 70 69.5-71.5 NO BET
Middlesbrough 68 64.5-66.5 NO BET
Notts Forest 65 63-65 NO BET
Birmingham 65 69-71 SELL
Blackpool 65 66.5-68.5 NO BET
Ipswich 63 62-64 NO BET
Burnley 63 59.5-61.5 NO BET
Derby 62 58-60 BUY
Brighton 62 64-66 SELL
Sheffield Wednesday 60 62.5-64.5 SELL
Huddersfield 60 57.5-59.5 NO BET
Watford 60 62-64 SELL
Charlton 56 58-60 SELL
Crystal Palace 54 53.5-55.5 NO BET
Bristol City 54 50.5-52.5 NO BET
Millwall53 54.5-56.5 NO BET
Barnsley 52 46-48 BUY
Peterborough 50 48-50 NO BET

However the second part of the process is equally important, if not more so and seeks to include an assessment of the likely range of outcomes – an assessment of the ‘volatility’ of those average points totals if you like.

Not only is it important to be right more often than you’re wrong (what the first part above seeks to ensure), but also to make your wins bigger than your losses ie. ensure the likely distribution of outcomes is skewed in your favour.

It is reasonable in my view to assume for example that clubs with uncertain financial situations (eg. Charlton) or rather experimental business models (eg. Watford, Blackburn), might have a wider range of possible points totals than more stable clubs like Derby or Brighton.

I use a ‘95% confidence’ range (ie. one within which I would expect the club’s points totals to be in 19 out of 20 seasons) – clearly on a 100% confidence basis the range would have to be from zero to 138 points which isn’t very useful, and I’m willing to take the risk that I’m wrong 5% of the time (especially given I may be wrong in a profitable direction!).

The following would be my assessment of the range of outcomes of the twelve remaining clubs on a 95% confidence basis, again with the actual spreads shown alongside (and the ‘average expectation’ from above in brackets).

Here my additional rule is that the ‘upside/downside’ risk has to be at least 2:1 in my favour.

Leicester (82) 70-95 70.5-72.5 BUY
Bolton (82) 70-90 73-75 BUY
Blackburn (75) 66-95 67.5-69.5 BUY
Hull (72) 62-85 63.5-65.5 BUY
Leeds (72) 65-88 67-69 BUY
Birmingham (65) 58-76 69-71 NO BET
Derby (62) 50-70 58-60 NO BET
Brighton (62) 54-72 64-66 NO BET
Sheffield Wednesday (60) 50-68 62.5-64.5 SELL
Watford (60) 48-72 62-64 NO BET
Charlton (56) 39-70 58-60 NO BET
Barnsley (52) 36-58 46-48 NO BET

For example in the case of Bolton, I can buy the spread at 75 points and I additionally expect that in 19 out of 20 seasons, I could win as much as 15 times my stake (the upper end of my range ie. 90 less my bet entry of 75) whilst only risking 5 times my stake (my bet entry of 75 less the lower end of my range).

Thus the upside/downside is actually 3:1 in this case, and thus sufficient to warrant taking a position.

This ‘profitability hurdle’ meanwhile rules out a bet on Birmingham, Derby, Brighton, Watford, Charlton and Barnsley.

Interestingly given our opening home game, the most extreme example of an attractive bet is ‘buying’ Leicester at 72.5 – this spread is almost ten points inside my ‘base’ expectation of 82 on average, and moreover offers an upside/downside ratio of 9:1.

It is often useful to try to rationalise what appears to be an extraordinarily appealing opportunity just in case you've missed something, so here goes: Leicester started 2011/12 as pre-season favourites on the basis of their strong squad, but the bookies did not discount of the ‘Sven factor’.

With the more competent Nigel Pearson at the helm, with a full summer to prepare his squad (whilst also adding to it), and with wealthy owners likely willing to use the January window to make a real ‘push for promotion’ (if competing) then I’m comfortable that this bet also passes what one might call the ‘smell test’.

Indeed it makes sense to weight the size of each bet according to the degree to which they stand out on the above metrics, so my Championship ‘investments’ will be as follows:

BUY: Leicester (high conviction), Bolton (low conviction), Blackburn (medium conviction), Hull (medium conviction), Leeds (low conviction)

SELL: Sheffield Weds (low conviction)

I’m slightly nervous that the analysis is throwing out a disproportionate amount of ‘buy’ recommendations, but the same analysis across the Premiership and League One threw out more ‘sell’ recommendations than ‘buy’ so across the divisions it is about even suggesting no inherent bias either way.

For those interested, the most attractive bet across all three divisions was to ‘sell’ Swindon at 73.5.

Before anyone attempts to superimpose their own forecasts on my model, I should finish with a small disclaimer: Please ensure you understand the risks with sports spread betting as it involves a high level of risk and you can lose more than your original stake.

Up the Addicks!


At 2:44 PM, Anonymous Anonymous said...

I'm not worried about who came down from the Premier, nor about the likes of Cardiff. We are not competing with those guys.

Sure a top ten finish would be great, but ultimately, we should be realistic and hope for a mid-table finish and in the process avoid any chance of a relegation scrap.

Consolidation is all we need. Anything else would be a nice bonus.


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