FOLLOW THE MONEY?

Betting favorites in horse racing win about 30% to 35% of the time, which is a high degree of accuracy given that the average field size is 7.38 runners per race. This varies by track, type of race, the number of entries, and other handicapping variables. 

In the 2021 NFL season, favorites won 64% of 272 games, not considering the point spread.  Over the past five years, NBA favorites won regular season contests 67% of the time.

But what about political elections?  In predicting event outcomes, sports or elections, I’ve always watched what people do with their money rather than what they say.  How did this heuristic work out in the November 2022 American elections?

Betting markets on political elections work as follows (using a direct quote from one of the betting websites): “Each share is priced somewhere between $0.01 and $.99 apiece.  If the event comes true (the bet taker) rewards the holder of yes shares with $1 less fees.”  So, if candidate X has a value of, say, $.75 and wins the election, the bettor wins $.25 per share less fees.

On the day prior to the November 2022 elections, the Cook Political Report listed 23 of the 35 Senate seats up for election as being “solid,” meaning that each seat was judged to be safe for a Democrat or Republican candidate.  Indeed, these seats went 100% as forecast and bettors had the winner as the heavy favorite in each and every race.

Cook listed 8 of the 35 seats up for election as “likely/lean.”  These seats were projected as being in play but one party had the clear advantage.  All of these seats went as forecast and bettors favored the ultimate winner in every case.

This left 4 of the 35 seats in Cook’s “tossup” category.  One of these seats (Georgia) is still unresolved and will be decided in a runoff in early December because no candidate received 50% of the vote.  On the day before the election, bettors favored the Republican candidate in Georgia (64 cents) to his Democratic opponent (41 cents).  In fact, the Democratic candidate garnered more votes.  In two other states (Nevada and Pennsylvania), bettors turned out to be wrong, favoring the losing candidate.  Finally, bettors split evenly on the Arizona race, with half favoring the Democratic candidate and half favoring the Republican. 

Removing the Arizona race, where the bettors split, and the Georgia race, which is unresolved, bettors were correct on the outcomes of 31 of 33 Senate seats for a winning percentage of 94%. 

How did bettors do in wagering on who would win control of the Senate and House of Representatives?  In the Senate, bettors favored Republicans (68 cents) over the Democrats (37 cents) and were wrong.  At best Republicans can have a tie in the senate at 50 votes for each party if the Georgia runoff goes their way, but Democrats would have control because the (Democrat) Vice President casts a vote to break tie votes on legislation. In the House of Representatives, bettors favored Republicans (90 cents) to Democrats (6 cents) and were correct in the outcome. 

Bettors would have won by choosing the favorite in the vast majority of Senate races, but the payoffs for doing so would have been small.  However, in the tossup races, bettors fared poorly.  While bettors were right about Republicans taking control of the House of Representatives, it was a closer outcome than the public opinion polls and the wagering predicted.  And bettors favored the wrong horse in the Senate.

“Follow the money” is often a reliable guide to how an event will turn out.

Copyright © 2022 Horse Racing Business

RACEHORSE OWNERS ON THE 2022 FORBES 400

The 2022 Forbes 400, which identifies the wealthiest Americans, includes the same four racehorse owners as in 2021: John Malone (Elizabeth, CO), Tamara Gustavson (Lexington, KY), Gayle Benson (New Orleans, LA), and Vincent Viola (New York, NY).

A discernible pattern on the Forbes 400 is the number of major sports-team owners on the list (Jerry Jones, Dan Gilbert, David Tepper, Shahid Kahn, Stan Kroenke, Robert Kraft, and others).  Likewise, Gayle Benson and Vincent Viola are sports-team owners.

John Malone, age 81, is the 66th richest American, with a net worth of $9.7 billion. He is the largest land owner in the United States and has racehorse farms in Florida and Ireland—Bridlewood in Ocala and Ballylinch Stud in County Kilkenny.  Malone’s main source of wealth comes from cable television.  He holds an earned doctorate in Operations Research from Johns Hopkins University.

Tamara Gustavson, age 60, is 83rd on the Forbes 400, with a net worth of $8.1 billion.  She is the daughter of B. Wayne Hughes, who died in August 2021.  He pioneered the concept of self storage.  Tamara Gustavson and her husband Eric Gustavson own Spendthrift Farm.  She earned bachelor and masters degrees from the University of Southern California.

Gayle Benson, age 75, is number 224 on the Forbes list, with a net worth of $4.7 billion.  She is the widow of Tom Benson and owns the NFL’s New Orleans Saints and the NBA’s New Orleans Pelicans franchises.  She races under the name of GMB racing.

Vincent Viola, age 66, is number 310 on the Forbes 400, with a net worth of $3.6 billion.  His source of wealth is electronic trading.  Viola owns St. Elias Stable and the National Hockey League Florida Panthers and was a partner in 2017 Kentucky Derby winner Always Dreaming.  He is a graduate of the United States Military Academy.

Brad Kelley is one of the largest landowners in the United States, and his holdings encompass the legendary Calumet Farm.  Yet with an estimated net worth of $2.5 billion, he comes in at only number 1,163 on the Forbes list of wealthiest Americans.

Copyright © 2022 Horse Racing Business

2022 BREEDERS’ CUP REFLECTIONS

The weather in Lexington cooperated and Flightline put on a performance for the ages in the Breeders’ Cup Classic at Keeneland.  Life is Good led until the stretch and showed just how game he is, setting blistering fractions of 22.55 seconds for the first quarter mile and 109.62 for six furlongs. However, in the end, Flightline was so dominant that the rest of the field looked like $5,000 claimers.  The official chart read that Flightline was “in hand during the final stages,” indicating that he could have finished faster than the 2:00.05 recorded for the 1 1/4 miles.

Irad Ortiz, Life is Good’s jockey, described his thoughts during the race: “I felt him [Flightline] every step of the way, just tried to get away from him and couldn’t. I know I’m going fast and said let me look again down the backside and he’s there. I said ‘Oh my God.’ Then he goes by me like nothing. He’s an unbelievable horse.”

Two days after the Breeders’ Cup Classic, a 2.5% share in Flightline was sold at the Keeneland Breeding Stock Sale for $4.6 million.  While some people said this auction price gives Flightline an imputed current value of $184 million, that is almost certainly flawed reasoning. A more defensible assumption is that the person who spent $4.6 million for a 2.5% share vastly overpaid and therefore Flightline would not bring close to $184 million if he were to be sold privately or at auction.

The 80-1 winner of the Kentucky Derby, Rich Strike, finished fourth, which earned a purse of $300,000.  Not bad at all for a former $30,000 claim.

European-trained horses prevailed in the turf races, with Coolmore and Godolphin winning three races each.  One of the television announcers correctly commented that the winners were not the best horses in the Coolmore and Godolphin arsenals. They were back home in Europe.

All-sources handle for the two-day Breeders’ Cup cards set records.  The total bet was almost $190 million, a 3.4% increase over the previous record set in 2021 at Del Mar.  The ten races on Friday had all-sources wagering of over $66 million—a 7% increase over 2021—and the twelve-race card on Saturday attracted handle of nearly $123 million—compared to $121.5 million in 2021.

Copyright © 2022 Horse Racing Business