SHOULD TV BETTING ANALYSTS HAVE “SKIN IN THE GAME”?

Andy Serling, a television handicapper for the New York Racing Association, recently opined (on At the Races with Steve Byk) that people whose job it is to recommend horses to bet on should have skin in the game.  That is, they should risk their own money on their picks.  What percentage of the on-air hosts at the various racetracks and at TVG do so is unknown, but the guess here is that the percentage is very small.

Is Mr. Serling correct?  I believe he is, with one modification: analysts should at least reveal to viewers if they have backed each and every pick with a bet.

On Cable television shows like Fox Business or CNBC, whenever guest analysts appear to discuss and recommend stocks to buy, a graphic is often shown to viewers depicting whether the analyst or a member of his/her family own a stock being endorsed.  If the analyst does not own a position, the obvious question is why not?  If he or she does have an ownership stake, this signals confidence in the pick or, alternatively, that the analyst may be hyping the stock to run up its price.  If an analyst’s ownership position is not revealed at all, his or her recommendation is manifestly not as credible.

Before purchasing a company’s stock, a skilled investor knows to access publicly available information pertaining to how many shares of the company’s stock insiders hold.  A large ownership stake by executives and board members is a favorable finding whereas token ownership or selling signals caution.  Recent purchasing activity by insiders is another indicator of the confidence they have in the company’s future.

Over time, a horse bettor following the picks of a TV analyst can judge the analyst’s skill.  But it would be informative if the analyst were to let viewers know whether he or she personally has backed a horse and even for how much money.

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