Book Review: Handicapping The Wall Street Way: Picking Xtra Winners at the Track

Ah yes my friends. Today it is my pleasure to bring you a review of the book of one of our advertisers, Uberhorse.com. The book is written by Mark E. Ripple and the title is as shown in the header for this entry.

The general thesis of the book is that playing the horses is much the same as investing in the stock market. Particular with regards to the Efficient Market Hypothesis (EMH) as an analogy to the wagering pool. The gist of EMH is that at any given moment the given price for a stock is at the proper level due to the vast amount of information known about the underlying asset the stock represents. The idea being that the ebb and flow between rational buyers and sellers establishes the true value for the stock.

The author makes the claim that betting pools behave similarly to the market in that there is a vast amount of information processed by rational players which is used to establish the proper odds for each contestant in the race. Therefore, at any given moment the odds for a given horse are a true reflection of that horses probability of winning the race. The author has dubbed this phenomenom the Efficient Pool Hypothesis (EPH).

Naturally, there are flaws in the EMH as well as the EPH and imbalances occur in both markets that the astute trader (player) should be able to take advantage of. Without going into all the reasons (greed and fear) that these imbalances occur, I am in general agreement with the author on this count.

Generally, in the markets and in the wagering pools, the crowd gets it right most of the time. In recent years in the stock market we've seen many manias and panics. These manias and panics are over-reactions of the crowd to certain pieces of information which is either favorable or unfavorable. The author gives several examples of how these imbalances may occur at the racetrack and suggests methods by which one may take advantage of these imbalances. The think I liked best about the suggestions are that they were simple, easy to follow, common sense ideas without a lot complicated or esoteric calculations that are impractical for most player and, in my opinion, of dubious value anyway.

The author talks a little about the psychology of betting. The subtitle of Chapter 2 is "The Zero Sum Game". I disagree with the author on this point. Because of the take-out, racing is actually a negative sum game. The track returns less to the bettors than they take in, its how they make their money. Here he makes some generalized observations about different types of players and the effects these different types may have on the betting pool. I really think this is probably one of the weaker sections of the book as the author makes several conjectures regarding player preferences which may or may not be so.

Most analogies are of limited value at some point, and here I think the author meets his Waterloo in comparing two and three year olds to penny stocks. I don't think anyone is thinking of Rachel Alexandra as a penny stock. Personally, I love betting 2 year old sprints because they are all about speed as two year olds just hit the track and go. They have yet to learn the finer points of racing and if you can find the one that will break well and carry his speed for 4 1/2 furlongs you've likely found the winner. But even noted author James Quinn warns against playing 3 year old maiden races saying they are too unpredictable, so I can't totally bust on the author for this part of the book. I'll just say that I didn't think this part of the book added much to the discussion and move on.

The author offers a little questionnaire to help the reader determine his risk profile. I think the questions are, for the most part good and perhaps useful to the novice just starting out. My personal question regarding this part of the book is how the author came up with these questions. If he developed them himself, then in what way is he qualified to come up with these questions? Perhaps he could answer that as a stock broker, part of his job was to assess the risk profile of potential clients. Or maybe, he collaborated with a qualified psychologist to arrive at these questions and the personality assessment based on the answers to the questions. Either answer, or perhaps another would satisfy me. It would just be nice to know. By the way, I fit the high risk profile.

After determining whether you are a high risk kind of guy or more conservative bettor, the author then offers potential strategies and angles one can use which fit the profile. Again, what I liked about these offerings for both the aggressive and conservative player is the simplicity of the methods and the clear straightforward manner in which the methodologies may be applied. I do have some basic disagreements some aspects of the approaches the author uses, especially those that would require me to carry a calculator to the track. But that is only to say that there is more than one way to skin a cat, not to disparage the methods the author proposes. There is my perpetual quibble that I would like to see some statistical documentation that these methods are actually profitable, but maybe that is asking too much.

The author offers a list of tracks that he suggests are good for either long shot or conservative players. I'm not sure about how accurate this chart is, particularly after the Uber chalky Saturday I spent at Calder on Saturday. And many of the races at Gulfstream with its emphasis on 3 year olds and horses coming of their late fall early winter layoffs can at times be quite inscrutable leading to frequent box car payoffs.

The author discusses money management. Good for him. More authors should discuss money management. Barry Meadows suggested using the Kelly Method to determine bet size and, for my money, this is the method that has always made the most sense except for the fatal flaw that it required me to use a calculator at the track. I found that I was spending most of my time figuring out bet sizes and not really enjoying myself. The author discusses progressive betting methods where the player bets more money on each successive race after a loss until the player finally wins. The problem is, if the player doesn't win soon enough, he goes bust. The author kind of hedges his position on progressive betting sort of saying he, "is not a big fan of progressive betting in general, but the Fibonacci sequence is certainly my favorite method....." I'm not quite sure if he's fer or agin it.

I did like his Dutching section and in fact I used that method in my Preakness bet. Unfortunately for me, for dutching to work, you still have to have the winner. I don't usually dutch, as a rule, but somtimes I find it a useful tool, particularly if I have two longshots in a race I feel good about. The section on dutching, if you are not familiar with the technique is very useful. Personally, I tend to be a flat bet wagerer although I will occasionally vary the size of my bet depending on odds, mood, or confidence in my handicapping of a particular race. The author states that flat betting does not take full advantage of the conservative betting methods he suggests, but then I am not a conservative better and will tend to put more money on longshots than my short priced overlays.

The last chapter, discussing finding value in exactas is very useful, particularly for new players. Unfortunately for me, I'd have to take a calculator with me again. For me, if at least one of my contenders is an overlay, then I'm good to go. I know that this is not always a reliable method for finding value in the exacta pool, but its close enough for me to work with. However, the author is technically correct and one should at least pay attention to the exacta payoffs to determine if the pay out is really worth the risk. I do wish that the author would've discussed value in more depth in other parts of the book.

In summary, while I do have some quibbles and disagreements with the author such as I have already discussed. I did find the book to be a worthwhile read. There is a saying, attributable to Benjamin Graham, I think,"Buy when there is blood in the streets." Or, to put it another way, when everyone is jumping on Smarty Jones or Big Brown in the Belmont, maybe its time to look for a little value elsewhere. I think the author gives a unique perspective and offers some good solid advice. If I ever find a book where I agree with everthing in it, I'm goin to go have my head examined. To me the great thing about racing is everyone is entitled to their opinions and beliefs and furthermore, they can put their money on it.

So in closing, buy the book. The price is reasonable and you definitely will learn something from it.