As Captain Renault — Claude Rains’ character in Casablanca — might say, “I’m shocked, shocked that there is betting on sporting events!:”
The Brain Trust [is] a shadowy cabal of gamblers who wager enormous amounts of money on sports events, using a supercomputer and a SWAT team of injury and weather experts to take advantage of minor discrepancies in the point spreads set up by the Vegas linemakers. Itís a multimillion-dollar business ó and legal ó but thereís a wrinkle: they like to bet hundreds of thousands of dollars per game, and whenever the casinos sniff out betting syndicates like the Brain Trust, they show them the door in a heartbeat. Thatís because in addition to risking huge losses each week, the bookmakers are forced to adjust their betting lines ó sometimes by two or three points for a football game ó whenever the ìsmart moneyî wades in, since they desperately need other customers to bet the other side to balance their action and stand a chance of making money.
The foregoing excerpt is from this NY Times book review of Michael Konik’s new book, The Smart Money (Simon & Schuster 2006). As Konik notes, the Brain Trust attempts to manipulate the point spread on sporting events in the same way that hedge funds and currency speculators attempt to move the stock market on certain stocks and currencies. Capt. Renault would almost certainly be playing.
I once batted around the idea of forming a “betting mutual fund” with my buddies around a single NFL season. The idea was to start out with a set amount of money at the beginning of the season, and then “reinvest” each week by betting every single game on the money line (i.e. straight winners). Regardless of whether this strategy was sound, the thing we couldn’t get around was the taxes – 25%. That’s a huge chunk to take from your profits. I wonder how these boys are doing it?