I make no secrets about the things I absolutely love in my life. Beautiful women, good food, my family and very close friends and, of course, sports. Any day filled with all of that is a great one, in my opinion.
On the sports side there is very little I care for more than the Pittsburgh Steelers. I was born and raised just outside that great city and visit often, as I travel around the world. My family is still there and nothing is better than sharing Thanksgiving dinner with them and then catching a Steelers game live on Sunday. The feel of that stadium is like no other.
A lot of the loyalty that comes towards that team is based on the economics and culture of the town. Hard working people who love their family and their home teams. You would be hard pressed to walk around my town and not see Steeler paraphernalia, from hats, to T-Shirts, to cars painted in the team colors and even babies born wrapped in the team towel. Steeler football isn’t just about a sport, it’s about a life and how the people of that city see themselves. Tough, honest and strong.
Now here is the part that some people can’t wrap their head around. Sometimes I invest in the team that is playing against the Steelers, and I still cheer for the Steelers. I know it’s bizarre but it’s true.
You see, ScoreMetrics is an investment strategy that I developed that used algorithms, models, and research mechanics to find metrics that I can invest in. I don’t care who wins and loses, because I trust in the systems to give me a favorable pattern of success that shows measurable profits. The proof is in the profits; ScoreMetrics backtested results show a 156% ROI just for baseball season alone last year. BTW baseball season is only 26.5 weeks long!
Let’s get back to the lesson here today; I can love the Steelers and I can still invest in sports, because I am non emotional about my investments. Stocks go up and down. Property values rise and fall. Some investments win, and some lose. I have been on both sides. I risk what I can afford to lose and I live with the consequences. ScoreMetrics has just been an amazing find for me that gives me comfort that it’s not connected to any other market and has maintained its success year after year. I also love the exclusivity that I have in what I am doing because no one else is doing it!
But let’s use the Steelers and look at them in analytical sense for a moment. In doing this I will hope to give you a better idea of what it is we do in the office when we are combing through data and how we develop our systems.
The Steelers have won 7 out of 8 games. An impressive number of wins for any team over that time period, even more impressive given the injuries and obstacles the team has had to overcome this season. But, again, none of that matters. ScoreMetrics looks strictly at the data.
So forget it’s the Steelers, because it doesn’t matter. Instead just think of a team that has won 7 out of 8 and let’s see if there is an opportunity to cash in on this and speculate.
Remember that we are never looking at one game as an investment, but instead a series of games that match the same criteria and are mathematically proven to provide us profit that makes our risk worth it. This is the basic map for how we develop a system in the ScoreMetric data labs.
In this case, teams that win 7 out of 8 games in the NFL have a record of 266 win and 144 losses in the last 16 years, winning at a rate of 64.9%. At first look you might think you have found a system that provide 20+ investment opportunities a year.
That number if opportunities is actually perfect for a ScoreMetrics system so let’s dig deeper.
It turns out using this as a system would make us look foolish. If you only invested $100 per game during this time you would have a net profit of $341 over that 16 year period, with 5 years having a negative ROI. Your biggest profit year would be $621 and your biggest loss would be -$574.
So, as impressive as the streak looks and as likely as they are to win this next game, it’s not a good fit as a sports investment system for ScoreMetrics. Now normally we would add more layers of data to a system before giving up, and we did that here as well. The ScoreMetrics lab allocated 6 hours deep diving into this theory only to come up empty, unable to fit our system criteria.
Why? Low profit potential, it’s worst year is worse than the average of all the best years and far too many years with a negative ROI. This is a high risk, low reward system that I would never even think of adding to our portfolio.
I hope this little walk through a system theory helped some of you out there understand exactly what it is we do and how we do it. None of it is easy as it takes hour upon hours to work these data strains and work out path to profit.
So, for today, we will just have to hope that my beloved Steelers can win again this Sunday and keep the lab working and looking for new systems.
I do have a feeling on the Steelers this weekend though. Anyone wanna bet lunch? =)