Mark Cramer
C & X Report

CONTENTS
Editorial
BC Lessons
The Microeconomics of Horse Race Betting
Five of the most under-reported stories of 2009
Reflections on the Short Form
Cramer’s Last Shot

EDITORIAL
With this final issue I am not going to say good-bye. You are all welcomed to communicate with me, through www.altiplanopublications.com, where all my contact information is available. From time to time I will post something new on that site.
In the meantime, in this issue I have decided to focus on long-term and short-term lessons. What can we learn from our betting past, from our own past performances, and from those of colleagues? As C&X has often mentioned, the best text book on horse race handicapping is found in one’s own records, especially if those records go beyond a pure ledger. We’ve often referred to the idea of writing in the reason for each bet. A review of all our “reasons” will tell us what works and what does not.
Many C&X readers lament that it’s quite difficult to consistenly keep copious records and confess that they abandon the enterprise after a noble attempt. Naturally the best solution involves complete betting records, but for the “time-challenged” among us who nevertheless have a good will to keep meaningful records, I suggest a “short form” of record keeping.
This involves writing down at the end of each betting day, only how much was invested and how much was returned, along with only two brief narrative comments: first, what was the best decision of the day, and if so, why. This may be for a losing race if the decision was smart enough and chaos contributed to its near miss. It also involves inscribing the most important wrong decision of the day, be it on the handicapping side or the betting side.
You’d be surprised how patterns begin to materialize that will help you avoid bad decisions and increase good ones. An amazing thing happens: the mere act of writing down a reason for a decision on a piece of paper helps to engrave that message in your mind. As a result, the pattern developes within your network of neurons and synapses, and contributes to a quicker and deeper decision-making under stress.
Let’s ask one question: who is the professional player, the guy who says he wins a lot but never keeps records or the one who has clean and neat records that show he has lost 5% for the year. Between these two prototypes, I would assert that the second guy is the real deal, the pro player. He’s more likely to break through the profit barrier. 
I would like to be remembered as the racing writer who did more (or less) than help contribute to the betting handle of the race track industry. Let’s hope that a few lines in this issue will strike a chord and lead to something good in the betting records of the readers.

LONG-TERM RECORDS: A TESTIMONY
Let it be known that this article is not intended as a display of exhibitionism or narcissism. I hope that in the raw truth of my own betting history will contain some message that can carry over into positive results of those who read these lines.
The introduction of Tropical Downs is the most recent reference to my overall records: a profitable bottom line, but an overall income that would have been more easily achieved by working at McDonalds.
There have only been a few brief periods in my life when my betting and making my living were one in the same. When our son was born in 1984 and it was time for my wife to go back to her bank job, I asked her to take a leave without pay and stay home for awhile longer. She agreed, so long as I could make her salary at the track. It was Santa Anita at the time and in the California winter I managed to make her salary for two months. During the third month, I leveled off and my wife became impatient and went back to work. I finished out my horse race year (which for me is the academic year from September though June) with a significant winning meet at Hollywood Park. Then came the doldrums.
Looking back at the Hollywood Park period, a pattern began to emerge. My profits were mainly due to automatic or semi-automatic bets. During the 1980s, my three favorite automatics were Mike Mitchell claims (I had to do a little timing of the market), John Gosden Euro shippers, and beginning at the end of the 80s, Richard Matlow first-time starters.
As often happens in my betting records, I am interrupted by one of three things: a job and security that I can’t resist, a potentially adventurous travel experience, or a crisis that I need to micromanage. During those periods (and my records prove it), my horse betting is scaled down to a manageable level that would make it impossible to make enough of a profit to talk about but also impossible to crash (you could call me a wimp during these periods). After one of those mediocre years, my entire annual profits were spent in purchasing one Cohiba cigar, and these “profits” were then smoked away in a glorious half hour under a palm tree.

The next prolonged success was at the beginning of the 1990s. It actually began during the 1989 summer meet at Hollywood Park when my well in Southern California had run dry and my income network turned brittle. We moved to a town just north of Barcelona, where I wrote Thoroughbred Cycles from a balcony overlooking the Mediterranean Sea. Barcelona is one of the most beautiful cities in the world, but it doesn’t have horse racing. With a short weekend train ride to the southern Pyrenees region of France, a new epoch was ushered in; just across the border I saw the now familiar green and red of a French OTB (PMU) bar. I knew we couldn’t stay in Barcelona and I also knew that one day we would come to France. Don’t tell any France lovers that I was attracted to their country because of the racing. If they knew, I would be considered an heretic.
When we returned to the States, it was to Maryland, splendidly colorful in the Autumn, with an encore performance in the Spring, and there I found myself in a period between jobs: freedom in the realm of time and the need to make my living. It was also the beginning of the C&O Report with one of my favorite all-time iconoclasts, Bill Olmsted. That publicastion eventually morphed into C&X.
For this period of three months, I was able to raise my bet and make a modest living on the horses. Once again my records are strikingly clear. The core of my winnings came from an automatic bet, which this time was a variation on today’s Short Form, exclusively in maiden claimers. I was then offered a job teaching Spanish at Mount Vernon College, women’s university associated with Georgetown. Tough to turn down. This and another teaching gig meant drives to Rockville and DC, nowhere near Laurel or Pimlico, and I was sidelined for most days. The winning period enjoyed a brief aftershock in early Autumn, when I would automatically play the French and English shippers at the Laurel International Turf Festival. That automatic bet was eventually terminated when Laurel discontibued the event.
The third period of salary-sized profits which amounted to a modest but meaningful percentage of my income came about in the 1993-94, at the Cracked Claw OTB in Urbana, Maryland, where coincidentally I met Ed Bain, Susan Sweeney and Julian Brown, three pros. Those were good days. Three years earlier, during my at-the-track Laurel days, I had met Jack E, a methodically winning player who introduced me to the Tomlinson turf sire ratings. By 1993, at the Cracked Claw, I had developed an automatic method (95% automatic) in which I bet maiden turf races and sometimes allowance turf events which included horses trying the grass for the first time. One of my patterns was that I would take the precise opposite position of those experts who write: “never bet that a horse will do something new for the first time”.
This method was so good that I could get 20-1 on horses that should have been 2-1. I froze all other bets. In late 1994 I moved to Bolivia but I managed to continue using the Tomlinson method thanks to two friends who faxed me pps, Art from NY and Bill from Louisiana. That, coupled with betting trips to Gaithersburg and the Cracked Claw, allowed me to prolong that winning period, that with the help of Mike Helm’s pedigree stats. The Tomlinsons were eventually published by the DRF and lost their value (especially since trainers were using those stats to help them avoid entering their can’t-win horse-on-grass horses, making it much tougher to eliminate more than half the field in turf maiden events. At the same time, “Closer Look” columnists were now giving the players turf dam info, and digging the grave on this method.
As my Tomlinson period dried up, things got hot in Bolivia, and my betting was reduced to occasional trips to Maryland, Saratoga and Santa Anita, where I was able to tread just above the level of mediocrity. Strangely, my handicapping was better than ever because absence had made the heart grow fonder, but I lacked something, and that something was an automatic core to my betting and decision making.
So bears repeating that my most fertile betting periods gained their primary sustenance from some form of automatic bet. This is the big lesson for my own betting, and maybe it can be true for others. I recalled that it was also true for the early Andrew Beyer when he discovered a rail bias at Pimlico and made it the absolute core of his wagers.
I had what might be called an exciting life in Bolivia, but without any racing available, I satisfied my yearning for the pari-mutuel challenge by making intense betting trips to nearby Chile, or to Maryland, Saratoga or Santa Anita. In the beginning, as I explained, these betting forays very modestly profitably but as time wore on, my separation from racing was taking its toll and I experienced two consecutive losing trips. I spent a good part of one summer at Canterbury, where I eked out an embarrasingly low profit, but my betting self-esteem had leveled off and was teetering on the brink of clinical . The same situation resurfaced with a trip to Livonia (the nw defunct Detroit track).
That was when we moved to a country where they had racing: France.
For a couple of years in France I was just trading money at the windows, with my bankroll essentially bolstered by the annual Breeders’ Cup and other American stakes races. By now, I could get pps on line and by specializing in the stakes scene, I was able to be intense without being extensive. As often is the case, work intervenes. I had some exciting jobs working at French universities and doing language consulting for French companies. This took a lot of time away from racing and so, as usual, I retreated to a level of betting where I could scratch out a small profit, only by practicing the art of passing each and every race where I had no insight, which meant most of the time. My records prove that my only edge was being able to reject every potentially lethal race. At the time I was wounded psychologically by my own reluctance, but today I realize that I had simply made a wise decision.
I eventually resolved by specializing in one type of race, one per day, where the Paris-Turf centerfold included brutally honest trainer commentaries on their horses’ chances of winning. I was often surprised that the trainer would imply that it was a prep race and that their were better races down the road and yet players would still bet enough on these “trainer-says-no” horses that I could have an edge.
My grand structure of operation was two-fold. I continued with the American stakes races as a foundation but began a new and prolonged round of research on the “short form” (with some visits to American tracks to practice it, especially at Canterbury and occasionally Saratoga) and now I had found a type of short form in France, which became applicable with a bet called the MULTI, where you have to pick the top for horses in any order, with fields of 14 horses or more. In one three-month winter harness race meet, I was once again able to make a percentage of my family income from the races. This period coincided with the fact that work dwindles precisely in December when the big harness race meet began, and in January the universities were on vacation. By the time the Spring semester had restarted in February, I had memorized all the horses on the grounds, allowing for effective shortcutting of my time.
Then suddenly my racing income vanished as the Spring t-breds became a baffling mystery, all of them coming back after layoffs. I am sure that my guerrilla strategy of retreating to the hills when I had a disadvantage had more to do with my profitable bottom lines than the brilliance of my handicapping.
I am now at a point where I am gradually phasing out my work and phasing in more horse betting. While experimenting with using statistical databases, I have also come to the realization that racing for me is a tactile experience and I need to work with paper and bet at real windows, preferably at the track. This may be part aesthetic and part practical. I have not been able to adjust to living any kind of life in front of a screen. I think that the screen lifestyle is having a horrendous effect on attention spans. Some folks have managed to keep themselves in one cohesive piece, but not most.
As you can see, some of these life choices about racing have to do with pure zen, the way a bird chooses a place to nest. My nesting place in racing is not in front of a screen. That’s me, but not a recommendation for any of you. France offers me a wonderful way to “be there” because several race tracks are within bicycling distance.
As an alternative, I wouldn’t mind buying a house in Harpers Ferry, West Virginia and bicycling to Charles Town, or a house near Saratoga, doing the same thing in the summer and otherwise using the OTB. But my good wife prefers to live in a real city, where she does not feel isolated.
I have one other point regarding the zen of racing. In my above account, I have excluded a period in which I entered five racing tournaments, four with Mike Helm and one with betting friends Larry and Jeff. These were all real money tournaments, where if a person does not win a big tournament prize, he could still win money. We finished fifth once and seventh another time, and in total won three prizes, with the bottom line translating to more than a hundred percent profit.
The last tournament with Mike burned me out. Four nights trying to sleep at the Sam’s Town casino and handicap four different tracks. We entered for $500 and on the second day we won the prize for the biggest profit of the day, collecting $1,000 (thanks to two automatic bets, a $30 turf sire winner and one of Mike’s debut pedigree winners at over $50), thus assuring a 100 percent tournament profit, even if we were to tap out.
On the third day, maybe it was the sleep deprivation (no fresh air in the otherwise comfortable rooms) I could not find a single horse to bet on any of the four cards. We were in the tournament room struggling to hold our own when in a rare flash of inspiration, I discovered a pace control horse in a route claiming race at Churchill. It was a late discovery but when I got to what I automatically call “the window” (actually it was a table) there was only one person in front of me and the horses were just starting to load.
The guy in front of me finished with his play and I gave the lady my betting slip for our horse. As the rules stated, it was 10 percent of the day’s bankroll, which meant for us something around $170. (I still have precise numbers in my old records in boxes but it’s painful to dig in and relive.)
The lady told me that it was too late. I asked why. She said, “tournament rules” say that no plays after the first horse loads.
Needless to say, Mike and I watched the horse wire the field, paying $77.00. That would have put us in first place.
We scraped through the day, salvaging some of our bankroll but we were devastated and even the world’s greatest Shrink could not have saved us from self-destruction.
The next day we tapped out, arriving at the airport with a 100% profit and yet totally defeated. Since then, the zen part of me has kept me from entering another tournament.
One day I will do another tournament, maybe with Mike or his son. But for now I can say, as I did in Tropical Downs, that, year after year, I have managed to scrape out a profit (an existential success, for sure, and one I am proud of) but with no bragging rights and certainly not worthy of the applause I have received. I am just one of the guys, trying to find my way.
I looked back again at the records. They told me something uncomfortable. They said that each and every time I had made enough to support myself, it had been a transition situation when my back was to the wall. Often I was between jobs, or was given an inescapable mission, like making my wife’s salary. I thought back to the very first time this had happened, in 1980, L.A., when I was at the point of finishing my temporary contract with USC, with no other work on the smoggy horizon. I had just bought a house on 28th Street and it came down to the closing costs. I had hocked everything, borrowed from everyone I knew, and yet, had come up short. I had a total bankroll of $10. Actually it was milk money for my kids. Back to the wall. I stayed up all night with the past performances from Santa Anita. There were three exacta races at that time, the third, fifth and seventh. I scanned the three races and chose th fifth, the one I understood. I went to sleep at 4am.
The next day, armed with a strong dose of coffee, I drove out there and the first thing I did when I got in was to go up to the window and place the bet, an exacta box. My last tenner. Just enough gas in the tank to get home. That was two hours before the race. I rested on the grass in the infield.
Ten minutes before post I went through the tunnel to the infield and placed myself at the rail, half way between the turn and the finish line.
By the time the horses past my perch, it was apparent that the exacta was mine. Nothing was coming from behind. My numbers lit up on the auxiliary toteboard, and the payoff was about a buck and a half short of the closing costs. Enough to make it.
My records were telling me the uncomfortable truth that for the most part, my betting had been seriously hampered by complacency, the complacency of having an income and having security. They also told me that I have the potential to turn it on again, and this is what I will try to do.


BC LESSON I

Two distinct and precise lessons emerge from the 2009 Breeders’ Cup. Looking back at my past records, I note that on most occasions I got out alive and healthy from the Breeders’ Cup mainly thanks to one or two big payoffs with Euro shippers. That was one of my specialties, and I was proud of it.
Today I fear that yet one more value method may be slipping away. This year, my two Euro winners, Midday and Pounced, returned in the realm of 5/2. In the past, given the contention in both of their races (they were deeply contentious races) they would have returned 8-1 or better. I KNEW something about each of these two winners that the public did not know. On Midday, I knew that the trainer was so hot that betting an equal amount on his more than 300 horses for the year would have yielded a flat-bet profit. On Pounced, I knew that his 7 furlong place finish (he’s a 2yo) was just as fast as the 7f time of Goldikova and older horses the day before!
What I did not bargain for was that a considerable segment of American players were betting these foreign shippers AUTOMATICALLY because of the results of last year’s BC races. For nearly two décades, the Euros have given me a significant profit. It now appears that I must go back to the drawing board for a new methodology to replace this one.
The second lesson is probably good news: the trainer specialty factor is alive and well (even though I missed the longshot winner). I am referring to Furthest Land in the BC Dirt Mile, who returned what they used to call « boxcar mutuels ». C&X readers will rightfully lynch me for this one, and I probably deserve it. In my pps for this race, I have only two horses circled: Mastercraftsman, the overwhelming favorite, and Furthest Land. If you have a copy of your pps, you can see where my red circles were: around trainer Michael Maker’s overall 27% win rate, and then at the bottom, in his specialties for the race, where his percentages hover around 30%, three points more than his overall percentage, and where he has a flat bet profit in three of those categories, with samples of 552 races (route), 239 races (won last race) and second race after long layoff (133 races). Also circled is the horse’s 2 for 2 record on synthetic surfaces combined with Maker’s 31% win rate on such surfaces.
In the end, I singled the unplayably low-odds horse Mastercraftsman for what I felt was an unbeatable class advantage.
The point is that there are still opportunities for the player who blindly wagers on trainer stats.
Aside from my two Euro winners, Pounced and Midday, there was another winner worth referring to, simply for the text book case of what I have called « the Co-Favorite Race », dating back to out of print books such as The Odds On Your Side and Thoroughbred Cycles. In this type of race, two horses tower above the field and can be equated with equal chances, with one of them going off at higher odds than the other.
Thus was my reference, in the F&M Sprint, of Informed Decision as the value over Ventura. ID had defeated Venture, same distance over a different synthetic track by a head. The significant odds differential that gave a betting edge to Informed Decision was nothing less than a rare pari-mutuel gift.
My final commentary concerns the BC Turf Sprint. As I had mentioned, it was a contentious race and the favorite would face less early speed than in his losing effort in last year’s edition of the same race. But the value in this race was its deeply contentious nature, so I explained that I would extract the three most likely longshots: Desert Code, Gotta Have Her and the Mike Mitchell horse, Delta Storm. One noteworthy odds differential was between the two mares, with Diamondrella, coming in from the east and unifamiliar with the SA downhill turf at much lower odds than her soul sister Gotta Have Her, even though the latter was 4 for 4 on the SA specialty course. As it turned out, as a « trifecta-as-place-show-bet », I backed up my wager with a tri key: the fave on top of my three longshots. The fave won, Gotta Have Her was second, and the Mitchell horse Delta Storm was oh so close to holding on for the show. That one back-up bet would have made a huge difference in my bottom line for this year’s BC, but in any case, I was pleased with my handicapping for that race.
PS1: Aidan O’Brien must get our bum of the decade award for showing up year after year with the classiest horses and failing to dominate. His stable operates with the best sires and a huge volume (the way Lukas used to operate), while others with a little less money get more for their bucks, guys like Gosden.
PS2: For me it was much more difficult to place Goldikova on top than it was for American players because most of the professional French handicappers were very skeptical about the Freddy Head filly. The French press guys had no excuses for Goldikova ‘s 7f prep loss, and the main guy for the Paris-Turf Breeders’ Cup column was recommending a bet against. I stood by Goldikova.
Yes, the other filly’s race in the Classic was truly memorable, but so was Goldikova’s. Zenyatta was used to spotting the field and coming from last, but Goldikova’s poor start and lousy running position went against her style and required her to do something for the first time. Her « turn of foot » was chillingly efficient.

BC: Lesson II
In the past 5 years (excluding juvenile races) I found 9 winners with mutuels around $30.00. Of those 9---8 were debut 1 or 2 winners. Note: my stats show that there debut 1 and 2 winners accounted for 70% of the horses and produced 65% of the wins in this period.
The thing is that 7 of the 8 winners from $29 up all had very good Beyer Speed Ratings, Timeform ratings or positive trainer stat. For example: the winner of this years sprint was Carla Gaines, (52.60) Her horse had the highest BSR at 106 and also had this stat (won last race 56 34% 2.90) and the dirt mile was won by Michael Maker who had a co-high BSR of 106 and a trainer stat: (route 552 29% $2.12)
One other piece of data. There were 211 horses that went off a 8-1 or higher. They returned $396.90 (0.94 roi) 2007 was the only year without a $30 winner.
I think that the data points out that the class angle is overrated in these races and the point to remember may be that class in the breeders cup can be defined as: Debut 1 or 2 winners in the breeders cup races. Let it go at that .
I can supply the data on the on the other long shot winners if you like.
As a side bar. I am going to miss C&X. For real. Through C&X, what you taught and the interviews that you did and the information you and your readers shared, I have learned a little bit how to find the answers to my own questions.

Thanks.
don a.


BC LESSONS III (from long-time reader)
Subject: Breeder's Cup Or "More Expensive Tuition towards Phd in Handicapping"


On Friday I went down in flames with three horses that absolutely stopped. Junia Tepiza in the Juv Fillies Turf; Devil May Care in the Juv Fillies and Careless Jewell in the Ladies Classic. (At least Jewell had the excuse of going 109.2 for 6 furlongs while attempting to go 10.) After Mastery flopped in the Marathon (another loser for me) Junia Tepiza might have given reason to start thinking less of the Euro’s this year as compared to last. But then Midday won the Fillies Mile Turf. Seventh Street disappointed in the Sprint.

I began Saturday trying to beat Pounced with Viscount Nelson in the Juv Turf. I did use Pounced on top with Viscount in the Super because I felt strongly that those two plus Interactiff and Bridgetown would make up the top three. Unfortunately I resisted the all button in the 4th position, limiting it to adding the 9,11 and 12. Bet the $.10 twenty times which would have netted $5400 with the All. Then I almost did some good handicapping. I took a stand against Desert Code because I did not agree that we had a pattern match with last year’s win. In 2008, Code’s prep was much sharper than this year’s. In 2008 he raced on the pace for the first half mile before fading but, in this year’s prep was never close. Eliminating Desert Code, I then managed
somehow to throw out California Flag and then perfectly line up the second thru fifth place finishers. Unfortunately, they won’t cash that ticket.

In the Sprint, I bet Fatal Bullet to win and a large exacta with Dancing in Silks who was the winner. The Juvinile resulted in a new betting rule for me. When I note a young lightly raced horse as “improving” like I did Vale of York and he’s trained by a really good trainer, and he has shipped half-way around the world and then goes off at 30-1, I will have something on him.! More expensive tuition here as I went with D’Funnybone expecting an easy lead. In the Mile I tried to beat Godikova (because of post and price)with Zacinto. Wrong again.

Dirt Mile: The television in my box was tuned to what appeared to be the local racing channel/show. I was able to hear the commentators report that Mastercraftsman had had difficulty standing up on the ProRide surface, much less training over it. So I correctly eliminated him in favor of Bullsbay. Right but wrong. Bullsbay was lathered when he came to the gate and was never himself.

Wish I had made the effort to hear if the locals were saying the same thing about Rip Van Winkle that they were about Mastercraftsman. I now have 4,000 reasons to wish that. Will always wonder if there was some subtle difference in the surface this year that put off the Euro’s. Will always be glad I was there for Zenyatta to prove all us wise guys wrong. What a filly! Ruffian like?

In 2008, my reason for eliminating the winner of the 10th was that one of the top jocks (Gomez I think) had given up the mount to a jock that was struggling. As I lamented this fact to the seller I had been betting with for two days, he said he saw that happen rather frequently at SA, resulting in a win for the replacement jock. Guess what? It happened again this year with The Usual QT. I had marked him as a possibility but ultimately eliminated him from the top spot as being a little short in class for a Grade 2 turf event. (Gomez had gotten off in favor of Espinoza.) We all know that a top jock may take off a last race mount, especially in a meaningless claimer. Not so often in a Grade 2 with a live mount. Might be worth some research to see if there is a pattern at SA or other tracks as well.

Love our game and the work you do. Morgan H (Subscriber since day One)

MICROECONOMICS OF HORSE BETTING I
One of the concepts they throw at you in microeconomics is "perfect competition" or the "perfectly competitive market structure". Most economists admit that perfect competition is only an abstract ideal that is never reached, useful for business projections. Some debunking economists show that perfect competition is not possible under any circumstance.
It occurs to me that maybe pari-mutuel horse betting is the nearest any marketplace has ever gotten to perfect competition. If so, perhaps there would be a way for bettors to exploit such a situation.
There are five main characteristics of a perfectly competitive market.
(1) Many small buyers and sellers
(2) A homogeneous product
(3) No barriers to entry or exit
(4) Perfect information
(5) No externalities
First, in a betting pool, there are indeed many small buyers and sellers, thus preventing any one bettor/investor from monopolizing the market. Even the largest players are small in comparison to the total pools, except for the smallest tracks. Even there, a large bettor cannot remain a high roller or he would destroy his odds. Thus, we can say that, yes, there are many small buyers and sellers in our market.
Second is the homogeneous product. This means that all offerings are the same, so that the buyers and sellers are on a completely even playing field. With pari-mutuel wagering, as opposed to the bookie scene in England and Ireland, all products are the same, which for us means simply that we are have the same odds in a given race.
The fact that all players, big and small, get the exact same odds makes this a fair game, in the straight pools, smaller exotics like the exacta, and the 10-cent superfecta. (At the other extreme, the pick 6 and other larger exotics are not homogeneous because a large player can indeed monopolize the probabilities.) This makes most horse race betting one of the only fair games in town.
In the third category, the player can get in and out of the market any time he or she wants, which is not often true in other marketplaces. For example, if you own property today, you are forced to stay in the market until prices go back up.
In the fourth category, "perfect information", some of you will argue that inside information plays a big role. I disagree. Yes, inside information exists. I have done research on inside information, both through the toteboard and actually interviewing trainers. In fact there is a near perfect equilibrium between good inside information and bad insider info. In the end, the player who sticks solely to inside information will lose the same percentage as the random player. Beyond the so-called inside information, we all have access to the same information.
In fact, we could argue that we, the horseplayers, have better information than stock market investors or businesses basing their investments on flawed market research.
Finally, externalities such as natural catastrophes or government regulations do not affect one player any more than another, so they are neutralized.
Given the above reality, racing gets a bad rap it doesn’t deserve. In the betting realm it is nearer to perfect competition than banking, transportation or any other sector of the market.
In Part II let’s explain how we can take advantage of the unusually level playing field and make it work in our favor.

THE MICROECONOMICS OF HORSE BETTING II

In reference to our personal volume of betting action, one other element of microeconomics might play a role: what is called “economies of scale” and “diseconomies of scale”. In economy of scale, as production rises, the cost per unit of that production goes down. But there eventually reaches a point where management costs go so high that you actually raise your cost per unit when increasing production (diseconomy of scale).
In pari-mutuel wagering, there are two diseconomies of scale. The first is obvious. If you wager too much, you impact your odds in a negative sense and destroy your advantage.
In fact, in the realm of the pick 6 and sometimes even the superfecta or pick 4, the diseconomy of scale kicks in when the player uses so many combinations that his eventual return may be less than what he would collect in a straight pool, or even less than he invested (a pick 6 syndicate can sometimes collect a wager and still lose money).
The less obvious diseconomy of scale concerns betting psychology. I show my cynical wife my profitable ledger at the end of the year and she says, “I see much larger bottom lines in any other business.”
I looked back at my records and note that my return on investment was much higher percentage-wise for my moderate bets than for the big ones. From an item analysis of the larger bets, I realized that above a certain volume of action, the average odds of my horses would tend to decrease. In other words, once above a certain psychological threshold, the diseconomy of scale kicks in and my margin is greatly reduced.
So we might ask ourselves: “Well, you have a positive bottom line, so why not increase the volume invested?”
I have discovered that most successful longshot players encounter a similar diseconomy of scale, because they are machos at 8/5 and wimps 18-1.
For the time being, if we are victims of diseconomy of scale, we have a choice: either visit the shrink to allow us to be equally macho in more difficult and contentious races, or we can pare down our average wager so that we do not end up overbetting the lower odds horses.
In horse betting, the diseconomy of scale kicks in when we are betting above the comfort level.

FIVE OF THE MOST UNDER-REPORTED STORIES OF 2009
I say “some” because journalism has increasingly failed in its job to dig for stories, prefering the role of stenographer for official sources or cheerleader for conventional thinking.
THE YEAR’S UNSUNG HERO
Trainer Mick Channon’s Youmzain finished second for the third straight year in what is arguably the classiest horse race in the world, the Arc de Triomphe. In 2008, Youmzain failed only to defeat the super filly, Zarkava, while finishing ahead of a huge field of proven talent. In 2009, the top six finishers in the Arc, including the winning phenomenon Sea the Stars, were all multiple Group I winners, as were several also-rans in the 19-horse field. Youmzain also finished ahead of the eventual BC-Turf winner, Conduit.
In all three Arcs, Youmzain was a huge longshot. At the post Arc press conference, I complained about the fact that the trainer or owner of Youmzain had not been invited. Youmzain’s accomplishment will go down in history, even if it was forgotten when it happened.
Youmzain also proves to the horseplayer that the overachiever method is alive and well.
SMOKESCREEN I: THE COUNTERPARTIES
How would you like to play precarious Pick 4s for a couple of years, tap out, and then get reimbursed by taxpayer money? During the AIG bailout the media “scandal” concerned the pay bonuses, but they were peanuts compared to the amount of money returned in full and not as a loan to the so-called counterparties of AIG. The public was led to believe that these counterparties were shareholders or account holders with AIG when in fact, they were co-investors. Therefore, the bail-out was really a second and much more generous round of cash funneled to banks that had already received TARP money: Bank of America, Merrill Lynch, UBS, JP Morgan Chase, Deutsche Bank, Morgan Stanley and none other than Goldman and Sachs (whose former directors were part of the team of advisors that decided to pay for the gambling losses of these investment bankers). Several foreign investors were also counterparties, including BNP Paribas, where I do consulting. The AIG bailout was an inside job costing more than 80 billion in taxpayer money. The bonus scandal was merely a smokescreen to cover up the bigger deal.
This is why I love pari-mutuel wagering. It’s the fairest form of capitalism ever created. You win when you’re right and you lose when you’re wrong, and no one is there to reimburse you.
SMOKESCREEN II: SYNTHETIC SURFACE SAFETY
Big debate on the safety of synthetic tracks, with contradictory evidence that fails to include stats on jockey injuries when they fall on the synth and whether or not the extra cost of maintenance for these polytracks, if it had been directed toward dirt maintenance, could have increased the safety of dirt surfaces on a par with the safest of all the synths, the Tapeta.
But this whole debate may be a smokescreen for a more fundamental cause of breakdowns: the use of bute and especially of steroids, which allow lame or otherwise infirm horses to race without feeling the pain, resulting in life-ending or career-ending injuries, and also eventually decreasing the real value of American pedigrees.
(One thing we have all learned, corroborated by the last two Breeders’ Cups, is that dirt specialists are overbet when facing synthetic specialists on the polytrack.)
Look, if you want your car to go well, what’s the most important: keeping your tires with the right amount of air or lobbying for new highways?
THE DEATH OF TRAINER RICHARD MATLOW
Mr. Matlow has died the way he lived, in a low-profile, unhyped way. He was a get-the-job-done trainer who specialized in young horses and held up the game from the claiming ranks. After being diagnosed with Lou Gehrig disease, Matlow was able to have his first and last graded stakes winner in the November 2008 Hollywood Preview Stakes. In typical Matlow fashion, the horse paid $41.80.
This writer has received more thank you letters from readers who cashed in on Matlow first-time starters than for any other theme.
Matlow’s low profile was preserved until the end, when he requested that there be no funeral services.
One of the greatest “should-haves” in my life is to have never interviewed Richard Matlow. Each time I hear of the passing of a hyped movie star or overrated politician, I take a moment and remember that Richard Matlow has passed away.
SMOKESCREEN III: ENERGY TECHNOLOGY TO PREVENT GLOBAL WARMING
In the whole boring discussion about alternative energies to save us from climate change, no public figure, not even Al Gore who is supposedly in favor of the environment, has mentioned the simple and functional solution: consume less. For example, why take one’s car three blocks to buy a racing form (spewing CO2 emissions when starting and stopping the car) when we could walk and improve our fitness. I mean, here’s a concrete way to consume less and improve the quality of life, proven mathematically.
Or, as the Slow Food Movement people advocate, why not eat less but choose things of better quality? We’re not saying to make a “sacrifice” as Al Gore would say (Has Gore stopping driving?; has he gotten a smaller house to reduce heating consumption?). In fact, sometimes, consuming less may involve spending more, such as a buying meat that has no hormones or a chicken that has not been raised industrially. Or simply eating less meat, which every nutritionist (except Atkins, the cholesterol accumulator), has said is a good idea. No, the idea is to consume in a smarter way, using less energy but improving the quality of life.
No one from any political party talks about this idea, and few economists dare mention it, except guys like Herman Daly at the University of Maryland.
In fact, with more efficient energy technology we confront something called the “rebound effect”, a subject which has been missed by journalists because they can’t think like handicappers. The rebound effect explains that once we develop more efficient energy technologies and are able to reduce the cost (which won’t happen for decades), we will end up using more energy because it’s cheaper and easier, with the end result that our CO2 and other more obviously polluting emissions are not really reduced by that much. So consuming less, the simple solution, has been the ignored story of the year.
For us, this message makes sense: bet fewer races, choosing the ones that really count!

REFLECTIONS ON THE SHORT FORM
This is this last formal time I have to communicate with you on the Short Form, except that I will try to publish updates of my findings on www.altiplanopublications.com
For the moment, I have received quite a few good letters from readers on their use of the Short Form, all of them positive. I have found one thing in common with these letters and e-mails: all of them refer to tinkering with the method to adapt it to their own handicapping persuasions. Reading between the lines, I sense that the method is approximately 90% automatic, with 10% left for original input from the handicapper.
The bare bones of the Short Form look simple:
(a) Exclude no-win trainers (less that 12% hit rate).
(b) Exclude proven losers (two or more recent losses and no wins sandwiched in between) at today’s class level.
From there the nuances grow geometrically. For example, in (a), what if the trainer has fewer that 12% overall wins but has above 18% with a flat-bet profit in one or two key specialty stats listed under the pps? In such a case, the spirit of the law would tell us to keep his horse in the mix.
For (a) we can add a requirement that the trainer should have at least 18% overall wins or should have at least one specialty category below the pps in which he has at least 18% wins and flat-bet profit.
For (b), what if the two “proven-loser” losses are on dirt and the horse is switching to turf, where you can find his most recent victory, maybe seven races ago, at today’s class level? Once again, the spirit of the law says to keep this horse in.
The good news for those in search of the automatic bet is that with regular practice, picking out spirit-of-the-law exceptions is not a time-consuming process. The scanning becomes more or less “automatic”, the way we learn to type on a keyboard, but with creative analysis not entirely excluded from the formula.
The second piece of good news is that the Short Form seems to be a universal tool, which functions in different environments by simply adjusting the parameters to fit the racing reality of the venue. Thus, I have been able to apply the Short Form to French racing (cheaper races) in a relatively methodical way.
For example, since they have as much as 20 horses in a field, you cannot use the 12% cut-off point. My cutoff is to exclude trainers with less than 5% wins, and it is surprising how many exclusions I get.
Where the Short Form may be most interesting is at small American tracks with conditioned claiming races. There you would have to accept that a horse that is going from $6,500 “non-winners of a race in the calendar year” to $5,000 open company is actually rising in class.


Great exceptations
Here's one last short-form discovery. By actually using the short form, mapping it out, and then looking back to see if there are any worthy exceptions, I have come up with some juicy longshot winners. Yes, it's happened here in France, but believe me, this mechanism is universal.
When I play the MULTI (which is a superfecta box), I use the short form to eliminate horses with no-win trainers or several other no-win stats (hates the race course, proven loser at the level, based on earnings, etc.)
A pattern has emerged. In looking back at my MULTI scores, I notice that the horse that became the exception to the rule, often ended up winning and being the highest odds horse among my four top finishers.
I have learned several things. In most cases when the exception horse has won, it was because he was a horse for course: a proven loser AT OTHER TRACKS but a winner at this one.
Furthermore, I learned that if I had not begun with the short form analysis, I would not have discovered the exception to the rules. Bizarre but true: the short-form procedure and process forces the handicapper to fine-tune his analysis of horses that would normally be eliminated.
This is the best of both worlds. The Short Form helps to map out a race by eliminating more than half the field, but then it also acts as a quality-control expert, forcing the handicapper to make sure that all pieces that have been thrown out have been truly defective.


CRAMER’S LAST SHOT
The winning idea resides in consuming less (which means playing fewer races). Consuming less may mean betting less but it might also mean betting more (when the wager is of better quality), as I hinted in the last entry of the ignored stories of 2009.
The idea is this: we try to consume (bet) as much as possible (as many races as possible) for greater gratification. But in fact, the slow food (slow bet) movement tells us that we can consume (bet) less and enjoy it (profit from it) more.
The problem with overconsumption is that if we buy too much we don’t have the time to enjoy what we have bought. Ditto for playing too many races. Unless you have a nano-mind that thinks at the speed of light, there’s no way you can analyze, in depth, the pps of eight or nine races per day.
Some of the most acrobatic thought processes come after you have put something down and you pick it up again. If you are dealing with several race cards per day, you are not going to have time to get through the whole creative process, and you will end up betting on half-digested musings.
Let’s say that you enjoy chocolate. You get a few chocolate bars of dubious quality and consume them regularly. If they had been truly satisfying, you wouldn’t need to go back a few minutes or hours later and consume another one. When food doesn’t really satisfy us, we try eating more of it. But more aint better, and in fact, the medical consequences are not good.
But if you find a fine chocolate of rare delicacy, shut out your mind from everything else, and consume it slowly, the memory of the complex flavor will persist and there will be no need for another.
There’s not much of a difference from our eating habits and our horse betting process. For this reason, any handicapper who is not “satisfied” with his bottom line after weeks and years of betting, should step back and try the slow-betting method.
This method calls for only playing one race a day. You can inspect several races, concentrating only on those of substance, which means the types of races where you have had the best success. Then you filter out any race for which your selections match those of the morning line. Also filter out any races for which you have no special insight.
Zoom in on that one race where you think you’ve really discovered something. Study the pps. Put them down. Do something else unrelated to horse racing. Then pick up the pps again and you will make deeper discoveries.
It’s no small coincidence that we have the expression “let’s sleep on it”. Yes, let your subsconscience play around with the pps, which you have looked at before sleeping.
The next morning, the morning of the race you are working on, may turn out to be a time of enlightenment. This is not just any new age babble. It is based on numerous studies of the creative process. Strangely, in the end you may discover that one and only one handicapping factor stands out against the rest. Or you may have found a delicate balance between various factors. Or you may have discovered a beautiful pattern match.
During the past year, I have used this method while playing the French races. At first it wasn’t by choice. I was dealing with chronic health problems of two of my children and this required a certain investment in time and emotional energy that did not permit me to handicap in a quantitative way.
On the other hand, I needed to handicap to keep myself balanced. Handicapping intensely was a type of therapy that gave me energy for everything else I did.
I would choose the three or four races where the “Short Form” method could be applied, and then I would submit the races to quick tabulation. Usually it was easy to end up with one single race. Occasionally, within the spirit of the law, I would allow myself to cheat and play two races, when those races were truly exceptional.
It’s important to handicap in stages, putting down the pps with time to reflect on something else. This is what I did. The next time I picked up the pps, I first checked to make sure that my eliminations were based on rigorous criteria. At the end of the second stage (and sometimes in a third stage when I had the luxury to revisit the pps), I would read through the pps of the eliminated horses to make sure there was no pattern match that would call for a horse to be a possible exception.
In my 90% automatic exotic combination, I would allow for one eliminated horse to re-qualify if there were some element that could render his proven-loser status irrelevant. For example, if the horse was changing from a 2% rider to a 19% rider, or from a no-win trainer to a high-percentage stable.
It could be a proven loser at every other track but a proven winner at today’s track.
You get the idea. I am looking for the one piece of information that would be in the spirit of the Short Form law without being in the letter of the law.
By handicapping intensely, usually on only one race a day, I would have the time-luxury of being able to cross examine myself to make sure that I was not using subjective judgments in keeping a horse in the mix.
Today my grown “children” are doing much better and it looks as if their conditions are in remission. They are beginning to thrive again. I will have the time to handicap more than single race per day. However, with the one-race-per-day habit, my percentage of profit has improved, and I may decide to continue this experiment as long as it remains effective.
Choosing one race that really matters allows me to savor the process of handicapping and decision making.
In my role as a writer of handicapping literature, I constantly warn myself that my job is not to catalyze greater handle for the race tracks. So this is my last shot at convincing you (if you are not satisfied with consuming so many races) to be selective and only choose and then confront the most meaningful handicapping puzzles. In most cases, this should end up being more fun and at the same time more profitable. (With thanks to the Slow Food Movement!)