Revel, the Atlantic City Casino Morgan Stanley poured $1.2 billion into and then booked a $1 billion loss on when the bank washed its hands of the place, which still haunts some senior executives’ dreams and is the word James Gorman whispers to employees with a knowing glance when it looks like they’re about to […]
Given everything else that’s gone wrong with Atlantic City’s flashy, unpopular new gambling paradise—and everything else that’s gone wrong in New Jersey recently—why shouldn’t a hedge fund that invests some of the Garden State’s pension cash own a casino?
My point about pigskin offense and defense is the perfect metaphor for the world of investing as well. Offensively minded risk takers in the markets have historically been the ones who have dominated the headlines and won the hearts of that beautiful gal (or handsome guy). Aside from the rare examples of Steve Jobs and […]
There’s a possibly true anecdote about Greek uncompetitiveness that goes like this: “An online store is more complicated than a regular store basically because of the way payments are carried out,” explained Fotis Antonopoulos, one of the co-founders of www.oliveshop.com, which sells olive oil-based products such as cosmetics, mostly to foreign markets. … Antonopoulos and […]
I was scoring up the Super Bowl (small loss) when Ocean called. Ocean is a good customer. He had a couple questions, and I told him fire away.
First he wanted to know if we were doing the Oscars again this year. Of course we are. I’m not thrilled about it –I’m half paranoid about inside information bubbling on the Internet, but I’m learning to embrace the inside mis-information. Most importantly, we do it as a service, so the customers won’t start betting online with bookies in Costa Rica.
Ocean was pleased. For what it’s worth, he likes The Artist at very short odds. He watches rom-coms. With his wife, he says. His favourite movie though is Love Story, and he cries shamelessly every time he watches it: he truly believes that love means never having to say you’re sorry. I’ve never figured that out. I’m forever apologizing to my wife for doing boneheaded things and saying stupid shit. And apologizing is a necessity But whatever. A happy customer is a beautiful thing. And I thought the phone call was over. And then Ocean said it.
“What do you have on the VIX for this summer?”
I asked him what the hell he was talking about because I didn’t compute what I was hearing. He then said how he had been watching CNBC. He went to his mutual fund guy determined to buy the VIX, and the salesman blew him off with “Oh, that’s just gambling”. So, hey, I must surely book the VIX, right, because I take bets from gamblers?
Well I totally had my pants down and started mumbling about monthly contracts and the need to be a sophisticated investor and how there were a few products out there and…he cut me off. He understood how “the 1% were trying to make this complicated” and he just wanted a near-even-money type bet that the VIX would be over 30 at the end of June, as per the top of the screen on CNBC.
I gave him the bet. 30’s a pretty big number, and I figure this’ll make me learn about trading the VIX instruments so I can lay it off if I want to. (I’ve never done anything more sophisticated than buy a put spread when I was afraid of a downturn. Go ahead, laugh.) 30’s a lot. So I let him have it at 6-to-5. He was only expecting even money or slightly worse, so he was pleased.
Ten minutes later I was using this episode as an object lesson for my Faithful Assistant, a guy who is muddling through an MBA while living in his parents’ basement. Garage loft, I stand corrected. Anyway, good customers need to be kept happy, good customers lose, and happy customers pay. The Hollywood-movie days of kneecapping customers who stiff you were over before I was born, if they ever even existed, and—and the phone rang again.
Ocean again, wanting an over/under number on where Apple would be in a couple months’ time. Oh, and Facebook. I told him I would have to call him back. I started throwing coffee cups and in between my screams my Faithful Assistant told me he’d just pretend I have Tourette’s. He’s cold. Then he asked me what was going on. And after I told him, he smiled, and tried to give his boss an object lesson of his own:
“This is great. You trade the odd option. All my electives are Finance. We just set the over-under price, I mean you KNOW he’s going ‘over’, high enough that we can buy calls a couple strikes below that number. We use his bet to buy the calls, if he wins we clean up, and we’re covered.”
And when I asked what would happen to Ocean’s bankroll over time, the answer came back that we would sodomize it.
I just shook my head. My young friend may well end up in a business career where the necessary m.o. is to grab-it-all and grab-it-now, but that’s not how my business works.
I actually want my customers to win 45-50% of their bets, lose fairly small amounts over time, and never lose so much in one fell swoop that they can’t pay or that they decide to stop playing. There’s a purpose behind all that languid ritual at the Baccarat table in the high-limit room at the casino: try to keep the House’s earn slow-and-steady. It makes the news when a whale beats Vegas for $10 million, or drops $10 million, but the casinos tolerate those lumpy earnings—aside from a little ink, they don’t really want them. The casinos want everybody playing dollar-slots, losing three cents a spin.
His eyes kind of glazed over, so I thought, what would Suze Orman do to get her point across? I figured Suze, to make the young’uns understand, would probably Go Gangsta. So I said “Look, we make money by drawing blood from our customers.” His eyes lit up as I continued: “We’re blood collectors. We need a nice orderly blood bank. What you’re proposing, is a drive-by.”
(Well, I actually said “drive-thru”, but we sorted it out after a little confusion.)
So we’ve told Ocean that these bets are going to be for peanuts and we’re going to have fun with them. He’s on board, and he’s all excited. Faithful Assistant is going to make the numbers and I told Ocean to give us some requests for stocks he thought would go lower. “Oh you mean I could bet ‘under’ too? Not just ‘over’?” Yep, ‘under’ too.
February’s a shit month in the bookie biz—the regulars are there, but football’s over and it’s a ways before March Madness. Ocean’s stockpicking is going to keep me interested.
As you may have heard, Deutsche Bank owns a casino (/hotel) in Vegas, called the Cosmopolitan. The Germans never intended to run the joint, originally merely funding the project by developer Ian Bruce Eichner but in 2008 Eichner had to go and default on his loans. No one else wanted to invest in the place, […]
If you haven’t read the document yet (and only one person has so don’t feel bad), have a looksee at the clip above, produced by the White House, which explains the impetus for the bill (“the careless risk-taking by Wall Street had to be stopped”), makes some references to banks playing craps with other people’s […]