Friday, January 22, 2016

A Caution to Patriots Fans: Consider the Oddity of the Odds

Nobody likes the Broncos this Sunday, well, almost nobody.

Among the NFL commentariat, opinion is as near to unanimous as it gets. Thousands of voices and word processors from coast to coast, from highly knowledgeable observers down to Skip Bayless, are of one mind. The Patriots will defeat Denver in the AFC Championship Game. It won't be difficult for them and the score shouldn't be close. In fact, I had to leave the country to find a forecast of a Broncos victory -- by Paolo Bandini, the NFL writer for the British newspaper "The Guardian."

Let the record show I am wholly behind the tide of conventional wisdom. Because Peyton Manning can no longer throw with consistent accuracy, the Broncos' offense does not generate big plays and the Pats' offense sure does. My expectation is that the game will resemble the Patriots' win over the Chiefs. New England will build a quick early lead and let Denver futilely try to "chase the game" to use the British soccer term. The Pats should win by between 6-10 points and there's considerable upside potential for the spread to be more than that, or much more.

I have only one qualm about that forecast. A group of mostly anonymous folks who have the most direct stake in the game's outcome aside from its participants disagree with me. This dissent from conventional wisdom comes from an unexpected source -- the bookies of Las Vegas.

These worthies made the Patriots a three-point favorite over Denver early this week. That spread has not budged a fraction, even though it is reported that over 80 percent of wagers on the game have been by New England bettors seeing an easy overlay.

According to classic gambling theory, that's not how the spread is supposed to work. Books are expected to use the spread to equalize wagers on both sides of an NFL game, thus guaranteeing themselves the five percent profit from their commission on each bet. Most of the time, that's how the spread does work. But not always. It's the bookies' spread to set as they see fit, after all. Sometimes, the oddsmakers think the public is full of it, and set the line based on their own collective opinion. As is said, they take a position.

Bookies aren't actuaries. They're gamblers. Books take a position for the same reason JP Morgan Chase does more investing than just borrowing money at low rates and lending it at higher ones. More risk equals more reward. If five people bet $11 to win $10 on the Broncos and five do the same on the Pats, the book makes a guaranteed $10. But if eight of the 10 bet on New England and Denver covers, the house makes $68.

Of course, if New England covers, the house loses $58. So for the bookies to take such a strong stand against public money in a high-profile, high-wager volume tilt as the AFC title game, they must have a strong opinion indeed that Denver's chances are far better than we conventional wisdomites assume.

Whenever my forecast of a sports event differs significantly from that of the boys in Vegas, I get twitchy. It's not a question of "what do they know that I don't?" There's no fact about this contest that isn't in the public domain. There isn't a fact about this contest fans aren't sick of hearing about by now.

No, I'm asking myself, "why do those guys believe what I don't." Few bookmakers' guesses are just hunches. Las Vegas didn't get to be a big city by putting much faith in its own luck.

So if I'm a Pats fan, I'm asking myself this morning, "why do THEY feel lucky." And getting just the slightest bit twitchy, too.


At 6:11 PM, Blogger Whiteboard said...

Just read this Mike, 2/1. "The Oddity of the Odds" is a perfect title, even better than "Curioser and Curioser." Did you ever figure out what the Vegas bookies were all keyed into?


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