I still manage to smile when promoters refer to betting as “investing.”  The idea, of course is to make us imagine that some approach to the game is so solid—such a sure thing—that it is equal to putting your money in the bank for a federally insured return.  With all respect to William Murray, who is a terrific writer (and, I learned recently, an hilarious speaker) this “investing” scenario has been around as long as there have been beginners who wanted to profit from the races and sharpies who wanted to profit from them. 

It is part-and-parcel with the infatuation of most players with “ROI” (return on investment), which implies grinding a small—or, in the case of some promoters and many novices, an unrealistically large—25 percent or more—expected return from the cashier’s window over time.  Until very recently, this had no parallel in the every day investment world available to the average person.  However, in this sizzling economy and with the Internet, there is finally a close analogy for horse race betting—it’s called “Day Trading.”

I’m sure you’ve seen these kiddies on TV.  The TV financial networks love them as five-minute color pieces on the hot economy.  They are mostly young (in some cases really young—like sixteen), hyper, caffeine-heads who gather in computer-jammed rooms to share their energy and watch events and make their moves—buying and selling as fast as slams in air hockey, which they’d be playing at the mall if they weren’t here—until the day is over and they have either scored huge or lost their teeny-bopper butts.  Does this sound familiar?

If it does, it is because neither horse race bettors nor day traders are “investors.”  We are gamblers.  Day traders don’t hit the keyboards with the idea of grinding a 25% return every day.  They want to score big—in proportion to their dollars at risk—and are willing to take risks and day-to-day losses to do it.  If you recall, last week, that is very similar to the way I suggested we should view horse race betting.  Moreover, if you intend to profit from betting on horse races, you had better view it that way or it could turn out to be one of those expensive, frustrating, enraging, obsessions—like golf.

Suppose you believe in “ROI,” aren’t too worried about variance, and also think, like so many writers, that “professional play” in horse race betting should be in the 25 percent (mutual fund) range.  In this artificial setting, if you leave your house with a hundred bucks in your pocket (which, by all accounts is far-and-away the most common betting “bankroll”)—and, if you are absolutely on top of your game with perfect play—you should pull back into the driveway with $125.00.

For the moment, let’s ignore “take out” and gasoline.  (At $1.59 a gallon, my current costs for attending the races in person is $25.44, which would put me 44 cents in the red right out of the box—your mileage may vary.)  We bettors go into apoplexy over a change in take out from 17 to 18 percent.  While if parking doubles from $2 to $4, we don’t even blink.  Yes, I’m aware of what the take out means over time, but suppose, in this artificial scenario, your “perfect play” takes it in stride and your expected take home remains $125 as you pull out of your driveway with five, crisp $20s in your money clip, before the ants attack:

--You hand the parking attendant $3.00.

--If you haven’t already, you buy a Racing Form, maybe two if there is simulcasting.  $8.00

--You walk to another line and buy a local program.  $2.00

--You take the elevator to the Turf club where there is a slim chance for a seat instead of an aluminum bench that leaves cross-stripes on your gabardines.  $7.00

--You buy the cheapest, plain hamburger on the menu and skip the designer cheeses because they are two bucks extra.  $11.00 with tip

--The cold French fries were greasy and over-salted so you sip a large diet coke all afternoon for heartburn.  $3.50

--Three “action” bets, aside from your “ROI bets” @ $2 each.  $6.00

You play your serious, ROI bets perfectly and collect your theoretical return of $125.  Your expenses for the day are $40.50 not counting gas—vastly more than has been withheld as “take out” for purses, taxes, heating, cooling, and the jockey’s benevolent fund.  You pull back into your driveway with $84.50 in your pocket.  This is not as serious a beating as you would take at a pro football game where the ticket itself can easily cost what you’ve paid in total expenses.

However, there’s one teeny little difference that the tracks don’t take into account when they size up their competition—which, is not football, baseball, and basketball—it is casinos and race books who use the under-handed tactic of customer service.  You didn’t go to the track to watch your home team win—you went there to make money.  (Sports betting is immense, but unlike the track, the stadium gets no direct cut, so let’s pretend that football is an innocent pass-time.)

Obviously, if you are a “dolphin” bettor like I talked about last time, putting $5K through the windows each day (in this artificial scenario of 25 percent ROI), your daily profit would be $1,250, so you could probably throw in the Jockey club and cheese on your burger—and whine justifiably about take out.

But this is not how it works.  Whether you are a $100-a-day bettor or a dolphin, you will thrive on scores, which will not happen every day.  If you are a $100-a-day bettor and your “scores” are in proportion to your money at risk, then we are talking about occasional $50 hits to, more rarely, $100 - $250 homeruns.  These scores are not at all out of the question, but they are not a living, either.  If there is a $100-a-day bettor making a living at the track, I’ve never met her.

If your intent is to become a professional bettor or use horse racing as an exciting alternative to mutual funds, you are going to have to work toward becoming a “dolphin” (see last week’s column), but unless you are already wealthy, the only way to do that is to master $100-dollar-a-day economics.

Your average day might run about like the one above—up $25, down $40.  But the depletion of your net worth is $15.50, so one decent $2 exacta or $10 Win bet resulting in a $50 score, over and above your holding pattern, takes care of three such days.  Just as the “sweet spot” in odds is between 4 and 8 to 1, the sweet spot for scores for the $100-a-day player is in the $50 to $150 range.  Much less doesn’t carry the game—much more creates too much risk.

Handicapping, in the traditional sense of selecting likely horses, is probably only half the game today—and the easy half, at that.  The other half is letting the results of your handicapping flow with the shifting public odds to shape your betting decisions to make the necessary scores.