WHEN TO ‘SELL’ A WINNING TEAM IN MAJOR LEAGUE BASEBALL
One of the primary differences between recreational sports bettors and ‘sharps’ is their relative understanding of the importance of pricing. At the right price, the worst team is ‘bettable’ and the best team is a ‘go against’. One of the smartest handicappers I’ve ever known once told me ‘squares bet teams, sharps bet prices’ and there’s much truth to that.
I found myself in a tangentially related discussion this weekend. The subject was the Chicago Cubs, who are off to their best start in over a century and winning games at a torrid pace. At the end of action on Saturday, May 14 the Cubs are 27-8 which is a .771 winning percentage. They’re 14-5 at home and 13-3 on the road. For a long time the Cubs have been known as ‘lovable losers’. That’s no longer the case—this Chicago Cubs team is currently the best in baseball and are the favorites to win the 2016 World Series.
The recreational player runs a great risk with teams like the Cubs as well as teams at the other extreme that lose every game. They start to think that betting on a good team like the Cubs (or against a bad team) is a ‘license to print money’. A few years ago when the Houston Astros were the worst team in baseball there were plenty of articles in the mainstream sports media about how easy it would be to make money by just betting against them on a daily basis. The was plenty of reason to think that the Astros would keep losing (and they did) but the clueless sports writers never considered that prices for wagering against Houston wouldn’t remain static.
And that brings us to the 2016 Cubs. They might not maintain a 70%+ winning clip but they look to be a team that will continue winning at a brisk pace for the rest of the year. The prices are already getting ‘frothy’ but at what point will the Cubs become ‘unbettable’? More importantly, at what point will the value be on the other side?
HOW TO DETERMINE WHEN A WINNING TEAM IS DUE TO BECOME A MONEY LOSER
We already mentioned once obvious sign—when mainstream sports media outlets start talking about the advisability of blindly betting on (or against) a specific team it’s time to start looking at the other side. If something is this obvious to the general public—the so called ‘squares’–the linesmakers are miles ahead of the situation. To some extent, this concept also works whenever a media property like ESPN starts to gush about a team being ‘unbeatable’ or ‘hopeless’.
It’s already getting tough to pull the trigger on the Cubs when the ace of their staff, Jake Arrieta, is on the mound. He started today’s (May 14, 2016) game against Pittsburgh and went off as a -310 favorite! Granted, Arrieta is arguably the best pitcher in baseball and has been downright monstrous this season. Heading into this game he had a 1.12 ERA, a 0.875 WHIP and the Cubs had won all seven of his starts. He’s talented enough to stay at or near this form all season long but even the best pitchers have a bad start every now and then. If Arrieta is already a 3 to 1 favorite against a team with a winning record what will happen to the prices if he keeps winning? At -310, implied probability is 75.61% which means that Arrieta would have to win roughly 76% of his starts just to break even. Maybe he will, but that price is reaching the point where there’s not much ‘upside potential’ in terms of value.
Baseball is not a sport that rewards ‘chalk eaters’. At a price of -235 or higher a baseball team has to win 70% of their games just to break even. Only 14 teams in MLB history have finished with a winning percentage of .700 or higher—and that includes the 1887 St. Louis Browns who went 95-40 in the old American Association. It’s happened only twice since 1954—the 2001 Seattle mariners went 116-46 for a .716 winning clip. The 1998 New York Yankees went 114-48 (.704) en route to a World Series championship. In other words, at prices of -235 or above a team has to rank among the all time greats just to break even. Thankfully, there are easier ways to make money betting on baseball.
In most seasons, the best teams lose 40% of their games and the worst teams win 40% of theirs. Typically, when bad teams win and good teams lose their ‘financial backers’ get good line value as a result. As the season progresses, it’s helpful to pay close attention to the ‘profit/loss statements’ for teams and starting pitchers. You’ll be amazed how many good pitchers with glossy records are either right around break even or even losing money. It’s all about pricing and even teams that make money overall can be big money burners in certain situations.
As far as team P/L statements go, a good thing to look for are situations where a team is piling up a lot of wins but not making any money. That means that the pricing is such that every loss means a substantial hit to the profits they accrue with wins. Specific to the Cubs, at this writing I’m going to be looking for spots to play against them at home. A team with a 14-5 record in a particular situation should have made more of a profit than the +2.8 units that the Cubs had won at home. Had Arrieta lost on Saturday the Cubs would be ‘in the red’ at home for the season despite a 13-6 record.