In Wong's Professional Blackjack he stated at that time blackjack was 5 times as profitable or 1/5 as risky as the market. With blackjack conditions deteriorating and the market's volatility the last 4 years, what do you think the ratio is like today? I realize obviously there is no exact answer, but I thought the discussion would be interesting.
1. Blackjack conditions are not deteriorating, if you select games wisely. There's no single deck dealt to the last card, but there's plenty of great games out there.
2. It's apples to oranges. A good blackjack game will be expected to double your money in about 100 hours betting full kelly. But a bad game betting quarter kelly may not return 10% annually.
Generally, I would say blackjack is the best investment I know of. Real estate investing would be second.
The Cash Cow.
blackjack is not easy by any means to make money at, ut once you get passed the mirage (i guess you could call it that) of card counting, indices, hours of practice, etc it becomes second nature. To be extremeley profitable at the stock market you have to get passed the mirage and understand basic fundamentals (i.e. cc for bj) but then it comes down to having information before anyone else. or having enough money to be a market maker. With enough cash and the right information you can make millions in a couple of minutes or a couple of weeks with the stock market. WIth blackjack you could only come close to that if they fully penetrated the deck, casinos didnt care if you counted cards, and there were no minimum or maximum bets.
On the other hand blackjack is a lot more funthe stock market is very tedious and you can also lose millions in the blink of an eye. Also with the stock market you can hedge your portfolio and blackjack you cant really hedge 2 max bets of 400. When the money is out there its out there and if the dealer pulls a 5 card 21 then your eff'd.
for a moderate bank roll (less than 100k) I would say blackjack is a better investment. If you have more than that and even into the millions you can live off interest alone from many long term investments for the rest of your life.
Stock market: Buy S&P500 and kick back with a beer while your bankroll appreciates at ~7%/year inflation adjusted over the long term.
Blackjack: A lot more work for much higher gains.
I wouldn't recommend day trading or short term stock investing, but that's just me.
You can make a comfortable living with BJ with a 100k bankroll (as KJ can attest).
You'll be hard pressed to make a comfortable living off of investing/trading on a 100k bankroll.
The way to get rich investing is to invest other peoples' money and collect your 2/20 vig. Good gig if you can get it.
I have found that blackjack becomes tedious once you accustom yourself to the wild swings in variance. I still find it challenging, because the slow pace to the long run makes it hard to be complacent with one's expected win rate, and the temptation to overbet one's bankroll is ever present to overcome the tedium. If that makes any sense...? Ventures outside one's calculated best flight path sometimes wind up in destinations never planned on.Originally Posted by bigharryonion
Aslan 11/1/90 - 6/15/10 Stormy 1/22/95 - 8/23/10... “Life’s most urgent question is: what are you doing for others?” — Martin Luther King, Jr.
Not even sure how you can compare the two.
If you just say you have 1 million dollars, and could you make more playing blackjack or playing the stock market with the money, you would still need to set equal parameters - like risk level, hours playing, etc.
The benefit of the stock market is you don't get backed off. The more money you try to make in BJ, the harder it becomes or the less you make due to cover. In the Stock Market its almost the opposite, the more money you make, just helps you make even more money, plus as your BR grows you can diversify into more risky assets which then makes your BR grow even more. (I guess this would be the same in BJ, as your BR grows your max bet can increase, but you are still left with the backing off problem).
Also BJ is a time consuming grind. Sure you can spend just as much time researching the Stock Market, but the longer you spend you get diminishing returns - in my opinion. And once you are invested you don't have a lot to do, except occassionaly modify your portfolio, unless you are a day trader. Whereas in BJ it is linear (excluding the variance), the longer you play the more money you make, and there are only so many hours in the day. To go beyond that you would need a team.
Interesting comparison and one I make often (to friends and colleagues, not that anyone who's not an AP really understands). There are at least a couple of factors that make blackjack superior
1) The efficiency of the returns (Sharpe, SCORE, whichever metric you prefer!). On a risk adjusted basis, even a moderate counting game massively outperforms anything you could find in the organised markets if you roll it up over, say, a year. If you're doing something advanced then it's off the scale in terms of investment quality when compared with literally even the world's most talented fund manager.
2) The small number and simple nature of the assumptions. This is the key one for me. You might think that you have some edge in the stock (or derivatives) market but this is really a question of estimation. You've done some research and think there are good reasons that you'll outperform the market but when you think about it deeply, there are a huge number of assumptions that you're relying on for your forecasting (even with well-defined systematic edges) - basically, all of economics! Either that or you're making some assumption about the future distribution of returns resembling the past which, again, is a big assumption. With blackjack, on the other hand, you're just taking the structure of the game, your playing strategy and assuming that it's honestly dealt...and the rest is literally just math! It's basically a closed system and is completely tractable with a minimum of axioms...beautiful! Not that I'm trying to play down the important and difficult work of Norm and others in actually solving the game!
As mentioned previously in the thread, the major downside is liquidity - it's one thing managing your $100K bankroll through blackjack but you're never going to manage a billion $ hedge fund (and take your "2&20")!! But then I think you get more lulz this way and, hey, what's more important than that??...
This isn't as true as you'd think. I've been backed off from various brokers for exploiting AP-like opportunities. Usually they were "features" (that were analogous to casino promotions) that they didn't know how to value properly and that could be exploited if you're sneaky. In these cases I got backed off very quickly as the broker was taking the other side by providing a feature not available in the underlying market. Sometimes they were just for exploiting structural mis-pricing in some OTC product and the broker eventually gets pressure from the ultimate counter-party to stop you trading in a particular way. It really is so similar to APing if you're doing something genuinely smart...
Of course, if you just buy and hold equities then you're not subject to these countermeasures. But then you're a ploppy, albeit one that actually has +EV through economic growth!
Other types of trading are not subject to countermeasures, for example, trading DMA on the derivatives or stock market. But then it's much harder to find an edge and even if you do it won't be a structural edge but due to your ability to price securities better than other participants (and this comes with a range of estimation problems). This is more like being a poker player - someone else provides the venue and you play against other people in which case the venue doesn't care so much what you do. There are some exceptions to this general rule and a lot of interesting market edges have been deemed "market manipulation" by the regulator...and being backed off by the SEC is a pretty serious backing off!
It's just so similar in so many ways and, in the abstract, it all boils down to the same manipulation - the illusion that you can beat the casino/market/whatever...except that when they realise you can they single you out and stop you doing it (rather than e.g. fixing the underlying structural vulnerability). "All losing players are welcome at the table!"
Another reason this is apples to oranges is that stocks can very easily be a completely passive investment. You can park your money in an index fund and get good returns without doing any research or even thinking. Blackjack always requires time. In this way it's an investing job, somewhat like real estate investing.
The Cash Cow.
Good point. Its much easier to get lucky and stay lucky if you happen to invest in the right stock, fund, etc. for a long period of time. A ploppy however in blackjack can get lucky plenty of times, but eventually will lose all their money based on the house edge.
Im a financial analyst so i know a little about this stuff and there are ways like someone mentioned before to read the market like a poker player. the market reacts to certain events(news, catastrophes, political statements etc.) if you know how the market will react to certain things through much research than you can anticipate this reaction and exploit it.
Not so. Some people invest in blackjack teams without being players so are passively exposed to AP returns. Some people invest in hedge funds and so are passively exposed to actively managed portfolios. It's exactly the same idea but obviously with a different implementation. Of course, if you have the necessary skill, you can reduce the fees you pay (or paying players in the case of AP) and actively manage it yourself (or play in the case of AP).
The apples really are the same as the oranges - all you're doing is buying or generating a distribution of returns. You can estimate and compare these distributions and choose one based on your personal utility. There are a wide range of distributions to choose from and different people will estimate them differently in addition to having different personal utilities. In terms of the efficiency of returns (which must be a criterion for any rational investor), well implemented APing outperforms anything in the stock, real estate or derivatives markets by a considerable margin (even measly card counting rolls up an annualised Sharpe of around 5) but unfortunately lacks the liquidity to invest large amounts.
The main difference between the distributions you get between the casino and the markets is that the baseline returns are different - being a ploppy in the markets (e.g. index fund) actually has +ve EV but obviously being a ploppy in the casino doesn't...well, you occasionally find a game that even a BS strategy player can beat but not that often!
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