Lindsey

The numbers say why I'm still on the wheel

[Lindsey @0x_Squirrel]

Don Johnson won $15 million at blackjack without relying on card counting as the edge. The casinos had invited him.

In 2010, Atlantic City was bleeding revenue. Tropicana, Borgata, Caesars needed whales. Johnson overheard a host pitching rebates at an Eagles game and asked for the same deal with a million-dollar line. They said yes. 20%. Then 22 and a half.

The house edge on a six-deck game with very good rules is 0.253%. The 20% rebate plus a stop-loss meant he was never paying a full dollar when he lost. He said dealers at those stakes make more than one mistake an hour. He did not eat them.

The article below shows the same blind spot with smaller numbers. Your brain evaluates $100 differently depending on what it is standing next to. A casino evaluated a 20% rebate as a marketing expense. Johnson evaluated it as a mathematical edge.

He won every chip in the Tropicana's tray. Asked for a fill. They said they were out. Could not open another table because of cash-on-hand rules. He took $6 million from one property in one night.

They invited him back twice after that.

In Australia a dealer pulled a five on a 16 that would have completed Johnson's hand. He had $45,000 in play. He never signaled. The casino wanted to burn the card. He refused. The hand sat on the table for the entire weekend until Gaming Control arrived Monday and ruled in his favor.

"Nobody extorted anything from a casino. They did deals they were comfortable with. If they invite you in, you're an invited guest. You don't get to act surprised afterwards."

The article says your brain runs a different equation than it thinks it's running. Johnson found the casinos doing the same thing, at $100,000 a hand.

[Beaver @Beaver_0x]

https://t.co/bnTUVXMGpH

[Lindsey @0x_Squirrel]

@WealthLens_ Princeton Newport ran 230 months. Three down, all under 1%. The Sharpe ratio on that is somewhere north of 2.5. Nobody talks about it because the fund is closed.

[Lindsey @0x_Squirrel]

Ed Thorp made $1 million on Black Monday. He started by finishing lunch.

His office called in panic. It was October 19th 1987. He was having lunch with his wife Vivian. A daily ritual from which he does not deviate. He had assessed the risk of upsetting her and it was not worth taking.

He walked to his study, instructed his head trader to sell twice as many stocks as needed to hedge the futures, and locked in the million before the day was over.

Twenty-five years earlier he had published Beat the Dealer. Sold 770,000 copies. Casinos banned him. They drugged his coffee at a baccarat table. They tampered with his accelerator linkage on a downhill road. He wore disguises to get back in.

Then he walked into a bookstore in Beverly Hills and found common stock purchase warrants. A small fee is the maximum you can lose. The upside is limitless. He saw the same asymmetry he had been playing at the blackjack table, except the pit boss could not throw him out.

Warren Buffett played an afternoon of bridge with him and told him to start a hedge fund. He did. Princeton Newport Partners returned 19.1% a year. Three down months in 20 years. Those were less than 1%.

[Lindsey @0x_Squirrel]

Don Johnson was paying 80 cents on every dollar he lost. The casinos thought they were charging full price.

A 20% loss rebate on a game where the house takes 0.263% is not a discount. The rebate, the stop-loss, and the right to quit meant the casino was never collecting a full dollar when he went down. They modeled it as marketing. He modeled it as a contract with a mathematical edge built in.

He said dealers at those stakes make more than one mistake an hour. Most players let the mistakes slide. Johnson held them to their own rules, every time. The casinos called it intimidation.

He played for about 72 hours straight. Bruce Willis came over from craps, down a million. Johnson was down $600,000 at one point. He made it back. Willis got his million back about ten hours later.

Different night, Tropicana: he won every chip in the tray and asked for a fill. They said they were out.

The casinos rewrote the deal the moment he proved he could read it.

[Lindsey @0x_Squirrel]

@DaniilBuilds He had a stop-loss written into the contract before he sat down. Leaving wasn't discipline. It was a clause.

[Lindsey @0x_Squirrel]

@batagonx The Fibonacci industry makes more from subscriptions than any Fibonacci trader makes from the market. The product isn't the indicator. It's the customer.

[Lindsey @0x_Squirrel]

@WOLF_Financial Lynch retuned 29% for 13 years. The average Magellan investor underperformed him. They kept buying and selling the bottoms of his own fund. Who was the problem?

[Lindsey @0x_Squirrel]

@CHERRY2TIMES Johnson's edge wasn't luck or IQ. It was reading the rebate terms better than the casino's own lawyers.

[Lindsey @0x_Squirrel]

Don Johnson won $15 million at blackjack without relying on card counting as the edge. The casinos had invited him.

In 2010, Atlantic City was bleeding revenue. Tropicana, Borgata, Caesars needed whales. Johnson overheard a host pitching rebates at an Eagles game and asked for the same deal with a million-dollar line. They said yes. 20%. Then 22 and a half.

The house edge on a six-deck game with very good rules is 0.253%. The 20% rebate plus a stop-loss meant he was never paying a full dollar when he lost. He said dealers at those stakes make more than one mistake an hour. He did not eat them.

The article below shows the same blind spot with smaller numbers. Your brain evaluates $100 differently depending on what it is standing next to. A casino evaluated a 20% rebate as a marketing expense. Johnson evaluated it as a mathematical edge.

He won every chip in the Tropicana's tray. Asked for a fill. They said they were out. Could not open another table because of cash-on-hand rules. He took $6 million from one property in one night.

They invited him back twice after that.

In Australia a dealer pulled a five on a 16 that would have completed Johnson's hand. He had $45,000 in play. He never signaled. The casino wanted to burn the card. He refused. The hand sat on the table for the entire weekend until Gaming Control arrived Monday and ruled in his favor.

"Nobody extorted anything from a casino. They did deals they were comfortable with. If they invite you in, you're an invited guest. You don't get to act surprised afterwards."

The article says your brain runs a different equation than it thinks it's running. Johnson found the casinos doing the same thing, at $100,000 a hand.

[Beaver @Beaver_0x]

https://t.co/bnTUVXMGpH

[Lindsey @0x_Squirrel]

@alpha_brody That's the part casinos modeled as marketing. A rebate that changes the payoff structure isn't a discount. It's a redesigned game.

[Lindsey @0x_Squirrel]

Don Johnson was paying 80 cents on every dollar he lost. The casinos thought they were charging full price.

A 20% loss rebate on a game where the house takes 0.263% is not a discount. The rebate, the stop-loss, and the right to quit meant the casino was never collecting a full dollar when he went down. They modeled it as marketing. He modeled it as a contract with a mathematical edge built in.

He said dealers at those stakes make more than one mistake an hour. Most players let the mistakes slide. Johnson held them to their own rules, every time. The casinos called it intimidation.

He played for about 72 hours straight. Bruce Willis came over from craps, down a million. Johnson was down $600,000 at one point. He made it back. Willis got his million back about ten hours later.

Different night, Tropicana: he won every chip in the tray and asked for a fill. They said they were out.

The casinos rewrote the deal the moment he proved he could read it.

[Lindsey @0x_Squirrel]

Don Johnson won $15 million at blackjack without relying on card counting as the edge. The casinos had invited him.

In 2010, Atlantic City was bleeding revenue. Tropicana, Borgata, Caesars needed whales. Johnson overheard a host pitching rebates at an Eagles game and asked for the same deal with a million-dollar line. They said yes. 20%. Then 22 and a half.

The house edge on a six-deck game with very good rules is 0.253%. The 20% rebate plus a stop-loss meant he was never paying a full dollar when he lost. He said dealers at those stakes make more than one mistake an hour. He did not eat them.

The article below shows the same blind spot with smaller numbers. Your brain evaluates $100 differently depending on what it is standing next to. A casino evaluated a 20% rebate as a marketing expense. Johnson evaluated it as a mathematical edge.

He won every chip in the Tropicana's tray. Asked for a fill. They said they were out. Could not open another table because of cash-on-hand rules. He took $6 million from one property in one night.

They invited him back twice after that.

In Australia a dealer pulled a five on a 16 that would have completed Johnson's hand. He had $45,000 in play. He never signaled. The casino wanted to burn the card. He refused. The hand sat on the table for the entire weekend until Gaming Control arrived Monday and ruled in his favor.

"Nobody extorted anything from a casino. They did deals they were comfortable with. If they invite you in, you're an invited guest. You don't get to act surprised afterwards."

The article says your brain runs a different equation than it thinks it's running. Johnson found the casinos doing the same thing, at $100,000 a hand.

[Lindsey @0x_Squirrel]

@batagonx Most traders never audit their own fills. The brokers count on that. Johnson just applied the same discipline to a different kind of dealer.

[Lindsey @0x_Squirrel]

@dromexa After this run, Atlantic City changed the rules. Casinos now need regulatory approval for loss rebates above a certain threshold. One player rewrote the regulations.

[Lindsey @0x_Squirrel]

@baldman_man Every mispriced contract starts the same way. One side thinks they're offering a concession. The other side already ran the expected value.

[Lindsey @0x_Squirrel]

@batagonx Same math, different table. The edge isn't in the trade. It's in the fee structure you negotiate before the first order hits.

[Lindsey @0x_Squirrel]

@Solerbtc He negotiated a 20% loss rebate on top of rule changes cut the house edge below 1%. Then he played perfectly. The casinos didn't check the math.

[Lindsey @0x_Squirrel]

@batagonx The portfolio was 95 boring blue chips. The real question isn't what he bought. It's what made him never sell during the dozen bear markets he sat through.

[Lindsey @0x_Squirrel]

@0_xSan 35 years of being right and still contrarian. that's how you know the thesis holds.

[Lindsey @0x_Squirrel]

Howard Marks built a $170 billion firm on one rule. He says the riskiest moment is when nobody sees risk.

He co-founded Oaktree Capital. His distressed-debt franchise is built on one idea: the best time to buy is when everybody else is certain they should not.

The article below lists 10 engines that build capital. Index funds, dividends, rental income, bonds, hard assets. Each one compounds. Each one works. None of them tells you when to stop.

"Anybody who's sure is an idiot."

In 1978, Citibank moved him to the bond department to start a high-yield fund. He stayed in credit for the rest of his career because being a lender requires one skill above everything else: assessing the probability that the borrower will pay you back.

He wrote a memo in October 2008, after Lehman, titled "The Limits to Negativism." The market was certain the system was finished.

He told TBPN this year: "The scariest thing in the world, the riskiest thing in the world, is the belief there's no risk." When everybody is unafraid, he gets terrified, because they do nutty things that put everyone in jeopardy.

The worst of loans are made in the best of times. That is an old banking rule. It means the engine runs hottest right before it breaks.

The article lists 10 ways to build capital. Marks spent 35 years proving there is only one way to keep it: assume you are wrong.

[Mirage @dontstopmirage]

https://t.co/pSo9zNwHeW

[Lindsey @0x_Squirrel]

@bubosees The 2008 vintage fund returned over 30% IRR. Listening paid. It just didn't feel safe at the time.

[Lindsey @0x_Squirrel]

@batagonx The law of large numbers guarantees the house wins eventually. It says noting about how many trades that takes. How many retail accounts go to zero waiting for "eventually"?

[Lindsey @0x_Squirrel]

@m444k_ Seventy five people worked the WaMu deal and closed it the same evening the FDIC seized it. How long was the due diligence?