Here's an interview on NPR with Ed Thorp and author of 'The Quants' Scott Patterson. The book is #23 on the New York Times National Best Seller List (hardcover-nonfiction) and is subtitled "How a new breed of math whizzes conquered Wall Street and nearly destroyed it." Thorp discusses blackjack considerably in the interview before the debacle on Wall Street is discussed. Thorp was playing to the lowest common denominator of the audience who only know of card counting as 2-6=+1 and 10/aces=-1. It was implied that he developed High-Low through the computer work at MIT instead of the Ten Count. The 1962 original version of "Beat The Dealer" did not include High-Low and was dedicated to the Ten Count.
Also curious was Thorp's admission that he trusted others with his investments who didn't use Kelly Criterion when the financial meltdown occurred. Thorp lost much of his wealth to the new breed of Quants who ignored money management and leveraged at will. "Any good investment, sufficiently leveraged, can lead to ruin" Thorp says in the book which asks the question, why didn't Thorp use his investing methods with his wealth at that time? Thorp did recover most of his wealth back after the meltdown using his tried and true methods.
Casino reporter JSTAT, ABC News 20/20 Contributor, enjoys blackjack/baccarat card counting, and Bay Area poker pro. Saying what needs to be said.
Friday, February 26, 2010
Tuesday, February 23, 2010
Ed Thorp and I beat the same casino boss at card counting.
In a 2/1 interview on NPR of the book 'The Quants', Ed Thorp recalled his 1961 actual play of his count with Mr. X (Manny Kimmel) then "tiring" and quitting of play at Harvey's. In the story below, my meeting with Joe the casino manager disputes Thorp's words.
In the summer of 2007, my wife and I stayed at Harvey's as we do every summer. Her cousin who has been a resident of South Lake Tahoe since 1976 visited us in our room. He brought his wife, son, and an old friend of his. His friend was named Joe. When he introduced us, he said Joe was the casino manager of Harvey's, but now retired. I looked at him and knew him right away since I worked at Harvey's in 1979. They laid me off because of the gas crisis then. Last one hired, first one fired. I told Joe this and he was shocked. He asked the name of the shift manager at the time. I said his name and Joe believed me. I told him it was a blessing because I moved on to deal the best craps games in Las Vegas. I was upset that I had to leave Lake Tahoe and my dreams were crushed then. For payback of my layoff, I used my own Ten Count in 1992 at Harvey's and crushed them at single deck blackjack. Joe was surprised that I got away with it under his watch. I spread $5-$150 and only made big bets when the hi-lo count was negative and the Ten Count showed positive blackjack expectation. I assumed the eye in the sky used hi-lo to evaluate blackjack skill. Won $4000 in 6 hours of nonstop play utilizing card counting. This fooled his bosses, and Joe was dismayed.
Our conversation changed to Ed Thorp. Since Joe was the casino manager at the time, I asked him about Thorp's story in "Beat The Dealer(1962)" about Harvey's. Thorp wrote on page 112, "In two hours we broke the bank again. The great heaps of chips in front of us included more than $17,000 in profits. I had won about $6,000 and Mr. X, betting wildly, had won $11,000. I was tiring rapidly. The aftereffects of our huge dinner, the increased effort in managing two hands, and the strain of the last few days were telling. I began to find it very difficult to count properly and saw that Mr. X was equally far gone. I insisted that we quit, and I cashed in my $6,000." Joe's eyes lit up and said,"I threw that bum out of here and you know what he did? He hugged me and kissed me and said thank you!" I asked him about Mr. X and Joe said that he was a known player and let Mr. X play on. Thorp was backed off by Joe instead of "insisting that we quit" as written in "Beat The Dealer." It was surreal spending that afternoon with a part of blackjack history. To hear the untold story of Thorp's adventure at Harvey's with the casino manager whom we both beat as card counters right under his nose.
In the summer of 2007, my wife and I stayed at Harvey's as we do every summer. Her cousin who has been a resident of South Lake Tahoe since 1976 visited us in our room. He brought his wife, son, and an old friend of his. His friend was named Joe. When he introduced us, he said Joe was the casino manager of Harvey's, but now retired. I looked at him and knew him right away since I worked at Harvey's in 1979. They laid me off because of the gas crisis then. Last one hired, first one fired. I told Joe this and he was shocked. He asked the name of the shift manager at the time. I said his name and Joe believed me. I told him it was a blessing because I moved on to deal the best craps games in Las Vegas. I was upset that I had to leave Lake Tahoe and my dreams were crushed then. For payback of my layoff, I used my own Ten Count in 1992 at Harvey's and crushed them at single deck blackjack. Joe was surprised that I got away with it under his watch. I spread $5-$150 and only made big bets when the hi-lo count was negative and the Ten Count showed positive blackjack expectation. I assumed the eye in the sky used hi-lo to evaluate blackjack skill. Won $4000 in 6 hours of nonstop play utilizing card counting. This fooled his bosses, and Joe was dismayed.
Our conversation changed to Ed Thorp. Since Joe was the casino manager at the time, I asked him about Thorp's story in "Beat The Dealer(1962)" about Harvey's. Thorp wrote on page 112, "In two hours we broke the bank again. The great heaps of chips in front of us included more than $17,000 in profits. I had won about $6,000 and Mr. X, betting wildly, had won $11,000. I was tiring rapidly. The aftereffects of our huge dinner, the increased effort in managing two hands, and the strain of the last few days were telling. I began to find it very difficult to count properly and saw that Mr. X was equally far gone. I insisted that we quit, and I cashed in my $6,000." Joe's eyes lit up and said,"I threw that bum out of here and you know what he did? He hugged me and kissed me and said thank you!" I asked him about Mr. X and Joe said that he was a known player and let Mr. X play on. Thorp was backed off by Joe instead of "insisting that we quit" as written in "Beat The Dealer." It was surreal spending that afternoon with a part of blackjack history. To hear the untold story of Thorp's adventure at Harvey's with the casino manager whom we both beat as card counters right under his nose.
Monday, February 22, 2010
Las Vegas Strip rewards card counting couple
John and Margarita Stathis decided to spend their 25th wedding anniversary recently at the Paris hotel on the Strip. Nevada is named "The Silver State" and celebrating the silver benchmark in Las Vegas was John's idea, instead of buying jewelry. Walking through the low limit 6:5 ($50 blackjacks receive $60 instead of $75) at two in the afternoon Mirage blackjack tables near the sportsbook, one will read "Bringing the heat for 20 years" stenciled on the green felts. Heat is a term used by counters when they have been made by a casino for betting with their heads, not over it. The people mover and the white tiger display are gone and the casino is nearly empty. The six high-limit double deck tables near the poker room with one of the best rules in town is completely deserted with only dealers and pit bosses waiting for customers. There is a saying that goes "throwing out the baby with the bath water" and maybe the Mirage threw out weak counters who comprise the majority of blackjack's profits with the few competent players.
Margarita never card counted before because of the higher limits and held John's feet to the fire as an anniversary present. They took the tram from Mirage to Treasure Island next door to play the four $10 minimum double deck games that offers a low .19% advantage to the house. MGM Mirage sold Treasure Island to billionaire Phil Ruffin recently to raise funds to open its struggling CityCenter project. Ruffin is known to offer good games as he did when he owned Frontier on the Strip and this blackjack January surprise is just what the doctor ordered. The Treasure Island $10 game is parallel to Mirage's (or Wynn,Bellagio, and Aria) double deck with the dealer standing on soft 17, 3:2 blackjack payouts, double after split, and penetration around 60%. A good game to play for a couple on a budget looking for a good deal and a chance to win a few bucks.
Margarita was told by John to "pump it up!" when more aces and tens than normal were left in the presence of pit bosses who took interest. John never looked at his cards and took insurance if a dealer had an ace up, when the deck was rich in tens. He had a personal pit boss within inches of his face! This proved to his wife about the heat he has always received, and never believed by her until then. The couple made off with $600 of Treasure Island's money that paid for their Cashman Crystal anniversary gift with their picture inside the crystal.
Margarita never card counted before because of the higher limits and held John's feet to the fire as an anniversary present. They took the tram from Mirage to Treasure Island next door to play the four $10 minimum double deck games that offers a low .19% advantage to the house. MGM Mirage sold Treasure Island to billionaire Phil Ruffin recently to raise funds to open its struggling CityCenter project. Ruffin is known to offer good games as he did when he owned Frontier on the Strip and this blackjack January surprise is just what the doctor ordered. The Treasure Island $10 game is parallel to Mirage's (or Wynn,Bellagio, and Aria) double deck with the dealer standing on soft 17, 3:2 blackjack payouts, double after split, and penetration around 60%. A good game to play for a couple on a budget looking for a good deal and a chance to win a few bucks.
Margarita was told by John to "pump it up!" when more aces and tens than normal were left in the presence of pit bosses who took interest. John never looked at his cards and took insurance if a dealer had an ace up, when the deck was rich in tens. He had a personal pit boss within inches of his face! This proved to his wife about the heat he has always received, and never believed by her until then. The couple made off with $600 of Treasure Island's money that paid for their Cashman Crystal anniversary gift with their picture inside the crystal.
Thursday, February 18, 2010
Harrah's, Apollo Management, and CalPERS/CalSTRS debacle
The California Public Employees Retirement System (CalPERS) has a 9% stake in the private equity firm Apollo Management which owns most of Harrah's Entertainment. CalPERS also shelled out close to $4 billion to keep Apollo above water like a floating craps game. Harrah's was bought at its high before the financial collapse, leading Apollo's CEO Leon Black to seek new investors. Private investors were not willing to invest while CalPERS plunged in due to double digit returns from Black's magic touch. The Chief Investment Officer of CalPERS, Joseph Dear, decided to up the ante of the Alternate Investment Program to 14% of the $200 billion retirement fund. It is possible that California is chasing good money after bad money with Black's prior controversial history with Michael Milken. It's a crapshoot.
Harrah's has pulled in its horns by offering 6:5 blackjack, lower video poker payouts, and less comps. A glass of wine at the Paris restaurant bar in Las Vegas costs $15! Harrah's is known as the "Evil Empire" on blackjack newsgroups such as blackjackinfo.com and bj21.com message boards because of its tight games. But for California to survive, more gamblers must play or stay at Harrah's properties to get out of this mess. Harrah's should use the Steve Wynn or MGM Mirage's business model by offering looser blackjack games that pay 3:2 blackjacks, stand on soft 17, late surrender, and resplit aces.
California can get out of this jam by cashing out and securing all of its retirement funds in United States Treasury bonds. It seems conservative, but an old saying professes, "light gains make heavy purses."
Harrah's suffered a $1.621 billion loss in the 3rd quarter of 2009 and CEO Gary Loveman said his company is "addressing our capital structure to cope with the protracted economic slump" in a statement published in the October 27, 2009 Las Vegas Sun. On November 4, 2009 the New York Post reported that one of Harrah's owners (Apollo Management) is "doubling down" on its investment to gain control of the company if restructuring is required due to Harrah's massive debt. Doubling down at the game of blackjack with a 9 vs ace is not a smart play, so partner TPG and minority investor Blackstone Group did not bet with Leon Black's Apollo. Where did all this capital come from? It is known that the California Public Retirement System (CalPERS) is Apollo Management's cash cow by committing $4 billion that helped Harrah's according to the Wall Street Journal October 23, 2009. But Harrah's capital structure did not stop here and another retirement fund was needed to structure the debt.
The California teachers $120 billion retirement fund CalSTRS is also invested with Apollo Management and TPG Capital also has taken a bath with its investments in Harrah's. Calls to the CalSTRS Chief Investment Officers office was not returned on why this trio of private equity firms were the leading losers of its Private Equity Portfolio Partnership. If CalSTRS and CalPERS gets wiped out by these corporate raiders, the taxpayers of California will have to foot the bill according to the state's constitution. If California defaults on this obligation, the United States government will bail out these public employees pensions.
Las Vegas was built on Teamsters pension money through the mob before Howard Hughes bought them out to legitimize casino gambling. This opened the doors to Wall Street's taking a piece of the action by offering shares to the public. Corporations such as MGM Mirage and Wynn Resorts offer the public the opportunity to invest in these companies and have a say at shareholders meetings. Coming full circle from the gangland days to Harrah's where the public has no say (because it is a private company) while its money is at stake. At least the mob made money running Las Vegas casinos.
Investments in the profitable bond company PIMCO run by Bill Gross will be cut in half by the California Public Employees' System (CalPERS) in spite of turning a profit for them, if approved at the Nov.16 CalPERS Board meeting. Bill Gross is known as the "Bond King" and cites his blackjack card counting experience to guide his business decisions for PIMCO. He turned $200 into $10,000 one summer in the 60's after reading the book "Beat The Dealer" while racked up in a hospital after an accident. The man knows risk management and made a profit during the financial meltdown while pension funds around the country took a bath. CalPERS decided it was smart to allocate more into the risky private equity funds.
State pension funds are “dumb” clients according to State Street Bank's whistleblowers in a suit filed by California's Attorney General Jerry Brown. CalPERS and CalSTRS (California State Teachers' Retirement System) were skimmed $56.6 million in currency exchanges and want it back. CalPERS also was allegedly hoodwinked by Alfred Villalobos, a former board member who took $60 million in kickbacks from Leon Black's Apollo Management , Black's brother-in-law's CIM Group in Los Angeles, and Arvco Financial Ventures/Arvco Capital Research owned by Villalobos. This is small potatoes compared to the billions already lost from the $200 billion CalPERS and $120 billion CalSTRS.
Gross contends investments in casinos will take a nosedive in the near future, not good news to the risk managers who chose to chase good money after bad money. CalPERS is in at least $4 billion with Apollo Management who owns struggling Harrah's with TPG Capital who also raided the California pension systems to buy the casino chain. United States Senator Harry Reid claims that he saved 31,000 jobs at Harrah's properties in a provision in the stimulus bill signed by President Obama this year. Harrah's was allowed to kick the can down the road by restructuring debt. Obama's signature allowed Harrah's to deleverage close to $4 billion in debt and keep the company above water at the expense of California's taxpayers, if CalPERS/CalSTRS goes belly up. If California goes bankrupt, the United States government is obligated to pay, and guess who is stuck with the bill?
Click the "Harrah's, Apollo Management, and CalPERS/CalSTRS debacle" group on Facebook for more details
Harrah's has pulled in its horns by offering 6:5 blackjack, lower video poker payouts, and less comps. A glass of wine at the Paris restaurant bar in Las Vegas costs $15! Harrah's is known as the "Evil Empire" on blackjack newsgroups such as blackjackinfo.com and bj21.com message boards because of its tight games. But for California to survive, more gamblers must play or stay at Harrah's properties to get out of this mess. Harrah's should use the Steve Wynn or MGM Mirage's business model by offering looser blackjack games that pay 3:2 blackjacks, stand on soft 17, late surrender, and resplit aces.
California can get out of this jam by cashing out and securing all of its retirement funds in United States Treasury bonds. It seems conservative, but an old saying professes, "light gains make heavy purses."
Harrah's suffered a $1.621 billion loss in the 3rd quarter of 2009 and CEO Gary Loveman said his company is "addressing our capital structure to cope with the protracted economic slump" in a statement published in the October 27, 2009 Las Vegas Sun. On November 4, 2009 the New York Post reported that one of Harrah's owners (Apollo Management) is "doubling down" on its investment to gain control of the company if restructuring is required due to Harrah's massive debt. Doubling down at the game of blackjack with a 9 vs ace is not a smart play, so partner TPG and minority investor Blackstone Group did not bet with Leon Black's Apollo. Where did all this capital come from? It is known that the California Public Retirement System (CalPERS) is Apollo Management's cash cow by committing $4 billion that helped Harrah's according to the Wall Street Journal October 23, 2009. But Harrah's capital structure did not stop here and another retirement fund was needed to structure the debt.
The California teachers $120 billion retirement fund CalSTRS is also invested with Apollo Management and TPG Capital also has taken a bath with its investments in Harrah's. Calls to the CalSTRS Chief Investment Officers office was not returned on why this trio of private equity firms were the leading losers of its Private Equity Portfolio Partnership. If CalSTRS and CalPERS gets wiped out by these corporate raiders, the taxpayers of California will have to foot the bill according to the state's constitution. If California defaults on this obligation, the United States government will bail out these public employees pensions.
Las Vegas was built on Teamsters pension money through the mob before Howard Hughes bought them out to legitimize casino gambling. This opened the doors to Wall Street's taking a piece of the action by offering shares to the public. Corporations such as MGM Mirage and Wynn Resorts offer the public the opportunity to invest in these companies and have a say at shareholders meetings. Coming full circle from the gangland days to Harrah's where the public has no say (because it is a private company) while its money is at stake. At least the mob made money running Las Vegas casinos.
Investments in the profitable bond company PIMCO run by Bill Gross will be cut in half by the California Public Employees' System (CalPERS) in spite of turning a profit for them, if approved at the Nov.16 CalPERS Board meeting. Bill Gross is known as the "Bond King" and cites his blackjack card counting experience to guide his business decisions for PIMCO. He turned $200 into $10,000 one summer in the 60's after reading the book "Beat The Dealer" while racked up in a hospital after an accident. The man knows risk management and made a profit during the financial meltdown while pension funds around the country took a bath. CalPERS decided it was smart to allocate more into the risky private equity funds.
State pension funds are “dumb” clients according to State Street Bank's whistleblowers in a suit filed by California's Attorney General Jerry Brown. CalPERS and CalSTRS (California State Teachers' Retirement System) were skimmed $56.6 million in currency exchanges and want it back. CalPERS also was allegedly hoodwinked by Alfred Villalobos, a former board member who took $60 million in kickbacks from Leon Black's Apollo Management , Black's brother-in-law's CIM Group in Los Angeles, and Arvco Financial Ventures/Arvco Capital Research owned by Villalobos. This is small potatoes compared to the billions already lost from the $200 billion CalPERS and $120 billion CalSTRS.
Gross contends investments in casinos will take a nosedive in the near future, not good news to the risk managers who chose to chase good money after bad money. CalPERS is in at least $4 billion with Apollo Management who owns struggling Harrah's with TPG Capital who also raided the California pension systems to buy the casino chain. United States Senator Harry Reid claims that he saved 31,000 jobs at Harrah's properties in a provision in the stimulus bill signed by President Obama this year. Harrah's was allowed to kick the can down the road by restructuring debt. Obama's signature allowed Harrah's to deleverage close to $4 billion in debt and keep the company above water at the expense of California's taxpayers, if CalPERS/CalSTRS goes belly up. If California goes bankrupt, the United States government is obligated to pay, and guess who is stuck with the bill?
Click the "Harrah's, Apollo Management, and CalPERS/CalSTRS debacle" group on Facebook for more details
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