DON'T BET THE FARM!

WSJ.com - Some Tips for Becoming A Shark in the Office Pool

WSJ.com - Some Tips for Becoming A Shark in the Office Pool

The odds of picking all 63 winners in the NCAA tournament are 9,220,000,000,000,000,000 to 1 against you (9.22 quintillion or 9.22 billion times a billion). So sayeth the above article in the Wall Street Journal Online Edition.

PICKING BASKETBALL WINNERS OR PICKING STOCKS--DON'T BET THE FARM AGAINST LONG ODDS.

Number one seeds make it to the final 4 about 40% of the time; number 2 seeds about 20% of the time. At the other end of the scale, not a single 16th seed has ever won a single game. The top 16 teams have a relatively easy first game and only a moderately tougher second game, but anything can happen in basketball. Making the final 16 is an accomplishment, winning from there takes a lot of skill and a lot of luck. The top 16 teams are all very good.

ESPN prognosticators like Illinois, North Carolina and Wake Forest. My assessment is that Illinois would win this tournament one time in 5 or 20% of the time. North Carolina and Duke each have about a 14 percent chance (1 of 7) and Wake Forest maybe 7%. Throw-in Ga. Tech. at 4% and NC State at 1% and I get a 40% chance that an ACC team is the next champion.

I would not bet on any team to win. I would not even bet on Illinois, North Carolina and Duke against the field. I can't tell you which team will beat anyone of the three but I can name a lot of teams that are capable. Kansas, Oklahoma State, Washington, Connecticut and many other teams are capable of beating any one of my favorites by 20 points or more!

It would be a poor bet to choose any three teams over the entire field; the same with three favorite stocks. If you put all your money on your favorite three stocks, you might hit a 10 bagger on one and not need to worry about the performance of the other 2 or you might not. However, if you spread your investments over your ten most favorite stocks, you would probably hit at least one 10 bagger. In the basketball analogy, give me my choice of 10 teams against the field and I will bet the farm on choosing the winner.

I listed Ga. Tech. as having a 4% chance. However, the same group of players made a big splash last year. They came close to winning it all. This year, one star player was out with an injury through-out most of the year. This team beat Carolina in the ACC tournament and had several chances to win the final game against Duke.

If one could invest in teams as if they were stocks, I suspect I would be able to buy Ga. Tech. cheap. I might buy the team for $2 with a $100 return for winning. My heart wants the Tar Heels to win, but I could not buy the "stock". Based on the analysts (ESPN prognosticators) excitement, it is clear that one would have to pay $25 or more to buy a share in the same $100 "pot". In my opinion North Carolina is no where near 12 times as likely to win as Ga. Tech.

The lessons are simple. Buy good values not hyped values; spread your risk; pull for the the TAR HEELS but don't bet the farm that we will win. :-)