This past week, on the USTA site, Bob Pandolfo presented a well-articulated article on the advantages of exotic wagering over win, place and show wagering. In his article, he articulated several points which we have already discussed here in Handicapping Corner, including:

a) the potential benefits of using "All" in trifecta combinations, and
b) the advantages of "multiple race" exotics as a means for reducing the percentage of track take out.

Further, he points out the inherent difficulty in grinding out profits using win, place or show wagering as a primary betting vehicle.

While I agree on balance with what was presented, there are a number of very important caveats that he overlooks in his presentation that I would like to emphasize here this week.

First off, if you have not read the archives, I should reference you to 2 articles in there … MY FAVORITE HORSE and THE MAGIC OF ALL, which deal in detail with the how, when and why of using ALL. Even if you have read this last year, now is a good time to go back and review this material. Go ahead … I'll wait while you do so. While Bob reaffirms the advantages of getting lucky - unless you know when to and when not to do this, you will go broke in a well-bet pool. Pushing the ALL button costs money. It can be a very costly way to play, even on $1 tickets. You need structure here and discipline. You need to know when it is really to your advantage to push the ALL button, and when not.

EXOTIC WAGERING VERSUS WIN, PLACE AND SHOW
My detailed records have consistently shown that place and show wagering just don't cut it - at least when you are keying on the type of horses that I tend to key in on. This is based on the mathematical concept of "Expected Value."

Expected value is equal to the chances of something happening, multiplied by the payoff (positive or negative). Let's say you were presented with the following gaming proposition:

With the type of horses that I have keyed on over years of playing, the expected value of well-chosen exotic wagers is by far the highest. A clear second is combining exotic wagers with straight win betting, followed by straight win betting alone. Place and show wagering, as defined above, are inferior to that of other types of wagering. Certainly, they are vastly inferior to win betting. Place betting is by far the worst.

COMBINING WAGERING TYPES TO MANAGE CASH FLOW AND SANITY
Win-Show wagering in equal amounts is worse that just win betting, but is far superior to either place or show wagering. The Win-Show combination, however, had a significant effect on the volatility of results and therefore, could be an effective means of enhancing short-term cash flow, even though it negatively impacts profitability over the long haul.

This is something that you must keep in mind - the balancing of profitability and cash flow. Even the largest companies in the world offer certain products as "loss leaders" - these products do not enhance profitability, but absorb overhead, bring people into the store, and generate the cash flow in the short-term until customers purchase high-margin items.

The same is true at the track. If you consistently bet higher-payoff / lower probability combinations, this may indeed be the most profitable thing in the long run, but few racing fans have unlimited capital. You can find yourself waiting around a bit longer than you might like for that big payoff to come in. In fact, if you catch a cold-streak in the interim, you can deplete your capital (not to mention your confidence) to such an extent that when the magic moment appears, you might be either unwilling or unable to make the bets that need to be made in order to cash.

It is in this regard that Win/Show wagering can be a useful combination, enabling you to withstand bad luck and keeping your cash flowing until you hit with that big-price winner. If you are wagering with limited capital, consider this combination as a valuable addition to your arsenal.

COMBINING EXOTIC AND WIN WAGERING
I strongly advocate the use of both exotic and win wagering as a means for managing not just cash flow, but your mental state as well. Here's a pop quiz -- let's see if you think the same way I do.

Well, most people tend to lie somewhere between b) and c) on this scale. The more it happens, the more you tend to move down toward d). Even me - my reaction to this is, truthfully, a). But if this starts happening a bunch of times in a row, even I can start reaching for a rope or razor blade. Personally, I'd rather see the horse finish last and take my licks, than have the winner and not cash.

This may sound stupid, but if this starts happening, you can actually get tapped out - not just financially, but emotionally as well - and like many games, the emotional component of wagering is much more important than most realize.

It's one thing to get financially and psychologically under the gun in this game from being wrong, but can you afford to go broke from being right?? What happens then if you go cold??

I've been through this now 3 times in a row with key horses I was looking to bet heavily - MIGHTY JJ and HYTAILIT HENRY at Balmoral Park, and most recently, this past Saturday at Garden State, with TRAINDENFER SEMALU. In each case I spotted the animal and knew that they were substantially sharper than the programs would suggest. Assessing their chances in their next races, in each case, I felt that the horse deserved to be the solid favorite. In each case, the horse was NOT the favorite at all. In each case I was salivating, waiting for the race so I could blow the doors off the joint.

In each case I was right. Each horse won, but in each case, I missed the exacta or trifecta. I could have been 0-3 and in the hole for several grand despite being absolutely dead right on with my observations. Even the strongest mental player can start to doubt him- or herself when this starts happening. If I had bet only the exactas and trifectas, that is indeed what would have happened. Yet I'm whole both financially and psychologically from this experience. Why?

Because I had the sense to put enough on the win bet to make it worth the while - that's why! MIGHTY JJ paid about $7 - $500 to win on him was what I needed to make a decent amount on him despite missing with all of my exactas and trifectas. HYTAILIT HENRY I think paid 6 and change. Again, a few hundred on the nose helped a bundle, as did wheeling him forward in the late double - catching the $21 double on the back end for a $100 ticket. Here, it was important that I played the double as well as the exactas, because it allowed me to be wrong on the rest of that race, but still be able to capitalize on the next race. But the money was already made on the win bet. Everything else was a free ride.

Now I know what you're saying. You're saying "that's good Steve, but I don't have an extra 5 C-notes laying around in my wallet to throw on the horse -- what about me?"

Well, on both of these occasions, I was with my friend Tom, who is a very moderate level player. With about $20 - $30 to wager on each of these, he asked my advice. We looked at the odds, and wheeling on the exactas was out of the question due to potentially poor payoffs. On the way to the window, I said to Tom, "whatever amount you bet, make sure at least half of it goes on the nose pal". So for $20, what the hell is so wrong with $14 to win and a few exactas?? At least this way, he's whole and ahead with the win bet, and if the exacta comes in, that's a bonus! He played this way on both of the above horses, right along with me. Could have been 0-2 and questioning his sanity, but instead, he's 2 for 2 and going strong. Filthy rich, no. But more than whole and more importantly, alive emotionally.

Just this last Saturday came TRAINDENFER SEMALU in the finale. In Gold Club, I said outright that of the 3 potentially playable races, this one had the best potential to be a great combination of odds and chances. Anybody who saw his last race or who can read a chart had to be shocked when this horse went off at 5-1. He deserved to be a favorite, and a solid one at that.

Again, what's the play?

Well, the greedy play is to pile on to the exactas and trifectas. Yea, you might catch an extra combo that comes up a winner that way … yea, you might catch it for some extra times that you otherwise might … all this is true. But since betting is at least 80% psychological, what is so wrong about having win money on a horse at 5-1 who deserves to be 7-5? I mean what the hell is so damned wrong with that? You got $20 to bet on this horse --- take $10 and put it to win -- pick up the value. If you catch the exacta on top of this, then it's even better. But few people can take the emotional beating from being so right and coming up empty after the race.

And the higher the odds on the horse, the more pronounced is this effect. Sure, you can pass an $8 horse in exchange for taking some extra shots at the exacta -- particularly if there are some real nice exacta numbers on the board --- there are more than enough $8 horses to go around, and you'll have many more of these (unless, of course, you are Mike Farrell or Dave Little, in which case this is probably your big long-shot of the meet). Okay, so you miss it -- big freaking deal. But truthfully, how many times in the course of a meet do you see a horse that you KNOW should be a solid favorite and is paying something like $17? Can you emotionally afford to miss these? Tell me truthfully - how many $30 plus horses have you been on - I mean keyed in on - in the past 6 months? Not that many. Maybe 1, 2 or 3? Can you emotionally afford to miss these payoffs entirely out of the greed in going for the big kibosh on the exacta or trifecta? You miss a few of these pal - and that's enough to make a chalk player out of almost anyone.

And speaking of chalk players, "Harry, are you there?"

My friend "Harry The Heckler" has been quiet for some time --- I understand the leasing company repossessed his computer because he was tapped out - but I hear he is back in business, and he'll be doing the next installment of Handicapping Corner along with me.

Chalkies have no fear -- Harry The Heckler's Guide to Chalk Betting is coming soon!!