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I've decided to start a new hedge fund. However, this hedge fund won't invest in stocks or bonds, or any type of business. It's going to be a fund that only takes bets. A gambling hedge fund.

It won't be me figuring out what bets to take, or what games to play. This is a fund.  I will find the best and the brightest, with a confirmable track record and hire them.

It's an idea whose time has come.

I have bet on stocks long and short for about 15 years now. I've done very well. There has already been one hedge fund started based on my trading results. In those 15 years, I have learned that despite all the claims and books written about efficient markets, the trading of individual stocks are not efficient. There are always people trading on better or worse information. There are always people trading on emotion rather than logic. There are always people trading on hopes of the big hit. What Peter Lynch would call the "10 Bagger". They were gambling. Nothing more. Nothing less.

It's not unusual to hear people refer to trading stocks as no different than going to Vegas. They are right. Gambling is gambling.

The question really is, which gives the opportunity for a better outcome?

If you play the slots in Vegas, you can read what the payout ratios are for each casino. 97 pct. 98 pct. If you play long enough, the casino will end up with 2 or 3 pct of your money.  Unless of course you go up to the winning side while you play, and quit while you’re ahead.

The stockmarket equivalent would be to buy an At The Money Long Term (LEAP) Put for 2 or 3 pct of the stock price. The put would protect your downside for several years, and the stock would only have breakeven or upside potential over that period. It's a nice thing, except that it's much, much, much more expensive than 3 pct.

And then there are sports bets. Like any other investment or bet, the question always come down to whether there is good information available, who knows how to use it better, and who is the competition and are they smart or not.

Most casual gamblers, who are the majority of the money spent, go to vegas expecting to lose money. It's part of the entertainment experience.  People put money in mutual funds and in their brokerage accounts and pick stocks expecting to make money. They don't find any value in losing money on a stock, fund or other traditional investment. That changes the opportunity completely.

They set odds in order to attract as much emotional, stupid money as it possibly can. It also knows that this emotional money will skew the odds and bring in the "smart money". As a result, they have learned to lay off their investments so that they are just taking their cut off the dollars invested rather than trying to outsmart the smart.

To me, this suggests the smart money is better than just good. It's very good.

The smart money doesn't brag about their results, but in the minimal reading and conversations I have had, it's the same people coming back over and over again. The smart money people are doing something right on a repetitive basis.

When you think about betting on sports, there really is far better information about your local sports team than there is about any local business in your market.  The local papers cover the team every day. The local TV station gives a report about every game. There are radio stations who cover them for hours at a time.

In sports, when someone does something wrong, they pretty much tell you the next day or two. Someone suspended, you know it. Someone hurt, They report it, and do a better job of policing that than any industry watch group.

And stats? my goodness. There is no comparison. You can tape everything and create your own stats, which I'm sure every "smart money" gambler does.  There are public play-by-plays of every game. There are websites that analyze every which way from Sunday every action and inaction of every player in the game.

Reporters are there after every practice to interview the players and coaches. They ask the same questions that every gambler wants to know, if only so they know who to pick for their fantasy teams.  They also get to see and report on who is there and who isn't and who is limping and who isn't.

That's not to say that the information is so good that this is a slam dunk investment. Sales don't get closed, product cycles get pushed back, drugs don't work as expected and players drop passes, miss shots and get hurt.