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Where I Placed My Bets for 2013: Fading The Hype; Investing In GMs

Peter Schoenke

Peter Schoenke

Peter Schoenke is the president and co-founder of RotoWire.com. He's been elected to the hall of fame for both the Fantasy Sports Trade Association and Fantasy Sports Writers Association and also won the Best Fantasy Baseball Article on the Internet in 2005 from the FSWA. He roots for for the Minnesota Twins, Vikings and T-Wolves.

It's time to take a look at the 2013 MLB season from a wagering perspective. I'm a big fan of the season win total bets ever since I started making them in person in Las Vegas back in the late 1990s. It's a good exercise before the start of each season not only to make predictions on where you think the teams will finish, but also test those against the conventional wisdom expressed through money wagered in sportsbooks.

My methodology isn't to get to granular with the prediction process. I'm not building a complex algorithm or computer model (such as PECOTA from Baseball Prospectus or ZIPS from Dan Szymborski) to predict run totals or wins. I try to take a step back and use a higher level approach to see if we can find any predictions that break historical norms. Teams that improve a lot one season tend to decline the next. The team with the big offseason moves that's expected to jump in the standings often fails to live up to the hype. If you bet those trends long enough, you'll make money. At least that's the idea.

And over the course of the last 13 years, I've come out ahead. My overall record is 32 for 54 (with one push) for 59.3 percent. My best bet each season is 13-8 (I had multiple biggest bets some years). I'm most impressive on a weighted or cash basis, where I've been correct 67.6 percent of the time ($2,500 in winning bets, $1200 in losers - not factoring in the vig).

I'm at my best on bets of $100 or more (I vary my bet size to emphasize how strongly I feel about the pick) where I'm 12-6. However, my track record isn't as strong since 2006, where I'm 12-16 but have won money 53.5 percent of the time ($1125-$975). My theory is that the sportsbooks have become smarter since 2006 and take into account the projection systems, especially after Nate Silver (who ran PECOTA at the time) had big success picking Tampa Bay's surprise breakout season in 2008. Or at least, that's the excuse I'm using.

Sizing up this year's field, I don't have any bets I really love. I'll indicate my confidence in a bet with a size of a wager below. It's rare I go above $100. I felt very confident in the under for Arizona last year and won a $200 bet. This year I have several small bets, which historically hasn't been a good sign as I've done better on bets with more conviction. So buyer beware. Still, I'm trying my best even if more bets mean I put my overall win-loss record at risk.

For this exercise, I'm using SportsBook.com for these odds, which I grabbed on March 28.

When I look at a upcoming baseball season, there are eight methods I use to judge which teams might be a good bet: Three are statistical, four are observations I've had watching the bookies set season-long lines for MLB and other sports and lately I've thrown in a wild card pick with no particular theoretical basis. Here's the breakdown on these theories and the teams I decided to actually wager on.

The Johnson Effect

The Johnson Effect argues that a team that scores more runs or allows fewer runs than most statistical formulas would suggest, is bound to regress the next season. For example, if one team scores more runs than sabrmetrical formulas such as Runs Created or OPS might suggest, then it will score less the next season. The theory works based on the fact that sometimes a team has more success than it should just based on pure luck. A bad bounce here, a fluke play here - they can add up in one season and make a team look more powerful than it should be.

My favorite type of statistic for this analysis is a tool called the Pythagorean Theory. You probably learned the Pythagorean theory in trigonometry, but in baseball it means that the ratio of a team's wins and losses will be similar to the relationship between the square of its runs scored and the square of its runs allowed. If the runs a team scores and gives up in any given season don't translate into the expected win total from the Pythagorean Theory, that means something odd took place that should turn around next season.

Using the Johnson Effect and applying the Pythagorean Theory, who looks like they'll rebound in 2013? Here are the top teams that should have seen more or less wins based on their 2012 runs allowed/created than they actually tallied:

Baltimore Orioles+11
Cincinnati Reds+6
San Francisco Giants+6
Arizona Diamondbacks-5
Colorado Rockies-5
Boston Red Sox-5
St. Louis Cardinals-5
Tampa Bay Rays-5

I usually look for teams that have a double-digit disparity in their Pythagorean wins and their actual wins. This year there's just one team that fits that mold. But more on the Orioles in a moment. I'll pass on the others as none really look like last year's luck alone made them a good candidate for a bet.

The Plexiglas Principle

This theory says that any team that improves dramatically in one season is likely to decline the next season.

What teams made such dramatic moves from 2011 to 2012?

Baltimore Orioles+24
Oakland Athletics+20
Cincinnati Reds+18
Washington Nationals+18

It was a banner year for teams with big movements in the win total column. All winter I waited with expectations to see what the lines on the Orioles and A's win totals would be. The Plexiglass Principle has been my most successful bet with a career 8-2 record. Last year I won my biggest bet ($200) on Arizona declining more than eight games after a 29 improvement the previous season. I'm usually looking for teams with 19 or more games of improvement. Since 1970, these teams have declined by an average of 7.8 wins the following season. Teams that have improved more than 24 wins have declined an average of 11.5 wins the following season.

The sportsbooks have the A's projected to win 8 fewer games than last season. That's almost exactly what you'd expect a team with a 20-game improvement to decline the next season. In fact, since 1970, teams who have improved 20 games or more have declined an average of 8.7 wins the next season. I don't see a betting opportunity for Oakland on this theory, as a result.

Baltimore is a more curious case. I'll get to them later. The Nationals took a big jump, but they seem like the kind of team that can sustain that level of success. Looking through the teams that jumped 19 games or more in win totals and held that level of success, I've noticed a pattern that these teams have at least two starting pitchers just coming into their prime with an ace who contended for the Cy Young award (for more detail, check out last year's story). Last year, the Diamondbacks didn't seem to fit this group with Daniel Hudson and Ian Kennedy. But the Nationals do seem to fit. Stephen Strasburg may have as much upside as anyone in the game. Jordan Zimmermann is just 26 and has improved each season. Gio Gonzalez is just 27. The Nationals have the type of staff that would seem to mimic the teams who have bucked the decline. Plus these teams also have had an offensive star or two who had a breakout season early in their career as well. Bryce Harper, who had the highest bWAR at 5.19 ever for a 19-year old, fits that designation perfectly. I'm more inclined to bet the over on their 92 wins. I think the Nationals win the World Series this year and have a dominant run the next three to five years.

The Reds have alternated seasons with wins in the 70s with wins in the 90s the past four years. Their offense should be solid again and their pitching staff may be among the NL's best. But I haven't liked a lot of the moves they made in the offseason. Can Shin-Soo Choo really play center field? Why sign Jonathan Broxton to a three-year, $21 million contract and then late in spring scrap the plan to move Aroldis Chapman to the rotation? The sportsbooks have the Reds declining by six games, which is close to the average of what a team winning 18 games should decline the next season. As a result, I'll skip on any bet. But I'm very tempted.

The Reverse Plexiglas Principle

When a team has consistently been a winner and then experiences a sudden drop off, there is a strong likelihood that its win total will rebound. Or at least that's my theory. I haven't had a lot of success with this bet (1 for 3).

Here are the teams that declined the most in 2012:

Boston Red Sox-21
Philadelphia Phillies-21

Both of these teams appear as good candidates for this bet. Doesn't it seem like 10 years ago that the Phillies were good? But they won 102 games in 2011 ad 89 games or more five consecutive years. Still, they've made terrible moves in the offseason. Delmon Young isn't an everyday player given his strikeouts and poor defense. Michael Young's low OBP isn't going to help the lineup. Chase Utley is 34 and hasn't played a full season since 2009. Roy Halladay is 35, coming off an injury-plagued year and hasn't looked good this spring. In short, this team has a lot bust potential. But the top of the rotation is still good and the lineup should be above average. The Phillies are projected for 85 wins as much of this decline was just because they'd won 102 games the previous year. That's not a win total with a lot of value.

The Red Sox had a season that spiraled out of control last year. Just by the sake of their $150 million payroll they should improve. They're definitely a bounceback candidate, but sportsbooks know that too and have them improving by 14 games to 83 wins. That's too rich for me to make a bet on them based on this theory.

The Bottom Feeder Bet

This is totally from a non-scientific study of watching the bookies set the lines on expected wins over the years. People tend to care less about the bad teams in any sport, so the line is set a bit lower to entice folks to bet on these doormats. I've won 5 of 7 bets since 2001 with this theory. Let's look at this year's candidates.

Houston Astros58.5
Miami Marlins63.5
Minnesota Twins69

The Astros are the outlier here. I've been doing this column and keeping records since 2001. The Astros have the lowest expected win total during that span - by a good margin. The previous low was Kansas City in 2006 with 63.5 wins. The Royals won just 62 games that year. Since it seems hard to lose 100 games - as you need some bad luck to win or lose 100 games, I almost think you should take the over on principle. In fact, one projection system (from Clay Davenport) even has the Astros winning 75 games. But the Astros are a different case. When GM Jeff Luhnow took over last year they had one of the worst major league rosters and one of the worst farm systems in baseball. It's going to be a long road back to being competitive. But Luhnow has taken a strategy where he's not concerned about winning in the short term and he has full support from owner Jim Crane in a long rebuilding process. If the Astros found a few major league players who could be components of a team that may be competitive in a few years, that would be a success even if they lost 120 games. For that reason, I'd avoid betting the over. There's just not much incentive for the Astros to win 65 games vs. 55 games.

Typically the best bottom feeder bet is a team with a decent amount of talent in the high minors. The major league team will get off to a slow start, but then rally in the second half when the new talent from the minors emerges. None of these three teams are a good candidate. All three haven't hit rock bottom yet, at least at the major league talent. ESPN's prospect guru Keith Law ranks Minnesota's farm system as No. 2 in baseball, but most of that talent is in the lower minors. And Minnesota's starting rotation this year is terrible (Kevin Correia, Scott Diamond, Vance Worley, Mike Pelfrey, Cole De Vries). GM Terry Ryan basically punted the 2013 season in an effort to get better later in the decade, trading away Denard Span and Ben Revere in the process. The Marlins traded away all their faux 2012 free agent signings in another Jeffrey Loria salary purge. They may exceed expectations, just because they're so low, but they're a team and an organization that's hard to put any faith into. And their top talent (Christian Yelich and Jose Fernandez) isn't likely to be in the majors in 2013.

The Book's Biggest Movers

I also like to look at what teams the bookies think will have the biggest improvement or decline in 2013.

Toronto Blue Jays+16
Boston Red Sox+14
Chicago Cubs+11.5
Cleveland Indians+11
New York Yankees-10.5
Baltimore Orioles-14.5

The Blue Jays are the big mover, and that makes sense with their big acquisitions of Jose Reyes, Josh Johnson, Mark Buerle, R.A. Dickey and Melky Cabrera.

But wasn't it just a year ago that Miami added all those big name free agents and failed to improve? Last year the Marlins were expected to improve by 13 games. Instead, they declined by three wins. Since 2001, teams projected by the sportsbooks to improve by 13 or more games have failed to meet those expectations by an average of 2.8 wins. It's been a 50/50 proposition since 2001 (six of 12 bets were over), but the losers have exceeded the winners in terms of margin of error. And I can see the case for the Blue Jays not living up to the hype. While the lineup is great, the starting pitching staff is no sure thing. Will Dickey's knuckleball translate to the AL East? Can Josh Johnson stay healthy given his recent injury history? Mark Buehrle may be the most consistent player in the majors, but has limited upside at his age (34) and strikeout rates (below 5 K/9 his last three years in the AL). Brandon Morrow's track record shows he has a wide range of expected outcomes.

I'm going to go against the hype and make a small wager they don't exceed expectations.

I'll bet $50 the Blue Jays win less than 89 games.

The Cubs should improve and 11.5 games is well within the team's margin of error. Same with the Red Sox, who can't help but be better after last year's fiasco. The Yankees have a ton of injuries, but it is interesting that Baseball Prospectus' PECOTA system has the Yankees pegged for 91 wins even after accounting for the players lost.

Meanwhile PECOTA has the Nationals winning just 87 games. I think a lot of that is because regression to the mean is built into the system both for the Yankees's stars (upward when they return) and Nationals' young players. The Nationals did make a big jump of 18 wins last year, but again I think they have the kind of talent that can sustain that jump. Still, PECOTA's track record is pretty good. I'd probably take bets against both PECOTA numbers, but not against the sportsbook for the Yankees at 84.5 wins. That seems about fair after all their injuries.

The Book's Non Movers

Arizona Diamondbacks1
New York Mets0.5
St. Louis Cardinals-1.5
Pittsburgh Pirates-1.5
San Diego Padres-1.5
Milwaukee Brewers-2.5

None of these teams stand out as teams that will clearly be worse or better in 2013. You can definitely make a case for for the Padres since so many of their hitters are entering their prime. They should be better rather than declining. But I'm not that convinced. I have no idea what to make of the Mets with some analysts saying they'll be .500 and others looking at their outfield and lack of prospects on the cusp of the majors and thinking they'll be terrible. I'll pass on a bet here.

The Billy Beane Theory

I noticed a pattern starting in 2009 that the sportsbooks were consistently underating Oakland GM Billy Beane. Maybe they hadn't caught on to his use of advanced stats metrics despite the success of the book Moneyball. So I created the Billy Beane Theory and made a $25 bet on it alone. Of course, I lost that bet and quit using theory to make a bet in subsequent years.

But looking back, maybe the best way to win these win total bets is to bet on the GM. If you put together a portfolio of good GMs the past decade, they would have beat the sportsbooks. Billy Beane is 75 percent (9-for-12) since I started tracking results in 2001. Tampa Bay GM Andrew Freidman is 4-for-7 in covering his expected win total, and 4-of-5 since he arguably got the Rays out of their previous muck in 2008.

Meanwhile, Kansas City GM Drayton Moore is just 2-for-6 in covering his expected win total since his first full season in 2007.

Looking at 2013, I can definitely see a case to make a bet for the over on Tampa Bay and the under on the Royals. The Royals traded top prospect Will Myers for James Shields and Wade Davis in an effort to go for it this season. But this is an organization that doesn't realize the poor on-base skills of Jeff Francoeur and Chris Getz may neutralize all those gains. The sportsbooks have the Royals improving more than six games to 78.5 wins. When have you gone wrong wagering against any hype created by Moore and the current Royals ownership?

The sportsbooks have the Rays declining by 3.5 wins, but I see far more areas on their roster where they could be better rather than weaker. Evan Longoria should be healthier. Matt Moore and Jeremy Hellickson should improve. Desmond Jennings could finally break out. It's enough to just put faith in the trend Freidman has been on lately.

And Billy Beane ... at eight less wins than last year it's a coin flip whether the A's beat their sportsbook projection based on historical norms. Given Beane's track record, that doesn't seem like a huge hole for him to overcome.

I'll bet $25 the A's win more than 84.5 games.
I'll bet $50 the Rays win more than 86.5 games.
I'll bet $50 the Royals win less than 78.5 games.

Wildcard

I've done a wild card two of the last three years based on hunches or other statistical trends I saw. I won a bet and lost a bet.

Here's where I finally dive into the Orioles. The sportsbooks have the Orioles declining by 14.5 games this season. I figured they'd be my layup bet this year. Instead it seems like the oddsmakers have overdone their decline a bit. They have them declining more games than average teams who improved by 19 wins and even 24 wins the previous season. I get why the Orioles are expected to regress. They outperformed their Pythagorean win total by 10 games. That's a bad sign. They also had a 29-9 record in one-run games and 16-2 record in extra-innings. Their closer, Jim Johnson, had more strikeouts than saves (a poor 5.37 K/9 rate for a closer). All of that screams fluke. And they play in the tough East with the big payrolls in Boston and New York, the smart guys in Tampa Bay and the Blue Jays, who just traded for half the NL East. I get it. I was ready to rush to the window to make a bet on the under when the odds came out.

But I think they expectations are now too low. The Orioles may have done it with smoke and mirrors last season, but this team actually has some talent. Manny Machado had 1.60 bWAR as a 19-year old. That puts him in rare company. Prior to 2012, eleven 19-year-old hitters had produced at least 1.0 bWAR in a single season and some of the comps are Mel Ott, Ken Griffey Jr., Ty Cobb, Tony Conigliaro and Mickey Mantle (that info from Joe Sheehan's newsletter. His Bryce Harper for MVP column based on this same logic is really compelling.)

Matt Weiters (26 years old), Adam Jones (26) and Chris Davis (26) are approaching their peak, and Nolan Reimold (28) and Nick Markakis (28) are in the same ballpark. And while their rotation isn't great, there's a lot of talent on the way, led by Dylan Bundy (RotoWire's No. 4 prospect) and Kevin Gausman (RotoWire's No. 30 prospect). And manager Buck Showalter seems to always exceed expectations.

I know 78.5 wins feels pretty high for a team that failed to win more than 70 games the previous five seasons, but it feels like a good contrarian move.

I'll bet $25 the Orioles win more than 78.5 games.

So to recap, here are my bets for 2013.

Toronto Blue Jays$50 under on 89 gamesBook Mover
Oakland A's$25 over on 84.5 gamesBilly Beane Theory
Tampa Bay Rays$50 over on 86.5 gamesBilly Beane Theory
Kansas City Royals$50 under on 78.5 gamesBilly Beane Theory
Baltimore Orioles$25 over on 78.5 gamesWildcard

One note: My bets/track record doesn't try to account for the variations in extra juice you need to pay. Most lines are -110, meaning the sportsbook takes about five percent on each bet. The "Vig" tends to be higher on these bets than for single games. Sometimes the vig can vary widely, such as the 2013 Kansas City under of 78.5 wins at -120 according to Sportsbook.com (the over is even). It's another method for the bookmakers to alter how the money is coming in on each side so it gets to their comfort level. Or it's a way to change the odds without moving the win total (the Royals are 77.5 wins at Pinnacle Sports).

If you are making a lot of bets, this is a serious factor in the math. But I don't bother to take that into account because I'm more focused on the overall wins number for a team perspective. Plus I forgot to keep track of the Vig in early years. I vary the dollar amounts below as a way to show how confident I am in the bet (the $300 bet on the 2004 Royals is my all-time high), so there are some holes in the math if you added in all the varying vigs.

And why should you care what I think? I've made money eight of the past 13 years (with one push). Here's the breakdown:

YearW/LTeamBetTheory
2012WonArizona Diamondbacks$200 under on 86 gamesPlexiglas Principle
2012LostMinnesota Twins$100 over on 72.5 gamesReverse Plexiglas Principle
2011LostKansas City$100 under on 68 gamesBook Non Mover
2011WonHouston Astros$50 under on 72 gamesJohnson Effect
2011WonMilwaukee Brewers$25 over on 86.5 gamesBook Mover
2011LostLos Angeles Angels of Anaheim$50 under on 82.5 gamesWild Card
2010LostHouston Astros$150 under on 75.5 gamesJohnson Effect & Book Non Mover
2010WonMinnesota Twins$100 over on 82.5 gamesWildcard
2010WonWashington Nationals$50 under on 72 gamesBook Mover
2009LostLos Angeles Angels$50 under on 88.5 winsJohnson Effect & Plexiglas Principle
2009WonDetroit Tigers$50 over on 81.5 winsReverse Plexiglas
2009LostBaltimore Orioles$50 over on 72.5 winsBottom Feeder
2009LostKansas City Royals$25 over on 76.5 winsBook Non Mover
2009LostPhiladelphia Phillies$50 under on 88.5 winsBook Non Mover
2009LostOakland A's$25 over on 82.5 winsBilly Beane Theory
2008WonSeattle Mariners$200 under on 84 winsJohnson Effect
2008LostChicago Cubs$50 under on 87.5 winsPlexiglas Principle
2008WonOakland A's$50 over on 73.5 winsReverse Plexiglas Principle
2008PushSan Francisco$50 under on 72 winsBook Non Mover
2007WonCleveland Indians$50 over on 85.5 winsJohnson Effect
2007LostChicago Cubs$50 under on 83.5 winsBook Mover
2007LostOakland A's$50 over on 85.5 winsBook Mover
2007LostMinnesota Twins$100 over on 84 winsBook Mover
2007WonArizona Diamondbacks$100 over on 78.5 winsBook Non Mover
2006WonChicago White Sox$100 under on 92 winsJohnson Effect & Plexiglas Principle
2006LostArizona Diamondbacks$25 under on 73 winsJohnson Effect & Plexiglas Principle
2006LostTampa Bay Rays$100 over on 68 winsBottom Feeder
2006LostMilwaukee Brewers$50 over on 81 winsBook Non Mover
2006WonMinnesota Twins$50 over on 83 winsBook Non Mover
2005WonNew York Yankees$150 under on 102 winsJohnson Effect
2005WonMilwaukee Brewers$50 over on 69.5 winsBottom Feeder
2005WonSan Diego Padres$25 under on 86.5 winsPlexiglas Principle
2005LostMinnesota Twins$25 over on 89.5 winsBook Non Mover
2004WonKansas City Royals$300 under on 81 winsPlexiglas Principle
2004WonHouston Astros$50 over on 91 winsJohnson Effect
2004LostDetroit Tigers$100 under on 66.5 winsBook Mover
2004WonSan Francisco Giants$50 over on 85 winsBook Mover
2004WonFlorida Marlins$50 over on 83 winsBook Mover
2003WonAnaheim Angels$100 under on 91 winsPlexiglas Principle
2003WonOakland A's$50 over on 93.5 winsBook Mover
2003WonNew York Mets$50 under on 86 winsBook Mover
2003WonToronto Blue Jays$50 over on 79 winsBook Non Mover
2003WonBoston Red Sox$50 over on 91 winsJohnson Effect
2002WonOakland A's$200 over on 90.5 winsBook Mover
2002WonPhiladelphia Phillies$100 under on 82.5 winsPlexiglas Principle
2002WonPittsburgh Pirates$50 over on 68 winsBottom Feeder
2002LostSeattle Mariners$50 over on 94 winsReverse Plexiglas Principle
2002LostColorado Rockies$50 over on 77 winsJohnson Effect
2002LostNew York Yankees$50 under on 99 winsReverse Bottom Feeder
2001LostSt. Louis Cardinals$100 under on 89.5 winsPlexiglas Principle
2001WonChicago White Sox$100 under on 88 winsPlexiglas Principle
2001WonHouston Astros$100 over on 82.5 winsJohnson Effect & Plexiglas Principle
2001WonPhiladelphia Phillies$25 over on 74.5 winsBottom Feeder & Johnson Effect
2001WonMinnesota Twins$25 over on 73 wins Bottom Feeder
2000WonArizona Diamondbacks$100 under on 93 winsPlexiglas Principle
2000WonMinnesota Twins$100 over on 64 winsBottom Feeder