Everything Has A Limit

It's fun when you go into Party Poker and click on "Player Search" to find out where the fish are playing. Most of them have disappeared of course, but a few remain and you add a few every week to keep the sourcefile sufficiently large.

But very few of them are still playing at the same level. Having (presumablY) got slaughtered at Limit, most seem to shift to either $100 no limit tables, or to $11 STTs, or (occasionally) to MTTs. Some have moved down the food chain to lower stakes, while some decide to try their luck at six-max.

It is undeniable that the fish might prefer six-max, because the variance is inherently higher. Either they will go broke even quicker or they will hit a lucky run.

A few, just a very few, actually move up in stakes. This indicates one of two things. Either they got very lucky and moved up, or my own analysis of them was wrong. If it's a small sample (and often my "fish" designation is based on 50 hands or so) then there's the chance that that player just happened to get a lot of good hands in that sample. Alternatively, this player might be one of that small breed that seem to be able to play 40% to 45% of pots, raise 20% to 25% of the time, and yet still be a winner. They do exist. I've seen them. Playing in such a fashion they can't be proficient multi-tablers, because they are too involved on just one table. Caro has noted that it's quite possible for two equally skilled players to play, say, 15% of pots or 30% of pots, and to come out roughly the same. This is because that "extra" 15% are zero EV hands, which you can either fold or play, without any long-term difference. For a particularly kind of player, a negative EV hand can be turned into a zero EV hand, meaning that you get these players seeing large percentages of flops, lookinglike fish, and yet being a winner. They are the latter-day examples of John Fox's "legendary ASQ".

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The games at the moment are really bad. perhaps the WSOP pushes every fish over to tournaments and satellites. Perhaps the satellites have taken their cash. Whatever, there's just one game on Ultimate at $3-$6 and one at $2-$4. The $5-$10 has six players at one table. On Party, the maximum average pot size at any table from $2-$4 to $5-$10 is six big bets. Most average 4 to 5 big bets. On Stars, where I'm just spending a week to clear the bonus, there are hordes of 19% seeing the flop at $2-$4 and $3-$6.

You see what I mean about the bollocks being talked on a lot of the sites about masses of fish waiting to be caught? :-)

If they are, they are hiding pretty well. Grim times indeed.

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Technical bit: Ignore if not interested in finance!

An announcement went out this morning from Sampo, a Finnish bank. No-one will pay much attention to it. Here's the full text.

Sampo Bank plc, part of the Sampo Group, will securitize approximately one billion euros of the exposure of corporate loans in its balance sheet. The reference portfolio consists of the loans of over 600 Finnish companies. The loans will remain in Sampo Bank's balance sheet and the arrangement will thus not affect the agreements between the bank and its customers in any way. This is a mechanism by which Sampo Bank can adjust its credit risk profile and release capital for future growth.

Securitization will be implemented by a company established especially for this purpose. The company will issue bonds whose final return will be dependent on realized credit losses from the reference loan portfolio, and offer them for subscription by investors. The company will compensate credit losses arising for the bank on the basis of a credit derivatives contract between it and the bank .

So what, you might think. And, indeed, the whole tenor of the announcement downplays any interpretation that this makes any difference at all. Its purpose, says Sampo, is to "adjust its credit risk profile and release capital for future growth".

But, therein lies the tale. This is what a number of banks are doing. In the old days, a bank was kind of a broker between depositors and borrowers. They didn't like being called brokers, but that was what they were. People deposited their money in the bank, and the bank lent it out. If they lent it to the wrong people, they were in a bit of shit. If they got into a lot of shit, then the depositors were in shit, because they might not get their money back. But it was in the interest of the bank to make prudent loans, if only because being an executive at a bank that goes belly-up because of bad loans doesn't look good on the CV.

Indeed, there is a current-day example of this. The Agricultural Bank of China theoretically has 25% "non-performing loans". In fact the figure is far worse than that, because local managers are lying to their regional superiors, who are lying to their national superiors. It's the old Stalinist five-year plan reports in action. Fucking up is not an option, so, if you fuck up, you might as well lie about it, because things couldn't be worse than if you told the truth.

Sampo's manoeuvre changes the rules of banking. What it has done is taken a billion euro of loans, and transferred the risk associated with those loans to another company, which sells bonds. Institutional investors buy these bonds (which can be spliced and diced into different tranches of assumed risk, paying different rates of interest) and, if the borrowers default, the institutional investors don't get their dividends. If things go very bad, they don't even get their capital.

But, and this is the point. The bank doesn't really give a shit. If the loans go tits up, they can point to the rates offered and the nature of the beast.

In other words, we enter the serious world of moral hazard. Sampo, by its own admission, has done this "to release capital for future growth". And what does that mean? Why, to make more loans, of course, which it can then securitize, in order to release even more capital "for future growth". What you have is a bank that seriously wants to lend money, in order to grow. Employed senior executives like to grow. They get higher bonuses, bigger cars, bigger desks in bigger offices with bigger-busted secretaries.

You would think that people would learn from history, from the Savings & Loan scandals of the 1980s in the US. But, well, 20 years is an aeon in financial services. It's going to take one almighty balls-up, a seriously massive default, before the institutional investors realize that perhaps allowing banks to lend money without assuming any of the risk associated with lending that money might not be the best idea in the book.


PJ

Here's an interesting hand from yesterday.

You have A♠, 4♠, in big blind at $4-$8. Three not-too-bad-not-too-good players limp, followed by a guy in Cut-off who plays every hand. You have also observed that he tends to fold flops that he misses, but always to bet if he is first with the opportunity to do so. If raised, he may slow down on the turn, but if just called, he always bets again. Once again, as far as you have observed, if he is just called, he tends to bet the river again, but your sample size here is small. It's possible that he checks the river if he has missed completely. Since you are unsure about this, let's assign a 50% probability to him betting the river, whatever, and a 50% chance that he will check if he misses the river completely.

Five players see flop. $19 in the pot.

Flop is 4♣, 5♡, 8♠,

giving you bottom pair with Ace kicker. The three limpers check, and our friend bets, as predicted. Calling here is compulsory and raising might be a good idea, to get rid of the players with overcards. As it happens, you elect to call, (a) because you have been doing your bollocks and you are playing like a gun-shy wimp, and (b) you think that the overcard guys are going to come in for two bets if they are going to come in for one. On reflection, I think that a raise is better. But, that's history now and it isn't the interesting part of the equation. As it happens, the three limpers fold. Presumably they give your call more respect than it deserves, since you have a reputation as tight-aggressive.

Two players see turn. $27 in pot

Turn is 4♣, 5♡, 8♠, 10♣,

You check. Opponent bets. The question here is, are you getting odds to beat a random hand with your bottom pair. top kicker?

Let's suppose you call.

Two players see river. $42 in pot.

The river brings 4♣, 5♡, 8♠, 10♣, Q♣.

Opponent bets again. Do you have odds to call (a) a completely random hand? (b) a random hand where he will only bet 50% of the time if he has missed completely? (c) a "very loose" player's hand where he will only bet 50% of the time if he misses completely?

I three-tabled at 3-6 on Party last night and this morning. If we were results-oriented, we might call last night "a bit of a disaster". But, we aren't results-oriented, are we? And, from an "am I in control" point of view, it felt fairly good.

This morning was better, from one very significant standpoint. That being that, at the moment, I have no idea how much I won or lost. Saturday mornings always used to be difficult to keep track of your net position, because games frequently folded and, if a game got bad, you had to leave it to find another loose game that you knew was out there. So this morning, I didn't bother. I can look at my balance at the end and compare it to the balance on my spreadsheet to tell how much I won or lost over the session.

( some more witterings are here )