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Cohen Strachan Investment (CSI Arbitrage) and International Arbitrage Strategies

Posted by Aegist on September 6th, 2007

Cohen Strachan Investment, known as CSI Arbitrage, is the marketing arm of International Arbitrage Strategies, a software company which programmed the arbitrage alert software CarbonA. I have received a number of queries about whether I think this company is reliable or not, so I started to look into it, reading through their website and booking myself in for a live demonstration of their software. I had known that CSI Arbitrage existed for a while, because they actually link to SAG from their links page. Inbound links arise like that every now and then, so I didn’t pay much attention to it, but other than that I had heard nothing about the company. No negative reports, nor any positive ones. I didn’t even realise that they sold arbitrage software, I thought they were looking for investments into a trading fund they were running and so pretty much lumped them into the growing group of dodgy HYIP’s available which promise huge returns on investment. The reason for that assumption is because most companies selling software make it very clear from the outset that they are offering software, they tell you the price, and they provide you with the option to buy straight away. CSI doesn’t focus on its software product so much as it focuses on the strength of their business, the strength of the company behind them (IAS), their trading fund which they are operating (hence my initial assumption that they were just another HYIP), and their goal to be listed on the Australian Stock exchange. Now that I am approaching the end of my initial research on this company, I have realised that CSI isn’t just trying to sell arbitrage alert software, they are trying to sell themselves, and the idea of a new level of sports arbitrage trading.

So when you make first contact with their sales representative over the phone and the $16,000 (+GST = $17,600 for Australians) price tag is one of the first things you are told, it becomes a little more obvious why they are going about this a little different to usual. In fact, my first thoughts when I heard that they were selling software for that much was that they had just put AusSoft to shame (with a cheap price tag of only $7,800!). But there is something more going on here. Why would a company which is selling their software for so much more than the average market price link to SAG? SAG clearly informs every visitor that software is as cheap as $50 a month in most circumstances and clearly informs every visitor that Arbitrage isn’t all easy sailing, it involves work and even a few risks. What could they gain from that? It seems like they weren’t relying on the ignorance of their prospective clients to make sales… but how could they sell their software for $17,600?

I spoke to Simon (a CSI Sales rep) over the phone in the morning. Basically the first thing he said to me was “This software costs $17,600, do you think you would be able to afford that?”. I answered honestly and said “No, probably not, but I’m already in arbitrage and I’d like to see your software” so he booked me in to see the live demonstration. The software looked much the same as most other arbitrage software on the market. It had a page full of arbs, showing the odds, the sport, the duration of the arb so far, the arb percentage etc. It does the usual calculations, and enables the user to hedge one way or the other on a sliding scale. The only two differences which really separated it from most of the other alert services on the market was that it has the ability to update currency exchange rates and auto convert currencies for you, and it also stores all of your bookmaker username/passwords so that you can have the software log in to all of the bookmakers for you, and for some of the bookmakers it can even do everything for you up to the bet confirmation page. Now this is the only software I have ever encountered which can do that, so that is impressive. Strangely though, I didn’t realise it only took you to the confirmation page until I spoke to Glen during my third conversation with CSI staff. Until that point everyone else had simply said that the software placed the bets for you, which I thought was quite problematic. For instance, that doesn’t take into account max bets, which contrary to the reassurance Simon gave to me at the time about the training directing you to large limit bookmakers, most betting limits encountered by arbers have nothing to do with the bookmaker wide betting limits, and everything to do with personal limits, sports specific limits, and bet specific limits. For instance I know that WillHill often has very high bet limits, but I can’t count on all of my fingers and toes the number of times I have had a great arb with Pinnacle and WillHill where the arb still existed but the WillHill side of the arb was limited to $1.50. However after all that, it only takes you to the confirmation screen, and only does it for a few of the top bookmakers (though they are working on adding the function to more). I think stopping at the confirmation screen is much more reasonable then letting the software commit your money, and this seems like quite a good function.

So all that said, is CarbonA, the software, worth $17,600? My honest opinion, is no; but remember, they aren’t really trying to sell the software, they are trying to sell themselves.

Shortly after I had my live demonstration of CarbonA, Alan Newton (a senior staff member who basically acts as a liaison officer) called me back and we spoke for almost an hour over the phone. He is determined to prove that there is nothing questionable about their business, and that the activities of other questionable organisations do them no end of harm (because everyone assumes the worst in an industry full of scams) while they are trying to basically start a new age of respectable sports arbitrage big business. So in short Alan basically promised to do whatever needs to be done to remove their company from being associated with any other questionable companies which have operated in the past. We spoke about what they could do to achieve that and we are working on some ideas, but personally my opinion on the matter is that the fact that they are willing to engage this problem so openly is quite impressive in itself.

So why do they charge so much? What does one of their clients get for that upfront payment? Basically, as I said, CSI are trying to usher in the age of Big Business Sports Arbitrage. They are trying to make sports arbitrage trading something which is worthy of the attention of the stock market, something that is worthy of financial reviews. They are not lone programmers working out of their basement selling their software for simple cash flow. So they have a big price tag to cover their staff which provide extensive training and support. They have a large price tag to cover their staff which trade their own investment fund. They have a large price tag to cover their costs, which are all designed to form a tight nit community of professional arbitrageurs who will work together to get the greatest profit they can manage: both individually, and for the IAS trading fund they run. So to reiterate the point: the software is not worth $17,600, but the company is trying to sell a dream, a big picture package of arbitrage which extends beyond the solo trader. The consumer is paying for the running costs of the CSI dream, not the software itself. I don’t know whether that is worth $17,600 or not, and I am not going to even offer an opinion on it because it is something which has never been done before. Who knows what it is worth? It could flop, or it could be the start of a real revolution. I offer no speculation.

In the end, the only question is whether you can trust them to uphold their end of the bargain. As I have said, I am impressed with their openness and their cooperation. The people I spoke to seem sincere and honest, and there is certainly a lot more going on than just some guys operating out of a house. But aside from their words, how can anyone be sure that they will still be around in 5 years? How can you be sure they will provide the extensive training their price seems to encompass? What motivation do they have to keep you happy once you have paid them? Well, it comes down to trust.

What should you do? My recommendation remains the same as always: If you are brand new to Arbitrage, take out the free trials, register at the bookmakers and have a go yourself before you part with any money. Once you have seen the reality of arbitrage, then re-evaluate whether you want to arb at all, and whether you would prefer to pay $50-$300 a month, or jump right in the deep end and lock yourself in with a one off payment. With that last step, I even recommend subscribing to one of the other services for a month or two first, just to be sure you are dedicated, because once you pay the big money, there is no going back.

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