The hype kids thing is getting out of control. To the point where it is actually quite worrying and is distorting the market so far away from the real value and win mechanics of the Index.

In markets, when you get an irrational burst of purchasing of risky assets, and all young players are risky, you are sitting on a powder keg. It’s not dissimilar from the hype then bust of cryptocurrency that was seen last year.

As has been mentioned on this site many times, whilst perhaps 1 in 10 or 20 of these youngsters may well go on to justify the price, the overwhelming majority will get shown up for what they are: over valued assets that will either not make it to a first team spot at a top club, or may well do so only to be not performance or media suitable.

The risk is that a crash in the price of just a few of these players can spread very quickly. It does not take long for a trend to die and reverse. The argument that “it’s fine because I’ll just sell when the player starts to decline” is nonsense, crashes can happen very quickly and it can be too late, instant sell will get suspended and the spreads will be huge.

The only way to avoid such a trap is not to put yourself in a silly position where you can get burned if it does occur.

With so much money tied up in those players, a crash of that nature could seriously damage the Index. The confidence that has been building up in the Index can quickly evaporate if enough people get burned. It could take years for the Index to recover in that scenario, and as a young product it may not be able to take it.

Of course, I’ve profited from this same as anyone. I just buy in the £1-2 range and sell at £4-5 and never ever chase the rise beyond.

I am not sure if social media can really discourage irresponsible behaviour, people will do what they want. But I think we do need to start thinking about the long term and whether this behaviour is really going to help us.

I’m not saying there will be a crash tomorrow, but I do think in the next six months at latest we will see an event that really sorts the wheat from the chaff.

In the mean time, the best thing we can do is get our own house in order and make sure our portfolios are not carrying any needless risks. There is a trading saying that goes something like “don’t own anything you wouldn’t be happy to own if you couldn’t sell for years.”

That’s a good place to start if you want a solid portfolio that isn’t overly vulnerable to any sudden events.

Rocket Ships

Philippe Coutinho

He was in my gossip column a couple of days ago and I said he would be one long term traders would be happy to hold given his quality, the knock down price, and the transfer rumours coming up.

I didn’t quite expect a bump so quickly but I think the odds of seeing a handsome profit on Coutinho if you can hold until the Summer are very good.

As I said then, he is a player of real quality that is Index suitable. Barcelona isn’t working for him but if he does not break through there, he is nailed on for a big role at a big club.

If that was the EPL, he’s a £10 player without breaking a sweat. Somewhere like PSG, or even with a regular spot at Barcelona, he hits £6-7 fairly comfortably I would think.

Declan Rice

Another I covered already this week and I said that I could not see where a performance dividend could come from. Though he did not win, he did put up a score that challenged for one.

So was my assessment wrong? I have no problem changing my mind on players if the facts change, and most players on the Index are very sensitive to tactical changes or changes in club. Historically bad players can become good and good can become bad.

I would say in this case no, my general view has not changed. The evidence suggests he will be too deep to score regularly. Whilst he should get decent performance scores often, it will usually not be enough to win without regular goals.

The performance yesterday does however put him back on the watch list. If he shows consistent goal threat over the next few matches, things may look different.

Sinking Ships

Houssem Aouar

Aouar is a real quality player, but there have been questions to answer about whether he was Index suitable.

At the start of the season, I was sceptical, I wanted to see runs forward and consistent threat. This season, he has shown that he has it with 5 goals and the stats to suggest this is sustainable.

So, I am converted. He looks destined for a transfer with very big clubs circling, including Manchester City.

Rumours for January have cooled though and I think it is more likely they will reappear in the Summer. With more current transfer targets to chase, it’s not surprising a few have jumped ship, but this is one I am happy to hold.

If you find this post useful please like the post on Twitter or share using the below buttons. You can also follow me on Twitter at @_FI_trader for additional daily thoughts and tips.

FIT