For the benefit of anyone who doesn’t like reading, my feelings on the announcement can be boiled down to:
For more details… read on.
Yesterday was a huge day in the development of Football Index, and for me, the headline is that pretty much everyone can be happy with a very competent and measured announcement from FI.
What you made on this one day? Doesn’t matter all that much. This new dividend structure will likely be the basis of trading for the whole of 2019 at least.
Once the dust settles, people will feel confident in the market and be able to trade more on quality than on pure speculation alone as has been the case in recent times. That’s a good thing.
It was essential that dividends were brought more in line with current prices. The amazing success of FI this year has meant that prices were by far outstripping the dividends on offer. FI has been running on the hype/hope of future dividend increases rather than reality for months now and it was starting to get a bit worrying.
To keep confidence in the product, that strong dividend/price link needed to be maintained. Whether you play for dividends or not, even the biggest speculator needs that or there would be nothing to speculate on.
And, I think the increase feels like a manageable rather than irresponsible amount for FI to handle. We need FI to be financially sustainable, so in many ways, I prefer this 28% average increase to a crazy 50-100% which would have led to short term hysteria but longer term worry.
We could easily be sitting here this morning feeling pretty bruised because a rule change had completely scuppered our plans and forced Instant Sells. But we aren’t, by and large. FI have managed to increase dividends in a balanced way that has not tipped the market on it’s head, and that is not easy to do. Well done, FI.
There are a few meaningful changes that may not be universally popular, notably at the In Play Dividend end of the market, but that is not an area that holds a ton of cash so it did not cause a ruckus. More on IPDs later. The joint two weekly blog I do with Football Index Guide and FootballIndexLM is out tonight and I’ll discuss some more detailed points on IPD’s and other things there. That will get linked on Twitter.
But overall, it’s objective achieved from FI. They haven’t dropped any clangers, and the technical issues that blighted the last couple of weeks were not apparent beyond some lag when the market reopened (which is to be expected).
So it’s 19:00pm. My palms are sweaty. The announcement is made. It lands somewhere between two scenarios I’ve outlined in strategy guides – the dull “as expected” and the “rabbit from the hat” big dividend increase.
The market will open soon. How will it react? It’s a strong announcement that I think most will be happy with. But it’s not the hype fest that a 50% or more increase might bring.
It’s now 19:15 already and I scramble to say something useful on my live blog.
I’ve then got 5 minutes to decide what I do. My strategy was always to commit almost all my bank weeks ahead, not buy afterwards. I’m happy because I think the changes will favour what I hold, if not tonight, then soon.
But I did hold a small chunk back just in case I needed to react. Or in case the announcement was big and I might see a chance to flip something.
At 19:30, the market opens. I decide to lump my remaining balance into two big ticket performance/summer speculation holds that I would probably have bought anyway. I watch the market flashing like I am trying to read The Matrix. I think I have a migraine. And then…
And then not a great deal happens.
There was a reaction, but it was not huge. Lumping in on the obvious premium price players did not yield a great deal. You had to be there already and this makes total sense.
The Share Split and accompanying dividend increase has been anticipated for so long that most of the buying was done and dusted. It was the end of November when the Share Split was first announced, and then I think the highly probable dividend increase was let slip in January from memory.
Prices have risen hugely on the back of that so in many ways, this dividend increase was priced in already for a lot of the premium end of the market. And not many wanted to plow in too hard and risk being flipped on (very sensibly).
The only time that would have worked is in a scenario where the increase was huge and unexpected, perhaps 50% or more.
So, maybe some of us hoped to be making 10% portfolio gains off the back of the announcement. But for most this did not happen. And to be honest, I think this is a good thing.
I’ve said for a while that FI needs to stand on it’s own. Profits eventually have to come from good trading, not bonuses or other “free money days”. What we have is a solid, responsible announcement that gives good traders the chance to make good money for the rest of 2019. And that is far more valuable than another one day price surge that feels good but actually makes people think “Is this real?”.
So, this was only the announcement. We have the actual share split to come, and I think this will have a good psychological effect. It should be gradual though, most existing traders are not stupid enough to think that someone like Rodriguez is now “cheaper” once split in 3.
But over the weeks and months, I think it will make our portfolios look and feel different, and there will be a positive effect.
And the hidden gem that has not got enough attention is this:
This bodes extremely well for any players likely to get media attention over the Summer. That could be the usual big boys (if they have reason to be in the news, not all will). But specifically, any players with strong transfer speculation. There is a chance that they run some kind of transfer speculation game as “special” could mean something other than a straight boost to media dividends.
So, despite the lack of an immediate cash bonanza, I am quietly very happy with the result of the announcement from a personal perspective. Members will already know that my pre-share split strategy was to accumulate on trend strong performance players with big Summer transfer links.
I picked players that I could foresee profiting under almost every scenario and with dividends in general rising and further boosts for media on the way, I feel like I am in a pretty good position to land a strong finish to what has already been an excellent season.
But there is a lot still to do and strategies often need to shift frequently, particularly as we head into what is the most difficult (and yet most rewarding) time of the year to get right.
Personally, as someone rightly said on Twitter last night (forget who, sorry!) I am mainly relieved that the Share Split hype is now ending and we can get back to trading on the actual merits of players!
Look out for the joint blog on Twitter tonight where I will drill into some more detail on last night’s announcement.