It’s been a big week on the Index and I for one am relieved that the long awaited Share Split is now out of the way.
It’s been November when it was first announced and honestly, I think 2 months is enough notice for the big changes. It’s just dragged on too long and it shifted the focus towards trading for a share split rather than trading for football for most of a season.
In the event, for that reason, the market re-openings after the announcement and the split itself were tame compared to the sky high expectations. But around them, when people had a bit of time and space, they felt very comfortable putting in more cash.
The biggest takeaway for me is that the whole thing was handled in a competent and professional way. That is far more important than what we made on the day or even in the whole week. Well done FI. It sets us up for what should be a good 2019.
The big discussion point after the announcement for those not on Twitter was the claim from some quarters that “Capital Appreciation of players is now harder”. Or, it now takes more money to move a price. This is 100% inaccurate. Example:
- 300 shares of a £1 player before SS costs £300 = 3p old money rise
- 900 shares of a 33p player after SS is £297. = 1p new money rise
That looks confusing but the maths works out – it costs exactly the same to move the price by exactly the same %, in fact, in this example you get a £3 discount on the price.
In our new world, 1p and 3p are the same % increase, relative to your buy price. We just have to mentally adjust to this fact.
Where there is a bit of room for interpretation is the suggestion that because price movements are now going to “look smaller” traders will think the market is more stagnant.
So where a player rises 12p before, they will only rise 4p now and it “looks” less. It’s true but the end result in terms of the money you earned from that rise is exactly the same.
In my view, as long as people are making good money, they won’t care and will just mentally adjust to these new prices.
The same could be said of dividends – they mostly now look smaller even though they are actually 28% on average greater than before. But nobody complains about that, people understand that it works out because you have more shares than you did before.
This will just be one thing of dozens that new traders have to get their heads around and I think the fuss will blow over.
Risers
Joe Gomez
He is flying and it is quite an interesting one to look at when trying to get used to the new prices.
He’s £1.23 now which in old money is £3.69. That’s a big premium for a defender.
As a defender, even for England, the media is very limited. So England involvement for Defenders is really not that big of a deal in the same way it could be for an attacking player. Unless there is a specific personal story, you aren’t getting regular media for your fantastic tackle (stop giggling).
Performance wise, he’s a solid player who should post some big scores a few times a season, but he’s nothing special.
So why would people do this? I guess some will misuse comparative pricing and say “look at his team mate Virgil Van Dyke he is under priced compared to him!”.
This is garbage of course. VVD has his own reasons for attracting a premium such as his decent goal threat and his rare ability as a defender to pick up some media wins.
But, because everyone knows that, VVD is hardly the marker that you want to compare value with. You pay a big premium for that dividend security.
The other explanation is the “injury bounce”. Many traders like to buy injured players and sell them on the return as people come back to them. This often results, as it has here, with the price actually being significantly higher than it was before he got the injury and dropped.
This can be very effective but you have to be quick off the mark and buy after the initial dip. Coming in late, you are at risk of falling into the trap the early birds have laid for you.
Jack Clarke
The Lineker bounce. Lineker bigged him up on Twitter and it’s sent the price soaring. He’s certainly got attention this season with some excellent performances for Leeds.
But are those performances the kind that will bring FI success? Potentially, yes. He’s got the right playing position, he’s shown an eye for goal and some decent threat. And he has a good all round game that wraps all this up in a tidy performance friendly package. So we can say he’s got potential.
So, what’s his path to success? It stills feels pretty far away. Leeds could get promoted, where he might spend next season in the team. He will be unlikely to win much (although Bielsa’s Leeds do have high possession – though whether they can do that consistently in the EPL would be in question).
Or, he could get picked up by a mid ranking EPL team, where the same would apply as above. If he was bought by a big club, he’d likely be benched.
So in all likelihood it’s going to be 2-3 years before we might see any real prospect of regular wins from Clarke.
I would also like him to apologise for this hair cut:
Fallers
Neymar (and other recent big winners).
Neymar is dropping but so are many of the other recent big winners. This was the case in the last blog on Tuesday, too.
It is very natural for those players who get bought up heavily in a feeding frenzy after an announcement or market reopening to fall in the coming days.
People are searching for a quick win and just want to ride the wave. They buy whatever is currently rising and don’t have to over think it. But, profits are then taken on players who have been over bought and people do then think more critically and start casting a wider net when looking for value.
So, if your player who was flying earlier in the week is suddenly not fashionable, it isn’t necessarily something to worry about.
If you know why you are holding them and think you will keep making gains (i.e because I think they have a big Champions League game to come, or a Summer transfer saga) you are probably fine. But, if the answer to “why am I holding them?” is because they were rising this week and I just clicked buy… you might be in trouble.
As for Neymar, well, it might be a bit more than that. He is of course one of the most consistent media returners on FI with only really Pogba and Ronaldo competing.
But, even the best players need reasons to be in the news. If the latest statement from Neymar’s father is true and they are discussing a PSG contract extension, then that could see Neymar dividends subdued at least until next season.
Coupled with the unexpected Champions League exit, it’s something to think about.
On the other hand, rumours can change very quickly and if Neymar did push for a move, it would be massive.
For the extremely patient you can usually be happy the price will ride out any ups and downs with a player like Neymar. But, not everyone has the patience to tie up large sums of cash in players that aren’t doing much.
Even at the most reliable premium end, there aren’t any completely “fire and forget” options on FI if you want to make optimal profits.
Hot Gossip
Marcus Rashford
Barcelona rumours for Rashford. Do I believe them? Emphatic no.
His contract is running down but negotiations are on-going to keep him at his boyhood club where he is flourishing under Solskjaer (I can finally spell that without looking, result!).
More likely, this is Barcelona trying to wind them up before the Champions League game.
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FIT