This feels like a huge day in the history of Football Index and even usually level headed folk are excited, spurred on by FI CEO Adam Cole’s confidence and liberal use of rocket emojis.
I’ve seen many an announcement by now but very few have the hype and expectation that this one does. There is universal expectation of positive news and given the language from FI it’s hard to expect anything different.
Having been brought forward as well, all the build up expected to take place over weeks is now condensed into a few days of frenzied buying.
I do expect positive news.
But there are traps here for the unwary.
In trading, not just on FI but in general, traders are often the most vulnerable when they are in a frenzy of over optimism and think that good times will last forever. The trading cliché of be a bit fearful when others are greedy is a cliché but it exists for a reason and has stood the test of time.
Looking at the market, the penny did seem to drop although a few days later than it could have with some that in order to profit from a dividend increase, you probably want to be stacked with players who actually win dividends.
This has cut into the profits of those holding many highly speculative youth players and benefited those, like me, who spend their time finding the real quality.
Overall, we are seeing some very solid players get rewarded this week although not always. As a whole, traders are not always that great at telling the difference between the real quality performance players and players who have just hit a recent hot streak, or who get a high average score but lack the ability to put up winning scores often.
So, the answer is not as simple as “ok I need to buy performance players”. Especially now, since traders like me have been buying them up for months.
You have to know exactly which performance players are still worth buying, through a real knowledge of who has quality and who doesn’t (tip, you won’t find this on social media).
They need real performance quality, the right price, and the correct trend fit that should see them continue increasing throughout the season.
Without those things, traders can easily find themselves charging into overpriced players this week and cause problems for themselves down the line, particularly with spreads higher than they have ever been. Mistakes cost serious money now.
Overall, we want to be headed into the announcement mainly with players we would be happy to hold even if Adam Cole announced that the result of the Dividend Review was that dividends stay the same. He won’t! But asking yourself that question about a player you are holding or buying is a useful way to know whether you have a solid portfolio or not.
For members from 5:45pm, I’ll be running a Live Blog in the members area giving my real time reaction to the announcement and analysis of who the winners and losers should be, before the market reopens at 6:30pm.
These are really popular features with hundreds of readers by now and the feedback from similar ones I did around the Share Split and Performance Scoring Changes was great. I’m told I was able to cut through the all the competing voices and offer some clear guidance within minutes of the announcement.
Looking back, the analysis given in the Live Blogs does seem to have stood up well to the test of time and I’ll be looking to repeat that tonight (no pressure!).
If you want to join me for that later, you can sign up here.
Trent Alexander-Arnold and Andrew Robertson
These rises are interesting to look at for a few reasons.
First, is TAA worth the money? He has been the most consistent defender so far, and defenders who will win often are definitely at a premium because there are not many of them.
He’s got real performance strength. But, there is no really credible argument to be made for him being worth £4.35 even so. At best, a very passive long term holder may be happy with this trade but most people don’t fit that description.
A player attracting that premium needs consistent media interest and let’s be real, it’s the goalscorers who get the consistent media, defenders don’t, not outside of very specific occasional media stories.
On a performance basis, he’s strong, but not so much stronger than other good defenders which can be picked up for half the price, or even a third of the price in some cases.
Robertson is actually a good example. He’s not quite as good as TAA performance wise, but he’s really not that far behind either. So, in terms of value, he’s streets ahead of TAA by now.
And you can see him rising too which showcases another odd facet of trader behaviour – the much overused comparative value.
“If X player is worth A then Y player must be worth B”.
This is flawed logically.
A player is worth what they are worth in dividend returns and potential dividend returns. The price of another player is not relevant to that calculation.
What it is relevant to is helping predict what the market may be willing to pay for a player it considers to be similar quality assuming of course that it is judging that quality correctly (it frequently doesn’t).
It can therefore be a useful indicator but we should not lose sight of the only thing that gives real value on FI, the player’s individual ability to win dividends now and potentially in future.
Taking comparative value too seriously leads traders into buying some absolute dross thinking they are the same i.e if one full back is strong and £1, they will buy his team mate at 80p thinking he is cheap without being aware he has no performance quality and therefore has little actual value at all.
Or, they will buy the cheaper team mate thinking that is value when actually he is already fairly priced or also overpriced. But the more expensive team mate can be significantly overpriced too making him a poor player to compare anyone with.
Whilst in the last week it’s been the overpriced youth players taking the brunt of the drops, today, as you might expect, not many are falling due to the extreme optimism in the market.
Not many will want to be selling today because of that, combined with the 5% bonus ending tomorrow.
It is however a good time to be offloading players at decent prices, particularly if they don’t fit with your core strategy for the coming months.
If you have a fair number of players you want to move on, it can even be better to do that than wait for the 5% bonus itself and take advantage of that freedom to reshape your portfolio hopefully by selling to market.
Tomorrow may be a different story with the drops. It all depends on who the winners and losers are later.
Whilst we can generally expect a positive announcement across the board, not all players can benefit equally and we may see money moving from one area of the market to another tonight and tomorrow.
We won’t know until we know so I’ll be busy analysing at 6pm on the Live Blog!
Hopefully, I am still going to be positioned correctly to benefit without having to do too much. But, in the case of anything unexpected happening changes may need to be made.
The only thing certain is that it will be an exciting evening, don’t miss it!