State of the Market
This week I’m going to talk about the current stagnating market and how important focusing on strategy is in the coming months.
Most people are currently pondering their portfolios and wondering whether there is anything to do to improve things.
Overall, it’s been a great few months. But a very quiet month or so. It’s quite easy to feel a bit glum or frustrated that things aren’t gunning along like they were in October.
It has been possible to make some gains but rather than just expecting all boats to rise, we have had to work harder to winkle some out in Scouting.
Players like Iheanacho, Keita, Nkunku, Reguilon, Renato Sanches, Pasalic, Upamecano from December scouting have done well and got a nice % return in recent weeks.
You don’t need more than this many players to make some progress, which is why I lazer focus on my absolute best picks (if anyone wants evidence as to why, see last weeks State of the Market analysis of pre-season selections).
There are also other picks that I am much less personally keen on gaining traction. Minamino, Greenwood are examples for the reasons given in Scouting. Over weeks and months backing such players is likely to lead to mediocre or worse results.
And as I look down the risers list, there is a boat load of mostly irrelevant garbage like FI weak Championship players that people are peddling too.
You often see this at times where traders aren’t collectively sure what to do. They want to buy something but there is no immediate push in a particular direction. That tends to send people out fishing for speculative punts.
On the fallers, lots of big hitters like Kroos, Alexander-Arnold, Messi, Depay, Kimmich, Sabitzer, Savanier, Pjanic, Pepe, Coman, Pulgar, Mbappé are dropping.
Some of them deserve these losses and others don’t, my views on the individuals are in Scouting.
But before we worry about individuals, right now is a good moment to reconnect with our strategy. In my case, that’s the site Key Strategy.
The Key Advantage for 2020
The start of a new year is usually a big psychological turning point for me. July to December is mainly about being better than other people at selecting the best performance players first.
That’s why the players highlighted positively on this site have performed so well since pre-season as highlighted in last week’s assessment. It’s all built on diligent player analysis.
The site Key Strategy got it right as well in terms of focusing early on performance quality Euro 2020 players like Kroos before anyone else was talking about that. That was important, sometimes simple is best, but the Early Season Key Strategy was actually quite straight forward.
The heart of it was just “select good performance players”. It was executing that and selecting those players that was the hard part.
As we get into January and towards the second part of the season, FI becomes more about strategy. Player selection is always important, we need to know who is improving and declining at all times.
But if our key advantage in early season was “better player knowledge”, the key advantage in mid to late season will be “better strategy”.
In the coming months, who will rise will not just depend on performance scoring, but the trends ahead, and in particular, who has the longest shelf life within the season.
You can see this happening already. Elite veterans gained strong traction early on but are fading as we get into December because people are fearing their age. Strong scores no longer move their value much.
In August Early Season Strategy I predicted this:
“Elite veterans… should not be ignored, particularly in early season which is the safest time to hold older players as they have a full season ahead.
I would get twitchy on them as we approach December but I would have no fear at all of holding a quality elite veteran at the right price in early season, particularly if they are expected to be a big name at Euro 2020.”
As it turned out, elite veterans like Lewandowski, Di Maria, Kolarov got the highest % rise from pre-season to the end of November and were responsible for huge profits. The average age of my most profitable players was 28. And this at a time when the social media / chat group consensus was that youth is the most important factor to look for.
Social media consensus is often wrong. Social media tends to amplify what is currently happening on the market and has almost no insight about what is going to happen next.
Not only is it often wrong, it often puts people off the exact players that can be due a big rise like it did here.
This happens again and again. The first members to join will recall the weeks before the Share Split in early 2019 where the social media consensus was saying the only thing worth buying was the top 10 premium players and I strongly disagreed. Go and take a look at how the most expensive players have done since versus the market. Spoiler: Not well.
Exploiting this very short termist thinking has returned consistent big profits. And it’s why my current Winter Key Strategy is what it is. I’ll recap why now because when things are a bit stagnant it’s a good time to remind ourselves.
Performance strength will remain a strong factor. But it will only get traction where the player has long term value and matches other trends.
As we have seen recently, players who are older can win and yet not get rewarded on the market. 30+ year olds will generally do less well than they did in early season.
Likewise, as we enter the second half of the season, players will only generally get rewarded if they win AND have a reason to retain value into late season. This could include Euro 2020 or a favourable transfer rumour. Later stage Champions League or Europa League is good but ideally, I would want this in addition to Euro 2020 or a transfer rumour.
The “end of season sell off fears” will likely start surfacing probably from February onwards and the players who are hit the hardest will be the players who have no reason to be in your portfolio between May and August.
It is my view that these factors combined create a funnelling effect for traders during the later stages of the season. Exactly when this might take place I’ll be better placed to say in the next Key Strategy in January or in the weekly updates.
I think money starts coming out of players that have no reason to be hanging around over the Summer. Even many long term holders who think they are in it for the full 3 years may quiver when they see the shorter term thinkers (the majority) creeping away from their long term picks.
That money generally has to go somewhere.
And it goes to the players who do have reasons to hold them into late season and are engaged in exciting big match days like Champions League and Europa League nights, with Euro 2020 to look forward to.
To be clear, for all my talk of Euro 2020 this season, it should be noted that I don’t care much about the tournament itself. I care about it as a reason for people to keep holding players both before and after the tournament.
The tournament itself comes down to just a few games. I am as yet undecided as to whether I will be keeping my big hitters for the tournament or selling before hand and I’ll develop that thinking closer to the time.
The purpose of this is to put into context why I am positioned as I am in Key Strategy. And why I don’t particularly care that some of these “full season fit” players are dropping a bit at the moment.
Provided their strength keeps up and their positive trend factors stay true, I’m confident that traders will be funnelled towards them.
Most of these have also earned their price through consistent strong performance showings. They are not as brittle as hype kids who are built on sand and tank when things go wrong. There are rational reasons to hold them. We don’t need to sweat on them so much.
But we should not be complacent. In Scouting I check in on all of these players each week and you are the first to know if my feelings change on them.
We must also avoid not confusing “popular” with profitable. As the analysis showed from last week about who has done well since pre-season – the “must have” players pushed on social media often deliver far from the best results.
But I am also far from inactive. These “full season fit” players make up around 60% of my portfolio as per Winter Strategy. That leaves a whole 40% in play for other selections such as trying to find the 3-4 players per week in Scouting that offer great value.
A few players like Iheanacho, Pasalic, Nkunku, Reguilon and others from December scouting so far are all we need to keep making good progress. Focusing on the absolute best is key.
If you look at the fallers list for the last couple of weeks, there are a lot of predictable players on this list that I’ve said are overpriced in Scouting, many of them popular until recently. We need to make sure we are avoiding these forseeable drops in order to avoid losses during months like this.
Looking ahead though, January last year was a fantastic month and it seems like FI have plans to get plenty of new traders involved possibly with a new Try January offer. And I think people tend to be more optimistic in general once fears of winter breaks and such are out of the way.
I expect a better January than we have had a December, anyway!
There will be no State of the Market next week as it is Christmas Eve, but it will be back Tuesday 31st on New Years Eve.
Scouting will continue as normal with an extra update planned for the 27th to cover the Boxing Day fixtures.
I’d like to wish all members a Merry Christmas and hope 2019 has been a very profitable year on FI for you!
Bring on 2020 🙂