Outlook
Optimistic
State of the Market
This week I’ll discuss the new offers from FI, how that has/will impact the market, and ways of dealing with it for the rest of January.
From feedback, having a summary at the top for those pressed for time proved popular so I’ll make that a regular thing, detailed discussion below.
Summary
- A January silly season was expected. But it did not happen naturally in the first half of the month. FI's new Money Back offer combined with the new Transfers Dividend are specifically designed to create one though, and we are seeing it begin now!
- This creates short term opportunities but longer term problems. It will encourage more volatility, and traders have fewer reasons to care about the real value of players this month.
- This late in the window, most genuinely good transfer targets have been bought already (I did transfer shopping in November/December, as per the transfer section).
- The remaining players in the £1.50 and under range (most profitable under the new Transfer Dividend) will likely be the dregs. Most will have little long term value beyond the transfer flip.
- If you are not working this week and have plenty of time on your hands for short term trading, ferreting out a few of these flips might be a good way to make a bit of extra cash.
- But if doing so, be aware that if they have no real long term value and rose yesterday, they are very likely to crash after the dividend is paid. Consider taking profit without waiting for the actual dividend as per the below advice.
- If, like me, you don't generally day trade, the offers can still provide value. They are insurance for my usual trading. And may encourage a punt or two on some transfer trades with longer term value (Moussa Dembele an example explained below).
- We can more usefully think of these offers as a short term distraction. Whilst social media and chat groups will be worrying about short term noise, the players in demand in 1-3 months time are more likely to be available at good value.
- This is why January may be the best opportunity remaining this season to secure the "full season fit" players who will be in hot demand in the second half of the season.
- We should look ahead to the Bundesliga returning, the Europa Round of 32, and CL Round of 16 (Preview article coming soon). And in a few weeks, I'll run a Euro 2020 groups preview to find some lesser known talents.
- January will be volatile. But we must maintain a lazer focus on the main objective: securing players who can win consistently throughout the second half of the season, who have reasons to hold them throughout the season.
- And keep weeding out players who have limited reasons to hold them in late season, to reduce the risk of taking predictable losses due to an "end of season sell off" fear which can start to creep in in the next month or two, and already has in the elite veteran end of the market.
January So Far
If we started January expecting a silly season with players flying up and down with little regard for their longer term quality, we didn’t get it in the first week or two.
But we are getting it now!
It was starting to feel like that spike in late December was people preparing on the assumption that January would bring huge gains like last year. But despite anecdotal evidence of plenty of new traders joining, it was proving to be a bit of a damp squib.
Then FI chief Adam Cole says “hold my beer” and swaggers over onto Twitter with a couple of announcements. A £500 risk free offer, then last night the new transfer dividends.
This is designed specifically to create a January silly season. Traders, with a smaller budget at least, are free to throw money around without a care, and they’ve got a new, very short termist dividend to chase with it.
Will that be fun if you are a new trader? Possibly.
Will it teach them anything about how to be a good trader and succeed longer term? Absolutely not.
Overall I like that FI are trying new things, and if they think this is the best way to show new traders a good time in January, I’ve no real issue with it. If it works, it’s good for everyone.
But I think it’s of limited short term value to existing traders, particularly those with larger budgets. It’s had a mixed reception.
Are the bonuses useful?
The money back offer certainly can be. It’s insurance for any speculative picks from 10th to the 31st January.
It’s probably part of the reason people are more confident with buying Bruno Fernandes even after the huge spike. Jumping late onto transfer speculation stories is not as risky as it usually is.
That’s helpful for those of us who were on this trade early, particularly if like me you see reasons to hold Fernandes at Old Trafford.
It’s helpful when the ups and downs are going your way, at least. It’s going to encourage more volatility and make people care even less about the long term quality of players.
That’s not always a good thing for traders like myself who target genuine quality.
When combined with the new transfer dividends, which can be very profitable for players in the £1 to £1.50 range who have a transfer likely, it’s a recipe for short term speculation on players that have limited longer term value.
Really, I did my transfer trading in November and December when populating the Transfers section ahead of the window.
If there were any players I genuinely wanted for a transfer, I’d have them already and they’d be in the Transfers section.
By midway through the window, even late transfer buyers will have bought most of the players they want. The players left at £1.50 and below in the middle of a window with a transfer are typically going to be the weak ones that nobody really wants at their potential club.
That creates a short term opportunity and a longer term problem. Most of these players are going to have value for a few days, a week, two weeks tops. And then become very undesirable.
If you have a lot of time on your hands and aren’t working etc, ferreting out a few of these to flip as soon as you can might be a good way to make a bit of extra cash.
My best advice would be to pay attention to the spread, and be very aware that once that dividend is paid, the player is likely to crash if they have risen sharply recently.
If you can bank a profit early, it may be best to do that rather than wait for the dividend.
You’ll have to calculate whether the dividend itself is big enough to be worth more than the assumed price drop, factoring in that you will likely have to Instant Sell and take the hit on the spread. Usually, waiting for the dividend itself is not worth it.
My Approach
If you are like me however, you don’t have time to sit checking news feeds all day for transfer flips. I’ve got a site to run! And a life to live! (sometimes, anyway).
I’ll be making my usual trades, if any of them go badly and get topped up, or qualify for a transfer dividend, great.
The type of transfer that it would encourage me to go for if I had spare bankroll would be the sort who I would want anyway.
Moussa Dembele would be a good example. Whilst it would have been better to get him at £2 when he was added to the Transfers section, at £2.32 he’s still a decent shout, and getting more now wouldn’t be a bad idea. Why?
Because if he doesn’t move now, he will probably move in Summer. He’s got strong IPD returns, so is likely to hover around £2 in the worst case. He’s not a great performance player, but on a big day, he can win.
If we are holding now, we might get lucky. If the unexpected EPL transfer happens, he’s probably hitting £4. If it goes badly, he might dip 32p or so to £2. And depending on your budget, all or some of that potential loss is currently insured by FI.
It’s a smart, high potential, low risk trade right now. Stacking odds in your favour like this is winning trading over the long term.
Bruno Fernandes was also a good example of this sort of high reward, low risk trade covered in Transfers. As this shows, for the players with genuine quality, their price rises are larger and more sustainable too.
In truth though, these opportunities will be rare by mid-way through the window. There is a reason I sew up transfer business nice and early.
Overall, my preferred approach is to use this short term distraction to pick up players that will be in demand in 2-3 months, and don’t worry too much about short term transfer trades.
We can think of these January offers as a useful distraction. Whilst social media and chat groups will be worrying about this short term noise, the better traders will be thinking 1-3 months ahead and signing up those players instead.
By the time shorter term thinkers switch onto what is coming in February and March, they’ll probably be buying the stuff we already own.
This is the “Full Season Fit” player with the performance attributes to deliver big scores and wins consistently in the second half of the season and have the trend fits that give reason to keep them all the way through until the end of the season.
We can look for Europa players for the upcoming Round of 32, as per the recent article.
Same for the Champions League Round of 16, and I’ll be starting work on that article today.
We can look at Bundesliga players shortly on the way back from the winter break.
In the next few weeks, it will also be time to look at some lesser known Euro 2020 players that can have performance quality and be under the radar.
Final Thought
There has been a lot of uncertainty and moving goalposts so far in January.
For those with the time, the offers open up some opportunities for some short term transfer trading. It’s a bit of effort, and it can make some nice beer money, but it’s not going to make or break your season.
They key to success in the next few months is actually quite simple and it’s the same message as last week.
The main objective is still to prepare our portfolio for a great second half of the season, just like we did in pre-season.
Back then, all sorts of rubbish was being hyped. You only have to look at my pre-season analysis article to find out what happened to players I judged to be overpriced – 68% of them worth less by end November in a market that had risen by 57%, with 97% of them not outperforming the market at all.
Yet if you followed recommendations on social media, this is what you would have bought. The best profits are not found on social media or in big chat groups. They are only useful for getting a sense of the general mood.
We can dabble in a bit of transfer trading if we want, the Dembelé type being the good example.
But the most important to be doing right now if we want the second half of the season to be as great as the first is to lazer focus on the main objective.
We need a portfolio full of performance suitable players with every reason to hold them throughout the season and beyond. January will likely be the last good opportunity to make that happen.
And, we need to weed out most remaining players that have few reasons to hold them in late season, to reduce our risk of losses to “end of season sell off” fears.
(Note: This is a good general rule, but as covered in Scouting, there are a few individuals who have good reasons to hold them in Jan/Feb and possibly into early March. That may be exceptional performance strength or a great value price.)
The next big pieces of work will be the next edition of Key Strategy coming at the end of the month, the CL Round of 16 preview, and then a Euro 2020 groups preview series.