State of the Market
A busy market this week!
Plenty of volatile silly season behaviour on the surface, but actually, if you dig a little deeper, it’s more sensible than we might initially think.
I see plenty on social media complaining of losses today, but I actually think it’s been a good period with plenty of opportunities to make gains
I’ll be discussing briefly the main objective of the month, then diving into what’s been rising and falling on the market recently and why.
I also discuss the difference between a good loss and a bad loss, as well as the recent “jackpots” we’ve seen for Fernandes, Haaland and Cherki and share thoughts on handling those types of trades.
As usual, summary at the top, details below.
January So Far
Silly season is now in full flow, which is not unexpected!
This is normal for January transfers, fueled even more by the transfer dividend offer discussed last week.
And a couple of big games for young players in Haaland and Cherki has revived some interest in the hyped wonderkid area of the market, which had been suffering after it took a battering around October.
The risk free offer from FI, mainly a background issue by now, also gives people an excuse to take risks, including on youth.
One quick thing that I only thought of today – the £500 refund offer can be a good opportunity to restructure a portfolio. If you find you are headed for a net loss come the end of the month anyway, that would be a good opportunity to get rid of some deadwood.
Hopefully, members aren’t amongst those struggling though. It has been possible to make good progress this month. The market has been rising. Hidden amongst the January madness, there is a lot of smart trading going on under the radar.
If we look at who has risen or fallen over the month, or over the last week, the lists generally make sense to me.
There are good rises for the Cherki’s and Haaland’s and Puig’s (though Haaland is still less than he was a month ago). Plenty of overpriced new trader traps like Brandon Williams rising. And lot’s of low level transfer pumps etc. It’s silly season, you’d expect all that.
But if you look beyond that, there is clear evidence of the “full season fit” and “end of season sell off” factors I discuss often playing a big part.
Focus on Trends
In a busy, volatile month it can be easy to forget what really matters.
The main point of the latest Key Strategy was to load up on performance suitable players that have reasons to hold them deep into the season and into Summer.
These players will be in demand, at a time when players without reasons to hold them in Summer will be falling. This should have what I call a “funnelling” effect, that makes a relatively limited selection of players highly desirable for the coming months.
That’s been happening already, you see it in the premiums paid for Euro 2020 players now for example. And the difficulty you have getting anyone to buy a good South American performance player even when they are smashing out big scores (can you think of anyone?).
I expect all this to intensify as we get into February and March. Which is why the main focus of the month, disregarding all other noise if need be, is to have portfolios in a good place for when that happens, as per Key Strategy.
What's hot, and what's not?
Let’s take a shorter term look at what is happening on the market in January.
Lots of players matching site trends with good Scouting reviews have done well this month.
And the fallers list generally makes a lot of sense, mostly made up of players running against the trends as I see them, particularly if they don’t deliver in performance scoring.
On the risers list, Fernandes has smashed it, giving holders a good headache to have about whether they cash out or let him run.
Brandt, Werner, Van Dijk, Mahrez have done well off the back of good performances. Reece James, who I flirted with for a shorter term punt, has done well too.
Leao has emerged as a good option with a quick price rise too. Pasalic. Havertz. Lo Celso. Curtis Jones continues to rise. Aouar. Moussa Dembelé is doing well, featured in last week’s State of the Market. There are others.
This is more than enough to keep making good progress. But many losses were possible too, and you’ll only be making gains with these provided you aren’t being dragged back elsewhere.
It’s another example of how who you don’t hold is crucial to profits, and why tighter, focused portfolios that don’t take many losses tend to do better.
Looking at the fallers, it’s a who’s who of players that run against the trends as I see them, have poor performance quality, or too high a price tag. As some broad themes of January’s loss makers:
- Risky transfer gambles that fall over. Haaland showed what can happen here with a savage drop. Similar for Barbosa. Lots of examples here, particularly at the cheaper end of the market.
- Transfers that go to plan but then drop because the player doesn’t deserve his hype price, like Gedson Fernandes, Minamino.
- Strong but off trend performance players, Messi the prime example, but also Parejo and others continuing to drop this month and since late November as veterans started to struggle as suggested in Winter Key Strategy.
- Overpriced players who are not delivering, especially EPL players if they were pumped in December. Alli leads these. Calvert-Lewin. Ceballos. Pulisic. Mount. Sessegnon. Moise Kean. Adama probably joins them soon. Felix. Vinicius. Rodrygo. Savanier. Could list a lot of players here.
- Stubborn holds of premiums with obvious negative drags, like Pogba.
Good Losses and Bad Losses
The vast majority of the drops this month were predictable, these negative trends have been discussed in Key Strategy and State of the Market for months, with the details on individuals in Scouting.
We will all take some losses. But there are good losses and bad losses. It’s an important distinction.
We can make a great decision and lose money. We can make an awful decision and win. But over a season, our total good and bad decisions get weighed and we generally get what we deserve.
On Social Media, people tend to either complain about losses like they are powerless and it’s bad luck. Or people chime in to say “just zoom out on the graph” or “think about how much you made overall”.
This can be true, provided you have been making good decisions.
But with the above types of predictable loss, the trader is making clear mistakes. It means there are things in our trading game to fix if we want to get better results.
Other losses can be shrugged off. They only annoy me if it was possible for me to see them coming and I didn’t make the change. With my style of trading, losses have historically been rare and not too severe, aside from a couple of memorable hits on big injuries. But we will all take some.
Kane and Rashford took a hit this month. Not generally the sort of player I hold but there were sensible reasons to hold them if you wanted a premium pick. And you can’t kick yourself too much because they got injured, it happens. I took a loss on Depay recently for that reason. Alcantara in previous seasons too.
Kroos is a good player that I like who took a beating in January, losing 40p. (Since yesterday as I mentioned in Scouting, his insane spread has been much reduced to a far more reasonable 10%, which is very welcome for holders).
This seemed to start when he turned 30 this month. In many ways, he is bang on trend. But for age, he is not. So he is going to get some headwinds and I held anyway knowing this.
My bet is that his raw performance strength blows past that supported by some optimism for Euro 2020, and his numbers suggest there is a very good chance it will. Plus, 30 isn’t a death sentence. He’ll be around next season. 32+? A bit different. That’s why I’m personally happy to keep him.
Either I’ll be right or I’ll be wrong about that, nobody can win them all. Taking a few calculated risks is fine provided we have thought them through and understand why we have bet against one of the trends in play (although he has other trends in his favour too).
Eriksen is another who has not done well this month that I liked. Back before the window, he had a number of good potential options, a big EPL move being the dream. He’s dropped because it did not happen, but not severely. Even at Inter, he’s got potential and I’ll be interested to see him there. Even better if he goes this month.
This is why this type of trade can be a good transfer bet, you’ve got a big pay off if it goes well, and when it doesn’t like this, it’s really not so bad even if you want to hold.
These are examples of the sorts of drops that we can live with and still come out with great profits overall. They are a small number of exceptions amongst a lot of other rising players, and the drops are not too severe anyway.
There have been a few “jackpot” moments from Fernandes, to Haaland, to Cherki. Whether you count Haaland I guess depends on when you bought, he’s actually less than a month ago.
These are nice moments for holders but we need to think about how often we are winning any high risk gambles and if it is worth it overall.
Occasionally you get your jackpot on a player like this, more often you stagnate or lose money.
If you check the price charts of players that were at one time the “must have” hype kid, we all know what usually happens to them.
The jackpots are talked about often. The stagnation and losses quietly buried. This can give the false impression that piling into hype is where the big profits are.
If you are diving in on Haaland for example at £4.25+ in late December, expecting a Manchester United move, you are taking one hell of a gamble. I would call it a flat out bad decision.
It went up to £4.82 but then that bet was lost, crashing to £3.92.
Fortunately, a debut hatrick recovered much of that ground, but I don’t think even the most die hard pumper would have predicted that.
Overall, you are pretty much back where you started even with a bit of luck on your side. It’s been a thrilling way to stand still!
If on the other hand you bought Haaland in July at £1 to £1.50, banking on the Solsjkaer connection to get him linked to Old Trafford, hats off, it’s brilliant.
If you also sold just before the January transfer window opened at the peak so that you couldn’t take a hit when it all collapsed, it’s a standing ovation for that trader.
I have bought many players like this and made a lot of money doing it.
But the key thing is this: the best profits are made by the early adopters, the mugs who come in at the end are feeding off scraps. And it is usually them who pay the bill when the party is over.
There is some madness in the market in January, as expected.
But underneath that, a lot of logical stuff going on.
I feel in a really good place with the Key Strategy, the predicted trends have been coming through for a while, and I expect that to intensify in the next month or two.
Some good progress has been made this month with lots of good players rising.
I note many on social media complaining of losses today. I hope members aren’t caught up in that.
The vast majority of the dropping players were foreseeable and mainly in line with what I’ve been discussing in Key Strategy, State of the Market and Scouting.
Reading social media, the killer for many seems to be having some good trades but getting dragged back by others.
If I think of what has led to the big overall returns over these past years, minimising losses has been as important as the big wins.
There is no point winning with that one golden player if you had to back 4 others who have stagnated for 6 months or even made a loss to get it.
Turning to the rest of the month. In the latest Key Strategy, the end point was to hit the end of January with the core of the portfolio made up of players with performance strength and reasons to hold them all the way through the season.
Most of that should have been sewn up, if not in November and December, in early January. There is still time to do some tweaking and get ourselves in the right place for the second half of the season.
It’s about time for the next phase of the Key Strategy, and I’ll be aiming to publish that on the 31st January.
The second half of the season is much more trend driven. Performance strength always matters, it’s especially important in pre-season and early season.
But for success in the coming months, our portfolios need to be bang on the trends ahead. Performance strength will be a big part of that, but on it’s own it is not enough from here out.
We’ll need a great sense of timing to read when certain trends are reaching a peak and it may be time to move on and pursue other areas of the market.
I look forward to sharing that next week once I’ve written it.
Note that the Key Strategies are designed to smoothly flow into each other.
You will not find me suggesting an immediate shift away from current strategy to something completely different!
It’s going to be about the months ahead, and how we move from where we are now, to where we need to be next.
Hopefully, we can make the second half of the season every bit as good as the first!