State of the Market
Whew. Quite the January.
I expected a silly season going into it. But it was a dull first week. And then it all went a bit mad.
We had transfer hype, with Fernandes flying in price and dominating as the on and off again big story. And he was a dividend gold mine to boot.
There were other big moves like Bergwijn, but as usual for January, far more rumour and hype than substance. But the Transfer Dividend from FI, a new concept, even ignited interest in the dullest of transfers.
Three youngsters, Haaland, Cherki and Fati rebooted the hype kid end of the market with eye catching performances. The kids had been struggling a bit since October when traders took withering losses from buying too many kids for too much money. But now that’s all forgotten! At least until the next crash.
We had Super Match Day’s, and when Adam Cole gets on Twitter and breaks out the rocket emoji’s, even the most level headed of us expect something big.
We were disappointed.
And on top of all that, the Risk Free offer gave people a licence to make bad decisions.
It has been possible to make very good money in January. It’s also been quite easy to get into trouble.
The importance of the full season fit, and the losses in players who lack it, is becoming more and more obvious.
That’s why the previous Winter Strategy in October advised getting ready for this. And why I’ve repeated that as the first objective in Mid-Season strategy.
There is just zero room for flabby, stale, off-trend holds in our portfolios if we want to finish the season strong.
You can get away with it in early season a bit, in late season, trends are far more important. (And I mean the real trends as per Key Strategy, not the short term noise on social media which can be ignored).
Clearing up Confusion
All of this leads to a market that is volatile and from reading social media, lots of traders are just a bit confused about what to do next.
The end of January was a good time to publish the next phase of Key Strategy.
I had a flick through Twitter before I wrote this and it’s been a while since I’ve seen so many conflicting, often down right ludicrous predictions. And more than a little panic and a few rash moves.
From October, we had a nice consensus going on. October to December was about picking high quality performance winners.
Lots of people were a little late, but by the back end of October even most hardened dividend deniers had eventually switched on to the importance of players actually being good on FI. What a shocker.
That resulted in huge profits if you were using Key Strategy and sitting there waiting for that to happen.
But as I’ve been discussing in the last two Key Strategies now and these posts, performance quality alone was going to stop being enough by the time we hit January onwards.
We’ve been seeing the impact of that for some time, notably at the veteran end, but in January we are already seeing it hit younger players without what I call a “full season fit” in Key Strategy. That’s only going to get worse and if I’ve been repeating that too often it’s because it’s so important.
So what do we do?
Should we abandon performance quality as an important factor? Focus only on Summer transfers and hype?
Absolutely not. That would be crazy.
There is plenty of the season left to come, including the hugely influential Champions League and Europa League nights.
Why would we voluntarily sit out the best half of the season, hunker down and just wait for June? We like money.
The key is to carefully position ourselves so that we can tick all the boxes. That’s the whole point of the full season fit portfolio core.
The full season fit players can win now because of their performance strength. And as long as the trend fit is right, they will keep attracting buyers when they do.
They will generally be involved in later stage CL and Europa and can get hype before the game, and can win to get attention.
And they will have Euro 2020 and/or a Summer transfer at the end to give traders a reason to believe they are worth holding into late season.
As a kicker, the next time FI do some kind of announcement, it is almost always those who are holding players capable of winning now and relevant to the trends just ahead that will benefit.
The odds of Champions League or Euro 2020 related promotions are quite high. Why not be holding these players already? There are plenty of reasons to do so even if there is no promotion.
We’re stacking up the reasons we can profit here, putting ourselves on the right side of probability.
That’s why Full Season Fit is the core. It’s important ground to have covered.
But of course, as per Objective 3 of Key Strategy, we should also be branching out into other areas, including some longer term prospects for Summer provided the prices are right.
Two Risks to Avoid
1. As per Objective 1 of Key Strategy – we’ve got to clean house, and if we haven’t already we have to get on it now.
There is zero room for fat in our portfolios as we get towards the end of the season. I cover the sort of player we should should be binning in the latest Key Strategy.
2. The second trap is going too early on Summer players with no reason to hold them now.
If they are performance weak, and generally unlikely to do anything to get attention anytime soon, we want to avoid tying up our balance and just sitting there waiting for June.
Some players, if they are going to be very popular, particularly if they have had a recent price drop due to a failed January transfer or similar, should just be signed up as soon as possible.
But for lower key players, we should try to wait until at least the end of March before buying if possible.
Not all players fit neatly into boxes.
This can be one of the toughest times of year for knowing when to sell. I’ve certainly been getting a lot of questions on this.
Even the best traders will currently be agonising over which players to stick with or sell as we head towards the end of the season.
From Scouting etc, it’s generally pretty clear who is a Full Season Fit player or not. And it’s a fairly easy decision to buy a good potential youngster at £1 with the future in mind.
But what about those inbetweeners who have lots of good factors but also some headwinds?
Someone like Mahrez, Kroos, TAA, Griezmann, Immobile, Milinkovic-Savic?
Mahrez is a very strong performance player, and has CL games on the horizon. He might win. He’d be a great Gold Day contender for CL quarter finals onwards if City get through. And he’s still reasonably priced. But he’s clearly not a full season fit player, he’s not at the Euro’s and unlikely to transfer.
Kroos and TAA are good FI players but at high prices. And you can pay too much for a good player. But the trend fit is good, they are likely to win, and it may be that their consistent wins blow past any drawbacks they might have.
Griezmann is doing ok but not not really hitting the heights we may have hoped for. He has CL games coming and could easily win. The price is reasonable. And he’s exceptional for France in FI scoring and should be a big contender at Euro 2020.
Immobile is older which a lot of traders don’t like. But he’s scoring for fun and should lead for Italy at Euro 2020.
Milinkovic-Savic is underperforming, but potentially performance suitable and the chances of a big money transfer are good.
We can weigh up a lot of factors, such as just how good they are looking for performance strength (Scouting helps), and how strongly they match the trends ahead. The more boxes they tick, the higher price they can hold and the more they can potentially rise.
One of the most important things to consider here is “what else would I do with this money?”. If I am convinced I have a slam dunk profit that I want to put money in, I am much more likely to sell a player I’m feeling 50/50 on to pay for them.
The important thing here is that we do not have too many of these marginal calls in our portfolio. If we believe that a players positives outweigh the cons then it’s fine to go with that. But we don’t want to fight the trends too hard.
90% of the time, we’re looking for players that are obvious Key Strategy fits with performance strength at reasonable prices.
If we are having to agonize over an individual player too much, and that hold is stressing us out, it probably means we should drop it.
Overall, having a few of these marginal calls in our portfolio is not going to make or break our season so we don’t need to sweat too much. The important thing is that most of our portfolio is in the right place.
It’s a pretty confusing time. We’ve seen a volatile market with all of the various promotions and interventions from FI. It distracts people.
If a player rose last week, people are very short term minded and want to find something similar.
But people move on quickly and what people are talking about a month from now will be completely different from today.
It’s unlikely events like the Champions League etc are going to pass by unnoticed. These are the real trends in play when it really comes down to it.
Performance strength is always important. Winners will get bought provided they also have the right trend fit for the months ahead.
But the winners who don’t have that fit will find it doesn’t matter so much anymore. They can win but it won’t matter that much because the price won’t move, we’ve seen that happen already.
It’s important we adapt to that as the season goes on, whilst never losing sight of the real win mechanics and value in FI.
Key Strategy feels like it came out a good time.
I’m confident that a clear focus on that will end up being what matters. We don’t need to pay too much attention to the aftermath of silly season.
Staying focused and not letting ourselves get too distracted by short term events can be one of the hardest but most rewarding things to do.