State of the Market
The big movement this week was an early push for Summer transfer players.
If you are already sat there waiting for that to happen, it’s fantastic.
But equally, you can try to position for a future trend too early.
This leaves you open to gains being chipped away as people come out again after the initial news. And, it can leave you sat on stagnating players for months until the event you had in mind for them happens.
In the transfers article on Feb 6th, I discussed this issue, and I’ll elaborate on that further now since we’ve just seen a few examples of what I was talking about.
I’ll also discuss the latest on the youth trend as we have seen some twists and turns there.
How far ahead should we try to predict?
It’s pretty obvious that players with big Summer transfer rumours will rise ahead of Summer as and when those rumours hit.
Everyone knows that. It’s not a particular advantage.
A simplistic strategy would say “I can just buy all of the players with a Summer transfer link right now!”.
But that’s far from optimal. We can go too early when trying to move for a new trend. The best strategies get it just right.
We could equally buy performance players for the start of next season now too. Is that a good idea? No. Why?
1) We’d miss the current action over the next few months.
2) A lot will change from now to pre-season in July. Our judgements about who exactly will be in demand then will not be accurate enough for the best profits.
There is a sweet spot in predictions.
Today? Or even this week? Pretty much a lottery that can depend on a news story or a random big performance score. Sure, I know who is most likely to put up a big score, but on any given day, it’s a lottery.
Yes – we could say “it’s the Champions League this week, that’s what will drive prices!”. We could but then we should look in the mirror and slap ourselves. This was an obvious event that we should have looked at and prepared for a month ago, as we did here with the in depth CL/Europa preview articles.
2-3 weeks or 2-3 months from now? That’s my sweet spot. Far enough ahead for Twitter not to be talking about it. Close enough that I have the information to make a good prediction.
3-6 months? Pretty good, but I need to be betting on an event like the Euros coming up, rather than someone necessarily winning performance in 6 months – who knows what will have changed – and that’s why I review all the games each week.
Beyond 6 months? It starts getting ropey. Next season? We’re getting into pie in the sky territory. This is why I consider the often discussed “career dividends” thing where you try to calculate their dividend return over a career complete nonsense.
It’s usually used by people trying to justify paying too much for a player.
This is why I tend to look at Key Strategy in terms of the next 1-3 months ahead, with a nod towards 6 months.
Let’s apply that to Summer Transfers.
If there is no advantage in mass buying all Summer Transfer players now, where can we find one?
It’s in the quality of selection, and knowing who we need to be picking up now, and who we can leave until later.
This is something I mentioned a lot in the 6th February transfers article. Every player was discussed with this in mind.
For example, Ziyech. He was stamped with “One to sign up sooner rather than later if interested”. He was £2.16 then and spiked to £2.91 just 3 days later.
Am I some kind of fortune teller? No. I didn’t know Chelsea would make quite an odd early signing at all.
But, I did know that he’s popular and a well known transfer prospect. He’s been a near miss in many windows so he was always likely to be one of the first to be bought ahead of Summer.
He also has the Europa (injury permitting) and because he’s performance suitable, there is a chance he does well and gets attention.
So with Ziyech, there were reasons to sign him up early. He’s just a bit too obvious and that means we generally need to be in there sooner.
Now lower key transfer players from that same article like Everton Soares, Fedor Chalov, Thiago Almada haven’t moved at all, or have even dropped.
So, had we moved too early to pick up too many of these, we’d have ended up with a pretty mixed bag.
The Dragging Up Effect
Overall though, we would have made a considerable profit on players from that article like Werner, Upamecano, Chukwueze, Neres, de Beek, Tsygankov etc.
This is because the unexpected news for Ziyech switched people on to a Summer Transfer panic very early.
There is a reason I picked these guys first – they are high profile, obvious transfers that are generally worth getting early.
On Tsygankov and Chukwueze I suggested we might get away with waiting another month, which without the Ziyech story would probably have been right. But you can’t win ’em all.
This is great short term if you had the ones that were worth holding sooner rather than later like Ziyech.
It also means we have some decisions to make.
This trend is clearly hitting far too early. And by too early I mean well before your average hype trader is willing to really consider holding these players at these prices until Summer.
Not all traders behave the same.
The guys who are spending all day on Google and jumping on Ziyech and others immediately upon breaking news are generally not the sort who are going to be patiently sitting on them for the next 4 months.
That’s why we’ve seen Ziyech creep down again. If we were in late April or May, I suspect he’d have held his price and even gone further.
So, how to handle a trade like Ziyech?
Either you were holding when it hit, or you weren’t. If you were, it’s an amazing profit quickly. If not, it’s pretty horrible to watch.
I confess I am in the latter camp on this one – it happened so quickly I hadn’t actually gotten around to following my own advice here, I’d spent my free balance on de Beek and planned to pick Ziyech up once something else in my sell queue cleared. Oh well.
If I had been holding, I’d have tried to market sell as he started to level out towards £3.
I’ve done this long enough to know that the short term traders are going to have moved on by tomorrow and that not everyone is going to be patiently holding until next season. It’s just too far away.
If I hadn’t managed to market sell though and was currently sitting on him at £2.77, I’d just be happy with the rise and let it sit. He’s got the Europa on the way (probably) and he’s going to be in hot demand come pre-season. I’ll certainly want him for next season. So an Instant Sell now would not appeal to me.
If he did suddenly rebound to over £3 and I could shift him to market, I might well do that and see if I can avoid a month or two of stagnation.
What I actually did, given I wasn’t holding, was hover, slightly annoyed, over the buy button at £3, then took a deep breath, slapped myself, and walked away from it.
It’s just the opposite of the above – it was likely the hype would fade so there is no sense in chasing it. It’s gone.
Now, it’s just a matter of seeing how long I can get away with waiting for a further drop before I buy.
Similar decisions have to be made for the rest that got dragged up with Ziyech. Werner, Upamecano, de Beek, Neres etc. It largely depends on price, and what shorter term reasons to hold them exist.
The better the Key Strategy “full season fit” the more we can keep pushing for a higher price.
And the more shorter term reasons to hold them they have (i.e they can win performance now) the more likely they generally are to hold a higher price.
Outside of transfers, there are some other factors worth covering quickly.
The topic of last weeks State of the Market was the youth trend, with the key message being be wary of highly priced players who are being overhyped, and instead target players a bit like them without the huge price tag.
Haaland perfectly illustrated the point. As did others like Berge, Hagi, Barrenetxea (Although I actually like Barrenetxea longer term and maybe not quite so expensive), Reece James, Isak.
These kind of losses would drive me crazy if I ever took them. We can take some losses. It’s in the budget of a good trader. Nobody will get everything right.
Even good decisions can lead to a bad outcome if it doesn’t go our way.
But these foreseeable self inflicted wounds caused by holding onto overhyped poor quality players too long just have to be eliminated from our game if we want to do better than average.
It doesn’t mean don’t buy them. I make plenty buying young players early and selling them to people paying too much later on. But it does not pay to be the “true believer” mug who thinks they have really hit the next Messi.
There is still mileage in the youth trend though. It’s just about being selective and picking the ones that haven’t reached a silly price yet. They’ll need some reason for people to buy – be that performance quality or another event like a cup appearance.
Whilst we’ve discussed trends growing in importance as we get towards late season, we should not make the mistake of thinking performance quality isn’t important anymore.
It absolutely is, and big performances are still driving prices. Pepe, Angelino, Guerreiro, Dybala all recent examples. Some more predictable than others. I talk about the quality of the last 3 often but Pepe’s was much harder to see coming.
We still need to keep our eye on the ball through Scouting because knowing who is good and who isn’t is useful information at all times of year.
Winners still get big price increases particularly if their trend fit is on point too. We don’t have to choose performance vs trend – the key to big profits is finding both.
And even if you are trading purely on hype, you don’t know how far you can sensibly push it if you don’t know what a player is really worth.
Champions League and Europa
Most CL and Europa league buying should have been sewn up well in advance of this week. I like to do it a month in advance of the games, which is why I put the CL and Europa preview articles out around then.
It’s a good time to revisit them and you can find all previous articles by going to the Dashboard then clicking Members Articles.
When buying big ticket players, we do not want to be the mug excitedly buying those players on the day. It’s just too late and you are going to pay a premium.
What we can do is go for the cheaper value punts that very few people are aware of yet are capable of stealing the dividends.
There are many examples of these in the preview articles. For this week, it is best to do this for the Europa games rather than the CL.
For the Gold Day CL matches I’ll do this, but punting for a Bronze Day win like it is tonight isn’t really worth it.
What we do need to be very much on the look out for is upsets.
If you don’t actually watch most of the games most of the time (a lot of people don’t) be aware of this.
With just another league match, you can usually get away with your player having one bad game. They get another go next week.
For knockout football, it really does pay to watch if you can and be able to react.
This is particularly apparent when there is an upset. If Liverpool get turned over 3-0 tonight that could have a significant market impact. Unlikely but could happen.
Beware the lazy assumptions about favourites particularly when there isn’t a Gold Day. Sure they’ll win but people assumed that already.
It often pays to bet on the upsets instead because players who people have written off can bounce back very nicely if they go through. And if they lose as expected it’s unlikely to cause a ruckus. Anyone holding Napoli or Atletico players worried about the CL has probably sold already.
That’s why I’d much rather bet on Morata tonight than Alexander-Arnold. There I said it.
Dortmund vs PSG will generally be seen as a more even contest. That may mean nervous holders who are steering a bit clear of their assets. But the team looking like making the Gold Day could be in for a boost.
And, it’s also worth noting that with limited competition, a big display from usually bad players with the right trend fit (hello Haaland) can get them going again.
I give more thoughts on handling the knockouts in the CL/Europa articles.