Caution

The main article from this morning is below. From here, I’ll run this page Live Blog style with the most recent entries at the top. As above I’m trying to answer questions from members today, so please get sending them in.

17:13

I’m going to wrap up today’s Live Blog here, but I’ll do them again whenever it seems relevant, especially the forthcoming announcements on more action from FI.

Final thought on situations like this: everyone is going to take a hit when the whole market drops. We might have protected ourselves and blunted the impact in the last week or two and if so it may not feel like a time to celebrate but we should be quietly happy with this work.

Any mug can make a profit when the market is flying (some more than others!) but it’s navigating times like this successfully without letting emotions get the better of us that makes a good trader. 

These sorts of events are just going to happen and we have to be able to deal with them without freaking out. Look at the real stockmarket in recent weeks, it’s far worse.

Our chief concern isn’t what other people are doing on the market or on social media. It’s about our own game. Our portfolio. Does each player have solid reasons for being there? What’s the reason I can expect traders to want these players in weeks or months from now?

If we have good answers to those questions then we’re probably not going far wrong.

Good evening all and thanks to those who sent in questions – I couldn’t get to all of them but I did read them all!

16:58

Question: With all that’s happening now will you be amending the ‘Trend fit’ so we can all have an idea of value and where we should be looking in the next few months once the dust settles?

Yep definitely. I think with things so fluid things like this the Live Blog with more details has been more useful. The trend lines are good but tend to work best when something is going to be a trend for a period of time.

We currently think media players will be the thing and I am sure they will. However which media players? is the question.

Before this weeks announcement everyone would have said Sancho was the sure bet for a pump. Because of the details of that bonus, it ended up being Bruno.

I’ll think more about this and also be Live Blogging on that announcement too when it comes.

I also expect FI to do something beyond just media. Again, I think it’s a time to be cautious rather than a time to be plowing in this way or that saying “this is the next dead cert!” as you see people doing. I think that is a mistake.

I also will do more on the transfer section which has taken a back seat mid update due to all the corona virus stuff. 

In the absence of football though I don’t just take the day off! I always keep the same hours so if Scouting is reduced, I’ll be doing whatever seems most relevant to help members. Actually I think some of my most popular/useful work has come in pre-season in the absence of football as the pre-season results article showed.

16:04

Question: I am generally happy with my port with PB players and majority have a potential transfer in them. I have no cash balance though. Would you 1) sit it out but potentially risk 1-2 months of stagnant market/potential further declines or 2) Look to free up some cash [for potential drops].

I think the ideal scenario to be in right now is:

a) to be happy with the players in your portfolio with a long term view in mind, and able to stomach any short term dips in them if need be. 

AND

b)  Have around 10-25% cash in balance from trimming the at risk players before today. 

If we are happy with our portfolio as per A but have not done B, I do not think today with these savage spreads is a moment where we can correct that.

We can’t free up cash to hunt for value if we are selling players way below their value to do it – we’re just chasing our tail.

I would sit tight if happy with what I have. You might want to earmark some weaker players, and if things ease up and FI start softening the spreads you might be able to start freeing up balance at some point in the next week.

I would definitely want some balance on the sidelines but I don’t think there is a panic for it – I do not expect everything to suddenly get better in the next few days.

15:58

Question: I’m afraid to jump on this media trend train, which we see in the last couple of days as I think as soon as we see clearly about the next couple of months,  people will move their money back to other players. I think my money should go Into none top five league players who have strong transfer rumours. Do you think it’s good thinking?

I think there is something to be said about “what is a media player?” here.

The most seemingly assured of Summer media would be Sancho. Kane is recently coming into this as transfer rumours build and offers better value. You could also have Neymar as a fairly safe premium. Fernandes is hot right now but in the absence of fixtures is likely to peter out over the Summer before becoming highly desirable again. 

Pogba… for nearly a year now I’ve said his price is doomed and the only thing that saves him is an unexpected new contract and commitment to stay. Recently, that has looked more likely, hence his recovery. But it’s still very up in the air.

Grealish is also in this sort of territory – he seemingly has value, but all it takes is for Manchester United to come out and say they aren’t interested and bang he struggles to justify £3. 

TAA, Haaland. Way above true value and have a premium price tag, but no real reason to win media and no reason to win performance with fixtures cancelled. At least TAA can credibly win when he plays, Haaland generally cannot be expected to win even if playing. 

Actually, in a hilariously odd way that makes Haaland kind of immune from fixtures being shut down. Can’t reduce his odds of winning to zero if they were zero already! Sort of a joke. Sort of not.

Sterling is in a middle ground. Premium, but actually quite boring at the moment and only a long shot Real Madrid move might ignite interest – but then if leaving the EPL he’d struggle for the same reason Pogba did.

With Sancho, you’ve got a strong chance of summer media but also everyone knows that and you pay for it. If anything goes wrong, and we’ve seen this today, the spread on him is whacked to an insane level and you are stuck with it. 

So yes you’ve got premium media options here and some are more sensible than others. What I really avoid like the plague is the players that are dependant on just one thing for their long term value. 

Grealish is the worst offender here. You see it on social media where people go “ah the brainiacs were saying Grealish was bad value at £4 and look at him now!”. Get out of town. 

You can ride these headlines as long as they last but as soon as they get shut down you are in deep trouble. And nobody knows when that will happen it’s just gambling. This one win doesn’t make up for the other 6 players this trader probably lost out on. 

A few of these picks can be smart but be selective. Throwing all of our balance this way would be stupid and it actually reminds me a bit of the Share Split last year where people went overboard on a handful of premiums, opening up huge value elsewhere. Ignoring the premiums whilst most ran towards them and going for the value instead was incredibly profitable. 

One of the reasons I could move swifter was because I did not have large sums locked up in premium players which can be very hard to sell.

By “media player” I would tend to go for the performance suitable/transfer prospect player. This generally means EPL transfers, foreign league transfers can get interest but it has to be a big one or the player has to be seen as very performance suitable at the potential club.

The ineligible league players you mention are generally a good bet for the reason I said in a question below – ineligible league players never relied on short term fixtures for their value anyway and so should be largely unaffected except for traders who sell everything in a general freak out. 

But we have to bear in mind here that we always overestimate how much media medium to small transfers are actually going to get. In reality, it’s going to be a small number of big fish who sweep the board just like Fernandes did in January. The hard bit is we don’t actually know which ones will do it, not even Sancho is a guarantee.

This is why selling them before the actual transfer window, profiting from the hype, rather than the actual media dividend, is often the best way to handle transfers. But it depends on what FI announce in terms of further media offerings. 

15:30

Tricky because many of the players we would want for “next season” are also the players who are taking an absolute hammering now.

I think this is quite similar to the answer below in that trimming off these players, waiting for drops, then coming back to them is probably the optimal strategy. Obvious strategy yes – it’s just not easy to do. I got the moment for selling at risk players right which was last week and Tuesday. Picking the moment to go back to them will be harder.

I think we can get into some carefully crafted “next season” or transfer picks, and there is a question below about the sorts of players I’d consider now.

But overall, I think it is just a time to be cautious, keep cash in the balance, and wait for that right moment to get Greedy. I don’t think that moment comes in the next few days, we’ve got more turbulence to get through. 

15:05

Question. A lot of my port has players that I was hoping would do well in the europa/champions league and had euros. Players like Eriksen, Gnabry etc. With all the fixtures being cancelled do you think they’ll still hold their value at the beginning of next season?

I think genuinely good players like these will always pull traders back to them, and as mentioned just below, it’s another reason I stick close to real value rather than rubbish.

You’ve always got that option of waiting it out and you know there are good reasons why money will naturally flow back to them later.

So, if you are a long term minded trader who isn’t particularly active, I think you can wait it out if you are happy to wait until corona blows over, which may be 2-3 months.

More optimally, as discussed here, we could have been shaving players heavily dependent on CL/Europa and/or Euros. These were most at risk of fixture cancellation.

Having done so, we may get the opportunity to buy them back at a discount if people panic and get over pessimistic. That is when the biggest value is created.

But fundamentally, if you are holding good players at good clubs with a decent trend fit, and I’d include Gnabry and Eriksen in that for sure, you have every reason to expect people to come back to them next season. 

And that can be sooner than you would think. People will want to be preparing portfolios early, you may only need to wait until May.

A more difficult question is should I be selling a player like this now? I mean. At these spreads? I think it would be extremely unlikely for Gnabry to drop lower than £2.48. 

These spreads are this big for a reason – they are deliberately awful value. 

The moment to sell was Tuesday or earlier as discussed here at the time. By now, I think we have what we have and we are closing the door after the horse has bolted in most cases.

With a good player with a savage spread that will be in demand for next season most likely, I think sticking with it is probably going to be the best course of action. 

It’s where you are holding a bad/hype based player that you need to sweat a bit – what is their reason that money will naturally flow back to them in the absence of real dividend prospects?

14:39

Let’s take a break from questions to look at the latest from Adam Cole. 

It’s a good general statement, says the right sort of keep calm and carry on things. All good. 

I’m not sure I quite agree that football fixtures can be expected to be rescheduled rather than cancelled. If you look at the calendar it is very difficult to fit it all in. You might have a shot if Euro 2020 is moved to make space AND corona settles down relatively quickly. But, this is just speculation, nobody really knows.

The point about dividend yields is a good one. And it’s one reason I stick to players who are actually good on FI. Let’s say the worst happened and our players really took a battering – we still have the dividend payouts for 3 years and all is not lost.

If we hold rubbish that can never be expected to win dividends then we are holding a pointless entry in Adam Cole’s spreadsheet for 3 years until it dies. 

He discusses the potential boost to media payouts in the event of a fixture lockdown. Good. But, like I just said below, they are going to need to broaden this out at least to transfer dividends – you aren’t getting a stable market based on media alone.

And they’ve mentioned the measures to combat short termism, which I assume is a reference to the whopping spreads that appeared today. It’s a smart move and without this I think we’d be seeing much much worse.

14:37

If I have £100 I can still buy 10 Pogba’s if I want to.  I wouldn’t want to. But I could.

The real risk here is that many people find media predictable and boring. And it is. It is performance that has driven the growth of FI. With no performance,  people may indeed leave at least until it is time to prepare for the new season. That could actually be earlier than many think.

Media does have an important part to play in covering for dry periods, usually around 2 months in Summer. But can it substitute in for 4 months effectively? 

I doubt it, not in a way that creates a balanced market. And FI probably need to do something that would be of benefit to performance players or at least performance players with transfers (like bringing in a beefed up Transfer Dividend like was trialed in January).

For all the chatter of transfers, including from me, when it really comes to the business end of the window, we know it will be 2-3 big name players who are going to be hogging the media almost all the time. It’s not going to be middle rankers or 17 year old players moving clubs – the real world cares about that much less than we do. 

I think FI are probably aware of that and will try to come up with something.

This however maybe the reason we see an irrational dip in performance players and it could make them extremely undervalued – it can be an opportunity and it is one that my sorts of strategies would naturally profit from.

14:19

Question: What are your triggers to enter the market again to scoop up the “value players” that have been oversold – is it purely price based? or real world events based? i.e annoucement of Euro2020 to go ahead, or Serie A to resume.

Aside from being confident on your picks, how else are you coping mentally seeing prices and your portfolio dropping at times like these.

The first question is about picking that right moment to be greedy. Is it price or events that is the trigger? I think it is a mix of both but I would prioritise real world events.

It won’t be as easy as waiting for Serie A to resume or Euro 2020 to be confirmed – that is the moment where everyone will know and you are just one of the mugs following in. If you are swift this can still work, but miss it by an hour… not so good.

Rather, a bit like real world trading, we’re going to have to pay attention to more than just football and follow Government announcements and news. We want to judge when it is likely that conditions are right where it will be possible for football authorities to give competitions the go ahead. That’s very different from the go ahead actually being given.

Of course, the go ahead may never be given and really we will then be thinking about whether it will have cleared up by next season.

Fortunately my background is working in Government so I speak the language and can interpret what they really mean by various statements quite well. That’s probably an advantage but it’s still going to be tricky.

On the second question on my own mental state. I think it’s hard for anyone and possibly the biggest test for traders I can remember in years on FI. I’m definitely not immune from worry and I think if anyone says they are I’d be sceptical.

Everyone will say don’t panic when a crisis is far away. But when a crisis comes everyone naturally wants to panic. Being able to control that can sort the really good traders from the bad ones.

I think a lot of this is in the setup. Not having more money in than you can afford to lose. Having carefully crafted your portfolio with players you are content with long term and are more likely to weather any storm.

These are the things that confidence can be built on. It’s like the cliché of fixing your roof whilst the sun is shining. If you’ve done that, you’ve got a chance of reasoning yourself out of a harmful freak out.

Once panic hits.. if you are caught out holding a portfolio full of worthless garbage that is reliant on specific events rather than long term real value… maybe you should panic! And it will be very difficult to stop yourself from doing so. 

13:59

Question: I’m generally happy with my current portfolio with good performance players for next season and nearly all have transfer rumours but I’m trimming a bit off all players as I currently only have a 5% cash balance. Do you think this a good idea because some players will sell at worse prices than others? Or should I just trim from players who have held up well?

This is called “salami slicing” where you trim a bit off the top of everything when you are trying to make cuts. I would say this is a bad idea. 

When trying to make cuts, some players will have better prospects than others.

Rather than trimming a bit off everything, good and bad, we should be using our knowledge of trends and performance strength to cut off the weakest parts. 

Since we’re discussing salami slicing I’m about to use a sausage metaphor, which is a first. Please bear with me.

Imagine that your portfolio is a sausage.

Some parts of the sausage are better than others. What we want to do is cut out the bits that have gone bad or will be going bad next. 

If we just chop 5% of the sausage off the end, we still have a sausage containing lots of bad bits. And we might have cut off a bit that was perfectly good. That’s not what we want.

Ideally, we want to chop off the bad bits so that we can reform our sausage with only choice cuts of the highest quality.

That is the end of the sausage metaphor, make of it what you will.

13:53

Question: There’s value everywhere in the market right now; With the information you have available to you, which group of quality players would you personally put your money into?

Our first optimist 🙂

I somewhat agree although might not use the word “everywhere”!

The trick with this is recognising when it is the right moment to get Greedy. Too soon and you catch that falling knife. Too late and you miss the bounce back.

As discussed this morning, I do not think it is time to be Greedy yet. I think it is a time for caution and mainly hoarding cash so that we can be amongst the first to get Smart Greedy when the moment is right. I don’t know when that moment will be it depends on events. Ideally just before most people see coronavirus settling down I suspect.

But, there are areas that are safer than others, and areas where I am content to leave my money. Performance strength gets more and less important at various times. It’s going to appear very unimportant when there are no games!

But it always matters. Always.

It’s like gravity. Eventually, performance strength will pull money back towards it even if we have to wait for the build up of next season. Given early buying in preparation, that might be as early as May. That’s 2 months.

But, it will likely take some time for many to see that.

If I had to invest money today I would hit up players that have zero dependance on short term fixtures because they don’t have any anyway.

Someone like Pedrinho, Trincao, Anton Miranchuk, Giorgian De Arrascaeta, Almada, Abulkadir Omur, Soares (most from the recent transfers article actually). They should be relatively fine simply because they have zero or very little reliance on the current crop of fixtures.

Same can be said of players like de Beek or Ziyech or Rodrigo De Paul for the most part.