What’s new since last update?
As expected, behind closed doors is dead and all football is now cancelled, apparently until early April but nobody believes that. This looks like months out, not weeks.
Reputable news sources (The Athletic, for me) are reporting that Euro 2020 is as good as cancelled and the only thing left is to announce is when it is moved to, which could be December or it could be next Summer.
We have big meetings on Tuesday where footballing authorities may reach a decision on the fate of the footballing calendar.
It’s essentially impossible to believe that the seasons finish in May.
We have a number of potential scenarios, ranging from using the extra month freed up by cancelling Euro 2020 to finish the season, declaring it void and starting again next time, finishing “as you were” or finishing with play offs to decide promotion/relegation/champions.
All of these are options, and either Monday or Tuesday I’ll sit down and write about the trading approaches we might take in all of those scenarios so that we are mentally prepared.
The FI market has been remarkably stable, with money actually going into a handful of players usually big media names. Money has been dripping out of some players but I cannot even call this a crash – it’s incredibly mild considering the circumstances.
FI have stopped short of intervening again so far, bigging up their existing double dividend media offering on Friday.
And, we think FI will come up with something more, but like many of us, I imagine they are also in wait and see mode. But I think it is safe to say based on behaviour that they will consider other interventions and I’d judge the likelihood of this high. We just don’t know what they are yet, or which players will benefit. I doubt FI do.
I will make some predictions Monday/Tuesday when I assess all of the potential outcomes.
The Spreads Lockdown
The market looks very stable. You can even see some social media optimism and cries of “top up time”.
But let’s be real.
It is the spreads lockdown that is keeping the market afloat.
Without that action from FI, I believe the market would have spiralled into chaos. The spreads are deliberately so high that only the most desperate people would consider Instant Selling, taking 40% losses in some cases.
There will be some desperate people who do have to sell.
Some people break the trading Golden Rule – if you need that money to live on, it should not be invested in anything.
And, even if you thought you followed that rule, you can just get unlucky. Maybe you are now worried you are losing your job soon and suddenly that money has to come out because circumstances have changed. Very unfortunate indeed.
Outside of that, for those of us who can afford to keep it in, we are essentially stuck with what we had when the music stopped.
This is why what I’ve discussed here about getting our portfolios in shape and as resilient as possible is so important once we see rocky times ahead. Once the crisis has hit – there aren’t too many good moves to make.
We really don’t want to get caught with our pants down holding too many speculative players that do not really have credible dividend prospects in the next season or two.
This will become even more important when I talk about possible scenarios ahead on Mon/Tues. If we are holding solid, dividend returning players backed up with performance suitability as well as some hype factors, we are going to find we have options in the weeks ahead. If the value of our players rests on hype alone, we’re not in control.
I don’t think FI are stupid. I think this spreads lockdown is here to stay possibly for weeks, at least until there is clarity, FI have put a response package together, and traders clearly have increased confidence.
I support that 100% because it’s critical for market stability.
Have we hit "the bottom"?
This is the question everyone wants to know the answer to right now.
The relative stability from the spreads lockdown means we really haven’t seen too many drops. This is a positive but in some ways a negative.
Poor quality, off trend players will always be the first to be sold.
Players with performance strength AND that longer term fit I discussed with an off pitch reason to hold like a transfer would have held up better.
So in many ways, from a purely trading perspective, traders with a portfolio aligned with Key Strategy tweaked with the State of the Market updates may actually have benefited from a panic.
Clearly, some good players would have been sold along with the bad, there is always “contagion”.
But this scenario may open up lots of value opportunities too.
We may still see that kind of panic depending on how long football is suspended for, but I think the spreads make it very difficult for panic to take hold – I think it would take football being off for almost all of 2020 for that to happen.
There is some longer term value in elite veterans who will pick up where they left off next season, but these are the players who were being sold heavily anyway regardless of corona.
And we can generally get a mild discount across the board on classic full season fit players like Gnabry or Werner. But it is a mild discount.
Some players expected to dominate media like Fernandes have even seen surges. This is the most commonly pushed strategy right now for obvious reasons – no football, all media, media bonus = buy media players. Far from rocket science.
The difficulty with this strategy is that it funnels traders into a very small number of players that will become over valued quickly, and in some cases, already are. And with the spreads lockdown, when you click buy on a player these days you are basically marrying them. This isn’t a 2-3 week fling anymore. You buy it, be prepared to hold it for a long time.
As of right now, I think buying any player when we have so much uncertainty ahead is generally a bad idea. Particularly at the media premium end actually.
I am more than happy to hold Fernandes for example.
(Three cheers for the new King by the way. I’ve been featuring him positively here since he was under £1 and this is what FI should be all about. I just hope he remembers me now he’s famous. He’s been a bright spot in this tough time.)
I’m certainly not Instant Selling him for £7.48. You’d have to be a lunatic or desperate. And his spread is relatively kind compared to many.
But would I buy more right now? No way.
I don’t want my funds locked up where I can’t move them around with so much uncertainty coming up.
Certainly, with very popular players like this, they are the hardest to get out of when they hit some bad news or expectations are not met. The spreads on these players are currently relatively low to encourage buying. Something goes wrong with them? Lockdown.
Depending on how the seasons are resolved and what the timings are on competitions we won’t know how the trends are going to flow.
There may not be a long summer of media as assumed. We could have a summer of domestic football as normal, and who knows what will happen to the transfer window – I doubt anyone is even thinking about that yet.
For this reason alone, I think having cash in the balance and waiting to have at least some indications of how the calendar looks and what interventions FI come up with is the best place to be.
This doesn’t mean waiting for 100% confirmation, that may be too late. But we certainly can’t start making calls on the information we have right now.
We may even be making a bit of progress now, with people buying some media and transfer players which should be part of many member portfolios. That, and not facing withering losses, should be more than enough to keep us happy in these circumstances.
We may not get more clarity until next week.
I am long term optimistic. I think there will be a moment when getting greedy will be the play. But I don’t think it is right now.
I’ll do more in depth analysis of the possible scenarios ahead, and how we might set up for them in the coming days.
And in the background I’m working on the transfer centre, and at the right moment, I’ll do “bargain hunting” articles on any value opened up in these uncertain times.
Have a good Sunday.
Thank you as well for sending in so many questions – please send in more if you have any now to firstname.lastname@example.org and I’ll cover the ones most useful to everyone here in the next few days.