Lots to talk about in the market as we see football back (praise Merkel) and prepare for the Matching Engine.
Market Review
Looking at market activity in the last 7 days, it’s a mix of the predictable and the unpredictable.
Obviously, we’d have expected Bundesliga players to keep pushing up there particularly as they put in good performances. Less predictable is who exactly that is – would any of us have called Ramy Bensebaini as the biggest percentage riser?
I’d love to be that good but I’m not!
Others have been more predictable and I can see lost of players I’ve discussed recently doing nicely – Cunha, Moussa Dembelé, Pavard, Muller, Cuisance, Willock etc. And then the established performers like Guerreiro when they do well too.
Some observations:
1) Big scores and wins are obviously driving prices up as we might expect.
Our Scouting knowledge of who is most likely to win is a big advantage that most do not have. Whilst we can go for the players who won already like Guerreiro – it is likely better to target good players who have not won yet. They don’t have to be 200 IQ selections – just good players who are currently at cheap prices.
Scouting has a focus on these this week. You could name half of Bayern like Thiago or Muller. Brandt at Dortmund. Angelino at Leipzig. Or the cheaper end like Can, Klostermann/Halstenberg or Plea.
Wins for these players are likely, because they are good and because there is limited competition.
We should be using our scouting knowledge to make sure we already own a selection of these players when those likely wins (or just big scores) occur.
One of the fundamental reasons behind my success to date is that I see this coming and then let other traders come to me – I don’t spend my time chasing match day scores around.
If we are waiting for the matches to tell us who is good we are just doing FI wrong.
2) There is too much focus on the Bundesliga.
You can see why – it’s the only league in play, people are excited by it. But the other leagues apart from Ligue 1 are spinning up too and we should not forget them. The best players from the EPL, La Liga and Serie A are just as likely to enjoy a bounce back once they get close to returns and then start playing.
We should have a decent selection of Bundesliga players, it’s probably my favourite league where I own the most players from the majority of the time. But we shouldn’t let the over focus on it make us try too hard to spend money in just one league.
It’s likely that a lot of the best value is currently in leagues that are yet to return – precisely because they are being ignored whilst the Bundesliga takes the limelight.
3) The Age tide is turning.
I’ve long said (counter to most social media chatter) that the aversion to age will start loosening up as football gets back on the cards.
That is clearly already happening and you can see even players in the 27-30 age range shifting now if they are good enough.
The Elite Veterans will ride again.
We must not fall into the trap of going along with the social media consensus on this – it has been wrong before and, provided we do get football back without a hitch, it will almost certainly be wrong again.
Do not wait for support on social media before getting involved in this trend – by the time social media catches up it will be too late.
4) We are starting to see some significant drops in some players.
Perhaps people are now listing more stuff to try to get towards the front of the queue if the market is more liquid once the Matching Engine starts.
That’s not a bad idea where there is stuff you want rid of.
I’ll talk about selling more below with the Matching Engine.
Things like Pogba are heavily dropping. This type of trade makes me crazy. The fundamental behind Pogba is that an out of EPL move kills his price and I’ve said that for over a year now. He spends a year dropping and yet people still do not learn this lesson and go back into him in March based on a few thin rumours.
That trader has now locked themselves into a nightmare scenario where if Pogba does leave then they are at risk of a major loss. And for what? Sure you might get a gain if you are lucky but greater gains are available in literally dozens of players that do not come with this level of risk.
This is bad trading plain and simple. Even if you get lucky with it – it’s still bad trading. This is the sort of avoidable loss that just has to be avoided particularly in a world without Instant Sell.
Not everything dropping is bad though. I can see some solid players on the list including Neymar, Coutinho, Leao, Ekkelenkamp – even Thiago has dropped after failing to win in his first game!
This brings me nicely onto the Matching Engine as the maxim of “one mans trash is another mans treasure” is going to really come into play.
And it’s another way in which better research and knowledge of player quality can be capitalised on that I am really looking forward to.
The Matching Engine
I did a Live Blog just after the announcement of this and my views on it are basically the same.
If anything, the main point here is how meekly traders have accepted the death of Instant Sell.
This is an Adam Cole masterstroke and it’s impressive how he has jumped on this opportunity to kill a big liability on his balance sheet and present it in a positive way.
I also immediately spotted an interesting thing:
One of my diligent nerd things is that I keep an eye on FI’s credit score through Endole, a credit check company. It’s not expensive, anyone can do it for around £10.
The very next day after the announcement of the Matching Engine (and no more Instant Sell) FI’s credit score jumped to “Stable”. I’ve never seen it above “Caution” before.
I can’t say for sure if this is directly related there just isn’t enough information. But it is an interesting coincidence.
I’m confident about trading on FI but one of the risks with any new start up business (FI is probably beyond start up by now to be fair) is that it might fall over. So stuff like this could be considered reassuring.
Anyway. Back to trading.
We’re seeing more stuff being sold, as discussed above, and some of them are value players.
Because the general level of knowledge about real quality and future trends is so poor (often people tend to think they should make the trades that were good last week or last month or just buy whoever won most recently) this can be exploited.
If your portfolio is anything like mine, it’s getting a bit stale. We haven’t been able to sell anything. I’ve prepared for that and lots of my stuff I am happy to hold longer term. But maybe 10-20% or so of it I’d like to move on if I could.
We can have this in the sell queue already, maybe we get lucky.
But if not, the Matching Engine should in theory bring a lot more liquidity into the market.
There will be plenty of traders out there who still think it is a good idea to buy a player I think is overvalued. That will free up some cash.
Then, there will be plenty of traders who can’t wait to drop something that I think is value and that’s where I will obviously spend my cash.
Everyone involved thinks they are getting a good deal.
But it will be the trader with the best research/experience/knowledge of players and trends who will win that little duel more often than not.
The Matching Engine, and the wider order book later, will give dedicated/skilled traders more opportunities.
And, it will give poor traders more opportunity to make mistakes and get fleeced.
Over time this will speed up the transfer of money from bad traders to the good ones, just as a good poker player will end up with the majority of the money in a game. Maybe not over 10 hands, but almost definitely over 1,000.
This is a good time to be preparing for the Matching Engine.
We should be giving plenty of thought to which players in our portfolios we think are overvalued or a poor fit for the months ahead (Key Strategy + Scouting are there to help!). We can try and get them in the sell queue now, why not?
If not, we’ll want to get quickly in the Matching Engine queue with a reasonable offer – if we are convinced a player isn’t right then offloading them for a 5% hit is generally going to be a good thing – especially with so many great targets to choose from right now.
I think in recent articles I’ve probably discussed over 100 players positively and there will be others emerging as Scouting goes by.
If other traders are desperate to free up cash they may take a cut price for these desirable players and the first week of the Matching Engine could be a great opportunity that I’m really looking forward to.
Particularly if by then we have more reassurance that football is back on we will be a bit more free to make our bets.
I would also say, despite the excitement, we’ve got to be mentally prepared for a setback. It could be that in a weeks time cases of Bundesliga infections start creeping up and it is all thrown into doubt again.
Fortunately, Key Strategy portfolios are built to withstand that. But I think it’s an important thing to mentally prepare for to ensure we don’t over react if and when that happens.
And finally, if you haven’t already, check Scouting for the latest on Leverkusen – I’ll be doing Scouting whenever there are matches and I have something worth saying.