Lots of grumbling and doom and gloom on social media this week as the reality of what the Matching Engine (ME) really means starts to bite.
This is going to be one of my punchier posts that, if we were back in my public blogging days, would probably flair up and make someone mad. I almost miss it. Almost.
If we go back to the Live Blog when this was first introduced, I was surprised lots of people were so universally enthusiastic about it. Because taking away that Instant Sell guarantee was a huge deal.
People have noticed that by now, but as with player ability or trends, a lot of people just tend to take a while to catch up.
In lots of ways the ME is a really positive force for us. There have literally never been so many value opportunities out there as there is right now.
People are so short term minded that they will accept insulting bids for apparently unpopular players that are near racing certainties to come back on trend in mere weeks. The Bundesliga is a very obvious example but there are tons as discussed in Scouting.
This stupidity should be punished by good traders. Abused, no less. If you want to stock up on prime Bundesliga targets for next season, the next few weeks is the best moment you are likely to get.
But it applies to other leagues as well. There are bargains available in Serie A too which has so far not had massive buying like other leagues did before they restarted. Perhaps because the restart came later when people have been feeling a bit more gloomy this week.
I highlight a lot of this stuff in Scouting so check it out if you haven’t already.
The Challenge of Losing Instant Sell if you are Thick.
The removal of FI backed Instant Sell creates a lot of challenges for a lot of people.
Specifically, and without wanting to be rude just honest, it mainly creates challenges for bad traders and people who are just a little bit thick or thicker.
There was a good tweet doing the rounds this week which bluntly stated that FI has made a lot of incredibly thick people a lot of money in it’s early life. As the market rises it has covered up all kinds of mistakes.
If you can convince a critical mass of stupid people to buy a bad player that player starts rising. To the point where even sensible people wonder if they need to be “on the train”.
And people follow the guys pushing these players because they can show big profits on their balance – not realising this is as much to do with the rise in the market as anything else.
Harsh as the tweet may be, this completely rings true to me.
The rising market has left room to make bad decisions and still come out with 50% or even 100%+ profit in a season. Plenty of people can say “I made £50k last season I’m great at this!”. But off a £50k stake that is pretty poor going, surprising as that may be.
Worse, that can make a trader feel like they are good at it because they are making money. But that’s a massive underperformance in a world where 200-300% was very possible.
If that trader making 50% has been taught that their reckless behaviour is good trading – they have probably ingrained a ton of bad habits that are very likely to get punished in the new world of the ME. They may even be teaching them to others.
In many ways, a newer trader starting fresh could be more likely to succeed in future than some of the old hands if they pick up good habits now.
What underpinned all of this reckless/bad trading in the past was FI’s promise to take your bad bet off your hands for cheap.
Imagine you have a bet on at the normal bookies for a moment. £10 for Kane to score tonight. Decimal odds of 2. If we get to 80 minutes and he hasn’t scored what cash out offer are you getting? £1? £2? £3?
Not much, anyway. It’s basically a rip off and weighted heavily in the bookies favour which is why they push it so hard.
But imagine if you knew the bookie would offer you £7/£8 cashout even with just 10 minutes left to play. Not only would you be happy to chuck your tenner on Kane every single weekend, you’d also chuck it on Troy Parrot to come off the bench and score at 12/1. Or bet on a crazy odds Accumulator.
Why not? It’s not far off a free hit even at long odds. Cheap to get out of it goes wrong. A bet with little consequence of failure.
But what if suddenly you can’t guarantee being able to cash out your bet for £7/8 anymore. What if the cash out for a struggling bet was back to 10-20% of your stake?
Will you now want to make your wild punt on a randomer coming off the bench to score? Probably not – it’s now much more high risk.
Will you still want to bet on Kane? Yeah maybe if the odds are right because he’s got a credible chance of scoring.
You’ve probably clocked where this is going. That is exactly what FI were doing – allowing extremely generous cash outs of bets that were going badly in order to grow the platform to this point. It was essential at the time.
But that security has been taken away. And traders are going to have to adapt by making better quality bets.
Is it really all Doom and Gloom?
Now things are actually still pretty damn sweet on FI. We have a good life. For the vast majority of players certainly in the top 200 and for lots of the better squad players you can get a decent spread. Your cash out is still very generous and plenty of other traders will take that player off your hands.
But there are some players getting trashed who are going to keep struggling.
These mainly fall into two categories.
The first is quite simple – outright bad players who never really had much going for them for FI purposes, not even much hype, in the £1.20 and under range.
Holding these in large numbers has always been a terrible idea. One of my catchphrases is that bargain bucket players are almost always in the bargain bucket for a reason. It is great value to shop in this area but you have to be highly selective and be pretty damn sure you know something almost everybody doesn’t.
If you have been caught holding too much of this bargain bucket garbage, it is going to be painful to get out of this and there is no easy solution. As with any crisis – it is very hard to solve after it has already hit. It’s a prevention better than cure scenario – manage the risk in your portfolio to make it very hard to get yourself into these kind of predicaments.
The second main category of players who are struggling and will continue to struggle is good players who have become overhyped and overpriced.
High profile examples of the week are Haaland and Odegaard. They are all good fun whilst the excitement lasts, and in the past, piling into them was fairly low risk. It became an FI habit. And whilst you would get burned pretty often, you could also get away with it too, though people do tend to forget all the wonderkids who went on to tank.
These are good players. Even Haaland. He may be awful for FI scoring and likely always will be. But what an incredible young striker. He can make it to the EPL eventually and media will give him a reason to hold value.
The problem is that the likely value is absolutely nowhere near £9 anytime soon. 4 weeks ago a holder thought he was worth £8.58 and could do no wrong. Today you can sell him for £7.20 max.
People are wising up to the fact you can’t go holding wildly overpriced players anymore when in order to realise that profit you will have to convince someone else they are getting good value further down the line. We can’t just dump him on FI anymore.
Same for Odegaard. Good player. Just got overpriced and once he hits a little bit of bad luck holders pay the price of putting themselves in weak positions.
And when it comes to trading a good overpriced player is not much better than a cheap bad player. It’s a little bit better. But still far from optimal.
This kind of thing has to be considered an old fashioned mindset. It was never a particularly good one. But you could get away with it.
I don’t think you will in future and whilst I remain very confident in FI I think the ME will speed up the pace of change and make the market more mature, and tougher too.
It may no longer be possible for people like me to hoover up 200%+ like in my New Trader Challenge.
2 seasons down the line I may be perfectly happy with 50-100%. Maybe later it gets even harder than that.
But that trader who has only been making 50% last season? He’s the fish. He’s sat there waiting to give better traders his money unless he improves.
But the good traders will find opportunities and really, the ME is putting so much value out there I just don’t have enough money to pick it all up. Certainly not when so much of what I have isn’t worth selling right now.
In a world where you can’t dump your bad bet cheaply, I expect people to gravitate towards higher quality bets.
That will benefit traders who know who those players are already and have set up for it accordingly.
The issue we are facing at the moment is in a panic the good players do get sold along with the bad. Not enough people know the difference – not until you get an extended period of football that starts proving it.
And usually, a dividend increase, which has a good chance of happening this Summer, usually refocuses minds on real quality too.
All we can do is take advantage – when we have spare cash – use it to hoover up players for insultingly low bids. Take them off the hands of people who are short termist or just don’t know any better.
Where we have good players that should come good later but are unpopular now – don’t sell ourselves short just to chase something that seems more fashionable right now.
What is fashionable changes often but quality players stay quality and will have their turn again.
Market Analysis
There are a few high profile casualties this week. The headlines like Sancho, Werner, Haaland, Odegaard. All fairly forseeable stuff.
Thing with something like Werner is you’ve got a clear decision point once the move actually happens. There isn’t really a bad decision to make. You can take a profit, better done sooner rather than later, or you can hold because there is a good chance he does well at Chelsea.
But not everyone is going to do the same, you can bet some people will cash out the transfer once the media dries up. And that’s pretty likely to cause a shorter term drop. If you can get anything like the current £5 bid price you’ll probably be happy with that. If you wanted to sell? Too late by now to get a fair price.
The drop isn’t surprising – but the severity of it perhaps is. I think the move just coincides with a gloomy period more than anything. You might set a self imposed rule like “I’ll always sell on the transfer” and that’s probably a good rule for keeping most people out of trouble. Most of the time that works.
That rigid rule would have lost you Bruno Fernandes at £5 though. So it doesn’t always apply. Maybe in this case, with so long until Werner starts at Chelsea the better move was a quick cash out and then buying back now. He can’t really make an instant impact like Bruno could. Interesting to think about for future anyway.
We are seeing general drops for lots of overpriced players and I think this will speed up. It’s really important as described above to ditch the garbage right now and if you aren’t already, shift back towards at least touching distance of true value (i.e a credible chance they can justify the price anytime soon).
Often the overpriced ones are also the most currently popular like Odegaard and Haaland were just weeks ago. So it can be a wrench to part with them but it must be done if you know they have ridden their luck.
More generally though, outside of the big drops, we have seen a really wide selection of players taking 2-5% hits. There isn’t a major pattern there anymore – the Bundesliga has probably done most of it’s bleeding by now.
It’s a variety pack of anything taking hits, from the really good players to the truly awful.
This is a sign of a market that is confused and anxious.
Good performances still attract buying though, even if it doesn’t deliver an immediate performance win. Asensio. Foden. Pedro Neto. Guedes. Fati. Garcia. Bruno Fernandes. People are on the look out for real talent here and will buy it if it appears.
So if we’re holding high quality players who have a decent chance of winning – we can expect people to buy them if they do well, though not always.
They tend to need a good trend fit and time on their side to give people that reassurance.
Winning on it’s own is not currently a guarantee of buying. Look at Calhanoglu from last night. Slam dunk bargain. Can easily win again. No interest at all because he’s unfashionable (Just 26 years old though!?). Kroos the same. 3 months of rises for him but after 2 wins he hasn’t gotten any further.
However, these wins are not wasted. You get the dividend plus your player is earning positive sentiment for later. Once you hit an event like a dividend increase and people are using tables to sort by “dividends per game” or whatever other deeply unreliable metric people think helps them judge value – these players will look attractive.
The problem is those tables throw up all sorts and can’t be trusted. A streak of luck can get a bad player on that chart. Bad luck can keep a really good player off it. Or a tactical change can make all historic data basically irrelevant.
But when we understand which players are likely to be consistently good based on current performances rather than relying on historic dividends and other voodoo – we make ourselves better at judging value than the vast majority of people.
If good value players aren’t rising even after wins, and our scouting indicates they can do it again, it is probably a good chance to take advantage of over-pessimism on a quality player. It’s very unlikely to be a good idea to sell a winner too cheaply just because they didn’t move after the win.
Final Thought
Whilst there is plenty of negativity around, some of which is understandable after the ME brought big change, I am not really concerned.
In times like this it is better to focus on what is ahead in 1-3 months time rather than what is happening this week. We all know how quickly the social media atmosphere changes from euphoria to impending doom. It usually happens twice a month.
There is uncertainty ahead but the best way we can deal with that is making our portfolios as bullet proof as possible and avoiding overhyped/pumped up players. The mental strength to ditch a rising player you think has pushed up too far is a great skill to have.
When we focus on what really lies ahead – a huge period of near uninterrupted football, an August CL/Europa all topped with a likely dividend increase (and potentially some media/performance changes) there are a lot of reasons to be positive.
It’s a case of thinking about what will be popular 4-6 weeks from now when good players have (likely) been winning, the new seasons are approaching, you have CL/Europa games going on and rumours of a dividend increase too.
That’s the stuff that matters. Whatever BigGaz1975 is saying on Twitter isn’t such a big deal in that context.