State of the Market
OPTIMISTIC
Excitable. And more than a little crazy.
That’s how I would describe the market this week.
In Scouting lately I am looking at the bid prices available for really strong players in near disbelief.
I can never remember seeing so much obvious value out there just waiting to be picked up.
These are players who are likely to be in demand in mere weeks or months at the outside.
Some will likely see the market drift back towards them naturally as next season gets closer and trends shift in their favour. Others will have to win to demonstrate to the masses how good they are.
But equally, it being a buyers market, it’s an awful time to sell the majority of players.
It’s a little bit like walking down a street covered in £50 notes but having my hands too full to pick anything up.
This can be frustrating but if a trader is holding good players I don’t think they need to worry.
I’m going to discuss the reasons why the market is behaving as it is right now, why it will change, and why I have changed my State of the Market rating to Optimistic for the first time in months.
At the end there should be time for some member Q+A from this week.
Hey FIT. Explain this market madness!
This Thursday’s impending dividend increase has naturally rekindled interest in quality players who win dividends.
But it’s not that simple a story.
Lots of prices just look very strange right now and there are a few reasons behind it.
Comfort Blanket Syndrome
We’re dealing with the splash caused by the Matching Engine which has been a real game changer.
That’s made people very “fashion focused” – fearful of anything that looks unpopular, hasn’t won recently, or hasn’t risen anytime soon.
I call this “comfort blanket syndrome”. And it’s a profit killer. Always was. Now we have the Matching Engine? That comfort blanket is more thread bare than ever.
Anyone who has been on FI more than a month knows how fast what is popular changes.
Yet people can go for a year or more on FI without ever breaking out of this short term focused mindset.
When you are making a bit of money there is little incentive to improve and it kills profits. In future it will actually cause them to start losing money.
The Matching Engine is like graduating to Big School. We aren’t in nursery anymore.
If a trader is seeking reassurance in a tight gap between the red and blue button prices (known as the spread for the newer traders out there) – they shouldn’t. It’s not like it used to be where prices ratcheted up and down slowly and fairly predictably.
That red button price means that you can sell that player for that price right now. It’s no guarantee that this price or anything like it will be available tomorrow.
Chances are, if you ever want to use it unexpectedly, it will be because something bad happens. And if something bad happens that price will disappear fast anyway.
Using Spread Information Properly
A tight spread is a good indicator that the player is popular right now. But no more than that.
Equally, a wide spread is a strong indicator that the demand for that player is weak. But that could change in moments. A dividend win. The right transfer. The spread could move from 50% to 10% in seconds.
We should use the spread for what it is – good information about the demand out there for certain players.
We should not be reassured by it or be put off a player just because of the spread.
Comfort Blankets for Smart Traders
There are only three things that can really give you reassurance about the chances of you being able to sell for a good price later.
The first is the genuine quality of the player. Winners will always have value.
The second is the trend fit, e.g generally ticking those boxes for an acceptable age and being a match for enough of the key events of the season to come.
And the third is not paying too much in the first place. This is why you generally want to be picking up players who are dropping, not rising. The opposite of the comfort blanket syndrome.
These three things: quality, trend fit, price are the smart traders comfort blanket.
As long as these three things are solid I do not have to care at all what other traders are doing this week.
Why are Blue Button prices on many good players so damn hard to shift upwards?
There is lots of clustering in a relatively small number of players right now, with lots of really obvious value being left on the ground.
There are some obvious mistakes from traders in play but some of these errors are being forced by tough circumstances too.
The fear of a wide spread with no FI backed Instant Sell is amplifying mistakes – causing people to ignore obvious value and buy fairly priced or over priced players because of Comfort Blanket Syndrome.
We also have long sell queues – likely backed up over many months of not being able to sell. They need whittling down and that is hard because very few people have to pay the blue button price when bids are so free and easy.
Right now it is very difficult to move a Blue Button price and this feeds Comfort Blanket Syndrome.
If you can’t get your player to start moving up in price because anyone buying him is doing it on a bid and nobody sees it happen – how can you get more people to follow into your player? He can’t get momentum until people see him rising.
And even if people pay the Blue Button price before the price will rise we are likely still working our way through that long sell queue that has been backed up for months.
There just isn’t enough smart money around right now to shift these prices. But make no mistake – the smart money will be quietly buying up as much of this slam dunk value as they possibly can right now.
The dumb money, which remains the bulk of the money on FI, will catch up later. This will happen as the big events get closer, and as quality players keep winning. And that is when prices will really start moving.
It will also get easier to shift blue button prices when people have to pay commission on bids, and more importantly when traders gain control of the blue button price with “offers” ahead of next season.
The Three Biggest Mistakes Being Made Right Now
The first mistake is the general poor quality of analysis out there. It’s worse than not being able to figure out the details that sorts players suitable from FI from those that aren’t – most people don’t even know what they are looking for.
Part of the reason for this is the social media/chat group omnishambles that deliberately misleads people and you can see how this happens.
Listening to all this is like going to a school where half of the teachers are underqualified and some of them are deliberately teaching you the wrong things.
It’s not that everyone is stupid. But how does someone new to FI even know when someone is telling them something useful amongst all that noise?
Now we could say the same about me! But that’s why everything I write or suggest is left up so it has to stand the test of time.
This is also the reason I haven’t introduced a site chat group tempting though it is because I think it would be good fun and I like chatting to members.
But from what I’ve seen it tends to attract resident loudmouths whose main purpose is to push their very specific batch of players. And I don’t want to spend time policing them that I could be spending on content.
Anyway. The result of this is that people confuse “Football Good” with “Football Index Good” all the time.
This is why we see players who you would think are brilliant but are actually weak rising ahead of a dividend increase. Saka. Pulisic. Kubo. All easy to confuse with fantastic FI players because they are fantastic players in real life.
But FI is not real life. It’s a football game that approximates real life with some very odd quirks that must be accounted for.
Now as per Key Strategy if you know what you are doing targetting weak but likely popular players ahead of a dividend increase can be a smart play.
The difference is that you will be aware they are weak and not sat there hoping you are onto a winner when you have no idea. You have to sell whilst others still see reason to buy so selling these players in advance of the increase (or very quickly after if you think we may get a very generous increase greater than 50%).
Then you shift that money to any of the currently unpopular but extreme value players of which there are currently many as highlighted recently in scouting.
The big mistake to avoid is to sit in these players too long. Don’t try to sell at the exact peak and be greedy – close enough is good enough. Especially when dealing with a weak player you do not want to get stuck with.
If a player is weak then they will eventually be exposed – often due to a run of poor FI scores. Bad players are better off on the bench where they can hide!
With quality players on the other hand you can push them further and hold out for a higher price.
The second mistake is paying too much for good players, or targetting players who are average value when there is slam dunk value available.
This is better than buying bad players but not by much. Continuing to buy Greenwood at this point is a bad idea for example. Even Foden is questionable now even though I really like him as an FI prospect. And a Dybala is still good but has risen a lot so wouldn’t necessarily be my first buy unless I was trying to build a core portfolio.
None of these are bad choices and I am far more comfortable with them than many others. But the question is this: are they the best value right now? The answer is definitely not.
Following into rising players leads to average results. For the best results you have to be willing to go for currently unpopular players who you know, through good research and a reading of the market, will be much more popular weeks and months from now.
The third mistake we see a lot of right now is that herd mentality and need to follow the crowd for reassurance as described above.
It’s a powerful instinct for many but it’s a profit killer for so many reasons. Clustering up with others leads to average results at best by it’s very nature and that’s obvious when you step back a bit.
What happens when everyone starts to realise that player is overpriced at the same time? Or they hit some misfortune? If everyone needs to rush out of that player they will find they can’t for anything like a sensible price. See Odegaard or similar recently.
And the kicker is you are taking on this risk for the prospect of a relatively smaller gain versus a currently unpopular but high quality player.
Particularly now we are in an odd situation where the most profitable bets can also be the lowest risk bets. And vice versa.
If you are buying a good player at a rock bottom price your chances of a profit are high and it’s actually quite hard to screw that up because the price started low anyway.
Buy a good player at a high price and… yeah. Much easier to lose on.
There are so many examples of that around right now as covered in recent Scouting.
Consistently stacking the odds in your favour like this is the key to big profits.
Why am I optimistic?
This is the first time in many months where I have set my market status rating to “Optimistic” rather than “Caution”.
Why?
It’s not just the dividend increase although that is a big part of it. This should help everyone good traders and bad.
Particularly if it is generous. I am still thinking 50% which would be great news. But I wouldn’t be totally shocked by something bigger – FI have big ambition and have just made their balance sheet a hell of a lot healthier by dropping the liability to prop up Instant Sell.
Still, sticking to a 50% goal is more realistic and avoids disappointment. It’s not good for anyone to talk up 100%’s and then be “disappointed” with a very generous 50%. The guys who think they put “pressure” on FI by pushing for a big one I don’t think help.
FI are going to do what they can afford and works for their ambitions and they don’t care what @BigBaz1973 thinks.
I’ll be doing a Live Blog on Thursday night with my reaction and analysis to that, by the way.
The main reason I am optimistic specifically for Key Strategy is that the movement of money from overpriced and weak players towards better quality better value players is inevitable from here.
Not likely. Inevitable.
It can take months for a market to figure it out but in the end these fundamentals will win out:
– People will buy players who win dividends and have more chances to win dividends – particularly before big events like the season start, internationals, CL/Europa/Euro 2021 or whatever it may be.
– They will eventually sell weak players who underperform and get overpriced. They will try to buy better players with that money. Money in the market in bad players eventually flows to the good ones or leaves the market entirely.
– The more football that goes on more and more people will get a better handle on who is really good and bad as players demonstrate quality (or not). By and large, we know already and just have to keep refreshing our knowledge as the games go by.
These 3 things were always true and are the reason why 200/300% profits have been possible.
The new factors we have are:
– we can often buy the high quality players cheaper (relatively speaking at least) than ever before on low bids because of the Matching Engine.
– Buying poor quality/hyped players is riskier than ever before with no FI backed instant sell – this is a natural driver that pushes traders towards real quality.
– the dividend increase will make winners even more appealing and drive money in the direction of high quality players.
This will take time to shake out of course, I think we’ll start seeing it in weeks but it maybe 3 months before it gets obvious. But it will happen.
And I expect big changes in trader behaviour over the next 12 months generally forced by the Matching Engine which will increasingly punish poor decisions and reward good ones.
Q+A
Portfolio Advice for a New Trader on a “smaller” Budget?
Q: Good Morning!
I think £1,500 is plenty for someone starting out and it’s enough to make it worth the time/interesting without completely throwing all your eggs in one basket when you are just feeling your way.
For many this is also a lot of money and I think given the sums that are casually thrown around on FI we can lose all sense of reality!
I think the first thing to say is that you do not need Foden or Bruno or indeed any premium players to make a strong return. In fact, I would advise smaller portfolios stay away from these premiums altogether or limit it to just 1.
More broadly – there is no one player on FI that is essential in any price bracket. There are so many good options available – I see a lot of portfolios from members and even amongst the members you can generally pick out some of the greatest hits but as a whole the portfolios always differ because people have their own preferences which is how it should be.
I think the advice you have already given your friend is solid. And adapting Key Strategy a bit to suit individual circumstance is the right thing to do.
If new – I think it is no bad thing to bump that up to maybe 15-20 players with perhaps 5 good value players that your friend is familar with. There is something to be said about “getting into” FI that might be important at first. If your buddy doesn’t enjoy watching a relatively obscure youngster break out slowly at Lyon then maybe that’s not the sort of thing to pick first!
They might want some players they know so it keeps their interest and they improve as traders because they are really into it/interested.
A good core would be easy to get right now from the Key Strategy core picks – there is lots of value in this area. That could make up 6-8 players. Maybe someone like Ziyech. Gnabry. Insigne. This is a solid foundation and it’s really quite hard to screw these up if picking them up on cheap bids as you can for many core players right now.
I would go for some of the lower risk elite vets/core players too (lots of crossover here) like an Eriksen or Thiago.
The key to small budget, reasonably aggressive portfolios that result in large gains that keep new traders interested is high quality selections. We need to be getting 7/8 of our trades right out of 10.
One sure fire way that new traders often torpedo themselves early on is trying to be too clever and picking random obscure and ultimately FI unsuitable bargain bucket selections that haven’t got a hope in hell. They do this to try to avoid picking the Foden’s and the Sancho’s who are too expensive.
There is a happy medium that sounds simple but is actually very difficult to do – relatively established players that have real FI potential and are at value. That does sound very simple but most people do not know how to find such players or even know what they are looking for. Most people typically buy the players they should have bought a month ago.
So to execute that strategy properly you need to learn a lot about player selection/market analysis/trends or at least sensibly cheat a bit by joining my site 🙂
Maintaining Portfolio Structure with the Matching Engine
Q: Hey FIT, I hope you don’t mind me asking but I wondered how you go about your % holdings? (The target % portfolio value in each player as per my Portfolio Management Guide).
In the new world of ME and future order books, do you use the blue button “market” price, the red button “value” price or your buy price? (When judging how much of your portfolio value you currently have in each player).
Just trying to balance out my portfolio and be good to understand your process.
Thanks again for your site, I’m on it almost everyday, it’s fantastic! Thanks to you I’m blue button profit of 17.5% since joining in Feb. I know it should be more but still learning the ropes and figure it’s better to learn while in profit than losses!!
A: Hey. 17.5% is not bad at all for a new trader starting in Feb in a tough market! I think anyone would have found it a difficult time to start in the last few months.
It’s an interesting question and one I haven’t entirely decided on myself in the new world of the Matching Engine.
I have always used the Blue button price but that used to mean a lot more than it did.
Technically speaking the red button price should be more “real” now. It is what we can actually sell for.
But lots of these red button prices are all over the place, not really representative of the true value of a player at all in a lot of cases.
So right now judging player value by what other people think seems like a form of madness. The market will eventually reflect value better but it is still taking time to figure this out.
If we go back to the original purpose of what we are doing by dividing up into percentanges it’s a) risk management and b) some diversification. Basing it on the blue button price still does that just fine. So I would just keep doing that for now.
Once things like Offers come in and after a 4-6 months it might settle down to a point where one of these red button or Offer prices becomes the better one to use.
But right now, the red button prices are all over the place and I wouldn’t take them too seriously. As above our best tools for judging value are our own analysis of quality, trend fit and price.