The mood on the market feels so much better than it was just a couple of weeks ago.
I discussed then how quickly sentiment changes and that’s proving true. Maybe it changes back again just as fast! But I suspect not – we’ve got lots of positive stuff coming up just ahead.
We really needed a couple of good Gold Day’s to showcase the amazing value that FI currently has to offer. We got them this weekend with the international break over – and the best thing is there are so many more on the way.
The schedule is packed – starting tonight with the Champions League.
If in recent weeks we’ve rightly had to focus in State of the Market on gloomy topics like the viability of FI… this week feels a lot more easy going.
Writing State of the Market this week hasn’t hurt my brain quite so much as it has recently – there are only two main things we can sensibly be doing right now:
– Keep stacking our portfolio with likely winners at great value using scouting information
– Be decisive in clearing deadwood from our portfolios to fund our buys
Market Analysis
In the past we could quite easily see the market movements just by looking at which players had risen or fallen in price over the week.
This is still part of the picture but often it’s the closing or widening spreads that are telling us the most about which players are in demand or not. And this is much less obviously visible.
A tight spread indicates that a player is currently popular. But no more than that.
One of the really dangerous things I’ve seen flying around on social media more than once this week is “I don’t want to risk buying that player with a wide spread. I’ll stick to players with tight spreads because I’ll be able to sell them easily”.
Uh oh. This trader is confusing currently popular with safe and often that is the exact opposite. If a player is currently popular and reaching a high price yet doesn’t really deserve it – he’s probably exactly the sort who is at risk of a drop.
In the Matching Engine – we’ve got to be aware of how quickly a bid price can either rise or completely evaporate. Just ask Van Dijk holders.
Spreads cannot be trusted at all.
By contrast, a player without a pumping price with a wide spread who is being underestimated is likely to be a) at a lower risk of a drop and b) at a higher chance of a bigger rise if they demonstrate that strength by putting up a big performance score (or hit the big transfer rumour if that’s the reason for holding).
This is quite similar to the “clustering” behaviour I spoke about last week. It’s a natural human instinct to seek safety in numbers but in trading this can kill us. The only reassurance worth a damn is found in solid research.
On the market this week we can clearly see the winners being rewarded with tighter spreads and in some cases price rises.
If price rises remain modest – it’s because before a player can achieve a big rise he’s got to close his spread first. Only when the difference between blue/red button becomes minor will people hit the blue button.
There is still so much value available on bids – traders will need to eat that up before we see huge blue button price rises across the board. That could take months. But that’s just fine.
We have only had football back for one weekend after the international break but we’re already seeing what a big impact match days are having on prices for successful players.
It’s plain to see that quality players who prove it are getting rewarded on the market. All we need is more and more chances for good players to show what they can do.
There can of course only be so many winners in one day and in some cases we’ll need to remain patient with our boys. As long as they are still coming out well in my scouting analysis I’ll find it easy to stay patient.
If however they are showing signs of fading… it’s getting to the stage in the season where we’ve seen a good few games and we’ll want to be cutting them. We want to be decisive here and not let things drift when there are clear signs we can act on.
Overall it all feels so much healthier on a match day than some of the wild stuff we’d see during the 5x IPD promotion not so long ago.
With the often hysterical fears about FI’s instability now fading – it is that constant grind of match days and those fat dividends dropping into balance sheets that were always going to be the real game changer as I’ve discussed here in recent weeks.
It isn’t FI tinkering with the market mechanics or the introduction of NASDAQ that keeps powering this recovery. People just need to see that the rewards are there more than anything else.
FI could stall that recovery if they introduce any new changes that don’t go down well. But I don’t think any changes they make are going to do more than consistent payouts to maintain this momentum.
Fortunately that is exactly what we are getting.
Making the Most of the Packed Schedule
We’ve got the CL/Europa starting tonight and more hectic match days at the weekend.
And the schedule in the weeks ahead is relentless.
There really is only one sensible thing to do right now and it’s very simple – use all of the Scouting information we have so far to select the most likely winners for the best prices.
We already know who is most likely to win. It’s a huge advantage. Of course it changes and that’s why we review teams every week in scouting and highlight the changes that matter.
But by now we have a really strong idea about who the consistent players are.
On individual match days – there is a huge slice of luck involved. On Sunday for example Kane won the forward category but only by very fine margins. Depay, Bamba and Berardi were all a whisker away too and it could just as easily have been any of them.
All 4 of these players are frequently covered positively in scouting. I don’t know which will win on any given match day – but across my portfolio I can cover enough winning tickets to make sure I’m in contention very often.
And missing out narrowly on a win isn’t wasted either. The more big scores a player can put on their CV the more people will want them, even if they just miss out this time.
This is the key difference between now and this time last season. We’ve got a dividend structure and market prices that make big time, first 11 consistent winners incredible value.
If FI has been known previously for wild speculation on obscure youth picks trying to find “the next Messi” or whoever – there is currently no need to do that at all.
That speculative behaviour tends to take over when the big time players aren’t looking great value anymore. Once traders have mined out all the gold they’ll look for the silver. Then the copper… then before you know it they are holding up lumps of tin claiming it looks a bit like silver.
But we’re still in the mining gold phase. Maybe a little silver. It will be a while before we have to start digging into the lower quality stuff trying to winkle out value.
In my view we should continue reducing the focus on speculative youth picks or future transfer picks and focus on signing up those consistent big ticket winners at value. That’s why I prioritised the CL/Europa articles last week as lots of these “Core” player types are going to be involved in those competitions, and ideally Euro 2020 too which again we’ve covered recently.
We want to be ready for that relentless grind of match days – winning dividends and reaping the capital appreciation that comes as our winners and consistent big scorers increase in popularity.
This is why using quality research as our main guide rather than stressing over who is currently popular is key right now. The general standard of judgement out there on social media or in chat groups about who is really good or not is dismal.
Only the match stats can be trusted to guide us and Scouting has no shortage of winners and big scorers already. We’re going to get more because the odds are stacked on our side.
So this has to be the focus – hopefully this is something we have been preparing our portfolios for for months now. And whilst we’ve seen plenty of football – it’s often been in times of a nervous market or interrupted by international breaks.
We’ve got a more positive atmosphere now and have so many match days and opportunities for quality players to show their quality (and for weak players to demonstrate they aren’t all that great, either).
I’m really looking forward to the period ahead and feel ready for it.
And yet, we won’t have perfect portfolios. I find it easy to find really great value targets at the moment but freeing up the cash to go for them remains a major constraint and I am sure it will be for many.
Imperfect Portfolios
In a perfect world we’d have our entire balance available to select a perfectly sized portfolio with all of the best value Core players and a smattering of high potential youth, veterans and transfers to spice it up.
But in many cases we’ll be carrying a fair number of players who felt like a good idea 6 months ago who have fallen foul of one misfortune or another and can only be moved on for a severe hit.
Usually – having too many of these would be a sign of bad trading and we should probably be annoyed with ourselves. In 2020 though… I’d be more forgiving. It’s often been very difficult to move players on for any kind of acceptable price – even if you had correctly spotted the warning sign that something was going wrong.
This is why I added the Selection Headaches article last week – to illustrate the sorts of decisions we’ll be thrashing out here.
I’d urge a focus on this and some decisive action in dealing with it. There is so much slam dunk value available we shouldn’t feel too timid about taking a hit if it is needed in order to get portfolios we are satisfied with.
This is a tricky balance as I discussed in last week’s article. We don’t want to sell players too cheaply when there is a good reason they can genuinely bounce back.
Equally – we need to recognise when that reason is just too loose and speculative and we’re clutching at straws. If our player doesn’t have a real reason why he’s bouncing back anytime soon (maybe in 3 months or less?) maybe it is best to just take that hit, even if it is as much as 50%.
Especially if we are able to get that cheap bid on a player we do want, we might make up for a bit of that loss by aquiring a player who is genuinely under valued.
This is not easy and every player is it’s own decision. There is no one size fits all answer. Hopefully the examples in the Selection Headache article provide some inspiration.
Final Thought
It’s nice to no longer be talking about the gloomy mood and the latest platform changes.
It really is time to focus on what FI is supposed to be about – building the best portfolio we can and then enjoying the rewards in dividends and price rises come match day.
For too long in 2020 we’ve been distracted and tied up by various things. Whilst I don’t think we’ve seen the last twist and turn in a big year of change for many weeks or months yet… I think we’ve got a really clear and rational basis for trading in this dividend structure.
I’ve been focused mainly on the value available throughout this recent difficult period. With that there, it always felt inevitable that the focus would be dragged back to that and I don’t think it’s unreasonable to say we’re starting to see that now.
The more matches we see and the more dividends rain down – the stronger that pull should be.
I definitely found no shortage of very strong players at incredible value prices in scouting this week. The harder part is finding money to get them and unpicking the legacy of this difficult year is probably the hardest thing traders have to do at the moment.
I almost envy a new trader who has his entire balance free. Almost.
In some cases we’ll just have to be patient and remember that the reason we bought that player may swing back around come the next transfer window. Or if they are good enough they can put up big scores and drag people back to them.
But in some cases we may be clutching at straws and when we don’t have great reasons for a player to recover I think it’s important we are decisive now and clear out any remaining deadwood in our portfolio.
There is just too much great value sitting there and we can’t afford to dither. It won’t wait for us forever.