Last week I found myself writing a very long SOTM post focused on platform mechanics. Much longer than usual.
A long analysis of the platform last week felt right – lots of people were worrying about this anyway and pro gambler Caan Berry’s video found fertile ground given the awful market conditions – angry people often want simple answers to complicated questions. But that video had a lot of misleading points that it was right to correct.
I had a lot of people message me with positive feedback – happy I’d set out such a detailed response which is nice to hear. I also had a few saying I’d been too polite about the video. Having seen the latest video and corresponded with him directly too, I agree. I was too nice.
It is good that people who don’t use FI take interest in the platform and it’s interesting to hear their views from the outside looking in. I like having assumptions challenged – it’s healthy. But he should have stuck to this angle.
When you start setting yourself up as an expert when you’ve barely used the platform at all – it’s not credible and it’s not helping people who watch – it’s just misleading.
FI has many smart and independant people who have been using and questioning the platform for years. Unsurprisingly, there is no fundamental flaw in FI’s business model that only Caan Berry was capable of spotting in his first week on the platform.
His “shocking” revelation that FI need to make more money than they spend should have surprised nobody. Anyone who has run a business understands that – whether you are running Tesla or selling cookies door to door. And of course there are circumstances where you will lose your bet and be unable to cash out – this is not news.
But none of this is to say that FI is perfect or risk free and must be defended at all costs. Of course it shouldn’t. There are important problems that need solving to get FI back on the right path and readers will know I’m someone who frequently points them out over the years.
The issue with sloppy and ill informed content is that it highlights the wrong problems and gives oxygen to phantom problems that don’t exist. This makes it harder to focus on the real things that need fixing.
So I think it is important that we get the right ideas out there in a constructive way just in case FI towers are listening.
I’m going to briefly set out what I think needs fixing here, which are my own thoughts plus one or two I’ve seen doing the rounds on social media that I’ll credit as I go.
But then I’m going to drag this article back to what it’s meant to be – discussion of the market, trading, what’s coming next and what we can actually do.
I’m not going to be providing a running commentary every week on various people’s views on FI unless there is something really new to say.
In Brief: What to Fix
1. It’s too good to be bad.
FI’s current balance of incentives encourages destructive behaviour. We’re encouraged to “sell and rebuy” and “refresh” far too often – this is in a trader’s short term interest right now – some people even like it for this reason.
But overall, this is bad for almost everyone when you game out what it incentivises people to do. It not only crashes prices but it makes it very difficult for them to gain momentum and rise. It cripples the USP of FI which has always been as a longer term, slower burning platform.
They should reduce the power of IPD. IPD got a double boost that gave it too much muscle – one intentional from FI when dividends were doubled. And one that was out of their control due to the fixture calendar.
Other things like the recent extension of the dividend deadline until after most matches are completed that encourage kneejerk buying and selling should also be scaled back. A cheap opportunity to mug someone buying on the win is not worth the health of the market overall.
A win for a player is often no longer seen as cause for a price rise – but rather as an opportunity to sell. And once everyone learns this – it does not work. This leads to absurd situations where a player is cheaper the day after a win.
This is as much to do with wide spreads as anything. The dividend deadline is a minor example but it’s these sorts of incentives for destructive behaviour that need to be removed.
2. Give people reasons to buy and hold good players.
Traders are always going to be driven by self interest. There is no point just asking people to engage in positive behaviour for the good of the community. It has to be obviously in an individual’s interest to play ball.
There is a massive incentive to buy and hold good players – dividends. They have never been bigger versus the prices. But we know even the best players aren’t going to win every week so why not just sell when they do win?
Currently nobody trusts a price to remain stable which is why they are not incentivised to hold and a price struggles to rise sustainably.
Fixing this is about tighter spreads in a lot of ways, but it also comes down to rebalancing incentives. With IPD reduced – that money could strengthen incentives for buying and holding players – the only thing that will lead to sustainable price rises and a return to general confidence in the market.
Whether you boost Team of the Month – or introduce something new like an IPD size dividend for any big score (say over 200+ is 1p or 250 is 4p) there needs to be a very clear and obvious signal that it is in your interest to have the best FI players in your portfolio on a match day. This has been doing the rounds on Twitter and I saw it on a good thread from @TheFantasyGaffa (clickable).
I quite like that – with one minor reservation that FI is complicated enough and perhaps we need to reduce ways to win rather than add another. But the principle is right – incentivise buys and holds, disincentivise cut throat sells.
3. Fix the way prices are presented.
We have zero confidence in the Average Offer Price. It’s too easily gamed. The Blue Button price is what still drives emotion/sentiment and this bares no relevance to real value or even general opinion.
Take steps to increase confidence in Average Offer Price by preventing artifically high bids. And reduce the ability of one panicing trader to cause a crash. I covered this extensively last week.
4. Other Stuff
I would be very confident that the above three things would get this market going in the right direction again. Not all the way. But it’s the immediate changes that are needed. Stamp on the incentives to destroy and increase the incentives to build. Provide better price information. It’s not complicated.
What’s needed is a package of measures over time though – there is no one magic bullet. Here are a few others:
– Market Makers – An obvious one but a crucial element of killing off “sell and rebuy” behaviour. It is consistent tight spreads that prevent this more than anything. Not listed in my main three just because this is covered extensively already and FI know all about it – they just haven’t been able to implement it yet.
What’s crucial is that this is done correctly. If rumours are true and “LP001” the market maker was widely buying players on the Blue Button this is, frankly, moronic. They are just going to get dumped on for a “Sell and Rebuy” shenanigan. It burns their money AND makes things worse. Market Makers need to help build up the wall of bids. And if they need to be told that then they are not the person for that job I can’t be plainer on that.
– Allow multiple bids with cash balance – Another doing the rounds on Twitter. It’s a good way of improving liquidity if you can bid on 2 players with the same £10. Whichever gets matched first takes the money. Good – but needs a limit because otherwise we will lose trust in the bid walls – we’ll know real money doesn’t stand behind all of it. Use with caution.
– IPO’s and controlling “dilution”. Of course we need the best young players on the platform. But this is clearly causing a “dilution” effect. Drop 500-1000 useless spoiler players that are never likely to win anyway and establish a “One in, One out” policy.
This will soothe the annoyance about IPO’s distracting from the current crop of players. An easy PR win that will signal the right sort of intentions.
– Apologise? – I add a question mark because this isn’t particularly important to me. But lots of people are angry and upset and feel misled.
I don’t think FI have deliberately misled people – I think the crime they are guilty of is a lack of competence in execution of Order Books (you can sympathise a bit because of corona but it is their job to get difficult things right). And sometimes they have shown an inability to see the consequences of their actions in terms of what trader behaviour they are encouraging.
But apologies do mean something to a lot of people and we’ve seen positive reactions to this in the past. At minimum at least further acknowledgement of where things have not gone to plan might soothe some bad feeling. People tend to respond well to honesty like this and it won’t cost FI anything.
If this could be combined with a statement from the new CEO reaffirming their commitment to the original USP of FI with a few steps in the right direction it could be a genuine win rather than just cheap talk.
These are things that are currently being discussed that in my opinion are actually distractions from what really needs fixing.
“Oversupply” – I did a lengthy explanation of this last week. There is no reason why having a large number of shares existing in one player is fundamentally unsound. There are difficult situations where a player suffers from their own popularity when lots of people want to sell as discussed last week. But if a player is good enough – they will support their own weight in normal market conditions.
With prices this low and those shares existing already – there is little that can be done on this that would make a tangible difference to the current situation. There is already a natural limit on how many shares get minted because people will stop buying at a point. And FI may want to consider whether they have a limit on how many they mint in future to avoid over exposing themselves.
But as holders it was always our risk to take that the player justified their price and if they do we can be confident they will recover.
If they don’t – we may have to accept that we have lost our bet and we may never be able to sell that player. That’s the game – I don’t think anyone should have ever had the impression that this is a game they can never lose. We’ve always been aware of the risks, or we should have been.
Right now – blue button price is a poor indicator of which players are good or not as the market is in such a flap. If we take the Blue Button prices as our guide to our success our failure it would be an error at the moment – we’d be letting the most negative, most paniced, most pessimistic person judge what our portfolios are worth. It’s just not sensible.
Our knowledge of the real quality of players and the underlying value has to be our guide to this. Players who are good enough over the long term will not struggle for interest as they will prove their quality.
This is a complicated topic and basic supply/demand economics makes a lot of sense. But it’s not being correctly applied here and if you want a few thousand words on why and how on both the level of the overall pot of money FI have and for individual players – I have a post on that last week.
“Bring back Instant Sell” – We may as well ask for Adam Cole to come down our chimney and hand us £10,000 each whilst riding a unicorn, to be honest. Order Books was always the plan and FI backed Instant Sell was never the permanent state of affairs – FI were clear about that for years. And OB’s were a popular requested feature. Some people hate to hear this – but it’s just the truth.
I could be wrong – but if FI did this I’d take that as a really desperate move and would not be encouraged by it. From FI’s perspective moving to Order Book’s was the holy grail for the business so to surrender this would be… no small thing. And they’d have to remove it again later and it would cause uproar all over again. I’m getting a headache just thinking about it.
What we are asking them to do is take responsibility for buying unwanted bets. I see this solution often bandied around by people criticising the stability of the platform.
The fundamental logic hole in this argument which came from Caan and others is that by asking FI to take responsibility for that you make them far less stable as a business – not more.
It’s like accusing a man of being terrible with money and then suggesting he goes out and gambles to get himself back on level terms.
Because of Order Book’s – FI have never been less directly dependant on the rises and falls in the market to balance their books. This is a good thing, even for traders.
Where an argument might gain traction here, and perhaps what FI should have done in the first place is taper off IS, rather than removing it in one sweep.
So FI could have said ok when OB’s is live we will provide a floor of FI Instant Sell for 50% of the Blue Button price for a while, reducing that as traders got more confident using the Matching Engine until they were eventually out of it.
They could introduce that now but it would be a big risk. What if too many people actually used it? Right now, they might well do. You can bet FI would be left buying the garbage that won’t win anyway.
And that would put the platform in real danger and it may be a case of be careful what you wish for. Though I see why this has some instant appeal to many.
I think they could/should have done this when OB’s came in when confidence was still there – I think doing it now could be a bit of a disaster.
“3 year bet” – This is a popular requested change but I don’t see this one. If anything, the 3 year bet is too generous a time frame and FI need to incentivise active trading at some point.
And FI cannot have a career liability to pay dividends based on just one transaction – you would have to be insane to promise to payout dividends for an entire career on a 16 year old, for example. That could cost them fortunes.
It does need more clarity on exactly when bets expire etc but this is not the area we need to be pushing on in my opinion.
Ok back to the actual market and what it’s doing, thankfully. I’ve been trying not to get too caught up in mechanics stuff but it’s hard at the moment being such a hot topic.
It’s important but we want the bulk of our mental energy focused on things we can actually do something about. Much as we may wish – we aren’t the ones who call the shots at FI towers.
The market looks bad with further price falls in the last 7 days. And that’s a chase we’d better just cut to. But it’s not all gloom as we might expect given how negative the general atmosphere feels right now.
The single biggest thing the market needs to kick start growth is tight spreads in the most popular players. Tight spreads make shenangians like “buy back and sell cheaper” a waste of time. It makes holding good players an easy call. And it encourages more people to buy them and stick with them.
Wide spreads is the thing that enables all of the destructive behaviour so we want to see them closing up.
Scrolling through the top 200 today – this issue actually isn’t too bad. Most players have a sell price – it’s often too low and too thin in places – but there is one. You can sell players and liquidity is there.
In some places where there is no price or it’s very thin – it’s often not entirely undeserved. Tomori. Lundstram. Lamptey. These are… at best punts. Often based on the traditional mentality of chasing youngsters well before they are really credible. We shouldn’t just expect there to always be a price – they do have to deserve it.
Lots of decent players have dropped too though. Werner – plainly the current valuation is ludicrously low. He really doesn’t have to improve much to get right back into contention. But he has hit poor form in a rough market so there is an obvious reason why he’s not getting interest. It’s an overreaction – but you can at least see a link between his poor performance and the price.
One of the hard lessons that will come out of all this is a correction of previously reckless trader behaviour that became commonplace and even considered “good” in some circles.
We shouldn’t peddle an “everything will be fine” narrative because whilst I have general optimism for the market overall, and for quality players in it, there are a whole swathe of players who reached high valuations without any rational reason behind that. And that will get punished. Order Books have turbo charged that but it was always coming.
Very low prices is currently the biggest problem the market is having – liquidity is taking a back seat. This has reversed – we previously had artificially high blue button prices and little liquidity.
Neither situation is good. But it is better the way it is now.
There are massive across the board drops again in the last 7 days. And really – little rhyme or reason behind it. I can see really good players here dropping 25% or more. There are poor players dropping too.
The only thing you can read into this is that price falls are not about logic or true value right now – they are about panic and negative sentiment in general.
Obviously a perceived bad performance (valid or not) or injury is going to get a player singled out. And overreactions are very common to even minor bad news at the moment. But a player can also drop without doing anything wrong at all.
Some prices have gone up… but not by a great deal and players are having to work far too hard to deserve one. And even then – it isn’t often sustained. People jump in for the dividend or whatever and then find they have to sell for even less the next day – utterly self defeating.
It is also worth pausing and considering what exactly a Blue Button price is. This is the minimum price the most pessimistic holders of 900 shares are willing to sell for. Nothing more, nothing less.
It’s relationship with the actual “True Value” of these players is non-existant.
As I said above FI need to come up with a better way of linking the Blue Button price to real value or at least the collective judgement of value. Average Offer Price was a failed attempt for the reasons I’ve given. Nobody respects this number because it can be gamed so easily.
The Blue Button price is still the price that people take their cue from about how well they are doing. They shouldn’t. But they do. And it’s totally natural to do that.
One of the most striking things about this market is how absurdly low the prices are on a rational basis. Lots of high quality players can cover their entire valuation in a season, and would have to hit very bad luck not to do so.
Hell. There are low risk players who can cover 25% to 50% of their valuation in a single game and they are likely to do so given just 3-6 months. But they could also do it as soon as next Saturday if the holder is lucky.
That is a crazy situation that cannot continue. People will come in to eat up that value provided things settle for a time. That’s not speculation it’s just basic economics.
Our focus really needs to be on our personal valuation of players and their True Value. It would be a massive error to get dragged around by current Blue Button prices – this is not an indicator of success or failure.
Ultimately our success or failure is about whether we have picked players that deserved their prices. If they are good enough – they will prove it. In some cases we’ll lose – either because we made a bad bet, or because we made a good bet but a fact changed.
We may be unfortunate here – often we can correct most of our good bets gone bad before too much damage has been done. But this difficult market may have robbed us any opportunity to sell a player even when we saw a problem coming.
But if we’ve structured our portfolio correctly we won’t have any one player totally wiping us out. And because we make good, diligent choices, most of them will be doing fine performance wise or at least retain a reason why they can bounce back.
Overall, if we can say we’re happy with 75% of our portfolio and are confident they justify their price this isn’t a bad place to be.
Where we damn near know a player is going to more than justify his price – we can hold if we want and I’m not letting a currently low Blue Button valuation throw me off. We have to trust ourselves to judge value without needing too much reassurance on this point.
I don’t think burning entire portfolios and going “full liquid balance” to focus on short term trading only is the best thing for most. Particularly if that isn’t someone’s usual game or it doesn’t come naturally to them.
But sitting on our hands isn’t a great idea either right now and if we are happy with 75% of a portfolio it follows that we have 25% we aren’t entirely happy with too. So what to do about that?
1. Sell where we have lost confidence, even for a hit.
If we have lost confidence in any of our players or even if we are just 50/50 wobbling – I’d say just bite the bullet.
What we need to be careful with here is whether we are wobbling for a good reason. Is the player now fundamentally weak (i.e Scouting reports are poor and he’s genuinely declined). Has the hoped for transfer collapsed totally? Is he out of the side with no credible hope for a move somewhere he can be a first team player?
These would strike me as credible reasons to sell – there is a genuine change in the reason we bought the player in the first place.
Yes – it will be a painful hit. But think of it like this – we are selling too cheaply but we are also going to be able to buy a lot of players we are confident in for far less than they are worth too. So if the cost to change to a preferable horse is broadly neutral or at least acceptable – I see no reason not to go for it.
We have to understand that whilst a bounce back is likely in general not every player will bounce back – some of the rubbish is just that. It may be best to take whatever price we can get when we are really sure we are holding a no hoper.
What we want to avoid though is a panic sell. Think about why we want to sell – is our need to sell mainly driven by the fear caused by others just because the blue button price is low?
That’s not a particularly good reason to sell on it’s own. When we are selling “deadwood” – it should be because we have little hope the player will recover anytime in the next few months either through a change in circumstances or a demonstration of strength.
2. Self Interested Destructive Behaviour
There is a reason why people are doing so much “IPD rotation” and “sell and buy back cheaper” trading at the moment. It works. At least in a short term, self interested sense. And who won’t bank a quick win if they possibly can?
The fact it is killing the market… well people often don’t think that far ahead. And this is really where FI need to take the lead in creating the proper incentives.
– IPD Rotation
There are clearly big percentage gains available here. There are so many reliable strikers putting away 5 or 6 goals a month or even more sometimes. And they may actually get an outright win along the way.
Morata. Lukaku. Lewandowski. Immobile. Yedder. Others too. Not exactly unknown players. I point them out regularly in Scouting.
What we are looking for really is a player like this at a rock bottom bid – helping to dodge any on paper blue button loss. It may appear for example that Lukaku has dropped 20p in a week but the red button prices are a lot more stable in many cases. You can often sell for a similar price if you get a very low bid matched.
Our other enemy is liquidity. We do not want to go charging in with huge buys of these players because we may give ourselves too many shares to dispose of.
So it’s important not to make a splash in the market. What I’m doing right now is setting aside 5-10% of my balance as an IPD rotation pool. Rather than lumping 5% of my balance in one player, I might pick 3-4 and spread evenly between them. This means I don’t have too many shares in a player to get rid of and aren’t causing any unwanted waves in the market.
This is an area where smaller traders get an advantage as they are naturally just nibbling at the edges rather than causing havoc. But the percentage gain can still be very nice.
More active traders watching games can sometimes take advantage of a jump in the bid price on a goal or similar to take an instant profit, too. We don’t want to trade too predictably around a “perfect 30 day window” as I’ve mentioned a few times previously.
– “Sell and Buy Back Cheaper”
The prevalance of this is killing the market and the incentives have to change to rebalance things in the favour of longer term holders.
But I can’t ignore that it’s a valid tactic and a little bit too easy to do right now.
If you hold a player like Robertson or Kroos or Kimmich back when he was stringing wins together – we know that winning every other week is probably a bit much to ask. So you can legitimately take advantage of any over optimism on the day they do win to sell for a higher price than you would otherwise have gotten.
Chances are – those chasing the dividend or having buyers remorse will drop their price the next day and you’ll be able to buy them back for cheaper than you sold for.
Or, once cash is liquid – you are free to spend it on whatever you think is currently the best value. Which may or may not be the same player. It may be better for example that instead of going back to Robertson whose had his share of good fortune – you go for someone who has been unlucky, perhaps Hakan Calhanoglu.
Nothing unusual about selling on a flood of optimism – I’ve been doing this for years. The difference now is that the market mechanics are currently teaching everyone that this is the only logical move. If we don’t give holders a reason to hold then this doesn’t really work for anyone. It’s a race to the bottom that FI need to fix.
Where I draw the line is any move to deliberately crash the price in order to panic people and buy back cheaper later. This is likely against the game rules so puts your money at severe risk. And is also just downright scummy. But no doubt it goes on and contributes to the current situation.
3. Take on the absurdly low valuations
Where we do have free cash, either from selling unwanted players or otherwise, there is potentially a way of making a massive profit with almost embarassing ease.
There are so many players that are so far beneath their rational value it almost makes you choke. Bear in mind we recently doubled dividends and we can comfortably peg a level player under 25 years old at around £4 without batting an eye.
Many players of this sort of level are sat in the £1 to £1.50 range right now.
Our deserving premiums, provided they pull in expected performance/media could be £12 without breaking a sweat. And up to £16 before it starts getting silly.
At 28+ years old we’ll have to start knocking chunks off for age but I’d still happily pay £7-9 for a good 28-30 premium with media pull – it’s well within rational value. (These are on the site Dashboard don’t forget).
Premiums (top 10 as a rough measure) are currently sitting at £2.72 to £6.16. Some of them don’t deserve that price sure. But many do, and in fact deserve more.
So. Provided you’ve been around the block on the whole “Is FI dying?” argument and you’ve come out in the “nah, probably not” camp where I am. That is a very mouthwatering prospect.
If that applies to you, then what we can be doing in this situation is taking on these absurdly low valuations.
And we are leveraging our better knowledge of the real potential of the player to mug the most pessimistic and most panicky trader that exists.
The scenarios where we lose that bet are: 1) FI does indeed collapse or 2) We are wrong about the player’s ability.
On point 1. Well. We’ve discussed that extensively – we’ll never have 100% certainty and at some point we just have to decide what our appetite for risk is. There are risks of staying in. There are risks in cashing out low too. It’s a very personal decision for which there is no one size fits all answer. It largely depends on how much you can afford to lose.
On point 2. That’s the game. I’m confident in my ability to judge the quality of players. It often takes time to shake out but in the end we know quality proves it in the end. And there are stumbling blocks with players hitting awful form or getting dropped or hitting the wrong transfer. That’s fine – we don’t have to be right every single time to turn a very strong profit.
Fundamentally, you never make the best money in trading by agreeing with everyone. You make the money when you correctly disagree with the majority. And that’s no different here. When we see things that are plainly illogical, we shouldn’t just gawp at it – we should challenge it by trying to get these low bids matched.
We have the luxury here of being able to target very reliable, proven players who are established, in the 21-25 age range and are unlikely to be going anywhere. Maybe they are a little out of form or haven’t won in recent weeks. But if our assessment through Scouting etc is favourable, we could do very well by going for them.
Often, doubling our money or more might require punts on unproven youth or similar. Not now. We can potentially get this with very reliable players.
And they may not even have to win – if we target those with ability and a trend fit that is easy to sell they are likely to catch a natural significant rise as/when the market recovers in general.
We might do well out of thinking “if we hit a period when the market recovers, what is it that I’d want to be holding?”.
We don’t want to make it too hard for ourselves – when it really comes down to it the best strategy right now is likely as simple as “buy undervalued popular players that are actually good for FI.”
The price drops in the last week have been absymal.
But spreads are reasonably tight. There is some liquidity there. Some Blue Button prices are reaching a point where they are just absurd and you would think there will be people out there willing to eat up those valuations.
And we know they are already. It’s just that the market is currently only set up to see prices fall – downward pressure is stronger than the upwards pressure and buyers have no reason whatsoever to pay more than the bare minimum.
There can be multiple optimistic traders buying and yet just one reasonably sized pessimist tells us what the price is.
We need changes from FI. That much is clear. But there is no obvious platform killing fundamental flaw in the system despite what some people say. There are issues – but they are fixable.
And in the mean time, we’ve got stuff we can be doing to improve our portfolio. It can be really tough to keep going and making positive decisions in emotional and difficult circumstances. But I really think that is where our mental energy should be focused right now.
I’ll still be around in the next week – and will not be missing a match day. I will be able to take advantage of the reduced fixture schedule however to have a little time off and recharge batteries.
I have the following updates penned in for the next week to cover the festive schedule:
23rd Dec – Scouting
24th Dec – Scouting
27th Dec – Scouting
30th Dec – Scouting
3rd January – Normal service resumes.
Finally – I’d like to wish you all a very merry Christmas and thank you all, genuinely, for being members even throughout 2020 which let’s face it, has been a miserable year on and off FI. This site would not exist without you it’s just a fact.
Things can change fast on FI and, with time to heal and some changes, we could well have a lot to look forward to in 2021. There has certainly never been a better price/dividend value proposition!
I hope you all have a really good Christmas, whether you are able to spend Christmas with some or all of your family, or are one of the many I know for whom Christmas will be a solo op this year!
I will try to see the positives this Christmas. No awkward Uncle at dinner. No Brussel Sprouts as they did not come in my online shop yesterday and Mrs FIT can’t make me go and get more in case I get corona. And I will get to watch Die Hard rather than Frozen on Boxing Day.