The Index as a whole is overvalued

  • Does anyone else think the majority of the index is now looking overvalued? I'm sorry to put a downer on the recent price rise but the way to value these futures is the potential dividends they may give over their lifetime relative to the cost you pay for them. If Salah repeats his season that hes just had at his current price (Roughly 9.80) you'll get circa 30% yield (most of that coming from MB, thats a cracking yield). The rest of the index is no where near that though. The vast majority of the index have zero expected value as they will never get a PB or MB and so aren't worth a thing, this has always been the case. However the latest promo by FI (the deposit bonus) has caused massive yield compression on the middle and bottom of the top 200 and on some of the squad players also. Prices are quite frankly ludicrous on a lot of the players now when you look at the yield they could possibly get. Latest promo is great for traders who got there early and for FI as it will give them a increase in trading fees but its overall bad for any one hoping to hold long term as its driven prices up without any prospect of increased cash flows. You can of course sell if you think they are overvalued but bubbles aren't good for the market as a whole, they will cause a lack of faith when the collapse. The only thing that would remedy this is an increased dividend (this would legitimately lead to the increased valuation of all player) or a massive market dump back to where we were before. I suspect we will see the latter occur all at once or over the season as many people realised they paid well above the odds.

  • @NewUser85246 so what's your point?

  • @Stevo
    I'm wondering what peoples thoughts are on it as I'm seeing very little posted on it on the forum. Surprised by the lack of people echoing what I'm saying, wondering if I have missed something.

  • Futures are worth what people will pay for them, when i was at school a kid paid £50 for a Charizard Pokemon which was really worth 17p

  • Most players are still undervalued. I'd say ~10% return on investment in dividends is the right value (bearing in mind this is tax free) but you aren't just buying a players current dividend potential but also his future value.

    That's why players like Leon Bailey, Sergej Milinkovic-Savic etc are great picks. They should return 5-15% of their value in performance and both are yet to hit their peak so you can collect the increasing dividends as they improve. You are then selling a 26 year old SMS or 23 year old Bailey to the market if you hold for three years.

    The equation is:

    Player value=dividend returns + expected value in three years

    This is why older players have a higher ROI in pure dividends because they should be less valuable in three years time.

    Obviously you need to consider opportunity cost and the fact you probably won't hold a player for the full three years but most of the index looks like value to me other than the inflated young players and transfers (CHO, Vinicius, Maguire, Willian etc).

  • @Gasdean Haha very good, but you've proved my point, it wasn't worth that. It was a bubble.

  • Agreed in principle ...

    However to an extent its a game and people want to play the game so will pay a premium. Before PB media buzz was 5p a day. Now players were really over valued then.

    At the moment people will buy because they see the index rising. Logically there is a danger that once this stops and the bubble bursts there will be a crash.

    But FI wont allow it. I would be surprised if they increased dividends anytime soon because they will want to hold it back for this eventuality. Whilst the index is rising , everything is rosey as people will buy for capital gain so no need to raise dividends.

  • @PB-man Yea I agree with that, I just don't think your getting 10% annualised for a lot of the players out there, not after the promo. (I admit id probably want more too given the volatility of the asset) Roughly 186 players would have got you 10% or more based on last years dividends divided by current prices. 186 out of over 2000 players. Prices have moved north since I received that data also so it would be even less now.

  • @mike778 How do you think they will prevent the crash out of interest? More bonuses?

  • @NewUser85246 said in The Index as a whole is overvalued:

    @PB-man Yea I agree with that, I just don't think your getting 10% annualised for a lot of the players out there, not after the promo. (I admit id probably want more too given the volatility of the asset) Roughly 186 players would have got you 10% dividend based on last years dividends divided by current prices. 186 out of over 2000 players. Prices have moved north since I received that data also so it would be even less now.

    Yep that's true but barely anybody owns 1000 or so of those (lots of them are junk World Cup players outside PB leagues). Then you have players who could get a big payday at some point (e.g. if Varane or another low PB scorer picks up some media for a Prem move) which will drive speculative investment.

    Also factor in that some of the players haven't been on the index for the full year and dividends doubled in September, young players will improve their dividend outputs (e.g. Ronaldo's eventual retirement opens up a lot of media to younger players) and you have ~500 players actually worth owning who can return or have the potential to return >10%.

  • @NewUser85246

    I completely get what you are saying OP. I normally put £100-200 in every payday, but haven't this month as I'm struggling to see value in a lot of places.

    Everyone keeps talking about the influx of new users and therefore the index growing as a whole. But if I was a new user today I would struggle to find decent dividend returns to make it worth my investment.

    I guess it's because I'm looking at the future dividend returns over a 3 year hold vs current buy price, which makes a lot of players price over inflated. But maybe we should be looking at the capital appreciation of players who may never return a dividend, but will go up in value just because they are under 20 and might one day play for a top team... after all, at least 1 of them has to be the next Neymar (but never mind the other 1,000 that won't)

    I think with the prices going the way they are, the market is going to be less driven by dividends and more about price increases, which kinda does turn this into a pyramid/ponzi scheme...

  • @Safri15

    Three year returns are still really, really high comparatively. the stock market only returns 8% ish a year and you pay tax on that.

    Neymar should return 20-30% of his value per year in dividends alone so if you can't find a value player there is your man. Pogba has returned over 60% of his current value in dividends over the last year so there's another one.

  • @PB-man
    I've got Neymar at 17% of his current price and pogba at 29% (Where did you get your stats from that they are so different to mine ?) based on last years dividends relative to current prices. Note Im talking about current prices not prices at the start of last season. (Also my current prices are actually about 5 days old but prices have only gone up since then so if anything yields would look worst). Actually still good value, especially Neymar if your betting on him moving to a PB paying league, if he goes prem hes a gold mine. Notice in my OP though I did say it was the middle and bottom of the top 200 that I felt was crazily overvalued.

    FTSE 100 is 4% a year and thats the best its been in ages. Arguably a lot less of a riskier asset though.

  • @NewUser - I thought the FTSE 100 was less risky until Carillion hit! Not so sure now..

  • @NewUser since 2 years people say the Index is overvalued. Lol. I cannot hear it any longer. Fi has now lets say 40.000 active users, with the sky deal and bristol rovers deal it will increase a lot. So theres only one way and thats up!!!

  • @NewUser apologies I think I used the wrong figure for Pogba, should have double checked.

    Neymar's return should be higher than last season considering his long injury layoff and PSG's failure to progress in the Champions League.

    The ftse comparison is a good one. Buying only Neymar would be like only buying shares in one company. That's a gamble since Neymar an break a leg/the company can go bust. Having a diverse portfolio benefits from general market growth whilst minimising risk.

    I'm not sure the ftse has much less risk considering the collapses we have seen in the past. I'm sure there are some houses of cards being built that will kick off another recession at some point.

  • I do sympathise slightly with the original point. It's all well and good to say 10% pa is a great return and you can't get that in the stock market. But a company has a far longer expected lifetime than a footballer's career.
    It's also different as we know that with each year that goes by a footballer is a year closer to retirement (and therefore worth zero). When you invest in a company you are obviously taking a risk as that company could cease to exist at any moment (Carillion mentioned above), however with a footballer it's not a risk, it's an inevitability!

  • @Blue-Python true which is why you need to consider resale value when you buy (not unlike a standard football transfer). Neymar should return around 20% of his current value per share (I would expect more) so about 60% return over 3 years. As long as 29 year old Neymar is still worth 7 pound or so it's a tidy profit especially with no capital gains tax.

  • @PB-man Not to mention you can reinvest the dividend from the first year into the second and the second into the third, compounding your return on the original investment.

  • It’s a fair challenge, but I don’t think you’ve accounted for the fact that stats on last seasons dividends returns are not a fair comparison. They were much lower than they will be this year, so I think you may be comparing apples with oranges.

    1. A lot of players only IPOd well into the season, which reduced their PB eligible gametime when you’re looking at the annual return.

    2. PB doubled in November, after a chunk of the season and most European group games had already been played. So you need to adjust your ROI calculations; and basically double anything in the first few months of the season. You also need to look whether a player that IPOd late could have actually challenged for dividends in the first half of the season. Someone like Florenzi (who I think returned £0) could have played an extra 15 games last season if he had IPOd in July.

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