Quarterly Quarrel: Financial Discussion Part 4

Well in terms of the difficulties - look at the Torres purchase

This causes not only 55m to be spent on Torres, but also 35m on Carroll for a 90m turnover on 2 players

So in some respects inflated deal flow starts to count double because of the knock ons.

However to me this represents the true state of the market.

To me it all starts to come back to a creeping lack of competitiveness.

Surely it cannot be a workable long term solution to be paying 20m or more for the Downings and Youngs when only a few years ago that money was buying the hottest european talent.

 

Was it though?

Go back to 2004-5 and you had Chelsea signing the likes of Damien Duff and SWP for £17 and £21m in absolute prices.

The likes of Downing and Young are proven PL players who have been successful for a number of years. At the same time they are still relatively young. There is always a premium to pay for people like that.

 

Just to come in here again, I also think that the prices reflect a number of changes that have taken place in recent years.

Firstly, exchange rates have moved badly against sterling. In 2007 the FX rate on the Euro-Sterling was roughly 1.5. Now it's roughly 1.2 and has only bounced back from a position of near parity following the ongoing sovereign debt crisis in Europe.

For instance, when Torres joined Liverpool in 2007 for c. £20m, that would now be roughly £26m, just taking the movement in FX rates into account.

Then you need to add in the ongoing inflation and growth in revenues that has taken place.

In 2007 United had a turnover of £210m. In 2011 it was £331m. That's over a 50% increase.

So then just taking that into consideration Torres today should cost £39m. In that light, Ashley Young at £17m doesn't look bad to me.

 

Yes great points.

Personally I attribute it to 3 factors.

1. Exchange rate - this is an immediate loss of competitiveness.

2. Inflation not related to performance/turnover. City jumping in with huge salaries/transfers for all sorts of players causes problems because it is not directly related to talent or increased revenue. Good examples are Adebayor and Nasri

3. Accurate pricing in Europe. It no longer seems possible to snap up top european players with any arbitrage - they are accurately marked to market.

Personally I think fergus is right when he says there is no value in the market.

What he really means is that everything is scouted out now, and everyone really has the same information.

Because england is not a top talent producer, this gives the league a problem.

 

There are another two points which I neglated to mention.

1. Increase in the top tax rate from 40% to 50%. When trying to attract foreign based players they are only interested in their net salary.

England has much higher tax rates in place for top earners.

2. The increasing financial power of some emerging nations. Brazil now has the financial backing to retain their top young players for far longer than before. Russia and Ukraine are now viable destinations for quality players.

I personally disagree on the point of there being no value in the market.

I do though think that a number of clubs have made life difficult for themselves by proving to be mugs in the market previously (Chelsea and City).

There is still value out there. Reus went for about £16m in January, Toulalan for £10m in the summer, Steklenberg for £5m, Kjaer has an option of about £9m, Debuchy I'm sure could be available at the right price (maybe £8m or so).

Udinese have demonstrated that it is possible to perform on a budget if you scout properly.

 

Agree on both.

Well of course there are still opportunities - but personally I think the opportunity to get bargains no longer really exists for the top teams.

Everyone has the same info, and the deals are distorted by agency.

Hence the need to run off to Mexico or buy kids where you can leverage value added better

 

I think the problem for the top teams is that there is very limited patience in respect of bringing through younger players or players taking time to settle. That means that people have to hit the ground running, which in turn means they need proven pedigree.

There's no point in taking a punt on a young player if you are likely to be out of a job in a year's time when he fails.

That in turn reduces the pool of players to select from and drives up the price.

There are still some remarkable anomalies though out there. For instance Real Madrid can sign Ronaldo for £80m, Kaka for £56m, but then are able to snap up Sahin for £5m (I know he had a release clause) and Oezil for £13m or so.

 

Wishing somebody to be dead is not cool NM....