CFF Market Inefficiencies: Buying & Selling
CFF Market Inefficiencies: Buying & Selling
The Q1 earnings calls are in--who's a buy, and who's a sell right now?
Markets can remain irrational longer than you can remain solvent.
- John Keynes, Economist
No company on planet earth has benefited more from the AI boom over the last two years than the American multinational software company NVIDIA. As expected in Q1 of this year, they reported record profits—with revenues increasing by over 350% year-over-year in 2023. In CFF terms, think of it like Oklahoma State RB Ollie Gordon’s performance in the second half of last season—just absolutely torching it (and then some).
How are they doing this? Well, the software firm currently has a monopoly in the market for manufacturing the chips which are crucial for training AI models. Given that AI is the tour du jour right now, it’s not hard to understand where all the demand is coming from.
Furthermore, NVIDIA’s chips aren’t just used for AI modelling, they also happen to be key components in self-driving cars, video games, and cryptocurrency mining—you know, basically all of the stuff Gen Z’ers like to tell you about at the Christmas party.
Most of the optimism that is leading to markets outperforming expectations is operating under the premise that the companies who are hoarding all of these chips for AI will actually produce something useful in the future. A dubious assumption, and, even worse, competition in this market is only going to continue to become more fierce—threatening the profits of those tech companies who do make break throughs anyway.
This has led some analysts to believe that investors should proceed with caution right now. Former Nebraska Cornhusker—Warren Buffet, recently told his investors there is “no possibility of eye-popping performance” for his fund.
CFF markets, of course, are infinitely more dynamic and complex than these simple macroeconomic ecosystems. For starters, we’re into mid March and the dust is just now settling on who’s coaching where next season. But there are some parallels between the two domains—notably, when everyone wants to buy, it can be prudent to look to sell; and by vice versa, when everyone’s selling, fortunes can be made by the brave souls that find the right buying opportunities—at the right time.
Another parallel is that in the CFF market, the sentiment around how to price various assets is often times illogical, and things like ‘hype’ and ‘momentum’ distort reality.
Today, we’re going to take a look at some players who I believe are not being priced appropriately right now.
The Wrong Side of the Trade
It should be noted that most of the players here are still players I like, I just don’t think they should be getting drafted as high as they are currently.
WR CJ Daniels (LSU) — I like Daniels as much as the next guy (more or less), I even wrote an article on LSU’s WR room not so long ago stating that I think he’s the logical one to reach for first. However, I have now seen on multiple occasions that he is being selected in the fifth/sixth rounds of drafts. Need I remind the reader that the new OC had zero 1000-yard receivers when he called plays at Louisiana Tech (LT)? HC Brian Kelly doesn’t have much of a track record either (save for his last two seasons at LSU with OC Mike Denbrock).
G5 WRs moving up a level also tend to make me nervous. Add on the fact that LSU is ushering in a new QB—one who we haven’t really seen before—and now I’m skeptical that a player like Daniels is going to provide the necessary returns to satisfy his investors. LSU has a pattern of having two 1000-yard receivers or none, and while I’m not going to follow that religiously, I currently lean closer to ‘none’ in my expectation, and will be drafting their WRs appropriately (i.e., in the later rounds).
That’s where fellow LSU WR Kyren Lacy comes in. We’re not even sure at this point who’s WR1 between them, and yet the disparity in ADPs is quite large.
Note: I completed the original version of this document multiple weeks ago, when this take on the LSU room might have been more spicy. I did a poll the other day on ‘X’, and it would appear that the pendulum has already begun swinging in the opposite direction, as just over half from that sample believed Lacy would be WR1. I would expect the ADPs between these two assets (Lacy and Daniels) to aggressively converge over the spring.
EDIT: Lacy and Daniels’ February ADPs were 123 and 60.5, respectively, according to Campus2Canton. Their current ADPs (week of March 15) are 112 and 62.3. So, it looks like the optimism around Lacy hasn’t yet come at a huge cost to Daniels.
Personally, I think we’re headed towards an outcome now where both are being taken too high; at this point, we don’t even know if either of them will be the go-to guy, there’s a new QB being broken in, and the system of the offence doesn’t have a strong track record of production for this position.
