Wednesday, December 18, 2013

Things to expect from the FOMC meeting: Why it (should) be time to taper

Breaking the pattern from my usual soccer posts, I decided to put out a couple of interesting thoughts on the Fed's year-end meeting.

There has been a lot of buzz in the market about the Fed's policy to eventually taper its asset purchasing programs (quantitative easing/QE) and unlike what happened in May at the first suggestion of tapering, the Fed is widely expected to outline exactly how it will reduce its purchases so as not to create a severe market panic using forward guidance as a tool.  Janet Yellen, the new Fed chairperson, is widely regarded as an effective communicator, in addition to her longstanding support for tapering.

The last time the Fed had a meeting was in October in the midst of the fiscal cliff debates, so naturally with a downturn in optimism across the nation and uncertainty about the state of the government's finances, the Fed decided to delay its decision to taper; however, with the economy on a stronger upturn than normal (not just fueled by the increase in seasonal unemployment), the Fed could accelerate the process a bit. Here's what we can reasonably expect at this meeting.

  • The Fed will likely not announce that tapering is to start by the end of December or even January. Given the looming sequester cuts in Congress and the uncertainty that it will cause, the Fed would not want to do anything to exacerbate the resulting situation.  
  • Fed officials will outline the specifics of their tapering program. Specifically, they will likely emphasize the reduction in treasury purchases given the inflated state of the bond market.  This will lower demand in the bond-market and raise treasury yields.  They will also stress that they are not immediately cutting out treasury purchases entirely so as to alleviate market uncertainty
  • The Fed will cite that their purchasing strategy will not increase the risk of the balance sheet as purchases of treasuries will be positive along with a continued sustained mortgage backed securities purchase
  • Tapering may be somewhat uneven given the seasonal fluctuations of economic growth in the United States (The past four summers have been characterized by slower growth), but it will definitely be methodical.  
  • The Fed may also address trepidation about the rapid growth in the stock market, given that they have absorbed a lot of risk themselves by adding MBS to their portfolios and that borrowing is still not reaching very rapid levels.  
  • Interest rates will not be altered until the economy shows a sustained recovery with tapering.   
A lot of credit has to go to Ben Bernanke, for his work throughout the crisis.  This was a rather unprecedented situation and many investors and market analysts were critical of the Fed's involvement in the financial market.  But given how interconnected financial markets are with federal assets nowadays, it was necessary for the Fed to use its position as a risk-free lender to balance out an incredibly risky market in the wake of the crisis and stimulate investment and expenditure. I would argue the Fed has had a greater impact throughout the crisis than the government.  The Rescue and Recovery Act stopped the bleeding, but the Fed's policies since 2010-11 have been gradually raising inflation to pre-recession levels and they have reacted quickly to fluctuations in the job market.  

Friday, December 6, 2013

World Cup Group Stage Predictions 1

Early to be doing this? Nah, this is my Christmas and I only get this once every four years.

The criteria I'm using for who can qualify is how good the teams are on paper, where they're playing, (since Brazil has several different climates), and recent form for individual players.

Group A
Brazil - 9 points
Croatia -4 points
Mexico -2 points
Cameroon-1 point

Brazil is by far the best team in this group and they haven't lost a competitive match at home since 1975.  I wouldn't expect anything different especially because Scolari (Brazil's coach, and he won the WC in 2002) knows his best group of players and has a variety of options on the bench, much like Spain.  They have physicality in central midfield with Paulinho and Gustavo to go along with Neymar's and Oscar's creative brilliance.   The reason I dropped Mexico is not for a lack of fitness or climate issues but the main reason is that none of their best players in European leagues are getting games.  On one extreme it's bad if certain players are playing too much (like what typically happens to England) but on the other if they're putting their eggs into the Gio dos Santos/ Javier Hernandez basket, they'll be disappointed.  If they don't use their European players though they lose a bit of quality.  Overall a very bad tradeoff to face.

I'd pick Croatia since they have a solid defense, a very much in-form Mario Mandzukic and Luka Modric to choose from.  Climate issues could be a problem for them.  Cameroon's best players are all over 30 and in this group they will struggle to get points.
Group B (Group of Death 1)
Spain - 9 points
Netherlands-4 points (goal difference)
Chile- 4 points
Australia- 0 points

This was a nightmare scenario for Chile. I said I expected them to qualify in most scenarios but in this group it doesn't seem very likely. Chile can dominate matches and the climate will favor them but it may come down to how many goals they score against Australia who are unfortunately the whipping boys. They are a bit questionable defensively too. They will face the Netherlands on the final day which will likely be a do-or-die for both teams.  The Netherlands forwards just about edge them there but I could end up changing this one based on injuries or interesting developments  If van Persie or Robben gets hurt or loses form for the Netherlands, I'd give Chile the edge.

Spain is being written off a bit due to the thrashing Brazil gave them in the Confederations Cup Final, but let's not forget they probably have the deepest attacking midfield set in terms of quality. Juan Mata, David Silva, Cesc Fabregas, Andres Iniesta, Pedro, Isco, and Jesus Navas to name a few.  Javi Martinez is also one of the best all-round midfielders in the world, and can offer a degree of physicality that has been lacking in this side.

Group C
Colombia -7 points
Cote d'Ivoire -5 points
Japan -2 points
Greece- 1 point

Colombia is the best-equipped team to win the group.  Falcao, Juan Quintero and James Rodriguez form a solid attacking trio, but they have some questions at CB which will only pose a problem in the knockout stages perhaps.  Cote d'Ivoire has an aging defense but it's not as much of a weak point as it is for Japan whose CBs could really struggle against intelligent and powerful forwards like Falcao and Drogba. Greece is fairly predictable in their play and are too reliant on Samaras and Mitroglou for creativity.

Group D (Group of Death 2)
Italy- 5 points (GD)
Uruguay - 5 points(GD)
England -5 points
Costa Rica- 0 points

When looking at it England and Uruguay are actually very similar sides.  Roy Hodgson has tried a variety of different personnel and systems to combat bigger teams much like Oscar Tabarez has done with Uruguay the past 4-5 years. Finely balanced group overall, and I could see all 3 teams playing for draws against each other and really going for it against Costa Rica. England does play Costa Rica last, so in theory they could have an advantage if they can get decent results against Uruguay and Italy. Uruguay does have a climate advantage although playing in the Amazon will be tough for everyone. Their performance will depend on how Suarez and Cavani keep going and whether they can play together. Italy's got the most technical quality out of the group and Cesare Prandelli is quick to adjust his tactics.  I wouldn't expect a lot of goals from this group though.

Group E (Group of Life)
France- 5 points (GD)
Switzerland-5 points
Ecuador - 3 points
Honduras- 1 point

This group starkly contrasts the other groups and France and Switzerland should fancy their chances. France typically starts slow in the Group Stages and tries to become dangerous later on. Karim Benzema's international form leaves questions about who can come up with goals, and they've experimented with their CB pairing a lot; however they're still good enough to qualify if not win their group.  Ecuador was formidable in qualifying but lack creativity through the center.  Antonio Valencia's their best player but as a winger, he can be marked out of a game. Switzerland has a talented defense and have gotten impressive results against big teams in the group stage before. The road will likely end in the round of 16 because they are most likely to face Argentina.
Group F
Argentina-9 points
Bosnia-Herzegovina-6 points
Nigeria-3 points
Iran-0 points

Argentina started out as one of the tournament favorites already but they got a really good group and a favorable match in the round of 16. Lionel Messi will run the show, but more importantly Sergio Aguero and Gonzalo Higuain have been in excellent form for their respective clubs too. Alejandro Sabella's tactical flexibility and a hard-working midfield trio in di Maria, Mascherano, and Banega will definitely help them win the group.  Bosnia has some very talented creative players and Edin Dzeko, but they don't have a solid defense so they may have a very open game with Argentina.  I previously pointed to Nigeria's lack of cohesion even though they have several talented individuals.  In a group like this, a side that stays even somewhat organized will earn points.  Iran is unfortunately is out of their depth.
Group G (Group of Death 3)
Germany-9 points
Portugal-4 points
USA-2 points
Ghana-1 point

This was a nightmare draw for the US; however, they do have a chance at qualifying. Ghana has somewhat regressed the past 4 years so if they can get a big win against them, and a draw against either Portugal or Germany, they can make it to the next round. At central midfield, Michael Bradley and Jermain Jones have improved greatly and overall the US looks more comfortable.  They have evolved from a purely counterattacking side into one that can break teams down and play intricate one-twos around the box. I'll go into more detail about how they can qualify some other time.  They do also play Germany on the final day so they will need everything to go right in the first two games.

Germany has an enviable depth of midfielders. Mesut Ozil, Mario Gotze, Toni Kroos, Marco Reus, Thomas Muller, (I could really just keep going here), so they will be able to impose themselves on almost any side on the world. Mats Hummels and Philip Lahm are top defenders and Bastian Schweinsteiger brings a lot of experience. At striker they risk leaving themselves a bit short, but their midfielders will score goals.  I think Portugal can hold them to a draw.

The reason I think Portugal goes through over the US is that, contrary to popular belief, they have a very solid team including a formidable back 4 with Pepe, Coentrao, Bruno Alves, and Joao Pereira; a good defender-runner-passer model in midfield with Veloso, Moutinho, Ruben Micael; and of course Cristiano Ronaldo.  They lack a clinical striker but when you have Ronaldo, who needs one?

Group H
Belgium-7 points
Russia-5 points
South Korea-2 points
Algeria-1 point

Belgium at the moment is a team of individuals They don't have great chemistry yet, and are susceptible at fullback since they're using a back 4 of centerbacks. That being said, the potential is there and on talent alone they will likely win this group.  Eden Hazard, Dries Mertens, and Moussa Dembele all offer different points of attack for Belgium.

Russia got a favorable group that could pan out for them.  Fabio Capello has a point to prove after leading England through a disappointing World Cup in 2010 and they will fancy themselves over South Korea and Algeria. Can't see them going much farther than the round of 16 considering that they will likely have to face Germany.  

Tuesday, December 3, 2013

World Cup Scenario Draws #1

All 32 teams have qualified, but the groups have not yet been drawn.  I realize what I'm about to do is as useful as pre-Thanksgiving Christmas decorations, but I don't care and I'm making a scenario draw  This is my Christmas, don't ruin it since I only get to celebrate every 4 years. Since there's no fun in just going by the FIFA rankings (in which everyone would just want the lowest ranked teams), I'm going to try something a bit different based on tactics/playing styles, climate adjustment, players available, etc.

Here are the Pots drawn out.

Pot 1: Host + Seeded Teams
Brazil, Argentina, Colombia, Uruguay, Spain, Germany, Belgium, Switzerland
Japan, Iran, Korea Republic, Australia, USA, Mexico, Costa Rica, Honduras
Pot 3: CAF, CONMEBOL + France
Chile, Ecuador, Cote d'Ivoire, Ghana, Algeria, Nigeria, Cameroon, France
Pot 4: UEFA
Netherlands, Italy, England, Portugal, Greece, Bosnia-Herzegovina, Croatia, Russia

Pot 1: Best and Worst Case scenarios

For Brazil, Spain, Germany, and Argentina, they should all feel pretty comfortable playing anyone in Pots 2 and 3 and most of Pot 4.  Needless to say the two teams they most want to avoid are the Netherlands and Italy.  Italy has the tactical tools needed to combat Spain and has a very impressive record against Germany. The Netherlands is starting to integrate some of their younger, more talented players such as Kevin Strootman, and Erik Pieters, along with Robin van Persie and Arjen Robben as experienced players who are in-form.  Qualification Chances: >97%

For Uruguay they have a couple of teams to worry about in addition to the Netherlands and Italy. While they have a talented striking partnership in Cavani and Suarez as well as a resilient defense, they can get overrun by teams with good central midfield duos.  USA, France, Chile, and Portugal fall into this category.  They struggled pretty heavily in South American qualifiers until the past couple of months and are only seeded due to a semi-final run at the Confederations Cup along with winning the Copa America recently.  Qualification Chances: 75%

Colombia and Belgium are roughly on the same boat.  Both teams are appearing at the World Cup for the first time after a long layoff and are brimming with attacking talent. However neither team is particularly strong at fullback. Belgium frequently uses CBs in those positions and it doesn't come as naturally. They could struggle against teams who have very good wingers. Portugal, Cote d'Ivoire, and Ecuador are teams they probably want to avoid.  Qualification Chances: 85%

How Switzerland got in Pot 1 is somewhat of a travesty given that the Netherlands and Italy are better teams by far, but they aren't a bad team and have a quality defense. Stephan Lichtsteiner is very good at getting forward from his RWB/RB position, but if he's forced to play a more defensive role against advanced wingers, the team could struggle to get forward. In addition to the teams above, they would probably not want to face England, Ghana, or France. Qualification Chances: 50/50

Pot 2
This isn't a very strong pot when looking at it.

Asian teams: Japan was the first team to qualify for the World Cup (not counting Brazil who automatically qualify as hosts), but since then they haven't had a great run of games, including a disappointing Confederations Cup. Their CB pairing is still a bit shaky, but they have an impressive attacking trio with Keisuke Honda, Shinji Kagawa, and Shinji Okazaki and are relatively comfortable with the ball.  They are organized enough to do well against many teams in Pot 3 but need a favorable matchup with a team from Pot 4 to progress. . South Korea is in Japan's boat but doesn't quite have the same attacking power.  Their back 4 plays in the Korean league which could be a cause for concern. They are a side that presses energetically. Qualification Chances: ~40%

USA has been in very good form throughout qualifiers but could face a tough group.  They have the physicality to keep up with many teams, they're looking more comfortable playing with the ball, and they'd probably fancy themselves against anyone in Pot 3 when in form. That being said, beating teams in CONCACAF while playing well is a totally different thing than taking on some of the best from Europe and South America. One concern is Jozy Altidore isn't playing very well for struggling Sunderland in the Premier League. While there are very few outcomes in which they can win a group, finishing second might not be too far-fetched. Qualification Chances: 50%

As for the other teams, Mexico just about squeaked into the World Cup and several of their starters, including Chicharito, Andres Guardado, and dos Santos have been unable to get games in Europe's top leagues at the moment.  Starting players from the Mexican league are more likely to be in form, but their talent level will likely be insufficient considering how many teams are.  Iran, Australia, Honduras, and Costa Rica are sides built primarily around one player and that doesn't bode well since they are easy to mark. I can't really see a scenario in which any of these teams would qualify.  Mexico might be able to if their players in Europe start playing more games. Mexico's chances: ~30%.  Australia 10%, The Rest <3 b="">

Pot 3:
The theme for this group can be summed up as strong attacking play but questionable defending.  France was in a group with Spain in UEFA qualifiers and that's the only reason why they had to enter a playoff against Ukraine. While Franck Ribery is the standout player for Les Blues, there are plenty of talented attacking and defensive midfielders to choose from; however, there are some issues that can surface.  Many French players play for English clubs and that could potentially lead to burnout.  Plus Didier Deschamps still hasn't figured out what his best CB pairing is and that nearly cost them a spot at the WC against Ukraine.  Karim Benzema's lack of form for the national team is slightly worrying but if Olivier Giroud keeps playing at a high level, like he is for Arsenal, then they might go far. 75% chance of qualifying

African teams: Cote d'Ivoire and Nigeria have had awful luck with draws in the past being put in either the Group of Death or the second hardest group.  With the strength of the opposition at the World Cup this year, it looks likely to continue. Nigeria has several energetic young players but are rather erratic going forward and too often resort to individual quality to score as opposed to cohesive team play.  Cote d'Ivoire are nearing the end of a golden generation but still have very talented, powerful attackers like Yaya Toure, Wilfried Bony, Gervinho, Seydou Doumbia, and of course Didier Drogba.  Their first choice defense is aging, but as a team Les Elephants can hold their own against some teams in Pot 4, and would fancy themselves against many teams from Pot 2.  35% chance of qualifying

Cameroon and Algeria are unlikely to qualify due to a lack of depth or inability to hold out teams from other groups. Beyond Samuel Eto'o who's 31 years old, there isn't much going for Cameroon.  Ghana still puts out several young players and with Kevin-Prince Boateng and an organized defensive structure they can play well and limit some of the big teams. However,with the level of attacking talent present at the World Cup, it may not be so easy for Ghana to qualify. Qualification Chances: Ghana 50/50, Cameroon/Algeria 15%

South American teams: Chile continues to be a high-pressing and ball-retention side, in the same pattern that former coach Marcelo Bielsa established at the 2010 World Cup.  Alexis Sanchez and Arturo Vidal are probably the biggest threats. Gary Medel is a tenacious defender and has carried that over to Cardiff.  They ran the show at Wembley in a friendly against England, and recorded as many wins as Argentina and Colombia in qualifying.  They can be exposed on counter attacks though and would be unlikely to impose themselves on a team in Pot 1. I expect them to qualify for the knockout stages in most scenarios.  They can definitely play their game against teams in Pot 4 due to a climate advantage and a cohesive starting XI.  Ecuador's chances are limited due to a lot of their play being concentrated around one or two players.  Antonio Valencia and Felipe Caicedo are their best attacking outlets.  Qualification Chances: Chile 60%, Ecuador 25%

Pot 4:
These are all UEFA teams who won their group/playoff match but weren't seeded.

The Netherlands and Italy are probably the teams best-equipped to qualify for the knockout stages either as group winners or runners up.  Italy did struggle a bit at the Confederations Cup as their players had to cope with the climate and a few injuries but they gave Spain a tremendous game and did fairly well against Brazil despite conceding 4 goals.  The Dutch have been revitalized under Louis van Gaal and have a good mix of youth and experience but there might be one or two defensive issues which could surface.. Italy under Cesare Prandelli are very tactially adaptable and look comfortable with a back 3, a back 5, a midfield diamond, or a straight 4-3-3/4-3-2-1.  They don't often use width in their attacks however. Both their respective problems might only surface in the knockout stages however. Qualification chances: > 95% for both teams

Greece, Russia, and Bosnia-Herzegovina are sides based around one or two good players but not much of a team dynamic.  For Bosnia, Edin Dzeko is the main source of creativity and danger but he isn't getting many games at Manchester City and unless that changes he might struggle and the team will lose its edge.  Greece has Kostas Mitroglou. but again the lack of form of other players means he's an easy target to mark out of games.  Russia's main source of danger is Alan Dzagoev but he is rather streaky and gets frustrated when pitted up against a good defense.  It's hard to see how these teams will qualify as they might struggle even against teams from Pot 2.  20% chance of qualifying

Croatia's form has been indifferent in 2013, similar to Mexico but they did manage to win their qualifier against Iceland.  Luka Modric and Mario Mandzukic are probably the most talented players and Dejan Lovren has been very solid for Southampton at the back so there could be hope for them. They can probably handle most teams from Pot 3 and Pot 2.  Qualification chances are around 50/50. 

And now we come to England and Portugal.  Portugal has pretty much everything except a proper forward to support Cristiano Ronaldo.  A strong midfield, a strong defense, but no one apart from Ronaldo to finish. If they can make it out of the knockout stages then they could be a dangerous proposition for many teams. England took qualifiers fairly seriously and Roy Hodgson has them playing as a unit; however with the increasing strain of English football, a lot will depend on how Wayne Rooney plays.  A lack of dynamism in central midfield could hurt them if they have to face one of the top teams.  In most cases I'd expect Portugal and England to qualify for the knockout stages.  75% chance