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The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Market


Johnny C

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The Tasty Ice Cream Sandwich

That I Just Bought for 50p

That I Haven't Tasted

And Haven't Unwrapped

Is Now Worth 300p

Simply Because I Own It

I just want to highlight how potentially utterly ridiculous

the transfer market is

as is some of the useless noise

coming out of it.

So this morning, Porto signed JAMES RODRIGUEZ for €5.1M.

Nice signing of an exciting young player.

l456994578883068.jpg

However, Porto immediately turn around

and instantaneously put out a press release

that says that JAMES RODRIGUEZ is now worth

... (wait for it) ...

€30.0M

simply because he wears a Porto kit

Absolutely ridiculous.

ice-cream-sandwich._V29378038_.jpg

Cost Me

British_fifty_pence_coin_2007_Scouts.JPG

One Minute After Buying It

I am Telling You It's Worth

This

British_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPG

British_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPG

I realize that Porto find themselves situated as buyers from South America and sellers to the remainder of Europe, but they (and other clubs) can really save this type of noise. I have a limited amount of brain cells as it is already.

Oh.... The silly season.

.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

Yes, stupid release clauses are ludicrous. Didn't Barca originally put a 60 million euros release clause in Y.Toure's contract. He's worth a third of that, and even with some ludicrous spending from Man. City they didn't reach half of that original release clause fee.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

However' date=' Porto immediately turn around

and instantaneously put out a press release

that says that JAMES RODRIGUEZ is now worth

... (wait for it) ...

€30.0M

I don't remember Porto ever saying, stating or writing that James was worth €30 million. That's simply a release clause, and it's purpose is solely to build a negotiation margin should James perform well and become a target to other clubs, while simultaneously being a reasonable fee which makes the player not feeling permanently tied to the club, should he confirm all his raw potential. It's something usual in Portugal, and 90% of the players here have a minimum fee release clause. Yet, I don't recall many who were sold for that value, Pepe being the exception that confirms the rule.

Cristiano Ronaldo has a €1 billion (€1000 million) release clause, yet he's not worth 1/10 of that.

Sorry Johnny, you know I love you, but it's a pretty pointless thread... Release clauses have been a cliché for a lot of years now, and I can't see it ending any time soon.

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

The Tasty Ice Cream Sandwich

That I Just Bought for 50p

That I Haven't Tasted

And Haven't Unwrapped

Is Now Worth 300p

Simply Because I Own It

I just want to highlight how potentially utterly ridiculous

the transfer market is

as is some of the useless noise

coming out of it.

So this morning' date=' Porto signed JAMES RODRIGUEZ for €5.1M.

Nice signing of an exciting young player.

[img']http://img15.imageshack.us/img15/3692/l456994578883068.jpg[/img]

However, Porto immediately turn around

and instantaneously put out a press release

that says that JAMES RODRIGUEZ is now worth

... (wait for it) ...

€30.0M

simply because he wears a Porto kit

Absolutely ridiculous.

ice-cream-sandwich._V29378038_.jpg

Cost Me

British_fifty_pence_coin_2007_Scouts.JPG

One Minute After Buying It

I am Telling You It's Worth

This

British_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPG

British_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPGBritish_fifty_pence_coin_2007_Scouts.JPG

I realize that Porto find themselves situated as buyers from South America and sellers to the remainder of Europe, but they (and other clubs) can really save this type of noise. I have a limited amount of brain cells as it is already.

Oh.... The silly season.

.

the release fee clause isnt what the player is actually worth, it is what the club think hes worth, it doesnt really matter as theyd probably be happy to accept a 15 mill offer, barca do it to their players such as pique and pedro, them both have ridiculous amounts of release fee clauses which will never be met.

In this day an age, it depends more on the players, if in the future james wants to leave, then will have to accept a lesser bid.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

Release clauses have been a cliché for a lot of years now' date=' and I can't see it ending any time soon[/color'].

The point is that release clauses and statements like this are complete noise. They are nonsense and aren't even worth the paper they are printed on.

They serve no positive purpose.

In fact, come-to-think-of-it, I wouldn't be surprised if clubs are deceivingly using these whacked-out release-clause valuations as a way to artificially inflate their club's "assets".

Pretty easy to see how clubs could take these artificial internal valuations on their own players and list them as the Asset amounts ; take this artificial Asset amount and show the banks that they do business with these figures ; and the banks are writing loans to the clubs based on James Rodriguez's €30M in worth to Porto or CRonaldo's €1.0 Billion worth to Madrid.

I wouldn't put it past any club to pull this type of "fraud". (not picking on Porto or Madrid)

Pull this type of stuff in the real world with a publicly listed company and the CFO will find himself in jail. Pull this stuff with a private company (which 99% of these clubs are) and the beat goes on until the banks pull the plug.

Hey' date=' I just bought an ice cream sandwich pack of 10 for 5 dollars (50 cents a sandwich.) In this 45 degree heat, I'm not selling them for 50 dollars. So it makes sense.[/quote']

You are too much ...! :D

.

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

People thought they were crazy when Santos gave 17 year old Neymar a 33 million euro clause, or something like that. Then, Coutinho and Wellington Silva were both signed dirt cheap.

And now, if it wasn't for the 33 mil, Neymar would no longer be at Santos.

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

People thought they were crazy when Santos gave 17 year old Neymar a 33 million euro clause' date=' or something like that. Then, Coutinho and Wellington Silva were both signed dirt cheap.

And now, if it wasn't for the 33 mil, Neymar would no longer be at Santos.[/quote']

who has wellington signed for?

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

lol..

If you go to the hypermarket, do you think you will buy the fruit at the same price they have bought to the producer? will be 100/200% more high! And i doubt anyone have eaten or at least licked the fruit !

Porto put him a release clause of 30M €, you only buy him if you want, and you only buy for that amount of money if you want. No one will aim a weapon to your head to buy him. If you want i can help you with 1€.

Porto have put a release clause of a value they think he will worth in the future. To guard he will not leave for less than his real value at that time. Being that value 30M€ or even less, but they at least will not sell him cheap.

oh, and Porto wasted 5,1M€ in 70%..

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

The point is that release clauses and statements like this are complete noise. They are nonsense and aren't even worth the paper they are printed on.

They serve no positive purpose.

In Porto's defence I tell you that we are obliged to release such documents. Why? Because FC Porto' date=' S.A.D is listed in the Euronext Lisbon stock change, meaning any potential share-inflationing deal, such as a multi-million signing, must be communicated to the respective entity, in our case the CMVM. Feel free to visit their website.

So we aren't talking about noise. We're talking about a legal obligation. Since James has a €30 million clause, that must be communicated as well.

Again, feel free to check the original document, which is later echoed in the press (not directly released by Porto to the general public, as you seem to think).

In fact, come-to-think-of-it, I wouldn't be surprised if clubs are deceivingly using these whacked-out release-clause valuations as a way to artificially inflate their club's "assets".

...Maybe. But it's undeniable that Porto is the club in Europe which sells most players at a high fee. A €30 million release clause on an 18/19 years old boy seems modest to me, when we sell the 29 years old Lucho Gonzalez for €20 million or 27 years old Lisandro for €24 million + clauses. The entire player market is made out of valorizations and desvalorizations, taking into account factors such as age, quality of the player, abundance of assets in his position, etc. Like good Portuguese we are, Porto is anticipating a valorizaton, which justifies said clause.

Pretty easy to see how clubs could take these artificial internal valuations on their own players and list them as the Asset amounts ; take this artificial Asset amount and show the banks that they do business with these figures ; and the banks are writing loans to the clubs based on James Rodriguez's €30M in worth to Porto or CRonaldo's €1.0 Billion worth to Madrid.

Pull this type of stuff in the real world with a publicly listed company and the CFO will find himself in jail. Pull this stuff with a private company (which 99% of these clubs are) and the beat goes on until the banks pull the plug.

You wrote an entire essay on how the Banks supported Madrid... Can't really argue here. But hey, Porto doesn't take bank loans any more... :)

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

Is it not more to do with protecting their asset once they, inevitably flourish and progress into a more-rounded individual, fit for European football (like we all know that this kid will do)? I don't think it's anything to do with Porto valuing Rodriguez at 30ME today, right now; I'd say it's more to do with what they expect Rodriguez to be worth in the coming years, and/or what they would be happy with in exchange for his services at that point. It's not like Porto are putting him in the shop window asking clubs to swoop in and take him away for this ridiculous quoted price before he's actually proven himself, is it? Once he begins to find his feet in Portuguese and European football, I'm confident his value (from what Porto paid) will treble - maybe even quadruple.

Also, is the Portuguese league like Spain where it is a necessity to put a release clause into every player's contract? (Well, it was like that on Football Manager, at least.)

And another thing, Porto paid 5.1ME for 70% of Rodriguez's services, meaning that his actual value is closer to 7.3ME.

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

Hey' date=' I just bought an ice cream sandwich pack of 10 for 5 dollars (50 cents a sandwich.)

In this 45 degree heat, I'm not selling them for 50 dollars.

So it makes sense.[/quote']

Its 42 here. HAH!

You know what is really ridiculous. I have a 90 minute game today with a 5 minute half time period and its 42 Degrees out side and is 50% humidity!

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Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

The More I Think of It

This Thread is Tackling a Whole Different

& MUCH MUCH MUCH BIGGER ANIMAL

Than I Originally Thought

When I Posted it Two Hours Ago

Release Clauses are very likely the avenue into accounting "fraud"

by clubs worldwide.

Porto just signed 70% of James Rodriguez for €5M.

1 Minute after signing him they are telling the world

and most importantly their bankers

that their portion of James Rodriguez

is now worth €30M to them.

Doesn't that strike anyone else as complete fraud...?

A Farcical Sham...? An Unmitigated Crock...?

Or At Least a Little Shady...?

Listen I know that Release Clauses have been around forever and are used by a number of clubs....

...But I want us to think outside the box.

Why do you think that all of these clubs use Release Clauses

when they rarely ever are met in real life...?

Seriously what is the point of them....?

Here's the logical explanation.

Here's a quasi-real life Wall Street example of what just happened:

Aside from being a typical investment bank, Bank XYZ also makes real-estate investments.
Bank XYZ acquired lots of real-estate in Miami and south of Barcelona.

At the end of the fiscal quarter,
Bank XYZ provides it's earnings, as well as shows you how it's assets & liabilities have grown/shrunk.

Investors of Bank XYZ as well as the business partners of Bank XYZ use this information
to
(1)
either put a value on Bank XYZ and/or
(2)
to understand the risks associated with Bank XYZ.

It is up to Bank XYZ to put their own value on their property
in Miami and their property south of Barcelona.

Despite real-estate values in Miami & south of Barcelona falling off a cliff
, Bank XYZ doesn't want to mark down their investments. For several quarters they prop-up the values of their Miami & Barcelona investments, by claiming that they are worth much more than the current real-estate market is willing to pay.

So essentially they are valuing their own assets and policing themselves
the validity of these valuations.

Why is Bank XYZ doing this...?
To show it's investors and the other banks & partners which it does business with, that it's in good health.

A high valuation for Bank XYZ's assets
means that other banks are more willing to loan it money.

A higher valuation for Bank XYZ's assets
generally means that Bank XYZ is valued higher by it's investors. Which means more money in everyone's pockets.

Question:
Who is valuing Bank XYZ's Assets...?

Answer:
Bank XYZ

This is sooooooooooo wrong.
Not necessary illeagal but soooooooo m-f wrong. Heck, it's how our entire recent recession started.

So let's put this example in terms of Futbol Club XYZ :

The assets at Futbol Club XYZ
(or any club)
ar
e generally give-or-take a small handful of things:
(1)
Stadium Complex

(2)
Contracts with business partners (kits,naming rights, etc)

(3)
Players

For the most part figuring out the value of
#1
and
#2
are fairly straight forward. Kind of hard for clubs to disagree with the valuation of an namings right deal or a kit deal or the real-estate of a stadium.

It's when it comes to putting a value on Players that Clubs have the most leeway
in terms of figuring out valuation.

In the stock market, every nanosecond you know exactly how much one share of Apple (AAPL) is worth. The stock trades every nanosecond of every day on an open liquid market.

Well buying & selling Players isn't a liquid market like stocks.
You don't have a new valuation on Cristiano Ronaldo every nanosecond, day, week or even month.

Like many other clubs, Futbol Club XYZ, uses the illiquid tendency of the Player Transfer Market
as a weapon when it does business with banks.

Banks give short-term and long-term loans to Club XYZ. These loans are necessary for Club XYZ to survive.
They use the short-term loans generally to finance Buying Players and they use the long-term loans to generally finance bigger things like a new stadium.

The amount that the banks are willing to loan to Club XYZ is 100% fully dependent upon
the fiscal health of Club XYZ. The better the fiscal health of the club, the better loan terms that they can get from the banks.

When determining the fiscal health of FutbolClub XYZ, the banks look @
a number of different things, but some of the main drivers are:
(1)
Assets

(2)
Liabilities (debts)

Club XYZ has Assets of €100M.

Club XYZ just bought a Player for €5.1M.
They shelled out €5.1M in cash for a Player.

The Assets of Club XYZ should be :

The Original Assets MINUS Cash Paid Out PLUS Player's Worth

€100.0M

-
€5.1M

+
Player's Real Life Worth

_____________________

Equals the Assets of Club XYZ

Now the Transfer Market just told the world what the general Real Life Worth of the player is ~ €5.1M

But considering that a buying club generally has a slightly higher valuation of the player than the selling club, let's assume that the Player's Real Life Worth is €7.0M (and even that's a huge stretch)

By doing the simple math, Club XYZ's Assets after buying the Player should be :

€100.0M

-
€5.1M

+
€7.0M

_____________________

€101.9M

HOWEVER, HERE IS WHERE THE FINANCIAL SHENANIGANS START.

When Club XYZ, put a valuation on the player,
they didn't use a realistic one (i.e. one close to the valuation that they paid 10 minutes earlier).

Instead, one minute after buying the Player, Futbol Club XYZ put out a statement saying that they are now immediately valuing the @ SIX TIMES HIS WORTH according to his new "Release Clause"

And here is what Club XYZ is now showing as their Assets :

€100.0M

-
€5.1M

+
€30.0M

_____________________

€124.9M

Club XYZ have now inflated their assets +20% from where they should be,
simply by placing a ridiculously high valuation on the Player's Real Life Worth.

That is complete accounting shenanigans at it's best !!!

Because of the higher Assets ; Asset-to-Liability Ratio, etc... banks are more willing to give Club XYZ the next loan, the next loan and the next loan.

At some point this ponzi scheme gets found out and everything unravels.

.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

...Maybe. But it's undeniable that Porto is the club in Europe which sells most players at a high fee. A €30 million release clause on an 18/19 years old boy seems modest to me' date=' when we sell the 29 years old Lucho Gonzalez for €20 million or 27 years old Lisandro for €24 million + clauses. The entire player market is made out of valorizations and desvalorizations, taking into account factors such as age, quality of the player, abundance of assets in his position, etc. Like good Portuguese we are, Porto is anticipating a valorizaton, which justifies said clause.[/quote']

This is a good point to consider.

But keep in mind that in doing so that clubs like this are greatly differentiating themselves from the rest of the futbol clubs on earth.

The majority of futbol clubs see themselves as entertainment companies who also may own some small real estate.

Clubs who issue Release Clauses and recognize the full amount of the Release Clauses as Assets are telling you that an inherent part of our business model is to be lucrative traders within the Worldwide Player Transfer Market.

And that's the rub.

Look no further than the real-life example of ENRON to see how this approach can spiral out of control. ENRON started as nothing more than a energy delivery company. There were hundreds like them. But at some point they decided that in addition to delivering energy that they were also going to trade it. Among other things at the end of the work-day they were putting their own valuations on their trades and propping up their Assets.

In the case of Porto today, they told the world that their portion of James Rodriguez was worth 6X what they paid for him 60 seconds earlier.

It seems very aggressive accounting and is certainly a slippery slope to traverse. And it's something to consider.

They aren't doing anything differently than dozens and dozens and dozens of other clubs who have this same profitable Transfer Market Strategy year after year after year. But certainly the aggressiveness in which these clubs "value" their players should be monitored.

As long as they can continue to it the ball out of the park with the actual transfer fees when they trade these players, everything is good. For instance, Porto has certainly been one of the more profitable in the Transfer Market over the past years.

It's when clubs that are player development profitable Transfer Market traders, put Release Clauses on their players.

That's when then bells and whistles and alarms should go off that something shady is up.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

But keep in mind that in doing so that clubs like this are greatly differentiating themselves from the rest of the futbol clubs on earth.

The majority of futbol clubs see themselves as entertainment companies who also may own some small real estate.

Clubs who issue Release Clauses and recognize the full amount of the Release Clauses as Assets are telling you that an inherent part of our business model is to be lucrative traders within the Worldwide Player Transfer Market.

And that's the whole point. Portugal belongs to the so called "PIGS" (Portugal' date=' Ireland, Greece and Spain), the weakest and most unstable economies in the whole Europe. Our socio-economic status is a mirror of the reality of Portuguese football. Low attendances, miserable income from selling TV rights, little to no merchandising profit outside the big-three...

In our specific case: Porto's only hope to keep up with the top gun teams is precisely getting a money injection from them. How do we get that? Selling our assets. How can we make the assets sufficiently valuable to help our finances? Through the player's valorization (on-pitch performance) AND over-valuing them ourselves... We took years to establish and polish the FC Porto brand, making it desirable, making the buyers of our assets TRUST in our valuation of our own assets...

That's what made us the team we are today. Without Russian clubs money-laundering schemes or EPL's rich owners, we manage to strive even in a time of recession...

Out of curiosity, Sporting is on the verge of collapsing (I doubt they'll live another 10/15 years), and Benfica hasn't collapsed already because public money was used to save their a$ses.

In the case of Porto today, they told the world that their portion of James Rodriguez was worth 6X what they paid for him 60 seconds earlier.

No... We told the world that if they want James, they'll have to pay us 6x of what we paid 60 second earlier... It's different.

It seems very aggressive accounting and is certainly a slippery slope to traverse. And it's something to consider.

Our little weapon in our little attempt to consistently match the big clubs.

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Re: Porto's James Rodriguez, The Super Expensive Ice Cream Sandwich & The Transfer Ma

And that's the whole point. Portugal belongs to the so called "PIGS" (Portugal' date=' Ireland, Greece and Spain), the weakest and most unstable economies in the whole Europe. Our socio-economic status is a mirror of the reality of Portuguese football. Low attendances, miserable income from selling TV rights, little to no merchandising profit outside the big-three...

In our specific case: Porto's only hope to keep up with the top gun teams is precisely getting a money injection from them. How do we get that? Selling our assets. How can we make the assets sufficiently valuable to help our finances? Through the player's valorization (on-pitch performance) AND over-valuing them ourselves... We took years to establish and polish the FC Porto brand, making it desirable, making the buyers of our assets TRUST in our valuation of our own assets...

That's what made us the team we are today. Without Russian clubs money-laundering schemes or EPL's rich owners, we manage to strive even in a time of recession...

Out of curiosity, Sporting is on the verge of collapsing (I doubt they'll live another 10/15 years), and Benfica hasn't collapsed already because public money was used to save their a$ses.[/quote']

DerbyP and I are on the same page here. I totally agree with all of this.

But DerbyPower is a very smart futbol guy and I know that he doesn't see things only through Porto-blue-tinted glasses.

The financial mechanism that "Selling" futbol clubs are using to compete with larger clubs is called the Release Clause, and it amounts to nothing more than financial shenanigans as shown by my simple mathematical exercise listed prior in my previous post.

If clubs who were fiscally truthful with their finances were fiscally accurate with their accountants & banking partners then the amount of the Release Clause would 100% EQUAL the amount that they are going to sell the Player for in a given year.

After all... That's exactly what a Release Clause is. Clubs are saying what they Player will be worth at some undefined point in the future as a member of that team.

For example, Porto are now telling the world (their bankers, other clubs, their stock investors) that they are going to eventually sell James Rodriguez for €30M. THAT'S INSANE. I'm not saying that they won't get it but:

(1)
DerbyPower said that he remembers only ONE Player's actual Transfer Fee being EQUAL to the Release Clause
that they were telling the banks/investors what the Player was worth (PEPE)

(2)There is NO CONCEIVABLE WAY that any team can slap a 6X Release Clause valuation on a Player one minute after
they and a bazillion other teams bid on the exact same player. How do I know this... Because this is what I get paid to do 24/7. I am fairly successful @ it and even then I may be right about the ultimate valuation but be wrong in the duration of time that it takes to reach that valuation. In which case I am completely wrong on the trade.

.

No... We told the world that if they want James, they'll have to pay us 6x of what we paid 60 second earlier... It's different.
No it's not different when it comes to the black and white stripe of the financial pen.

In the James Rodriguez case, Porto are telling the world that the James Rodriguez Porto Asset is worth 6X from what they just told the rest of the world when they bid for him a few minutes earlier. That's ludicrous by ANY measure.

And again, it's not just Porto, so please don't think I'm picking on them...

...It's any firm that employs a Release Clause whose 100% value amount they then turn around and recognize as an Asset for the club.

There is something very very wrong with this from most peoples' point of view.

We just came from a world where extremely loosey-goosey risk-adverse fiscal standards just took down the entire world's economic system. So why on earth would futbol clubs be taking the exact opposite approach with their accounting...? Crazy...right...

Our little weapon in our little attempt to consistently match the big clubs.
It's a weapon but it's a very very dangerous one for the club that chooses to utilize it. It's a slippery slippery slope.

Über aggressive accounting is not something to be taken lightly. When the party is over, it's lliterally Lights-Out !

.

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  • 4 years later...

Re: The Super Expensive Ice Cream Sandwich, Porto's James Rodriguez & The Transfer Ma

Looks like Porto didn't price the ice cream sandwich high enough!

I was right all along. :P

Remember folks, always trust the FC Porto brand! Now, can I interest you in Defour, Varela and Licá? Fantaaaastic players, I guarantee you won't go wrong with them.

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