Monday, December 20, 2004

The 04-05 free agent market

As a Pirate fan, I've sat back and watched the free agent signings with a kind of detached amusement. We don't desperately need starting pitching and we don't expect to sign a top-dollar slugger. So all of this has unfolded at some distance.

There's no doubt that these signings significantly change the environment in which Littlefield operates. Here are some thoughts on the subject.

1. The Mark Redman contract, which the A's and the media called "bad" at the time of the Kendall trade, does not look so bad today. The Benson signing established 3 years and $7M per as the standard for pitchers of Benson's ability. Mark Redman is more than half the pitcher that Benson is, was, or will be, and we have him not only for $4.25M, but also just for one year. And it's better. If the trade-time reports can be trusted, we also a team option of about $5M for 2006 or a player option for $4.5M in 2006. In the new environment, Redman, who is only one year removed from being one of the "catches" of the free agent market, is very much worth that contract.

2. Teams are spending like drunken sailors. Especially drunk are the Diamondbacks, who have a tremendous amount of deferred-salary debt. Or so they have claimed. Maybe they have been fudging the books to make it look like they have financial problems. I don't know.

Either way, I see three explanations for all the new spending.

A. More Money. Many people have reported that the teams are all doing much better right now. Increased attendance, satellite radio contracts, revenue sharing, etc. means more money is flowing into all the teams. If all of baseball is flush with cash, that could explain the drunken-sailor spending.

B. Incompetent financial management. Maybe they are drunken sailors after all.

C. Funny Money. Perhaps the owners are betting that the federal government will monetize the national debt. The easiest way for the government to get out from under its massive debt burden would be to invite inflation and devalue the currency. The dollar has fallen like a rock against the euro. Maybe the owners have good reason to believe that it's no big deal to promise someone $8M for the 2006 season. Will the day come when baseball contracts are valued in euros instead of dollars? Don't ask me - I'm just a beer-swilling guy in the bleachers.

3. If the More Money explanation is the answer, then we have to wonder what the Bucs are doing with their new money. If the Brewers can afford to sign some big-name talent, why can't the Bucs? The Brewers' 2004 payroll was in the $28M range. Now they've added Carlos Lee for $16.5M over the next two years. They are also making noise about keeping Ben Sheets when he goes to free agency. Looks to me like the Brewers have more money.

4. If all of these signings represent Incompetence, then we may see good buying opportunities next off-season. I like how we got Redman on a contract that was "bad" in September but good, or at least OK, in December. If teams are overextending themselves this off-season, perhaps the Pirates will have some good "certified pre-owned" players to consider this time next year.

It's always wise to let someone else pay the depreciation. Imagine that the Red Sox drive Matt Clement off the lot. Say he puts in a year where he pitches great in every ballpark except Fenway. If the current contracts are overvalued, the Bucs can acquire him or someone like him in a deal which involves the Red Sox paying part of what now looks like a "bad" contract. That's one way to get more with less money. Could a team plan on making such deals in the future? Only if they are certain that these contracts are above what will be market value in a year or two.

The easiest and most cynical explanation, I think, will be to say that the Pirates are making money hand-over-fist and putting it into the pocket of Mr. Burns Nutting. While I can't rule that out - what do we know about their books? - I'd also say it's possible there are other explanations. The owners and the front office get the benefit of the doubt from me. I'm not a sports fan for the opportunities it provides to bitch about the way the rich are screwing the poor. I'm not saying that I wouldn't agree with such arguments. I just don't think sports is the right context for what should be more activist energies.

5. Oliver Perez's agent is Scott Boras. There's no way Perez is going to sign an extenstion with us. He'll play year-to-year for the Bucs until he's eligible for free agency. Then he'll go to the highest bidder.

6. What's the best way, long-term, for the team to spend its money? Say the Bucs have some extra cash, like the other teams, and could increase payroll by $10M per year for 2005. When would you spend that money? Right away? One pro for spending right away is that every team should want to win right away. There's no point in losing now because you think it will increase your chances of winning later. Losing only promotes more losing. On the other hand, the market right now - and perhaps this whole off-season - looks overpriced. It's hard to buy value when contracts are only going up. In the end, as with every move a GM makes, the decision to spend now or hold for later involves calculated gambles.

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