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11BarryLarkin11
07-14-2007, 03:36 AM
Something unusual has been happening in baseball as of late and it is very relevant for us over the next month. In fact, I think it portends badly for our chances of rebuilding via a firesale.

There has been a subtle, but substantial shift in the way the market values players. In short, baseball organizations are beginning to value their top prospects like never before. Baseball writers mention it from time to time, but I think the shift has really become evident this year.

I read a chat with ESPN's Jerry Crasnick last week in which he suggested the reason for the shift was that fans had become more knowledgeable about the prospects in their organization, so GMs would come under fire if they were dealt. He cited Clay Bucholz of the BoSox as an example. Personally, I don't think that's the reason.

In years past, top prospects were often dealt for half season rentals. The best example that comes to mind is the Tigers trading John Smoltz to the Braves for Doyle Alexander. That trade worked out about as well as any half season rental can, as Doyle went 9-0 with a 1.53 ERA for the Tigers and helped them reach the postseason in 1987.

However, those deals have become increasingly rare, as the opportunity cost of dealing blue chip prospects is higher than ever before. The cost of giving up the production of blue chip prospects has begun to heavily outweigh the benefits. If you are dealing away inexpensive prospects, then you likely have to find replacement production via free agency or trade. No matter where the replacement production comes from, it's going to more expensive than the prospect that was dealt away, because prospects are the only inexpensive production available in the market. Not to mention, the cost of replacement production for the prospects that are dealt away is skyrocketing.

The average MLB salary in 1988 was $453,020 and players in their first 3 years of service time earned ~$85,000-150,000 and the top veteran pitchers were earning ~$1.75-2.0M. In 2006, the average MLB salary was $2,834,521 and players in their first 3 years of service time were earning $330-550K and veteran pitchers were making ~$10M in free agency.

Over the years, salaries have increased on average about 10% per year. The difference is that a 10% increase in $350,000 salaries is much less in real dollars than a corresponding 10% increase in the cost of free agents. Accordingly, the disparity between the cost of veteran free agents and the cost of prospects has grown by leaps and bounds.

If you deal away a young prospect, you are throwing away three years of VERY inexpensive production and three years after that of below market production. Instead of getting good production over the next three years for ~$350-500K, you have to replace that production with expensive free agents at a cost of $10M. It costs you $9.5M more per season for the next three seasons ($28.5M over three years) in order to acquire a half season rental. In the past, you could find replacement production at a much lower cost, likely ~$2M in 1988.

So, in 1988, the Tigers could replace top prospect John Smoltz for ~$1.75M. In 2006, that same type of move would cost ~$10M. Personally, I think that it is this cost increase that has led to organization valuing their prospects MUCH more highly. They are just very reluctant to deal these types of prospects.

Inflation certainly plays a part, but prospects are just a much more valuable commodity than in years past. The salary for first year players has risen 3.5 times (from ~$100K to ~$350K), but the cost of free agent pitchers has increased 5-6-7 times (from ~$2M to ~$10-12-14M).

By trading away top notch prospects, you are incurring a huge opportunity cost, because you can no longer take advantage of 6 years of bargain priced production. Dealing away top prospects for half season rentals is becoming impracticable because the cost of replacing the future production of that prospect is exponentially higher than in seasons past. The market has begun to factor in these increasing costs and the valuation of top flight prospects has changed accordingly.

Unfortunately, that bodes poorly for us, as we are unlikely to reap a huge return for Adam Dunn. The cost of replacement production just doesn't make it feasible to rent high priced veteran players anymore.

This trend seems likely to continue until the salaries at the beginning of a player's career begins to increase. Until then, dealing away top prospects is a risky proposition.

The disturbing part of this is that I'm not sure that Krivsky has realized this market shift in prospect valuation.

The idea that Krivsky is asking for such a massive package of talent in return for Adam Dunn makes me wonder. The market is not going to yield that kind of talent for an expensive veteran and setting such a high asking price is serving no purpose but to scare off potential trade partners. If we can get one elite prospect for Dunn, then I think we should be very happy with that.

At this point, I think the Reds should be willing to pay the market rate or perhaps even overpay to get certain targeted players (i.e. Matt Kemp, Jarrod Saltalamacchia, etc). It's time to recognize the market shift and cut a deal with the realization that they can still be beneficial under the new market paradigm.

My $.02.

AmarilloRed
07-14-2007, 03:55 AM
I respect your opinion, but there will be no trade if we don't get proper value in our trade. A team that wants Adam or any other very good player on their roster had better be willing to trade 1 elite prospect and 1-2 very good prospects. Teams had better realize it is going to take top prospects to make any trade happen. There will always be a risk when you deal a player in his prime and try to sign him to along-term deal, rather than have him as a 1-year rental. I don't think any team is looking at Dunn as a rental; they are looking to lock him up. This factor may cause there to be very few trades actually happen by the trading deadline. It doesn't seem like teams are willing to pay the necessary price to make trades happen.

11BarryLarkin11
07-14-2007, 04:04 AM
I respect your opinion, but there will be no trade if we don't get proper value in our trade. A team that wants Adam or any other very good player on their roster had better be willing to trade 1 elite prospect and 1-2 very good prospects. Teams had better realize it is going to take top prospects to make any trade happen. There will always be a risk when you deal a player in his prime and try to sign him to along-term deal, rather than have him as a 1-year rental. I don't think any team is looking at Dunn as a rental; they are looking to lock him up. This factor may cause there to be very few trades actually happen by the trading deadline. It doesn't seem like teams are willing to pay the necessary price to make trades happen.


Fair enough, but I just don't think there's any way you get that kind of package for a half season rental of just about anyone in baseball.

Why give up so many cost effective, promising prospects for 3 months of Adam Dunn? There is a huge opportunity cost that you have to factor in to the equation, as you lose the benefit of 6 years of bargain basement costs on those prospects that make the major league. That's a lot to give up for 3 months of Dunn and I think the market is starting to factor that in.

I think the skyrocketing salaries for veteran players have drastically increased the value of top notch prospects.

To me, a player loses much of his trade value when he reaches the point where his salary is at the going market rate. Why give up elite prospect to acquire a player whose salary is at the going market rate? If he is earning the going market rate, then you can simply go out onto the market to buy that production at the same cost.

I think a player's trade value is driven by the number of years he is under the team's control and how far below the going market rate his salary is and will be. Those two factors create a kind of unique value to the team that controls their rights, which is what's desirable in the current marketplace. The value isn't created by the player's production, but rather by the ability of the organization to obtain this production at a lower than market rate.

Why trade Hunter Pence for Adam Dunn when you go out on the free agent market and get Carlos Lee for nothing more than cash? The production difference isn't all that different, but the cost of acquiring the free agent is drastically lower.

I think that's the way the market is heading and it's a trend that I don't see reversing anytime soon. It's the unique value created by the player earning below the market rate and being under control that creates substantial trade value. I think those factors are what truly drives trade value in the current market.

BucSappy
07-14-2007, 05:16 AM
I have a trade projected for Dunn.

LA Angels get: Adam Dunn, OF Cincinnati Reds
CIN Reds get: Erick Ayber, SS, LA Angels

I think this is a fair trade. Ayber hit about .290 in the minors but is hitting I think .240 in his young career. He has great range and a great glove.

But I think this improves the offense of teh team because we get more speed and we get rid of Dunn. Dunn is killing the middle of the order, but he gives LAA a much needed powerful DH.

BearcatShane
07-14-2007, 05:35 AM
Where do we play Eybar?

joshnky
07-14-2007, 09:16 AM
But I think this improves the offense of teh team because we get more speed and we get rid of Dunn.

Since according this trade improves the offense of our team, wouldn't it conversely weaken the Angels offense? If Dunn is that bad why would the Angels do this?

I really hope we don't trade a guy who will hit 45 hrs, drive in 100, and OPS around .900 for a weak hitting middle infielder. The only benefit I can see would be the salary relief but I hope that is not the driving force behind any of Krivsky's trades.

nate
07-14-2007, 09:44 AM
But I think this improves the offense of teh team because we get more speed and we get rid of Dunn. Dunn is killing the middle of the order, but he gives LAA a much needed powerful DH.

Replacing a one of the league's best offensive players with a Judy-hitting SS improves the offense? Can you explain how this works?

Orenda
07-14-2007, 11:24 AM
Replacing a one of the league's best offensive players with a Judy-hitting SS improves the offense? Can you explain how this works?

Judy-hitting...nice. Top prospects are still unkown commodities, they don't always pan out. Trading for less than one would be unwise in the case of Dunn. If nothing else he gives you time to ease a then, (20-21?) year old Jay Bruce into a starting role at equal to above average value with his contract.

nmculbreth
07-14-2007, 11:58 AM
I think the OP makes a very interesting point. Most teams have limited financial resources so it only makes sense that as salaries have started to increase that they'd start to place a greater premium on cheap talent.

In regards to the market value for Dunn, IMHO it is fairly simple. When Adam Dunn leaves as a free agent, he will most likely be a type A player and net the Reds two draft picks in the top 50. If the compensation offered by other clubs doesn't exceed the expected value of the players obtained with those two draft picks, you don't make the deal.

11BarryLarkin11
07-14-2007, 12:12 PM
I think the OP makes a very interesting point. Most teams have limited financial resources so it only makes sense that as salaries have started to increase that they'd start to place a greater premium on cheap talent.

In regards to the market value for Dunn, IMHO it is fairly simple. When Adam Dunn leaves as a free agent, he will most likely be a type A player and net the Reds two draft picks in the top 50. If the compensation offered by other clubs doesn't exceed the expected value of the players obtained with those two draft picks, you don't make the deal.

Unfortunately, I'm not entirely sure it is that simple.

How can we decline the option year and then turn around and offer him arbitration?

Dunn gave us a team option under the condition that it was voidable if he was traded because he wanted to stay in Cincy. If he wasn't to be in Cincy, he wanted to control where he ended up.

Given his past comments, one would think he'd be interested in playing in the state of Texas, but Houston is not likely to be interested, as they locked up Carlos Lee who is similar in production and cost to Dunn.

So, unless the Rangers make a big play for Dunn in the offseason, he could conceivably accept arbitration. Cincy might be the most attractive option for him in 2008. If he does accept arbitration, then he could end up getting MORE in arbitration than he would've gotten had we exercised the team option. The huge contracts given out to Carlos Lee, Alfonso Soriano, etc could drive up the arbitration award of Adam Dunn.

Not only would we not get draft picks, but we might actually have to pay more to keep Dunn in 2008.

At this point, I think the only viable options are to trade Dunn before the deadline or to bring him back for 2008.

nate
07-14-2007, 02:19 PM
Judy-hitting...nice. Top prospects are still unkown commodities, they don't always pan out. Trading for less than one would be unwise in the case of Dunn. If nothing else he gives you time to ease a then, (20-21?) year old Jay Bruce into a starting role at equal to above average value with his contract.

Right, so why trade a good 20% of your offense for a player whose position you already have filled when your biggest needs are:

*relief pitching
*relief pitching
*relief pitching
*starting pitching
*right handed power hitting
*a decent offensive catcher

A young AAA shortstop would be nice but not for Dunn. No way.

Screwball
07-14-2007, 02:37 PM
Why give up so many cost effective, promising prospects for 3 months of Adam Dunn? There is a huge opportunity cost that you have to factor in to the equation, as you lose the benefit of 6 years of bargain basement costs on those prospects that make the major league. That's a lot to give up for 3 months of Dunn and I think the market is starting to factor that in.


First off, you're assuming the team trading for Dunn would not negotiate an extension in the 72 hour window prior to the trade. Secondly, a team would give up a top prospect for Dunn because A.) they're dealing from a position of strength or surplus to fill a void, and B.) Dunn could be the missing link to put that team over the top as opposed to a prospect who may or may not help out down the road. While giving up a top prospect may be painful, I think most GMs realize that's the going rate to get a player that completes the puzzle and makes you a world champion caliber team.

Now whether or not opposing GMs think Dunn is that missing piece will decide what type of return we can get for a potential trade.

thorn
07-14-2007, 02:38 PM
I really don't see the Reds going for a catcher, despite Ross's shortcommings, and they won't accecpt anyone they can't control for the next 3 years because they know this season is a wash. They will keep Ross, back him up with Hannigan next year, let Moeller and Javier go. If Javy stays, he will back up Votto at first, or they will get a RH backup 1b to backup Votto. 2009 we will see Hannigan and Tatum share catching till Mesoroco (SP?) arrives in 2012 or whenever he gets here. So I think any trades will involve youth, pitching and more youth, don't expect any Veterans now or in the near future, unless they are comming off the bench as cheap FA's or the bullpen. Our Veteran next year could be A Gon, outside of pitching.

AmarilloRed
07-15-2007, 02:37 AM
Fair enough, but I just don't think there's any way you get that kind of package for a half season rental of just about anyone in baseball.

Why give up so many cost effective, promising prospects for 3 months of Adam Dunn? There is a huge opportunity cost that you have to factor in to the equation, as you lose the benefit of 6 years of bargain basement costs on those prospects that make the major league. That's a lot to give up for 3 months of Dunn and I think the market is starting to factor that in.

I think the skyrocketing salaries for veteran players have drastically increased the value of top notch prospects.

To me, a player loses much of his trade value when he reaches the point where his salary is at the going market rate. Why give up elite prospect to acquire a player whose salary is at the going market rate? If he is earning the going market rate, then you can simply go out onto the market to buy that production at the same cost.

I think a player's trade value is driven by the number of years he is under the team's control and how far below the going market rate his salary is and will be. Those two factors create a kind of unique value to the team that controls their rights, which is what's desirable in the current marketplace. The value isn't created by the player's production, but rather by the ability of the organization to obtain this production at a lower than market rate.

Why trade Hunter Pence for Adam Dunn when you go out on the free agent market and get Carlos Lee for nothing more than cash? The production difference isn't all that different, but the cost of acquiring the free agent is drastically lower.

I think that's the way the market is heading and it's a trend that I don't see reversing anytime soon. It's the unique value created by the player earning below the market rate and being under control that creates substantial trade value. I think those factors are what truly drives trade value in the current market.

You are assuming that Adam or any other player would only be a rental for 3 months. Any team that gives up those prospect will want to make sure their team has him locked up for a number of years. I am sure the team will be negotiating with said player, and doing their very best to sign him to an extension before the trade is made.

11BarryLarkin11
07-15-2007, 03:15 AM
You are assuming that Adam or any other player would only be a rental for 3 months. Any team that gives up those prospect will want to make sure their team has him locked up for a number of years. I am sure the team will be negotiating with said player, and doing their very best to sign him to an extension before the trade is made.

Maybe they will, but given Dunn's desire to control where he plays (option year voidable if traded, talked of returning to play in Texas), it seems unlikely that he'd want to sign with any team that the Reds trade him to without testing free agency. If he were willing to sign an extension, then it would increase his trade value, but those types of trades involving a window for working out an extension are pretty rare.

Chi-Town Red
07-15-2007, 03:33 PM
First off, you're assuming the team trading for Dunn would not negotiate an extension in the 72 hour window prior to the trade. Secondly, a team would give up a top prospect for Dunn because A.) they're dealing from a position of strength or surplus to fill a void, and B.) Dunn could be the missing link to put that team over the top as opposed to a prospect who may or may not help out down the road. While giving up a top prospect may be painful, I think most GMs realize that's the going rate to get a player that completes the puzzle and makes you a world champion caliber team.

Now whether or not opposing GMs think Dunn is that missing piece will decide what type of return we can get for a potential trade.
exactly