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Thursday, January 18, 2018

The Current MLB Free Agent Market - Perception vs Reality? | Jays From The Couch

A very interesting take on 2018 free agency.

Remember last year when the market for power bats collapsed and shocked many – including the Blue Jays front office? That was preceded by a couple of years where “lower quality” aging veterans had already been relegated to 1 year deals or even minor league contracts. Last winter it was more middle of the road players which were hit hard, and higher quality players like Edwin Encarnacion and Jose Bautista were impacted. The contract Jay Bruce just signed (3 years and $39 million) continues this trend. Remember in early November when Jay Bruce’s agent appeared to be “demanding” 5 years and $80-$90 million? Kind of like a real estate agent setting the price of a home based upon recent comps regardless of where the market has actually moved. The result of such a mis-judgement of a market? Inventories pile up until prices drop to the point where the market clears, and/or sellers begin to panic and start making the dreaded “bid wanted” calls.

In financial markets, there are times when liquidity literally evaporates. There are legendary stories from the crashes of 1906, 1929, 1987 and even the relatively recent global financial crisis in 2008. Owners of assets need to sell due to financial obligations and/or panic, and there is a rush of people in search for buyers and liquidity. By definition, by the end of a long bull market, most market participants are already similarly extended and not in positions of strength to offer the required liquidity. This is a particular problem when asset prices are driven to levels well above actual value, as the combination of overvalued assets and low liquidity, means that prices can drop rapidly – like from the 5 years and $150 million that Bautista reportedly demanded prior to the 2016 season, to the 1 year $19 million deal he ended up with. There have been times when an asset owner makes a call to get a price on their asset (think mortgage bonds in 2008) and the price quoted is 50% below the last trade, or literally no one picks up the phone on the other side!

Jim Furtado Posted: January 18, 2018 at 08:36 AM | 12 comment(s) Login to Bookmark
  Tags: economics, free agents

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   1. JRVJ Posted: January 18, 2018 at 02:23 PM (#5608916)
This is actually a pretty good article.

I'm a bit at a loss as what MLBPA can do to improve the fortunes of its members, when considering that MLBPA usually looks out for the interests of vets (and not of young players, and certainly not young players who have yet to make their MLB debut).

The two things that I could see them doing are tweaks, namely: 1. Pushing to increase the luxury tax ceiling significantly (to at least get the Yankees and Dodgers primed to spend without paying a luxury tax);

2. Push for a higher minimum wage for players, so that at least young players get a little bit more on the front end.

If they want to be a bit more aggressive, I guess they could push to place a limit on how much a team's payroll can drop from one year to the other (i.e., no team is allowed to drop its payroll by more than 30% from one year to the other). But I doubt that would fly.
   2. John Northey Posted: January 18, 2018 at 02:30 PM (#5608922)
I suspect the players union likes arbitration as sometimes players get more than they are worth (thus teams release them and eat part of the salary). So keeping free agency after 6 years I doubt will change. A $1 mil minimum should've been in place by now already. The higher the minimum the higher the overall payroll goes. Especially with teams going young and trying to stretch out years of control.

What would owners want? Cost certainty. Harder payroll tax, maybe more option years so guys with under 6 years can be yo-yo'ed non-stop, lock player salaries to revenue as a ratio - union has refused in the past but might consider it now.
   3. What did Billy Ripken have against ElRoy Face? Posted: January 18, 2018 at 02:48 PM (#5608940)
In financial markets, there are times when liquidity literally evaporates.

Can it be "literally" when the noun being referenced is itself non-literal?
   4. Walt Davis Posted: January 18, 2018 at 03:33 PM (#5608978)
The bit in the excerpt gives too much credit to agent/player "demands." With regard to Bautista, there was his age (he was never getting 5 years) but more importantly his 2016 was sub-par and featured an injury. As I said at the time, the couple of times I saw him in late 2016, I thought he looked very toasty (although his performance was fine). Obviously most teams agreed with me. It would also be interesting to know whether he turned down some multi-year, "low" AAV offers (say 2/$30, 3/$39), taking the 1-year offer thinking he would prove himself.

FWIW I also got it right with EE, saying he should have taken 4/$80 but that was more my standard DH riff than any brilliant market insight.

I don't think the current QO is gonna have much effect but one small tweak would be to leave the QO in place until the player signs elsewhere or the team rescinds it (say after signing the guy's replacement).** Also have the QO disappear on March 1 (don't recall if any of this was changed in the latest CBA).

**with whatever mechanism you need to make sure the QO'd player doesn't accept the QO "simultaneously" with the team signing his replacement.
   5. Rally Posted: January 18, 2018 at 04:05 PM (#5609005)
With regard to Bautista, there was his age (he was never getting 5 years) but more importantly his 2016 was sub-par and featured an injury.


At the time the rumors of 5/150 were in the news, he was coming off a 5 WAR, 145 OPS+, 40 homer, 110 walk season. Plus an epic bat flip and 2 homers, 3 RBI in the final ALCS game where his team lost 4-3. I don't know what he was looking for after 2016 but I think it's safe to say expectations had fallen a bit.
   6. Curtschillingsdingleberrybatboy Posted: January 18, 2018 at 05:23 PM (#5609070)
I’m calling it, Bryce Harper signs a one-year, $40m contract with the Giants next offseason. The Yomiuri Giants.
   7. ptodd Posted: January 18, 2018 at 05:44 PM (#5609078)
The Real Estate market is controlled by a monopoly (banks in the Fed Reserve). This monopoly determines how much money to lend buyers and how expensive that money will be (interest rates).

MLB owners control the FA market and despite sitting on a pile of cash and enjoying tremendous surplus value on many young players making peanuts, they sit on their cash

Like real estate, the value or selling price of a house is not based on the crowds estimate, but on the value of thst property to an individual buyer which may be higher than the crowd due to individual preferences and needs. The exception to this is when banks are unwilling to part with money and insists the buyer get the crowd price. The seller may not be willing to part with the property at that price.

So someone is playing the part of bankers at MLB. Perhaps Manfred who controld disbursements of revenue sharing dollars to teams. Manfred began his work with MLB during the collusion years in the 80's. He may know a trick or two. Markets changed suddenly since he took over.
   8. 6 - 4 - 3 Posted: January 18, 2018 at 07:46 PM (#5609148)
The fundamental problem for the MLBPA is that ultimately there are too many players chasing to few roster spots (i.e., it's all about supply and demand). The solution that they should be pushing for is expansion to increase demand for talent.

Even if the new clubs aren't initially big spenders (like the late 90s Dbacks), an expansion draft (where each organization can only initially protect 15 players) will also have the effect of redistributing low-cost, low/mid-range talent so that teams will be more willing to (over)pay for a middling player like Jay Bruce.
   9. cardsfanboy Posted: January 20, 2018 at 11:59 AM (#5610028)
The fundamental problem for the MLBPA is that ultimately there are too many players chasing to few roster spots (i.e., it's all about supply and demand). The solution that they should be pushing for is expansion to increase demand for talent.

Even if the new clubs aren't initially big spenders (like the late 90s Dbacks), an expansion draft (where each organization can only initially protect 15 players) will also have the effect of redistributing low-cost, low/mid-range talent so that teams will be more willing to (over)pay for a middling player like Jay Bruce.


agree with that, it's past time for two more expansion teams, not sure how the divisions will be set up, or how the wild card will work if they do that (I'm assuming that they go to 4 divisions, per league, which would naturally eliminate a need for a wild card team, but the wild card concept is too popular for it to get thrown away completely)

I'm not a fan of increasing the minimum wage, I don't see any real reason for that, but in another thread someone was pushing for an age limit on free agency eligibility, I do like that concept, but I would go to 30 years old not 27 as proposed.

And I'm fully in support of a penalty system in place for teams that don't spend a certain amount and who's record is below a certain level. But I don't think this season off season is really showing us anything, there are just too many similar valued players out there, and it feels to me, like teams are waiting on seeing someone else set the market.
   10. snapper (history's 42nd greatest monster) Posted: January 20, 2018 at 12:32 PM (#5610033)
agree with that, it's past time for two more expansion teams,

I don't think adding two more week markets will help things, unless you significantly alter how revenue is shared.

Under the current system, you'll simply create two new teams with the incentive to run a bargain basement operation, and live off the shared revenue.
   11. Edmundo got dem ol' Kozma blues again mama Posted: January 20, 2018 at 03:57 PM (#5610146)
Can it be "literally" when the noun being referenced is itself literally non-literal?


FTFY ;)
   12. Bote Man Posted: January 20, 2018 at 04:55 PM (#5610179)
agree with that, it's past time for two more expansion teams,

The beauty of this plan is that the Rays will no longer have the worst attendance in baseball!

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