Archive for March 2019

Jacob DeGrom’s Deferred Money

March 28, 2019

The terms of Jacob DeGrom‘s new five-year $137.5 million are being reported, revealing that a whopping $52.5M is being deferred without interest for 15 years to the period between 2035 and 2038.  As a result the current value of the deal could be as little as $109M.

The deal defers between $12M and $15M each year between 2020 and 2023, and the $30M team option for 2024 includes $15M deferred to 2039.

I am generally in favor of deferred money contracts for athletes, because it pushes back money they don’t need now to years when their careers and annual earnings are likely to be much lower.  There can be significant federal and state income tax savings by deferring money, although DeGrom’s contract doesn’t really do that, except for the fact that he may be living in state without state income tax come 2035.

If it was up to me, I would start the payments in 2028, the year DeGrom turns 40 and continue the payments until the year he turns 60 and can cash out his IRAs or the year he can get the largest possible pension benefit, assumably somewhere between age 60 and 70.  That way, the $52.M is spread out so more of it is in lower federal tax brackets and he can rely on a steady income stream throughout his life.

What gets a lot of professional athletes in trouble is that during their top earning years, they spend money like the seven figure annual earnings will go on forever.  Then, when their pro careers wind down and they very rapidly see their annual incomes plummet, it takes them several years to adjust their life styles and spending to their new incomes.  In the meantime, they burn through much of the money they did save during their peak earning years.  It’s a lot easier to adjust to a new lifestyle when you’re still making $2M+ a year than it is when you are making less than $200,000.

As I wrote back when Max Scherzer signed his big contract with the Nationals featuring significant deferred money, the irony is that the players who sign these kind of contracts are almost always the ones who least need to do so.  The big stars who are already thinking about how they are going to support themselves in their 40’s and 50’s can probably be trusted to save and prudently invest the money they are making now so their retirements will be comfortable and thus don’t really need to defer money.

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Oh, That’s Bad

March 27, 2019

The Chicago White Sox announced today that Eloy Jimenez will be starting the 2019 regular season on the major league roster.  You think that had anything to do with the eight-year, $43M contract he just signed?

The White Sox will claim that Jimenez got the call because Jon Jay got hurt and will be starting the season the disabled list.  Well, that’s just full BS.  If Jimenez doesn’t sign the long-term extension, he starts the season at AAA, unless every other outfielder on the roster dies in a plane crash before Opening Day.

There is no longer any service-time advantage to starting Jimenez at AAA, so Jimenez won’t be starting the season at AAA.  Wouldn’t it be nice if teams simply called a spade a dirty shovel and were honest about why they send guys who are obviously ready like Jimenez down to AAA for a few more weeks so they can get an extra season of control before free agency?  Who do the teams now think they’re fooling?

Obviously, they think they’re fooling some fans, or at least giving certain fans a fig leaf, because teams still do it when everyone who is paying any attention and is not a dupe (or a conspiracy theorist, the modern equivalent) knows what is really going on.  Wouldn’t the world be a marginally better place if teams just said that major league baseball stars are very highly paid and the teams are therefore taking advantage of the terms of the collective bargaining agreement to get one more season at lower, but still multi-million dollar rates isn’t simply capitalism and common sense in action.

MLB thinks it needs to keep a certain mystique going that players and team owners are just sportsman who play and own teams for the love of the game, instead of the multi-billion dollar industry it actually is.  I, for one, am old enough to handle the truth.

 

San Francisco Giants Trade Chris Stratton to Angels for Williams Perez

March 26, 2019

The Giants traded former 1st round draft pick Chris Stratton to the Angels for hard-throwing lefty reliever Williams Jerez.  It’s pretty much a move to clear space on the Giants’ roster, as Stratton has no minor league options left and Jerez does.

I will be kind of sad to see Stratton go.  He had his moments the last year and a half, and it was nice to see him become a major league contributor after looking a few years ago like he might be a total bust.  That said, Stratton can only be seen as a disappointment for a first round draft pick taken 20 overall.

Stratton pitched O.K. this spring, and I hope he can help the Angels in 2019.  Jerez definitely has major league stuff, but his command still needs work.  He’s all but certain to start the 2019 season at AAA Sacramento, where he’ll get to work on it.

Now that the Giants have traded away their sixth potential starter, it will be interesting to see whether they make a run at Dan Straily, who is on the verge of being released by the Marlins.  The Marlins gave Straily a $5 million contract for 2019, but they will only have to pay him $1.2M if they release him before the regular season starts.

Straily has pitched pretty well the last three years, and he’s still only 30, so I fully expect that at least one team will step in and offer him $2M to $3M plus another $1M to $2M in performance incentives, once he clears released waivers and can be signed.  He doesn’t seem like a bad risk at this price for a team that needs one more starter.

An Off-Season of Contract Extensions

March 26, 2019

As we approach the start of the 2019 season, it was a notable off-season for the way in which big money contract extensions eclipsed all but the top three free agent signings.  As Spring Training started, it seemed like every single team was determined to lock in their best players for many years at big money, bigger money it sure seems than the free agents got at least in grand total.

A couple of things seem to be in play here.  First, it seems like the owners have finally figured out what Charlie Finley had realized around 1975, which is essentially that only the superstars are worth the really big contracts and that more average players and aging stars are fungible enough that teams shouldn’t go around overpaying them.

When the players won the Andy Messersmith free agency arbitration, Finley suggested that all players should be allowed to be free agents every year.  That way, the biggest stars would get huge salaries, but all the other players would be competing with each other for contracts, which would drive their prices down.

However, the other owners thought Finley was a kook and wanted to hold on to their best players as long as they could.  Thus, the owners negotiated a six-year service requirement for free agency, which meant that there would always be more demand for free agents than there were actual players who satisfied the six year service requirement and were still playing well.  As a result, for a very long time, free agents received enormous contracts, and the players’ association used those contract amounts to get higher contracts for younger players through the salary arbitration process they had successfully negotiated for a few years earlier.

The pendulum back towards a freer market began when teams began to non-tender an increasingly large share of their arbitration eligible players as arbitration salaries also got enormous.  More available players each off-season meant more competition for second-tier free agents, and the non-tendered players were and are more likely to sign one-year contracts for less money just to guarantee themselves major league jobs.  That surely drove down the market for second-tier free agents.

Also, teams may be realizing that their own superstars are worth more to them than anyone else.  While it is certainly exciting to bring in a high profile free agent like Bryce Harper or Manny Machado, there is probably just as much good will to be gained from the fan base when a Mike Trout or Nolan Arenado is locked into play all or nearly all of his professional career for the team that developed him into a superstar.

Given how much more generous the recent spate of extensions feels compared to the free agent signings this winter, I would if teams aren’t acting collusively to send a message to players: sign with the team that developed you for big money, or test an increasingly uncertain free agent market.

Of course, if more superstars sign long-term extensions covering their prime and declining years, the superstars who do elect to become free agents will find even less competition for their services.  In short, the Bryce Harpers of the baseball world who elect free agency will continue to set contract records.  Instead, it’s the second-tier free agents who will be feeling greater pressure to accept any extension offers their current teams are willing to offer them.

San Francisco Giants Trade for Catcher Erik Kratz

March 25, 2019

The Giants traded away middle infield prospect C.J. Hinojosa for 38 year old catcher Erik Kratz.  The Giants released 35 year old catcher Rene Rivera the day before, and for the life of me, I’m not sure what the difference is between Rivera and Kratz.  They’re both good-field, no-hit catchers well past their respective primes.

Once again, it may be a case of the Giants getting a good look at Rivera, deciding he was as bad as could reasonably be expected, and deciding to bring in someone marginally better who they haven’t had a chance to sour on yet.  Either that, or some of the players may have exercised opt-outs when they found out they weren’t going to make the major league team out of Spring Training.

At any rate, all of the Giants’ late Spring Training roster moves feel a lot like re-arranging the deck chairs on the Titanic.  Bringing in Erik Kratz or Michael Reed or Connor Joe isn’t going to make what looks like a weak team significantly better.

San Francisco Giants Outfield Churn Continues

March 23, 2019

The Gints are still trying to improve their outfield mix as the regular season rapidly approaches, but they keep bringing in more of the same marginal players.  They released Cameron Maybin, and traded for Michael Reed and Mike Yastrzemski, while trading John Andreoli for Reed and RHP Tyler Herb for Yaz.

Reed is going into his age 26 season, and he was really good in 53 games at AAA Gwinnett last year (.997 OPS).  In that sense, he looks a lot like Connor Joe, whom the Giants just brought in yesterday.  Reed can apparently play all three outfield positions and is expected to split playing time with Steven Duggar in center field, assuming Reed makes the major league club out of Spring Training.  For the Twins this spring, Reed went 5-for-18 with a home run.

While Reed seems like an improvement over Andreoli, he’s obviously not much of an improvement.  The recent spate of moves feel very much like a grass-is-greener-on-the-other-side-of-the-mountain situation, with the has-beens and never-have-beens the Giants started camp with mostly underwhelming and now being replaced at the last minute with a new crop of perhaps, marginially better has-beens and never-have-beens.  None of it inspires much confidence.

Yet another outfielder we could signed by the Giants in short order is former Giants prospect Adam Duvall.  The Braves gave Duvall a $2.88 million contract for 2019 in spite of how poorly he played late last season in Atlanta.  If the Braves release him before the regular season starts, the team will only be on the hook for slightly less than $700,000 of the $2.88M total as severance pay.

Duvall would be a natural fit for the Giants, who can always use a another right-handed power bat in left field (where Duvall’s defense is great), and the Giants have been collecting marginal outfielders like Duvall all off-season.  I’d certainly like to see the Giants give Duvall a shot on a minor league contract if the Braves release him, particularly as it seems more and more clear the team has no intention of bringing in anyone significantly better.

San Francisco Giants Add Connor Joe (Ugh!)

March 23, 2019

I keep waiting for the Giants to do something to improve their outfield situation.  And the Giants keep bringing in guys like Connor Joe.

I have nothing against Connor Joe, but he’s an old 26 (he turns 27 in August), he’s played exactly 49 games of merely above average offensive performance in the Pacific Coast League.  He can play RF, but his 3B defense is terrible (sub .900 fielding percentage).

The Gints traded Josh Johnson and “cash considerations” (I don’t know if that means $25,000 or $100,000 or anywhere else between $10,000 and $1M, although my guestimate is the first set of numbers) for Joe.

The Giants gave up on Rule-5 pick Drew Ferguson, who returns to the Astros, and replaced him with the Reds’ Rule-5 selection of Joe.  New Giants GM Farhan Zaidi is familiar with Joe from the Dodgers’ system, and Joe’s .806 Spring Training OPS was a lot better than Ferguson’s dreadful .405.

What I don’t like about the Giants bringing on Joe is that mlbtraderumors.com speculates that he will take Pablo Sandoval’s roster spot.  Yangervis Solarte has almost certainly made the team, which leaves Sandoval as a likely odd-man out.  Joe can’t defend 3B, but Solarte can, and Joe can play RF, which Pablo can’t.  The logic seems inescapable, but I will be sad to see Pablo go, if he does.

If bringing in Connor Joe is the Giants’ last outfield move before the regular season starts, I’ll expect the Giants to be sellers at the trade deadline.