August 6, 2010

Ahead in the Count

The 2010 Trade Deadline

by Matt Swartz

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As the trade deadline neared, I prescribed who should be buyers and sellers, and now that the deadline has passed, we can see whether those teams ignored their diagnoses. In discussing the rare success that selling teams have when making deadline deals, Steven Goldman wrote last week that “the vast majority of prospects don’t achieve anything close to greatness.” Of course this is true, but it does not mean that selling teams should not try because when these deals do work out, they tend to have very large positive effects. It is important to temper expectations, but that does not mean that selling is unwise. The reason that selling makes economic sense is that buying teams have more value from wins due to their position in the standings than sellers, and making a trade can be a mutually beneficial way to extract value from a player’s contract that you cannot gain by holding on to it.

The 2010 trade deadline was a buyer’s market. Nearly every trade was followed by a chorus of claims that the selling team got robbed, which naturally raises the question of whether analysts overestimated the price for win-now talent. As I mentioned in my chat last week, this is not a time when fans have tons of money to spend buying tickets for their local team's playoff run, so while there is still more value to winning, the difference is not as extreme as in previous seasons. Further, with interest rates so low, there is a smaller benefit to winning now and getting a bigger cash flow because teams will not accumulate as much interest from that bounty when leaving it in the bank. Thus, this year's trades need to be evaluated in that light.

Astros

The Astros were one of the teams that I thought did the best job of selling. In recent years, general manager Ed Wade, at the urging of owner Drayton McLane, has been stubborn in trying to build around an aging core that was not going to win while letting the farm system get weaker. This trade deadline, the Astros had three players who drew significant interest: Lance Berkman, Roy Oswalt, and Brett Myers. Wade traded the first two and extended Myers' contract through 2012

The return on Oswalt from the Phillies may have seemed particularly weak, but in this market, it was not that far off. Oswalt had health concerns, was owed a lot of money, and had a no-trade clause that he clearly was going to be picky about exercising. Keeping Oswalt certainly was of less value than trading him for the package they got. The Astros wisely ate $11 million on his contract in the deal, too, which is the best way to get a better value. Effectively, what the Astros did was buy $11 million worth of future wins from the Phillies, who were not willing to pick up all of Oswalt’s salary. The commissioner needs to approve all deals with more than $1 million changing hands, and it seems unlikely that he would ever approve one team paying $11 million for another team’s prospects. However, spending the equivalent money on Oswalt’s salary is something that is permitted, and it is one of the few ways that a rebuilding team can use cash to buy prospects and try to rebuild faster. The Astros continued this policy in getting the Yankees to surrender some prospects in Berkman’s deal. 

On the other hand, the Astros did not trade Myers. There was a rumor that the Astros were calling Myers untouchable, which of course makes no sense, because every player should have a value—presumably, the Astros would have been willing to trade Myers for, say, Stephen Strasburg. So, let’s call that “untouchable” claim a ploy to see if they could get a higher return. The Astros ended up extending Myers after not being able to get a high return, which is the type of thing that initially does not make much sense. They are not likely to be competitive in 2011 and even thinking of winning in 2012 is a stretch, but as I have highlighted before, teams truly know their own players better, as players who re-sign with their teams end up costing far less per win than players who sign with other teams.

However, the Astros also used their extra value in trading Oswalt to acquire J.A. Happ, a pitcher who will have one more year before he reaches arbitration, and then three years of arbitration eligibility before he reaches free agency. He will probably provide most of his net value in the next year or two. That means that the Astros are just allocating their resources toward being good in 2011 and 2012, which is too optimistic, and indicates that they still probably are not being future-oriented enough. A prospect swap of Anthony Gose for Brett Wallace, who moved into the major-league lineup, further indicates this line of thinking. The Astros made good moves in a business sense, but they should have worked on acquiring value further into the future.

Nationals

Why didn’t the Nationals trade Adam Dunn? The only good argument that I can think of is that they want to extend his contract or re-sign him as a free agent in the offseason. Like with Myers and the Astros, this makes some sense if the Nationals feel Dunn makes him far more valuable as a member of their lineup than his value on the trade market. However, regardless of how underrated Dunn is, he still had value, and any contract they sign him to would most likely be a bargain in the early years and a drag in the later years. Most free-agent contracts are bargains early and drags late. The Nationals, on the other hand, will be a drag in the early years and stand a good chance to contend in the later years. Dunn is just not a great match for them, especially when he would make such a better match as a great DH for an American League team. You could argue that Mike Rizzo needed to play tough so that he could get better value in future trades, but this was really an opportunity where he could get a lot for Dunn by setting up a bidding war between the teams looking to add a big bat, and those teams would have gotten far more value from him than the Nationals will this year as they are in last place. It was a wasted opportunity. Although the Nationals were able to pluck catching prospect Wilson Ramos from the Twins in the Matt Capps trade, they were said not to want to move Josh Willingham, though there was some interest in him. Willingham will be eligible for free agency after next season and the Nats probably will not contend in 2011. This was an opportunity to move a hitter with a nearly .400 OBP for two pennant races, but instead they appear to be keeping him for two non-competitive years. The Nationals are definitely building something, and with Ryan Zimmerman, Strasburg, and Bryce Harper (if he signs), they should have a roster filled with stars in a few years. However, we have seen countless teams in recent years fall short of the playoffs because they surrounded a core of superstars with below-average talent. Moving players like Dunn and Willingham is a good way to acquire that talent, and the Nats missed the opportunity.

I was at Nationals Park last weekend to watch the Phillies play the Nats, and when Dunn’s name was announced on the evening of July 31 after the trade deadline had passed, the fans erupted in thunderous applause. When my wife asked why they were so happy he was not traded, I told her that apparently the casual fans were more interested in the Nationals' quest for 70 wins this season than their quest for a championship in 2013.

Brewers

In early July, I made a detailed case explaining why I thought that the Brewers should trade Prince Fielder. The Brewers did not do so. What makes the case even stronger for trading Fielder is that the Brewers have made it clear that they are unlikely to sign the first baseman to an extension. So even if they felt that he was underrated in the market, they still are not going to have a good chance to re-sign him before he becomes a free agent after 2011. Although trading Fielder would be a public relations hit, it would be smaller that the hit they will take if they pass on the chance to get some kind of return for Fielder. Brewers fans would probably not like the trade, but they would also likely support a contending club in 2013 without him. The Brewers did listen to offers, but did not find one to their liking. They may look to trade him in the offseason, but why would they get a better package from a team looking for the slugger to aid them through one pennant race than teams who were looking to have him for two pennant races?

The Brewers also opted to extend Corey Hart's contract, rather than trade him. It is a risky move, but not indefensible. Hart’s terrible performances in 2008 and 2009, coupled with his 2010 resurgence, have left a big question mark as to his true talent level. If the Brewers believe Hart is ready to have some big years, then deciding to keep him is defensible.

Phillies

The Phillies were listed as a “hold” in my article written nine days before the trade deadline, but after winning their following seven games, that status changed to “strong buy” as their playoff odds approximately tripled. They did indeed buy as they traded for Oswalt. The Phillies are still far from a sure thing, but Oswalt gives them a powerful trio of aces in the rotation with three of the top 23 pitchers who had pitched at least 100 innings in the major leagues this season at the time of the trade in terms of SIERA. The Phillies still have an uphill battle, but Oswalt also gives them a solid rotation for 2011. The downside is that Oswalt also doesn't give the Phillies much wiggle room in the budget for next season as, with factoring in they likely already have about $150 million spent. However, it is money well spent since it gives them a contending team. The Phillies' roster is starting to get older and more expensive, and their window of competing will close at some point. However, this is the kind of move that helps a team in win-now mode get back into the pennant and also a good one because the Phillies did not give up any of their top prospects.

Rangers

The Rangers made a bold move early in July by acquiring Cliff Lee from the Mariners for a package headlined by first baseman Justin Smoak. The move is obviously old news at this stage, but one thing that I think is particularly notable about the trade is that the Rangers already had a 90 percent chance of making the playoffs when they made the move. That's why I don’t really like the move for them. The Rangers have a minor-league system filled with top talent, and they are likely to be competitive for years to come. Trading for Lee helps their already outstanding playoff chances, but will he really make them the favorite in any post-season series versus the Rays or Yankees? All the Rangers did was improve their odds a little bit for 2010 at the expense of future seasons, which is why I don’t think they should have done it. They did well in the last couple weeks before the deadline to not take this any further or move any more young high-end talent for a team, but unless Lee wins them a World Series or at least an AL pennant, the deal is going to be a waste.

Cardinals/Reds, Twins/White Sox

None of the Central division competitors made a move to improve significantly at the deadline, while both pairs are close enough in the standings that a move could have made a major difference. All four of these teams had achieved “strong buy” status by the time the deadline rolled around, but short of an outfielder-for-pitcher move by the Cardinals that was not even necessarily a lateral move, a pickup of a mid-rotation starter in Edwin Jackson by the White Sox, and a pickup of a new magical closer by the Twins in Capps, none of these teams really did anything to change the races. It seems one of these teams should have stuck their neck out and made a major trade to try to secure a division title.

Matt Swartz is an author of Baseball Prospectus. 
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