Saturday Stew

July 11, 2009

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With the slotting of the weekly columns on Wednesday, Wednesday Wisps are probably going to be few and far between. Until the schedule is completely shaken out, Saturday Stew will take its place. Just like Wednesday Wisps, there will be a bunch of small ideas in the stew.



Twins prospect B.J. Hermsen grew up a hop, skip, and a jump from my hometown. Iowa is, I’m fairly certain, the only state that has summer baseball for high schoolers – other states have it in the spring. This makes is fairly unusual for Iowa kids to get drafted very high, because they peak later than the other players, simply because the schedule is later (in fact, the season is still ongoing when the MLB draft occurs).

Last year, Hermsen dropped to the 6th round. He likely would have been picked higher, but he was also a stud quarterback in football, and there was uncertainty that he would sign. Well, the Twins offered him $650,000 and Hermsen signed.

At long last, Hermsen made his minor league debut on June 24. How did he do? He tossed six perfect innings. The bullpen closed the deal and they finished with a combined no hitter. Not a bad debut. Hermsen probably hated to come out of the game, but as a young kid who almost certainly was on a pitch count, the Twins front office probably would have fired the manager if he had pushed him too far in his pro debut!

How did he do for an encore? Not bad – he allowed 2 runs (1 earned), 4 hits, and a walk in 5 1/3 innings – pushing his ERA up to 0.79 for the season.


And speaking of great pitching performances, Rockies farmhand Brandon Hynick was the Pacific Coast League pitcher of the week for the week ending July 5. He pitched in one game during the week, and threw a 7 inning perfect game. The teams were completing a suspended game that day, as well as playing another game, hence the shorter games (it is relatively common for minor league teams to play 7 inning games when there is a double header). It still counted as an official game, though – the 9th perfect game in the storied history of the PCL. The kicker? He did it at home, in the sky high altitude of Colorado Springs. If you think the air in Denver is thing, go to Colorado Springs some time!

Bluffer vs. Bargain

In January, I wrote an article entitled The Bluffer and the Bargain, highlighting Jason Varitek and Andruw Jones.  The gist is that I thought Varitek had overplayed his hand and that Jones  was a great pickup for the money, since the Dodgers were picking up nearly all his salary.

Nearly six months later, how are these guys doing?

Varitek is actually having a pretty good year, with  12 homers and a .825 OPS (through July 7).  This means I’m wrong, right?  Well, no.  In January, I said that he had put himself in a bad position by declining arbitration and would likely not sign for more than $5 million – half his 2008 salary.  What did he sign for – $5 million.  And most people felt that the Red Sox could have squeezed him a bit more.

Andruw Jones signed a $500K deal with the Rangers (don’t feel too bad for him, as the Dodgers are also paying him the remainder of a 2 year, $36 million deal he signed befor the 2008 season).  Jones has been a part time player and has been a bit up and down over the course of the season.  As I write this article on July 8, Jones just launched his 3rd homer o the game – bringing his season total to 14 homers in 160 at bats.  Bear in mind that a lot of players have around 300 at bats already.  This is great production from a $500K player.  Well played, Rangers.

Michael Jackson

Michael Jackson died with  a reported $400 million in debt, but also with substantial assets, including the rights to his own music and the music of other artists (including a share in the music of The Beatles).

I have a thought on a way for the estate to raise cash on pay off the debt.  Incorporate the major assets – form Michael Jackson Entertainment, Inc.  Then have an IPO.  Jackson fans – as well as other investors – could own a share of Jackson’s assets.  With the outpouring we have seen since Jackson’s death, what sort of money could an IPO raise?


I was discussing the auto industry with a friend of mine as we enjoyed lunch at the outside grill at Nelson’s Deli in Cedar Rapids (great burgers and brats!).  I began the conversation with this rather unconventional thought – “If we took all the money that was spent on research and development and infrastructure for cars and planes, we could build a nationwide teleporter network.  We’d only need one pod  per city block, since they would only be in use for a few seconds at a time.

After Dave nearly spit Coke all over the table, he countered with a rational idea.  “How much cheaper would cars be if they didn’t include a warranty?”  At first, this seems like a crazy idea.  Who would buy a car without a warranty?  Warranties are a big reason why people buy new cars.

But take a deeper look at this.  Warranties, of course, are not free.  Car companies build the cost of warranty repairs into the cost of the car.  Basically, you are paying for the expected average cost of warranty repairs.  That doesn’t sound too bad, right?  Except that since warranty work can only be performed at authorized dealers, they’re building in the cost of dealership labor and OEM parts!  If you’re like me, you know a guy who can fix things with cheaper, non-OEM parts, as well as cheaper labor.  And my guy is just as good as the dealer (in some cases, clearly better than the dealer).

I don’t see this idea actually gaining any traction at all, simply due to the huge financial risk when it comes to cars.  Perhaps, though, there’s room for a warranty that only covers major repairs – perhaps with a $500 deductible.  How much money would this shave off the sticker price?

The bluffer and the bargain

January 21, 2009

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The bluffer – Jason Varitek

When the rankings that are used to determine free agency compensation came out, Red Sox catcher Jason Varitek was ranked as an “A” level player – the top level. When type A players are signed by another team, the team who loses the player typically gets either the first round pick or second round pick of the team who signs him (let’s call this team “Yankees” in order to simplify things), as well as a pick that is sandwiched between rounds 1 and 2 (referred to as a sandwich pick). In the case where a team signs several type A players, the compensation can be less – the team losing the highest rated player would get the Yankees’ first round pick plus a sandwich. The team losing the second highest rated player would get the Yankees second round pick, plus a sandwich, etc. (More information can be found on

One aspect of free agent compensation is that in order to qualify for the compensation, the player’s old team must offer him arbitration, and he must decline (arbitration is a process where each side submit an amount to a panel of arbitrators. The panel chooses one of the amounts as the player’s salary for the next year – they cannot settle on a compromise amount).

The fact that Varitek qualified as a type A speaks to some of the flaws in the system. Varitek will turn 37 next April, and catchers are not the sort of baseball player who age gracefully. The years of squatting behind the player typically catch up with a catcher in his mid 30s, affecting the quality of his play. This is a cruel fact. Add to this the fact that Varitek was coming off a rather lackluster year in which he hit just .220 with 13 homers – by most measures, it was the worst season of his career. Varitek is the captain of the Red Sox and is an emotional leader, so he does have some positives.

The reason why Varitek was a type A player is due to a good 2007 season (the rankings are based on the last two seasons) and a relatively poor group of catchers that he is compared against.

When the Red Sox decided to offer arbitration to Varitek, it seemed like an obvious attempt to bring him back at 80% of his 2008 salary (a player cannot receive a pay cut of more than 20% through arbitration). His 2008 salary was $10.4 million; 80% of that is $8.32 million). It should not have been hard for the Red Sox to win an arbitration case. In fact, it seemed that the smartest thing for Varitek to do would be to accept arbitration. If he declined arbitration, the team signing him would have to forfeit a draft pick to the Red Sox – and also overpay for Varitek (since he does not appear to be worth $8.32M).

Needless to say, I was stunned when Varitek declined arbitration. He now has two options:

1) Negotiate a deal with the Red Sox. It seems difficult to imagine that he’ll be able to negotiate a salary of more than $5 million per year, especially with the Red Sox holding most of the cards (see option 2)

2) Sign a free agent contract with a team willing to forfeit the draft pick and pay him the money he ways (again, he walked away from a $8.32 million salary for next year). For 11 teams, this would mean forfeiting a first round pick. For 17 teams, this would mean forfeiting a second round pick. For the Braves, this would mean forfeiting a third round pick, and for the Yankees, this would mean forfeiting a fourth round pick (because they Yankees have already signed three higher ranked free agents). Realistically, this limits his options to the Braves and Yankees, neither or whom seem to be jumping at the chance to overpay for an aging catcher. In fact the Yankees already have one aging catcher (Jorge Posada, who will also be 37 next year)

Essentially, Varitek tried to bluff the Red Sox by declining arbitration. While it is true that they would need to find another catcher if they lose Varitek, they could make a move and trade a prospect for a young catcher and then use the compensation picks to replenish their system.

The most likely scenario is that Varitek will be forced to sign a contract with the Red Sox for less than he would have received through arbitration – or he will try to sit out part of next year in hopes that a new suitor emerges.

[Update: there has been some confusion about whether or not a player can receive a pay cut through arbitration. Some sources have said that a player cannot receive a pay cut through arbitration. This is completely false. Others have said that a player can receive no more than a 20% pay cut, which is what I based this post off of. However, this only applies to players who are in pre-free agency arbitration (i.e. players who do not have the 6 years of service time necessary to be a free agent). For this group of players, they cannot receive a pay cut of more than 20% of their last year’s salary or 30% of the salary of two years previous (apparently in an attempt to avoid having teams reduce salaries 20% each year) – although this restriction is waived if the player had won a 50% pay raise in arbitration the previous year. This is outlined on page 15-16 of the CBA – article VI.F.3.c.i-ii.

However, for pending free agents, this is not applicable. Page 72 (XX.B.3) of the CBA clearly states “ … the rules concerning maximum salary reduction in article VI shall be inapplicable …”
So my statement about the Red Sox having to submit an offer of $8.32 million is not correct. It appears that they could have submitted any offer of $400,000 or more ($400,000 is the minimum salary for MLB). However, this does not change my opinion that he would have received more in arbitration that he will as a free agent. It is very unusual for a player to receive a substantial pay cut in arbitration, and I think it is quite likely that he could have gotten $7-8 million (if he had been smart and submitted an amount in this range).

In a report on NESN, Varitek said that he was not aware that other teams would be required to compensate the Red Sox if they chose to sign him (effectively reducing the number of suitors). I find it absolutely incredible that he didn’t know this. Even if his agent (Scott Boras) didn’t mention this to him, you would think someone in his circle of family and friends would be aware. Perhaps he could have had a short chat with Red Sox union representative Kevin Youkilis about his options. I’ll admit that I’m geeky about free agency compensation and such, but it seems crazy that Varitek wasn’t aware of the compensation.]

The Bargain – Andruw Jones

Center fielder Andruw Jones signed a two year deal with the Dodgers worth a total of $36.2 million before the 2008 season. He then proceeded to stink up the joint, hitting just .158 with 3 homers and 14 RBI in 209 at bats. He was dreadfully bad. Then he got hurt and missed most of the season.

The fact that Jones had a bad season wasn’t a huge shock to some people. After all, his 2007 season wasn’t particularly good – he did stumble into 94 RBI, but hit just .222.

Recently, the Dodgers severed ties with Jones. They restructured his deal to pay him the remaining $22 million over the next six years, with no interest. Then they cut him. The Dodgers have a glut of outfielders on their roster and didn’t feel that Jones would be a contributor for them.

Any team that signs Jones will only have to pay him $400,000 for 2009 – the major league minimum – since his salary is being paid by the Dodgers. This seems to be an excellent reclamation project for someone. The downside is fairly small. Jones does want a major league contract (rather than a minor league contract) so it would necessitate a roster move to make room on the 40 man roster. However, it would not necessarily mean losing another player to make room – if a player still has “options” remaining, he could be optioned to the minor leagues without passing through waivers. This would, of course, use up one of the player’s three (in some cases, four) allowed option years.

The possible benefit seems worth the risk, though. Jones is only a few season removed from back to back 40 homer seasons, and he’ll be just 32 in April. His strikeout rate shot through the roof last year (1 strikeout in every 2.75 at bats, compared to one K in every 4.5 AB for his career and one K every 4.14 at bats in 2008). This may point to a problem that is more mental than physical.

In short, I would rather take a risk on Jones and be wrong (and waste an option year on a prospect) than have a division rival gamble on Jones and be right (and get 40 homers out of him). In fact, some teams have some dreadful talent (Pirates, I’m looking at you) that it would seem to be a complete no brainer of a decision.