January, 2006

2006 Draft Day Preview

"If you want to save your money, save it for 2006.   That's when Mark Mulder, Richard Hidalgo, Jorge Posada, Nomar Garciaparra, Jason Kendall, Rafael Furcal, Matt Morris, Richie Sexson, Gary Sheffield, Mike Mussina, Mark Buehrle, Wade Miller and Orlando Cabrera all hit the market."

-- "From the Desk of the Commish," December, 2003

A year or two ago, the Class of 2006 looked as though it would be strongest draft class ever.  Instead, it has turned out to be the weakest.  How weak is it?  It's not even close.  Here are the total VORP numbers for each of the four auction classes to date:

2003: 2006.9
2004: 2210.3
2005: 2155.9
2006: 1903.2

What happened?  Well, age (and/or the steroids scandal) finally caught up to players like Jason Giambi, Gary Sheffield, Randy Johnson, Mike Piazza, Jorge Posada, Frank Thomas, Jim Edmonds, Mike Mussina and Jamie Moyer.  Jason Schmidt, Curt Schilling, Eric Gagne and Mark Loretta all suffered from major injuries.  And Mark Mulder, Orlando Cabrera, Matt Morris, Jason Kendall, Jake Westbrook and Francisco Cordero all performed worse than expected.

So, what are we left with?

Well, if you're in the market for a middle infielder, you're in luck.  The Free Agent Class of '06 features gobs of middle infield talent, including Michael Young, Brian Roberts, Jeff Kent, Rafael Furcal, Mark Ellis and Luis Castillo.

And if you're looking to add a closer, you've come to the right place.  Mariano Rivera, Billy Wagner, B.J. Ryan, Todd Jones, Bobby Howry, Aaron Fultz, Scott Shields and Hector Carrasco make this the deepest draft class ever for quality relief pitching.

Unfortunately, if you're looking for just about anything else, you're in trouble.  If you need an ace pitcher (and who, other than Tom, doesn't?), you can expect to pay well above market value thanks to the law of supply and demand.

Similarly, if you're in need of a big-time impact bat, good luck finding one.  There is no Barry Bonds, Vladimir Guerrero or Adrian Beltre in the Class of '06.  The biggest bat in this year's auction belongs to Michael Young, and most of his VORP is a product of his 668 at-bats.  When the top hitter in the auction sports an OPS under 900 (while hitting half the time in Arlington), you know it's a weak draft class for hitters.

How much money is out there this year?

Ready for more bad news?  Not only is this the weakest draft class ever, but more money will be spent on this year's draft class than any other class since the advent of the auction:

This explosion in revenue is greatly attributed to the bonus money awarded through Rule 7.16.  All but two teams in the entire league received additional spending money through Rule 7.16, including TWELVE teams (i.e. half the league) that received an additional $3 million.  That's $36 million for those twelve teams alone, plus another $12 million for six teams that finished below .500.  Thankfully, this rule has been changed going forward.  But in the meantime, we'll have to deal with some serious inflation.

Now, with all this funny money floating around, one of two things is going to happen: Either teams will drastically overspend in the auction, or teams will spend a great deal more money in the first ten rounds of the draft than they have in previous years. I believe it will be a mixture of both.

Because this auction is SO incredibly weak, I don't think we'll see more than $315 million spent on the 50 players in the auction -- and that number is roughly $18 million more than the "market value" of these players according to the Doyle Formula�.  Because there is so much money and so little talent available, teams will overspend more than ever to secure the top free agents.

Also, because this draft is SO incredibly strong this year, I think more players will be selected in the first ten rounds of this year's draft than any other year since the inception of the auction.  Barry Bonds, Curt Schilling, Jason Schmidt, Eric Gagne, Trot Nixon, Matt Morris, Scott Rolen and Bobby Jenks all have tremendous value for 2007 and beyond, and all are virtually guaranteed to go in Round Two.  Aaron Rowand, Javy Vazquez and Kelvim Escobar all have significant value for 2006, and could easily go in Round Two as well.  Then there's Kerry Wood, Mark Sweeney, Mark Grudzielanek, Mark Loretta, Paul Lo Duca, Magglio Ordonez, Orlando Cabrera, Jason Kendall, Francisco Cordero...the list goes on and on.

How much will these guys in the auction go for?

Your guess is really as good as mine.  I've listed the Doyle Formula� values for these 50 players in the sidebar to the right, but these values can pretty much be thrown out the window due to the amount of money that will be spent on free agents this year.  I wouldn't be surprised if EVERY one of these players fetched more than his Doyle Value this year.

Because the supply is so low and the demand so high, expect to pay at least 20% above those DFV's for Clemens, Buehrle and Millwood.  Roberts, Sheffield, Young and Burrell are also safe bets to fetch well more than market value, and I wouldn't be surprised to see Rivera, Ryan and/or Wagner get Eric Gagne money ($7.5m).

How accurate is the Doyle Formula�?

Normally, the DFV's (Doyle Formula� Values) are pretty accurate.  Out of the 150 players in the past three auctions, the Doyle Formula� has correctly predicted 88-percent of their salaries within $2 million and 53% within $1 million.  That's not perfect, but it's not bad.  There is still a lot of room in the formula for improvement, and eventually I plan to do more work on it to make it more accurate and useful.  (But when I do, don't expect me to share that information anymore!)

What is the risk level for this year's free agent crop?

Unless you plan to "go for it all" in 2006, with no thought whatsoever to competing in 2007, you'd be crazy to bid for most of these guys without considering the possible salary-squeezing ramifications for 2007:

• Clemens: 43 years old, nursing a sore hammy, future undecided
• Roberts: nursing an injury, possibly a one-year wonder
• Kent: 37 years old
• Giambi: 34 years old, constant injuries, steroid issues
• Sheffield: 37 years old, unhappy with contract, injury/steroid issues
• Konerko: one-year wonder?
• Millwood: one year removed from a 4.85 ERA, possibly moving to Texas
• Edmonds: 35 years old, injury-prone
• Johnson: 42 years old, constant knee/back injuries
• Burrell: just two years removed from hitting .209
• Mulder: declining strikeout numbers past three years
• Dellucci/Brown/Jones/Seo/etc.: came out of nowhere to post career year

I could go on and on, but you get the point.  Besides, no one heeded my warnings about overspending for Adrian Beltre, Nomar Garciaparra, Carlos Guillen, Sean Casey and David Wells last year, so why bother to continue?

The problems with building a team around free agents, of course, are that: a) you're paying market value, which means you're not maximizing your salary budget, and b) you're paying for players that are generally past their prime.  But because we enjoy that famous 20/20 hindsight in this league, we know that if nothing else, we are guaranteed of getting one full year of expected performance for our money's worth.  Combine that with a little pre-season irrational exuberance over our team's chances of making the playoffs, and you have the perfect recipe for wild and reckless spending.  It is the same recipe that the MLB Players Association counts upon each and every winter, and it is a recipe that has never (with the exception of mid-80's ownership collusion) failed.

How have "Type H" free agents fared in the past?

In three years of BDBL auctions, 92 players have earned salaries of more than $5 million, making them "Type H" players.  As you know, "Type H" players must be signed to a contract at the end of the season (unless you happen to be named "Bobby Sylvester.")

Of those 92 players, 71 of them (more than three out of every four) declined in value the following year.  Worse yet, 21 of those players (nearly 23% of all "Type H" free agents) saw their market values drop by more than $5 million the following season!

Some of the players on this list are tough to look at:

(Note: In 2004, although Bonds' market value dropped $5.5 million, his salary was still below market value.  If we look at the difference between salary and market value, Bonds drops out of the list above, but we still end up with the same number (21) of players that were overpriced by more than $5 million in the year after their auction.)

Of course, the biggest bust on this list was allowed to slip through the cracks via the 18.11 escape clause.  But even if we remove him, this group of 92 players as a whole saw a 28% dip in market value the year after they were signed.  In dollar terms, that's over $200 million in wasted spending money.  And if you compare the market values of these players in the following year to their salaries, the difference is a whopping $237 million.

In other words, if you spend more than $5 million for a player, you'd better consider him a one-year rental.  Any value you get from that player beyond the current season is gravy.

Should we all save our money for the Class of 2007?

Who knows?  Last year, it looked as though we should save our money for the Class of '06.  You saw what happened to that group.

That said, though, it's hard to imagine that too many bad things will happen to this next class of free agents: Todd Helton, Scott Rolen, Pedro Martinez, Brad Radke, Manny Ramirez, Ben Sheets, Carlos Delgado, C.C. Sabathia, Eric Chavez, Jim Thome, Johan Santana, Brian Giles, Jon Garland, Barry Zito, Chipper Jones, Brad Lidge, Bobby Abreu, Miguel Tejada, Tim Hudson, David Ortiz, John Smoltz, Adrian Beltre, J.D. Drew, Ivan Rodriguez, Chris Carpenter, Nomar Garciaparra, David Wells, Tom Glavine, etc., etc., etc., etc., etc., etc..  Not only is this draft class much better, but much younger as well!

So don't spend it all in one place this year!