Monday, January 19, 2015

Scherzer-fest - Part 2



If you missed it, here is Part 1 of my look at the Scherzer deal that looks at Scherzer the player and what he brings to the Nationals. Part 2, here, takes a look at the contract and its implications for the Nationals. 

The Contract

First up is the nuts and bolts of the actual contract the Nationals signed Scherzer to. By know I’m sure you know that the deal is for 7 years and $210 million. While that dollar amount is shocking, the biggest news coming out today is actually that half of the contract got deferred until the 7 years after Scherzer is done playing for the Nationals. If reports are correct, than the Nationals will be paying Scherzer only $105 million dollars for the 7 years he pitches for them and the other $105 million over the next 7 years he doesn’t pitch for them. It’s the BobbyBonilla contract Mike Rizzo (or, most likely, Ted Lerner) style. It means the Nationals aren’t really paying Scherzer $210 million when you consider the time value of money. You can read a very good and very detailed breakdown from Fangraphs here

If you skipped most of your intro to finance classes or are just too lazy to click the link, here are the basics. A dollar today is worth more than a dollar a year from now because you can take that one dollar today and invest it for a year, earning interest, dividends, etc. for 365 days, meaning one year from now you will actually have more than $1 dollar. If you do a net present value analysis of the Scherzer contract, it actually comes out looking a lot like the deal Jon Lester got from the Cubs only a few weeks ago and not out of line with what analysts thought Scherzer was going to get.
This structure will also help the Nationals. It gives them more payroll flexibility in the present moment as the dollars committed to actually paying Scherzer in 2015 will be a lot less than the dollars you would be paying without that deferral. Scott Boras, Scherzer’s agent, also has a history of skipping the GM and front office personnel and going straight to the owners when he is working on a deal of this magnitude. Don’t think Lerner’s age and his desire to build a winner in the next several seasons didn’t play at least some small part in Boras’ pitch.

Finally, Scherzer got a qualifying offer from the Tigers, so the Nationals will be giving up their first round draft pick this summer. The pick would be at the end of the first round, given the Nationals results in 2014, so it’s obviously not a deal breaker, but it is worth at least a couple million dollars.

The Roster

While the baseball world processes the Scherzer contract, the media is already speculating when the other shoe will drop and the Rizzo pulls the trigger on another massive trade. Depending on who you ask and what time of the day you asked, you might have heard Zimmermann, Strasburg, Desmond, or Fister were on the trading block. Or you might have heard the Nationals were content with their super team and aren’t listening to any trade ideas. While a major league team will never complain about having too many starting pitchers, and since we won’t know anything for certain until a trade takes place, let’s irresponsibly speculate on what might be in the works.

Option 1: Nothing at all

Current reports are pushing the idea that the Nationals are not looking to do anything further. They added to the best rotation in MLB, and pushed their #5 starter Tanner Roark to the bullpen, solidifying an area that looked inexperienced at best after the Clippard trade. 

Pros

Adding Scherzer pushes everyone back a slot in the rotation. Gio Gonzalez becomes the best 5th starter in the majors and Tanner Roark, who looks like a big regressioncandidate for 2015, becomes a big time contributor to a thin bullpen. The Nationals starting depth chart blows all other teams out of the water, combining a shutdown rotation and bullpen with an impressive offensive lineup. Scherzer becomes the ace of the staff for years to come as the young pitching prospects in the minors graduate to join him in the majors over time. There is always a chance that the Nationals re-up some combination of Strasburg, Fister, Desmond, or Zimmermann, payroll constraints be damned.

Cons

Without a trade, Zimmermann, Desmond, Fister and Span will most likely walk after 2015 and the Nationals will be left with only a couple draft picks to show for it. By signing Scherzer, the Nationals essentially picked him over Zimmermann, who is 2 years younger, not an insignificant amount of time for pitchers who could fall apart at any moment (see: CC Sabathia). By adding to a strength, the Nationals don’t really see a big bump in talent level in the starting rotation given the impressive stockpile of talent the Nationals had before signing Scherzer. The Nationals would then have to try and replace one of if not the most valuable shortstop over the last few years in Ian Desmond without an MLB ready rookie waiting his time in the minors. In the short team, while the 2015 Nationals team looks stacked, they lack some depth. Yes moving Roar to the bullpen will help, but there are still several rookies who will be asked to play major roles. When Werth returns to the lineup, the Nationals outfield depth is shallow, and while he nurses his surgically repaired shoulder, that depth will be perilously thin. On the infield, the Nats will rely on some combination of Kevin Frandsen and Danny Espinosa. And when Matt Williams looks for some pop off the bench in a pinch hitter spot, you get Tyler Moore in his third attempt to stick as a part time MLB player.

Option 2: Trade Zimmermann

While all the reports out there are saying the Nationals won’t make a move, I don’t buy it. First of all, Rizzo is never going to come out and say he has to make a trade as that destroys all his leverage in negotiations. Secondly, the Nationals are very tight lipped about these things and rarely get linked to trades until they are practically a done deal. Debate the economics of the Nationals payroll if you want, but for some time the Nationals’ front office has talked about a need for better payroll flexibility and keeping everyone around will be tough. So if you have to get rid of one player, let’s assume for now that is Jordan Zimmermann.

Pros

The Nationals have never been able to get close with Zimmermann’s agents on dollars for his next contract, and it is looking more and more likely he will sign elsewhere come the end of the 2015 season. Rather than letting him walk and getting only a draft pick, trade him now and pick up some combination of MLB ready bench help, bullpen reinforcements, and prospects to restock the minor leagues. You won’t see much of a drop off in performance out of the starters because of the talented players still left. With the savings you get from not resigning Zimmermann, you have more dollars to allot to keeping Strasburg and/or Desmond and/or Fister around long term.

Cons

Zimmermann has only one year left on his contract and opposing teams will not be happy to give up a significant group of talent for a one year rental who will probably command a deal close to Scherzer’s after the season. You will be moving on from the Nationals best starter over the last few seasons, right before a season in which the Nationals will be World Series favorites, a somewhat unprecedented move.

Option 3: Trade Strasburg

Pros

All the payroll implications from above apply here, only you would be resigning Zimmermann rather than Strasburg. Strasburg has the biggest trade value of any of the players we will look at as he has 2 years left on his deal and is the youngest of the group. The players you get back from a Strasburg trade could have an immediate impact, join the top prospects list in the minors, or maybe even both.

Cons

I personally like Strasburg’sfuture the best of any Nationals starter, so you will be giving that up. He is the youngest of the starters, so the least likely to be a big drag on your payroll come the end of his next contract. While Strasburg hasn’t been signed to a new deal, that’s not a reason to give up on it now. His agent is also Scott Boras, who the Nationals continue to have a good relationship with. Boras always advises his players to test the free agent waters, so the lack of a new deal for Strasburg is really par for the course with Boras. 

Option 4: Trade Fister

Pros

He is less talented than both Zimmermann and Strasburg and older than both of them. You would be sacrificing less from the 2015 team while still getting something back in return for him.

 Cons

He is also a one year rental, so take the fears with the Zimmermann trade return, and add more fears to it. You also don’t get as much potential payroll flexibility to resign the big name guys, so bringing back Strasburg, Zimmermann, and/or Span looks more like an “or” than an “and” proposition.

Option 5: Trade Desmond

Pros

Desmond is one of the most valuable players at shortstop, a position that has very little talent to spread around all the MLB teams. That means demand is higher which means Rizzo’s asking price can be higher. You gain that payroll flexibility we have been discussing, and can bump Yunel Escobar over to shortstop in the near term.

Cons

Desmond is one of the most valuable players at shortstop, a position that have very little talent to spread around all the MLB teams. Trading him means being stuck with Escobar at shortstop and Espinosa at second as a best case scenario (assuming you don’t bring back a middle infielder to replace him).

My Take

While I’m sure a lot of Nats fans have a vision of a Nationals Super Team dancing in their heads today, I actually think that is the worst course of action. Picking Scherzer to outperform Zimmermann (assuming he walks in this scenario, which seems like almost a done deal now) is a big gamble, made even riskier by getting nothing in return for Zimmermann this year. The improvement of Scherzer to the Nationals is not as high as you would think (read this Buster Olney piece for a good breakdown of why). The Nationals are also lacking in depth at both the Major League and Minor League level. You can’t count on the Nationals winning the NL East, but given the state of the other NL East teams, the Nationals have the easiest road to the playoffs where it really only takes 3 starters to take home a championship. So sacrificing a little bit of talent now for potential in the future makes a lot of sense.

If I were GM for a day, I am making a deal to send Zimmermann out to whomever gives me the best return. I then turn around and resign Desmond and Strasburg. Given the option, I will always choose the long term deal for the position player over a pitcher, given the injury considerations. Plus, Desmond plays a position of real need for the Nationals. If his range starts to go or a minor league prospect starts pushing for time, Desmond can easily shift over the second base. You know my feelings on Strasburg, and as the youngest pitcher of the group we are talking about, I’ll bet on his future over Scherzer and Zimmermann. Bringing back some bullpen depth or bench bats will help the 2015 team and offset the loss of Zimmermann in the short term and the long term.

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