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Posts Tagged ‘Cliff Lee’

The Phillies pitching rotation has had a monster season in 2011 (Photo: NY Times).

In the offseason, the Philadelphia Phillies “Four Aces” rotation was heralded as having the potential to be one of the best ever. Considering the track records of Roy Halladay, Cliff Lee, Cole Hamels, and Roy Oswalt, those lofty pre-season expectations were far from hyperbole. Perhaps that’s why much less attention has been paid to the fact that the Phillies have actually made good on even some of the most optimistic predictions.

To date, the Phillies’ team ERA of 3.05 ERA is the franchise’s lowest total since the dead ball era (2.46 ERA in 1917). Compared to the rest of the league, the current ERA+ of 128 also ranks as the NL’s best rate since the 2003 Dodgers ended the year at that same level. Put into further context, the Phillies have allowed 22.1% fewer runs than the league average, a comparative advantage surpassed by only 20 other teams since 1901. Clearly, the Phillies’ pitching has lived up to its billing.

Top-10* National League Pitching Staffs, Since 1901

*Based on percentage of runs allowed per game below league average.
Source: Baseball-reference.com

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(In addition to appearing at The Captain’s Blog, this post is also being syndicated atTheYankeeAnalysts.)

Some of Brian Cashman's best decisions have involved trades he didn't make.

The trade deadline has resulted in some of the most lopsided deals in history, but that doesn’t mean evey swap made under the gun has to have a winner and loser.  Each year, there are just as many deadline deals that are prudent as ones that are impetuous, but what about the trades that don’t get made? Sometimes, by not pulling an itchy trigger, a general manager can make his team a deadline winner even without making a single transaction.

During his Yankee tenure, Brian Cashman has not been very active during the trade deadline. In fact, when he has made a major in-season deal, it has often come earlier in the year when the pressure of the deadline was off in the distance. What Cashman has been very good at, however, is avoiding impetuous deals that would have a negative impact on the future more than help in the present.

In his first year as GM, Cashman inherited a strong team and built it into a powerhouse with additions like Chuck Knoblauch and Orlando Hernandez. However, despite compiling a record setting winning percentage over the first four months, the Yankees were still front and center amid several rumors at the deadline. In particular, it was reported that the team was close to securing Randy Johnson for a package including Hideki Irabu and a combination of prospects like Ramiro Mendoza, Mike Lowell, Ricky Ledee and Homer Bush.

Although it’s hard to imagine that Johnson would have had a negative impact on the Yankees, an improvement would have been impossible.  Granted, if the deal had been made, the Yankees may not have had to face Johnson in the 2001 World Series, but it’s also possible they wouldn’t have gotten there without the likes of Roger Clemens and David Justice, two players later acquired using players rumored to be in the mix for Johnson.

In 1999, the Yankees reportedly considered trading Andy Pettitte for Roberto Hernandez.

In 1999, Andy Pettitte was having one of his most difficult seasons in the big leagues. During the first half, the normally reliable lefty compiled a 5-7 record with a 5.59 ERA, leading to speculation that the Yankees might trade him before the deadline. One of the more prominent reports involved the Yankees trading Pettitte to the Phillies for two prospects who would then be flipped to Tampa for Roberto Hernandez. Had that trade been made, there not only wouldn’t have been a core four, but it’s also possible the Yankees wouldn’t have had four championships to celebrate. Because of Cashman’s ability to resist the pressure from above to trade Pettitte, the Yankees were able to enjoy 85 more wins, including nine in the post season, from the homegrown left hander.

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(In addition to appearing at The Captain’s Blog, this post is also being syndicated at TheYankeeU.)

Cliff Lee probably wanted to return to Philadelphia all along, but he did not leave a lot of money on the table to do so. Contrary to the prevailing wisdom, the five-year, $120 million deal that Lee signed is not worth much less than what Jerry Crasnick reported was the Yankees final offer of six years at $132 million plus a $16 million player option. In fact, it might actually be worth more. The devil is really in the details, particularly the vesting sixth year option (see comments section for an updated calculation) and incentives that exist in the Phillies’ offer, but even with those blanks left unfilled, we can still get a pretty good idea about how the two deals compare.

Comparison of Yankees’ and Phillies’ Reported Offers to Cliff Lee

  Phillies: 5 Years, $120 million     Yankees: 7 years, $148 million
Year Salary Present Value   Salary Present Value
1 $24,000,000 $24,000,000   $22,000,000 $22,000,000
2 $24,000,000 $22,605,728   $22,000,000 $20,721,917
3 $24,000,000 $21,292,456   $22,000,000 $19,518,085
4 $24,000,000 $20,055,478   $22,000,000 $18,384,188
5 $24,000,000 $18,890,362   $22,000,000 $17,316,165
6       $22,000,000 $16,310,188
7       $16,000,000 $11,172,839
Total $120,000,000 $106,844,024   $148,000,000 $125,423,383

 Note: Based on a nominal interest rate of 6% compounded monthly. Assumes salary paid in full each year (which favors shorter-term deal).
Source: zenwealth.com

Without factoring in the sixth year option, Lee left about $19 million in present value on the table, but that amount can be whittled down by about $1 million if you assume the extra $2 million in annual salary from the Phillies’ offer is invested at about 6% over the life of the deal. Furthermore, when you factor in New York State’s 6.85% top tax rate, which is more than twice that of Pennsylvania’s, the difference is mitigated further.

Even putting more nebulous variables like interest and tax rates aside, it’s still easy to narrow the gap between the two offers. For example, if the sixth year option is worth $16 million, as in the Yankees’ offer, the difference between the two deals would be narrowed to about $6.5 million. Of course, just because he won’t be under contract to Philadelphia in 2017 doesn’t mean Lee won’t be pitching somewhere. In other words, if he is able to negotiate a salary with a present value of $6.5 million (about $9.3 million) in that season, he’d actually wind up coming out ahead.

The bottom line is Cliff Lee did very well by his bottom line. He may have taken less guaranteed money, but in the long run negotiated a deal with the Phillies that is at least on par with the offer he had from the Yankees (and likely the Rangers as well). There’s no need to laud the Phillies’ stealthy maneuvering or applaud Lee for taking a discount because neither is appropriate (at least not until the final details are confirmed and suggest otherwise). Besides, what does it matter anyway? Lee is back where he wants to be and the Phillies are holding four aces. Now, it’s up to the rest of baseball to come up with a straight flush.

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For the second time in six months, Cliff Lee has slipped through the Yankees’ grasp. According to numerous reports, the off season’s mostly highly coveted free agent isn’t headed to Arlington or the Bronx, but instead is returning to Philadelphia.

Cliff Lee has decided to take his talents back to Philadelphia.

The Yankees reportedly offered Lee a seven-year deal that was worth up to $154 million, but the ace lefty opted to take about $50 million less to join Roy Halladay, Roy Oswalt and Cole Hamels as part of the Phillies’ powerhouse rotation. Coincidentally, just one year earlier, the Phillies acquired Roy Halladay from the Blue Jays and then, in a related move, traded Lee to the Mariners in order to replenish the farm system and free up resources. Who says General Manager Ruben Amaro isn’t willing to have his cake and eat it too?

By signing Lee, Amaro has righted a wrong from last off season. Meanwhile, Brian Cashman has been left to wonder if his decision to abort a trade for Lee in July didn’t wind up costing him in December. Regardless, the Yankees general manager has now been left holding a bag of money…and there’s no one left to whom he can give it.

If the Yankees initial reaction to losing out on Lee is to be a little disorientated, you really can’t blame them. After all, you’d probably have to go all the way back to the off season of 1992 to find another player who spurned the lure of Yankee dollars. That year, the Yankees not only missed out on one, but three highly coveted targets when Barry Bonds, Greg Maddux and David Cone all showed little interest in coming to the Bronx. Of course, that year, the Yankees were coming off six straight seasons at the bottom half of the A.L. East. This time around, however, the team was only one year removed from a championship, making Lee’s rejection seem all the more improbable.

Whatever the eventual reasons for Lee’s decision, the Yankees can’t be distracted by what went wrong. Too much time has already been wasted waiting around for the indecisive lefty, and during their pursuit, the Yankees made no secret of the fact that they didn’t have a backup plan. Unfortunately, when you put all your eggs in one basket, you sometimes wind up with a mess, which is exactly what the Yankees’ offseason has become. Now, it’s time for Cashman to clean it up, but in order to do so, he’ll need to be creative.

The obvious target in the wake of losing Lee is likely to be Zack Greinke, but the Royals have always been known as a very difficult trading partner. So, even if Greinke was a fit in New York, the likelihood of reaching a reasonable deal with Kansas City wouldn’t be great. Instead, the Yankees’ best course of action would be to convince Andy Pettitte to return for one more year and then target a veteran lefty like Mark Buehrle.  This way, the team could assess it needs during the first half of 2011 and react accordingly, instead of paying through the nose by acting out of desperation. In other words, Plan B might simply be another waiting game.

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(In addition to appearing at The Captain’s Blog, this post is also being syndicated at TheYankeeU.)

In an effort to evaluate whether the Yankees and Rangers are setting themselves up for a fall by offering a long-term contract to Cliff Lee, many have invoked similar deals that were given to the likes of Barry Zito, Johan Santana, C.C. Sabathia, Mike Hampton, Kevin Brown and Mike Mussina. Even if all those pitchers were similar to Lee, it would still be foolish to draw any meaningful conclusion from such a small sample size.

There really is no point in comparing Lee to other pitchers who signed similar long-term contracts. At best it is an anecdotal pursuit. After all, the question we need to answer is whether Lee will be productive over the term of the proposed contract, and a better way to do that is by looking at every starter who pitched from 32 to 38 (the ages Lee would be under a seven-year contract).

Relative Performance of Starters, Ages 32 to 38, Since 1901

  Total ERA+ >= 100 ERA+ >= 120
Lefties 37 32 15
Righties 80 65 19

Note: Includes all pitchers who threw at least 1,000 innings between the ages of 32 and 38 and started at least 75% of their games.
Source: Baseball-reference.com

Since 1901, 397 starters (75%-plus of all games in the rotation) pitched between the ages of 32 and 38. Of that total, 117, or 29%, pitched at least 1,000 innings, of which 83% had an ERA+ of 100 or higher and 29% had an ERA+ of at least 120. Among lefties, the percentage of starters with an ERA+ of 120 or better jumps to 41%.

Based on the data above, it seems that if a starting pitcher is able to stay healthy, he’ll likely be at least league average during his age 32 to 38 seasons. And, if he is a lefty, there is close to an even chance that he’ll be well above average. Looked at in this light, the key question regarding Cliff Lee is whether he will stay healthy over the length of a seven-year deal. Although he has suffered from minor abdominal and back issues during his career, Lee has managed to pitch at least 200 innings in five of the last six seasons (in 2007, he was sent to the minor leagues). The ace lefty also has a reputation for being in good condition and a tireless worker, so there is no reason to think complacency or a premature break down will develop. In other words, Lee fits the profile of a pitcher who should continue to log innings as he progresses deeper into his career. And, once you come to that conclusion, it becomes much more likely that he’ll justify a six- or seven-year contract.

Listed below for further comparison are the top-20 left handed pitchers who meet the criteria referenced above. After his soon-to-be new contract expires, will Lee’s name be added to this list? That remains to be seen, but soon we’ll know whether its the Yankees or Rangers that are sure going to hope so.

Top-20 Left Handed Starters, Ages 32-38, Since 1901

Player From To IP Age GS ERA+
Randy Johnson 1996 2002 1548.2 32-38 210 176
Lefty Grove 1932 1938 1628.1 32-38 183 149
Harry Brecheen 1947 1953 1191 32-38 157 131
Steve Carlton 1977 1983 1854.2 32-38 242 130
Warren Spahn 1953 1959 1929 32-38 240 127
Whitey Ford 1959 1965 1695.2 32-38 243 125
Carl Hubbell 1935 1941 1579.2 32-38 191 125
Thornton Lee 1939 1945 1308 32-38 159 125
Tom Glavine 1998 2004 1544 32-38 239 124
Al Leiter 1998 2004 1360 32-38 213 124
Preacher Roe 1948 1954 1277.1 32-38 173 124
Eppa Rixey 1923 1929 1779.2 32-38 221 123
Eddie Plank 1908 1914 1704.2 32-38 205 123
Tommy John 1976 1981 1322.1 33-38 184 123
Eddie Lopat 1950 1955 1104.1 32-37 148 121
Jamie Moyer 1995 2001 1291 32-38 194 115
Andy Pettitte 2004 2010 1262.2 32-38 203 115
Mike Cuellar 1969 1975 1921.1 32-38 264 114
Chuck Finley 1995 2001 1373.1 32-38 215 114
David Wells 1995 2001 1421.2 32-38 210 113

Note: Includes all left handed pitchers who threw at least 1,000 innings between the ages of 32 and 38 and started at least 75% of their games.
Source: Baseball-reference.com

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As the Yankees await Cliff Lee’s decision (unless the Marlins are the “mystery team”, at least we know he won’t be taking his talents to South Beach), one thing has become abundantly clear. There is no Plan B.

The Yankees are reportedly willing to pay over $160 million for Cliff Lee’s signature.

Putting all of your eggs in one basket usually isn’t the best strategy, but this offseason the Yankees have one clear cut need and Lee is the only viable solution. From that standpoint, you can’t blame Brian Cashman for having such a singular focus. However, if he fails to reel in his big fish, more than a few people in Yankeeland won’t be so understanding.

During the 2007 offseason, the Yankees were heavily involved in the Johan Santana sweepstakes, but Cashman ultimately decided that the combined cost of money and prospects was too prohibitive. As things turned out, that decision proved to be a wise one because even though the Yankees missed the playoffs in 2008, they were able to retain Phil Hughes and sign C.C. Sabathia the following offseason. Both men not only contributed to a championship in 2009, but remain as the only two reliable starters heading into the 2011 season. But, what would have happened if Sabathia decided to turn down the Yankees’ offer? How then would Cashman’s decision have been viewed (especially if he would up signing Derek Lowe instead)?

This offseason, Cashman is faced with a similar dilemma. Even though Lee’s Rangers booted the Yankees from the ALCS, his decision to hold onto wunderkind Jesus Montero will likely be lauded if the Yankees eventually land the ace lefty in free agency. Should Lee decide to return to Texas, however, history may not be so kind.

Let’s journey back to July 8 (amusingly, the same day LeBron James made his infamous “Decision”) for a moment. According to numerous published reports, the Yankees had acquired Lee from the Mariners for Montero and a package of secondary prospects. The deal was so close to being consummated that Lee even reached out to Sabathia for advice on where to look for a house. The next morning, however, the nomadic lefty found himself headed not to New York, but to Texas. Why? Because the Mariners became concerned about an injury to minor league second baseman David Adams and Cashman refused to substitute Eduardo Nunez or Ivan Nova in the deal.

Although it was first reported that the Mariners backed out of the deal, later clarification revealed that it was actually Cashman who turned them away. Although no one could blame him for being shy about dealing Montero, the fact of the matter is he had already decided to part with the Yankees’ top prospect. In other words, it was really Nunez or Nova who held up the deal.

Could the Yankees’ reluctance to trade Eduardo Nunez end up costing them Cliff Lee?

Compromising the team’s championship chances in one season is sacrifice enough, but if the Yankees fail to sign Lee as a free agent, the opportunity cost will increase exponentially. Presumably, had the Yankees completed the deal for Lee last July, re-signing him would have been much more of a formality. Although many had viewed Lee’s eventual migration to the Bronx as a foregone conclusion, the Yankees are now on the verge of losing out completely. Had Cashman known how difficult it would be to sign Lee, one wonders if he would have allowed Nunez or Nova to scuttle the original deal?

Even if he isn’t able to sign Lee, Cashman can still serendipitously come out smelling like a rose if Montero quickly emerges and comes close to realizing his potential. If that doesn’t happen, however, he’ll likely be given an amount of blame equal to the credit he received for the series of events culminating in the Sabathia acquisition. Although he has no control over Lee’s eventual decision, allowing him to have a good experience in Texas is a worthy second guess. Also open to valid recriminations is Cashman’s failure to be more active for a pitcher like Dan Haren, who if acquired last season would have lessened or even eliminated the need for Lee.

To this point, we’ve dealt with the worst case scenario, but it remains just as likely that the Yankees will be able to sign Lee, in which case Cashman will once again hit the jackpot. After all, putting all those eggs together comes with risk, but it can also offer a great reward. Never afraid to take a chance, Cashman is now in the position of waiting to see how his gamble will payoff. Although he would have liked the process to be over easy, the bottom line is he now needs to hope his offseason plans don’t wind up scrambled.

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The Cliff Lee sweepstakes has turned into a guessing game over which mystery teams have supposedly offered the ace lefthander a seven-year contract. Although no confirmations have been forthcoming, the addition of a seventh year seems to be a major sticking point, at least for the Yankees, who, again according to unsubstantiated rumors, are unwilling to go beyond six.

On his Twitter account, columnist John Heyman reported that although the Yankees intend on sticking to six years, they would try to “steal” Lee with an inflated offer of $140-150 million. Aside from the fact that a thief isn’t supposed to come away lighter in the pockets, the biggest problem with Heyman’s exclusive is the Yankees’ supposed logic doesn’t really make much economic sense (or cents, for that matter).

All long-term contracts carry heightened risk because of the increased uncertainty that comes from peering too far into the future. For many, the burden of carrying a star player past his prime at an inflated salary seems like a fate worse than being a fan of the Pittsburgh Pirates. However, we can sometimes get too carried away with the length of a contract, especially when what we should be focusing upon is the overall value.

Back loading a contract is one way teams seek to defray the exorbitant cost of long-term deals. Even though that goes completely against the misplaced logic summarized above (now, the star player is paid even more as he gets further from his prime), the economic reasoning is very sound. Why? Because money has time value. In other words, $1 in the present is not the same as $1 in the future ($1 in the present is usually worth more). Factors such as inflation, interest and tax rates can all have an impact on the value of money as time passes, which, brings us back to the Yankees’ reported aversion to giving Lee a seven-year deal.

Let’s assume that Heyman is correct and the Yankees are willing to pay Lee $150 million over the next six years. Instead of dismissing the notion of a seven-year deal out of hand, our next question should be at what terms would such a contract be equivalent? One way to determine that is to consider the present value of two different contracts and see how they compare.

Present Value Comparison of Two Contracts

  Deal 1: $150mn / 6 years   Deal 2: $164.5mn / 7 years
Year Salary Present Value   Salary Present Value
1 $25,000,000 $25,000,000   23,500,000 $23,500,000
2 $25,000,000 $22,186,231   23,500,000 $20,855,057
3 $25,000,000 $19,689,153   23,500,000 $18,507,804
4 $25,000,000 $17,473,124   23,500,000 $16,424,736
5 $25,000,000 $15,506,510   23,500,000 $14,576,120
6 $25,000,000 $13,761,240   23,500,000 $12,935,566
7 NA NA   23,500,000 $11,479,658
Total $150,000,000 $113,616,258   $164,500,000 $118,278,941

Note: Based on a nominal interest rate of 12% compounded monthly. Assumes salary paid in full each year (which favors shorter-term deal).

Source: zenwealth.com

At this point, it might be worthwhile to take a quick diversion and explain what present value means. Basically, in this instance, it refers to the amount of money the Yankees need today to pay off a debt tomorrow (think about Wimpy and hamburgers). Of course, the concept assumes that the money is invested wisely, not spent frivolously (think Carl Pavano). With that in mind, let’s assume the Yankees invested $22,186, 231 on day one of the rumored contract and received a 12% annual rate compounded monthly. At the end of the year, the Yankees initial investment would amount to $25,000,000 (principal plus interest of just over $2.8 million). As a result, with a discounted initial sum, the Yankees could pay Cliff Lee’s salary in the following season.

Now, let’s fast forward back to the comparison. Although it does look as if the Yankees’ shorter deal is less expensive, we aren’t finished yet. In addition to calculating the present value of each term year, we also need to consider the opportunity value of the $1.5 million “saved” under the longer contract. Once again, assuming that the Yankees invested the saving (125,000 per month) at an annual rate of 12%, they would end up with just over $4 million in return. When subtracted from the present value of the deal, the two terms presented in the chart above become near equivalent. For the Yankees, however, there is also the issue of luxury tax. Assuming the team’s payroll would hover around the same level regardless of either deal, it would enjoy a luxury tax savings of $3.6 million (or more, if the Yankees also invested that sum) over the first six years of the seven-year deal. When these factors are also considered, the seven-year deal comes in almost $3 million cheaper than the shorter version.

Normalization of Hypothetical Seven-Year Deal

Variables Total
Present Value $118,278,941
Interest on Lower AAS* $4,088,741
Luxury Tax Savings# $3,600,000
Final Cost $110,590,200

* Based on a nominal interest rate of 12% compounded monthly
# Based on luxury tax rate of 40% charged in years one to six of the contract.

At this point, it should be noted that there are more variables that need to be considered in order to increase the accuracy of the comparison. For starters, we’d need to determine the rate of return that the Yankees expect on their investments (it could be much more or less than 12%). Also, we’d need to have a better understanding of the team’s cash flow (i.e., does paying Lee compromise their liquidity to the point that they can not invest elsewhere). There is also the issue of taxes, which could mitigate the Yankees’ return on investment (although, considering the amount of debt held by the team as well as the favorable tax treatment it enjoys under the terms of its financing, that really might not be much of an issue), as well as inflation, which in a baseball sense would refer to the future direction of salaries (i.e., how much will star pitchers be paid 6-7 years from now). Having noted these caveats, the analysis still illustrates there are very sophisticated ways to evaluate long-term contracts that go well beyond how much an aged All Star is making during the final years of his deal.

Should the Yankees go to seven years with Lee? Or should six be the limit? It doesn’t really matter. What the Yankees need to do is decide upon a limit in terms of present day dollars, not contract years. Only after factoring in all the variables, can such a limit be determined. Then again, there probably is one other variable that also needs to be considered….the competitiveness of Hal Steinbrenner. We know how it would have factored into a negotiation with his father, but it remains to be seen how it will influence the son.

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