Thursday, February 19, 2009

Trade Deadline, Troubled Assets, And Richard Jefferson

It's no secret that the Bucks would like to deal Richard Jefferson before 2:00 today. If they don't shed some payroll they will be in a pretty tough cap situation going into next season, and if they want to have any hope of hanging on to Ramon Sessions or Charlie V, a Jefferson trade is almost a must. I don't see it happening. This post at Marginal Revolution is quite interesting:

You also may have heard that the Phoenix Suns have been trying to unload All-Star players Amare Stoudemire and Shaquille O'Neal. They are not hoping to get equal talent in return but rather they need to lower their payroll. (Why pay $75 million a year for a fringe playoff club?) And the New Orleans Hornets, former contenders, traded center Tyson Chandler simply to unload his salary.

I think of the Suns or Hornets as similar to a highly leveraged institution. I don't know the debt level of their corporate structure but that is not the point. The Suns have been spending lots in recent years toward the goal of ever-rising prices for season tickets and corporate boxes. Does that strategy sound familiar? If the future price hikes don't come on the main asset, they can't afford their obligations and so they will try to shed illiquid and hard-to-value assets into an unwilling market. Sound familiar?

There are not many buyers out there for high-priced assets, even if they are as good as Jefferson or Stoudemire, and even if you can move them, the lack of buyers means that you will get less than you usually would. Add in the fact that the salary cap is actually like to drop next year, and you wind up with all sellers and no buyers.

At least Richard Jefferson is a good player, and there are a few teams that are rumored to be interested (Portland, most recently), but don't be surprised if the trade market is completely frozen today.

1 comment:

E.S.K. said...

All this The Bucks The Bucks talk makes me think I should start paying attention.