2011-2012 Offseason Thread

[a700hitter]

While this is a bit of a distraction, the topic of equating player evaluation and risk reward to the stock market reminds of those hideous commercials on EEI for that guy's sports betting business, the commercials that talk about making "an investment in sports betting". Never heard anything so ridiculous in my entire life.

 

Frankly I have been somewhat disappointed in EEI for allowing such advertising content.

He might have some takers on TalkSox.

[User Name]

I made an exception an looked at your post' date=' because I couldn't resist seeing what you posted about a topic in which you have absolutely no expertise. Investment management involves far more variables than player investment. Investment management is far from an exact science. The reason why they can be compared is that GM's like investment managers have a finite pool of money to invest in assets that will perform. Are the businesses and assets different? Yes, but not so fundamentally different than to change the nature of risk/reward. There is no such asset class in any large industry as a low risk/high reward assets.[/quote']

 

I love how me saying they can't be directly equated (which you admitted above) equates to me having "absolutely no knowledge" on the subject. I never said i thought the elusive "low risk/high reward" signing exists. I'm just saying i don't agree with comparing the signing of players who are damaged goods to penny stocks, and i am absolutely correct in saying it. Reading comprehension is very important.

[a700hitter]

I love how me saying they can't be directly equated (which you admitted above) equates to me having "absolutely no knowledge" on the subject. I never said i thought the elusive "low risk/high reward" signing exists. I'm just saying i don't agree with comparing the signing of players who are damaged goods to penny stocks' date=' and i am absolutely correct in saying it. Reading comprehension is very important.[/quote']But you constantly rebuke people for not having knowledge of what it is like to work for a baseball team's FO. I work with investment professionals, so I know a fair bit about it. You do not.

[Emmz]

Zumaya was a penny stock because he was cheap and unlikely to have a high return. an investment is a risk, and it isnt even debatable. The risk isnt 1D like you seem to think, Ted. You're completely ignoring the financial investment, and saying the reward is the risk. That's a ridiculous way to look at it unless you're counting on it to be a major contributor.

 

You buy a loaf of bread for a dollar and you take a slice off to find out theres a big f***in piece of mold on it, is a dollar lost a big deal? Nope, not unless you took a bite and got sick from that moldy bread (signed it to a major league deal and blindly expected a dumpster purchase to work out). Next thing you know you're in the ER (in second place or worse) because of food poisoning (blown saves, a .106 batting average leading off, a John Lackey in the rotation)

[User Name]

But you constantly rebuke people for not having knowledge of what it is like to work for a baseball team's FO. I work with investment professionals' date=' so I know a fair bit about it. You do not.[/quote']

 

And that has what to do with the current discussion? You're always talking about "sticking to baseball discussion, and not making things personal". Take your own advice.

 

The reason i say they can't be compared is because there's a higher risk in signing a damaged good player than buying a penny stock. Every player you sign to a contract that needs to be allocated to the 40-man roster, or even worse, the 25-man roster brings the inherent risk of occupying a roster spot that could potentially be occupied by another player, and also, contributes to the overall amount that goes against the luxury tax, look at 2009 for proof.

 

There's a lot more risk in signing a player that in buying a penny stock.

[User Name]

Zumaya was a penny stock because he was cheap and unlikely to have a high return. an investment is a risk, and it isnt even debatable. The risk isnt 1D like you seem to think, Ted. You're completely ignoring the financial investment, and saying the reward is the risk. That's a ridiculous way to look at it unless you're counting on it to be a major contributor.

 

You buy a loaf of bread for a dollar and you take a slice off to find out theres a big f***in piece of mold on it, is a dollar lost a big deal? Nope, not unless you took a bite and got sick from that moldy bread (signed it to a major league deal and blindly expected a dumpster purchase to work out). Next thing you know you're in the ER (in second place or worse) because of food poisoning (blown saves, a .106 batting average leading off, a John Lackey in the rotation)

 

The problem is that every cheap player takes up a roster spot, and that's a limit that you don't have to deal with when you're buying penny stocks.

 

They're both cheap, they both have limited reward possibility, but one carries with it a lot more responsibility given the nature of roster construction.

[Emmz]

The problem is that every cheap player takes up a roster spot, and that's a limit that you don't have to deal with when you're buying penny stocks.

 

They're both cheap, they both have limited reward possibility, but one carries with it a lot more responsibility given the nature of roster construction.

 

And thats part of the risk too.

[Bellhorn04]

So' date=' penny stocks are low risk/high reward? That's completely wrong. It's not even a situation where we can agree to disagree. You are just wrong.[/quote']

 

OK, I see what you're saying now. The only thing is, Ryan's description of the Zumaya transaction leaves out any reference to the cost factor. When Billy Beane describes the Manny acquisition, it would be more accurate for him to say: low cost, high risk, high reward.

[The Boomer]

Inside or special information about an asset/player would influence the risk classification, but while were are talking about a finite pool as compared to the broad investment markets, there are 30 GM's with scouting departments all looking to get the same information, so I'd lean toward saying that it (i.e., a true low risk/high reward player) doesn't exist, because you only need a couple of the GMs armed with the information to drive up the price.

 

I respect your professional background in this area. Your expertise is definitely reflected in the way you have been discussing this topic.

 

The only real possibility is in drafting. In the FA market, I agree that there's little information advantage. Although if you knew a player preferred to play for your team, you might get a better negotiating position. My opinion is that Theo did this in the Beltre deal and it was a win for both sides.

[The Boomer]

OK' date=' I see what you're saying now. The only thing is, Ryan's description of the Zumaya transaction leaves out any reference to the cost factor. When Billy Beane describes the Manny acquisition, it would be more accurate for him to say: low cost, high risk, high reward.[/quote']

 

I agree, a better way to say it would be: low cost, high upside potential.

[a700hitter]

OK' date=' I see what you're saying now. The only thing is, Ryan's description of the Zumaya transaction leaves out any reference to the cost factor. When Billy Beane describes the Manny acquisition, it would be more accurate for him to say: low cost, high risk, high reward.[/quote']Yes, that would be more accurate. Saying high risk/ high reward is not inaccurate, maybe just not as complete. What Theo said was just wrong. Many investment portfolios allocate a small portion of its funds to invest in high risk assets. The fact that a small amount is invested in the high risk asset doesn't convert it into a low risk asset.

[The Boomer]

I love how me saying they can't be directly equated (which you admitted above) equates to me having "absolutely no knowledge" on the subject. I never said i thought the elusive "low risk/high reward" signing exists. I'm just saying i don't agree with comparing the signing of players who are damaged goods to penny stocks' date=' and i am absolutely correct in saying it. Reading comprehension is very important.[/quote']

 

So why don't you agree? It's not supposed to be a perfect analogy, but many penny stocks are "damaged" companies too. I'm sure it doesn't fit completely, but I thought it fit pretty well.

[User Name]

I agree' date=' a better way to say it would be: low cost, high upside potential.[/quote']

 

Wouldn't you consider the risk "medium" because you're using a roster spot? Roster spots are limited for teams, therefore, every time you fill one up, you're both taking a financial and a roster spot risk?

[Emmz]

Yes' date=' that would be more accurate. Saying high risk/ high reward is not inaccurate, maybe just not as complete. What Theo said was just wrong. Many investment portfolios allocate a small portion of its funds to invest in high risk assets. The fact that a small amount is invested in the high risk asset doesn't convert it into a low risk asset.[/quote']

 

I can agree with this, but not entirely. I still think that signing a player to a minor league deal and a small contract is a low risk, and if that player has a high ceiling of success, you could say it's high potential reward, maybe not likely reward, though.

[User Name]

So why don't you agree? It's not supposed to be a perfect analogy' date=' but many penny stocks are "damaged" companies too. I'm sure it doesn't fit completely, but I thought it fit pretty well.[/quote']

 

Because the cost is low, but because of the use of the roster spot + the financial investment (remember that 1.5 million bucks can be a very significant amount for a lot of teams).

 

Player signings carry with them a lot more risk than a penny stock.

[a700hitter]

I agree' date=' a better way to say it would be: low cost, high upside potential.[/quote']Yes, that would be accurate, and it is basically the definition of a high risk asset. The Red Sox should consult an investments guy like you before they attempt to put a positive spin on their acquisitions. "Low cost/high upside potential" is an accurate description, and it puts a positive spin on the acquisition. Low risk/High reward as Theo said time after time was like nails on a blackboard stupid.

[Emmz]

I think some people, if not most, view low risk high reward and "low cost, high potential" as interchangable. Not necessarily even a spin campaign or a lack of knowledge, its just a similar way of putting things.

[User Name]

I think some people' date=' if not most, view low risk high reward and "low cost, high potential" as interchangable. Not necessarily even a spin campaign or a lack of knowledge, its just a similar way of putting things.[/quote']

 

Great point.

[a700hitter]

I think some people' date=' if not most, view low risk high reward and "low cost, high potential" as interchangable. Not necessarily even a spin campaign or a lack of knowledge, its just a similar way of putting things.[/quote']I understand that, but it doesn't make it correct. It is like nails scratching on a blackboard to me because of my work with investment professionals for 25 years. I would expect a Harvard graduate and attorney and GM of a billion dollar enterprise to use terms like this correctly. I appreciate that Terry Ryan understands these terms and uses them correctly.

[Emmz]

I understand that' date=' but it doesn't make it correct. It is like nails scratching on a blackboard to me because of my work with investment professionals for 25 years. I would expect a Harvard graduate and attorney and GM of a billion dollar enterprise to use terms like this correctly. I appreciate that Terry Ryan understands these terms and uses them correctly.[/quote']

 

That doesn't make his usage incorrect. It's all perspective. Maybe in the business world that technicality bothers you. But it doesn't stand out as incorrect to the average person.

[a700hitter]

That doesn't make his usage incorrect. It's all perspective. Maybe in the business world that technicality bothers you. But it doesn't stand out as incorrect to the average person.

No, his usage of the term is incorrect. Just because people accept it and think it is correct doesn't make it correct. It's not that his statement is technically wrong. It is fundamentally wrong. Terry Ryan's usage is correct.

[SoxFanForsyth]

I guess after 630 pages of posts, it's only natural that the subject of the conversation isn't related to the Red Sox.

[seabeachfred]

OK, I will buy relatively low risk, relatively high reward.

 

To me the thing causing the confusion is what the term risk means here. I've always interpreted low risk/high reward as implying that if it fails, you're not going to lose that much on it. I might argue that Aceves was low risk, high reward. Especially because it's one of the few of ours that actually succeeded.

 

If you jog your memory back to the fall of 2008, Epstein called the signings of Smoltz and Penny LOW RISK, HIGH REWARD. It turned out just the opposite because they became high risk when Penny was inserted into the rotation as well as Smoltz when he was healthy enough to do so. The reward was pathetically low because they both failed miserably and wound up being released after both of them were scalded by the Yankees in the openers of two separate series, which BTW, the Sox won only one of the seven games.

 

When they were signed they were supposed to be low risk but as soon as they got into the rotation they were no longer that; they were high risk. And as I said, they both failed miserably. That is why I really don't have any use for that term. Bobby Jenks, for instance. How would be classify him? Three million per year down the crapper and what did we get from him? Not much. Was that low risk considering his past physical ailments or high risk? That's where the confusion comes in for me.

[VA Sox Fan]

I guess after 630 pages of posts' date=' it's only natural that the subject of the conversation isn't related to the Red Sox.[/quote']

 

This thread is just kind of a cluster f***

[a700hitter]

I guess after 630 pages of posts' date=' it's only natural that the subject of the conversation isn't related to the Red Sox.[/quote']Nothing is going on with the Sox. Today was picture day. Yesterday beer was banned. There's nothing to talk about with the Red Sox, but I am here anyway, because I don't watch the Oscars.

[VA Sox Fan]

Nothing is going on with the Sox. Today was picture day. Yesterday beer was banned. There's nothing to talk about with the Red Sox' date=' but I am here anyway, because I don't watch the Oscars.[/quote']

 

I haven't watched the Oscars in years.

[Emmz]

No' date=' his usage of the term is incorrect. Just because people accept it and think it is correct doesn't make it correct. It's not that his statement is technically wrong. It is fundamentally wrong. Terry Ryan's usage is correct.[/quote']

 

Usage of the term is technically wrong, because apparently in business school you can't just think of things in perspective. You're right dude, the universal meaning of the cluster of words "low risk, high reward" is what you learned in business 101. It doesn't even matter if the basic idea is right. /sarcasm

 

We've reached a point where we're all in agreement it seems, though.

[a700hitter]

Usage of the term is technically wrong, because apparently in business school you can't just think of things in perspective. You're right dude, the universal meaning of the cluster of words "low risk, high reward" is what you learned in business 101. It doesn't even matter if the basic idea is right. /sarcasm

 

We've reached a point where we're all in agreement it seems, though.

Yes, Terry Ryan used the terminology correctly.

[Emmz]

If you jog your memory back to the fall of 2008, Epstein called the signings of Smoltz and Penny LOW RISK, HIGH REWARD. It turned out just the opposite because they became high risk when Penny was inserted into the rotation as well as Smoltz when he was healthy enough to do so. The reward was pathetically low because they both failed miserably and wound up being released after both of them were scalded by the Yankees in the openers of two separate series, which BTW, the Sox won only one of the seven games.

 

When they were signed they were supposed to be low risk but as soon as they got into the rotation they were no longer that; they were high risk. And as I said, they both failed miserably. That is why I really don't have any use for that term. Bobby Jenks, for instance. How would be classify him? Three million per year down the crapper and what did we get from him? Not much. Was that low risk considering his past physical ailments or high risk? That's where the confusion comes in for me.

I don't even recall those two contract prices, and they were somewhat relied on to try and be starters. That is definitely not a low risk.

[Bellhorn04]

Speaking of Oscars, does anybody know if Brad Pitt uses the term 'low risk, high reward' in Moneyball?