Comments on: Felix’s Contract From Felix’s Perspective

By: DMZ

DMZ — Sun, 06 Sep 2009 01:12:01 +0000

Seriously, you can’t think of any reason beyond “deflation” in which backloading a contract might earn a player more money?

Really?

By: mw3

mw3 — Sat, 05 Sep 2009 20:14:14 +0000

Since a deflationary sprial has ocurred only twice in the last 150 years. I don’t think hedging for it is very wise. Hedging for inflation is wise because even in a low inflation environment there is still some inflation. For instance the the mid to late nineties had very low inflation but it still occurred.

By: mw3

mw3 — Sat, 05 Sep 2009 20:09:24 +0000

Boy is that true $200 million backloaded after adjusting for taxes and inflation = $139 million.
(One million dollar yearly raises)

$200 million dollars paid twenty million a year again adusting for taxes and inflation = $150 million.

And $200 frontloaded with million dollar yearly decreases adusted in the same fashion = $174 million.

By: DMZ

DMZ — Sat, 05 Sep 2009 20:03:36 +0000

Boy, is that not true.

By: mw3

mw3 — Sat, 05 Sep 2009 19:28:21 +0000

Backloading never earns the player more money in real dollar terms unless there is deflation.

By: snapper

snapper — Sat, 05 Sep 2009 16:28:45 +0000

I knew someone smart would be the first to do it someday.

If you assume both sides are smart, i.e. can do the math on discounting, the NPV of the contract should be the same front loaded or back loaded. Unless, of course the two sides have different discount rates. So, one reason for a front-loaded contract is the player has a higher discount rate than the team, and is willing to forgo more future salary for current salary, b/c he expects inflation, or whatever.

Otherwise, the clearest reason for it is to fit a team’s budget. The Yankees seem to play with a $200M budget. Since they had room to pay A-Rod $30M+, they buy themselves more flexibility later on to add players when he is not contributing as much.

Either front loading or back loading can make sense, depending on circumstances.

By: mw3

mw3 — Sat, 05 Sep 2009 02:24:28 +0000

And so could Felix if he is getting good advice.

By: mw3

mw3 — Sat, 05 Sep 2009 02:23:30 +0000

Now Arod can use the money to hedge against inflation and tax increases.

By: mw3

mw3 — Sat, 05 Sep 2009 02:18:05 +0000

I knew someone smart would be the first to do it someday.

By: snapper

snapper — Sat, 05 Sep 2009 01:32:15 +0000

Frontloading kills it in the present. Which is why it never happens.

This whole conversation is dumb. Back to Felix â€“ you can live in fantasy land on your own time.

Um, Dave. A-Rod’s current contract is frontloaded. $32M in 2009 decreasing to $20M in 2017.

http://mlbcontracts.blogspot.com/2005/01/new-york-yankees_111398168678860040.html

You probably should check the facts before berating your readers.