• Arbitrage opportunity!

    by  • September 16, 2010 • Uncategorized • 23 Comments

    Damien Cox:

    Then, after arbitrator Richard Bloch rejected the first contract, the Devils finally came up with $100 million deal that, after much discussion, was approved. Now they’ve been fined and had draft choices revoked on top of it, plus they still have to dump contracts to get under the salary cap.

    it’s hard to put a value on all of that. How much is a first round draft pick worth in dollars? But you could argue Kovalchuk will, when its all said and done, cost the Devils somewhere between $150 million and $200 million in salary, fines, prospects, draft picks and players. And it’s quite likely that he won’t put another body in a seat in the notoriously fickle New Jersey hockey market.

    Kovalchuk cost the Devils $100MM in salary (the net present value will be considerably lower, particularly if you think that there’s going to be a lot of inflation). They were fined $3MM. They’ve lost a third round pick next year and a first round pick in a year of their choosing in the next four years.

    I don’t expect MSM writers to know about net present value. Still though, if we follow the math through, Damien Cox thinks that you could argue that a first round pick in a year of the Devils’ choosing in the next four years and a third round pick is worth somewhere between $47MM-$97MM. The best part is that he apparently realizes how stupid it all is – he follows this up with:

    Unless Kovalchuk turns into Mario Lemieux, he can’t possibly be worth all this. It’s like the Devils got on a speeding bus and just couldn’t get off.

    Perhaps your figures are off?

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    23 Responses to Arbitrage opportunity!

    1. September 16, 2010 at

      Damien thinks he’s making 7 figures.

    2. Roke
      September 16, 2010 at

      I’m sure Mr. Cox spent many hours going through past drafts, player development, and the current player market to come up with those numbers. He’s a Mainstream Media Member after all and they don’t take liberties with their research.

    3. Hawerchuk
      September 16, 2010 at

      Even Phil Kessel didn’t cost the Leafs $47M

    4. Hawerchuk
      September 16, 2010 at

      Incidentally, I made the opposite comment as Cox did – the penalty for NJ was tiny – less than $6M in present value.

    5. lowetide
      September 16, 2010 at

      http://twitter.com/DamoSpin/status/11255463547

      Long history of salient prose.

    6. Tyler Dellow
      September 16, 2010 at

      What does he say LT? I’m blocked from reading his tweets.

    7. Tyler Dellow
      September 16, 2010 at

      Hawerchuk – yeah, obviously I agree with you. I don’t know what assumptions you made but I would assume the pick they give up will be, at worst, in the bottom 15.

    8. roddie
      September 16, 2010 at

      “Best offer Oilers got for Gilbert at the deadline? A seventh round pick for Gilbert PLUS a second. That’s the cost of bad contracts.”

    9. September 16, 2010 at

      Huh. Damien’s gone private. That pretty much says it all.

    10. September 16, 2010 at

      Kovalchuk is a bargain for the Devils. They basically paid $3MM plus two picks in order to be able to shave $500K-$1MM off IK’s cap hit. That’s probably worth it.

      The rip-off will come when the Devils are taking the $6.66MM cap hit for a guy who is scoring 25 goals a year (which is what happens to 90% of former 50G-scorers in their mid-thirties) and doesn’t backcheck.

    11. James
      September 16, 2010 at

      I may be giving credit where it isn’t due but from the language used I’d hazard a guess he’d be throwing in the return from the initial trade. I’m not sure what they were worth in terms of value though?

    12. Gerald
      September 16, 2010 at

      In fairness to Cox (who probably does not deserve it), i would assume he is factoring in the value of the players who were traded for Kovalchuk.

    13. September 16, 2010 at

      In fairness to Cox (who probably does not deserve it), i would assume he is factoring in the value of the players who were traded for Kovalchuk.

      Yea, but they’d have to pay those players. I’ve said it before and I’ll say it again: Damien Cox is the dumbest human on the planet.

    14. Hawerchuk
      September 16, 2010 at

      Quisp – let’s give Ilya a little credit: he already doesn’t backcheck.

      Tyler – I figured the highest pick they’d have to give up is #20. It’s worth something like $2.5-$3M.

    15. Pete.
      September 16, 2010 at

      What does he say LT? I’m blocked from reading his tweets.

      Something about this statement highly amused me. Not only can you not comment on Cox’s ‘tweets’ (a ludicrous term in and of itself, but that’s another matter), but you can’t even read them? Unreal, and hilarious. It seems more than a few people find you highly aggravating; probably a good sign about your character.

    16. September 16, 2010 at

      Just do what I do: log out and click the link again.

    17. September 17, 2010 at

      Damien is such a d-bag. The initial trade was Bergfors, Oduya, Cormier and a 1st, for Kovy right? That was to acquire his rights for the remainder of the season. There was no guarantee he was staying. The trade could have ended up being those four assets for a half season of Kovalchuk. Big risk.

      So then the Devils basically just give up another 1st and 3rd rounder to sign this guy to a lifetime deal. Sounds like a pretty good deal to me if you’re big on Kovalchuk, which the Devs obviously are.

      Nice article.

    18. Steven
      September 17, 2010 at

      They gave up two number ones, a conditional pick which atlanta now gets, oduya, cormier, and bergfors for kovalchuck and a lifetime contract at 6.6, I say this trade evens out, especially since the leafs gave up 2 first a second and a third for kessel, plus by getting rid of those players and pickd, you are saving money by getting rid of players and picks that will cost you money, wow damien cox you are an idiot

    19. September 17, 2010 at

      Damien Cox is the dumbest human on the planet

      I knew this guy who suffered a head injury that couldn’t even remember his name. He could neither grasp nor communicate the very simplest of ideas. And he’s alive, and on this planet, so even though I’ve never met Cox, that would make him #2 dumbest at the very worst.

    20. Scott
      September 17, 2010 at

      QUISP is right on. It doesn’t matter how much it costs them in the bank it matters how much it costs them against the cap. Who cares if Cox is right and in total it does cost them that much, the only number that counts is 6.66M.

      Sounds about the right number for a guy on the devils. . .

    21. RSL
      September 17, 2010 at

      Sorry to go back to an old topic, but….I can believe all of this and think it’s probably pretty accurate. What do you all think of it?

      http://dumpnchase.com/?p=266

    22. R O
      September 18, 2010 at

      The link to that blog post should really go in the old Caps/Belanger posts. Where it can get the appropriate amount of attention, which is to say none.

      I’m not going to do a Dellow-style dissection but frankly it reads like a load of shit. No quote attributation, plus Vogel is already a demonstrable Caps shill, not unlike various visitors to MC over the past couple of days.

      The funniest part was how Vogel compared Belanger’s house hunt to that of a rookie trying to make the team, i.e. implying he should live out of a hotel until directed by a team.

      Any reasonable family man can tell you that living out of a hotel with wife and kids is hell.

    23. NewAlgier
      September 19, 2010 at

      RO, I lived in an extended-stay hotel while shopping for a house with my wife for 3 weeks after our freaking wedding, and it was the longest/worst three weeks of our lives. I agree with you in spades.

      I find the Kovalchuk fine really harsh, actually. First of all, the original contract was thrown out by the NHL. Now the NHL fines the Devils for the terms of a contract that was not approved? Seems like Bettman is sorta like a wife: never embarrass her in public.

      Second, even though the PV is not much, a $3 million cap hit really, really hurts in the year that its effective. (I understood that the fine counts against the cap). Unless the Devils make up that $3 mil with above-market contracts throughout their roster, they will be in tough this year.

      Essentially charging the Devils a season for a contract that never even took effect seems unfair to me. I guess I’m just a softie.

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