Monday, July 30, 2007
RISK VERSUS REWARD REGARDING DRAFT PICKS
As I’ve discussed before, the market may be overvaluing free agent compensation draft picks. Not knowing specific trade proposals (if so, we could quantify them), so the above statement and past post is somewhat speculations. But it is based on the fact that draft picks are riskier investments than current minor leaguers for many reasons. Here a just some:
1. Players currently in the minors are more advanced and closer to the Show. The system inherently weeds out a number of draft picks.
2. The minors includes talent from around the world; the draft does not.
3. The draft is difficult to forecast for many reasons - players, parents, agents, other teams. A team is not assured a particular player.
4. Even though an effort is being made to reduce signing bonuses, current minor leaguers are cheaper with similar potential - all or some of their bonus has already been paid.
Add in the fact that the awarding of draft pick compensation is a dynamic process and difficult to predict when your club will select. It is a much riskier move for a non-contender to hold their soon-to-be free agent than trading the player.
On the other hand, it could be that the youngsters being offered have such low major league prospects that it is better to play the draft lottery. We don’t know, but I do think many teams are not considering all the risks associated with free agent compensation draft picks.
As I’ve discussed before, the market may be overvaluing free agent compensation draft picks. Not knowing specific trade proposals (if so, we could quantify them), so the above statement and past post is somewhat speculations. But it is based on the fact that draft picks are riskier investments than current minor leaguers for many reasons. Here a just some:
1. Players currently in the minors are more advanced and closer to the Show. The system inherently weeds out a number of draft picks.
2. The minors includes talent from around the world; the draft does not.
3. The draft is difficult to forecast for many reasons - players, parents, agents, other teams. A team is not assured a particular player.
4. Even though an effort is being made to reduce signing bonuses, current minor leaguers are cheaper with similar potential - all or some of their bonus has already been paid.
Add in the fact that the awarding of draft pick compensation is a dynamic process and difficult to predict when your club will select. It is a much riskier move for a non-contender to hold their soon-to-be free agent than trading the player.
On the other hand, it could be that the youngsters being offered have such low major league prospects that it is better to play the draft lottery. We don’t know, but I do think many teams are not considering all the risks associated with free agent compensation draft picks.
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