Tuesday, March 31, 2009
Fantasy teams shouldn’t wait for a toxic asset bailout
Posted by Eriq Gardner at 2:10amUnited States Treasury Secretary Timothy Geithner stepped up to the mound last week and pitched a long-awaited relief plan to rid banks of troubled mortgage assets. The government's announcement that it would soon team up with private investors to do something about these so-called "toxic" assets led to an explosive late-inning rally at the stock market on Wall Street. Investors were pleased that bolstering banks would lead to more flexibility in the credit markets and a flow of new transactional activity.
Meanwhile, in fantasy baseball drafts and auctions throughout the country, participants will make investment decisions that will result in the accumulation of some of their own “toxic” assets. For example, some figure that buying Alex Rodriguez at $12 is just too good a deal to pass. Others have several second-basemen already drafted but can't resist when Howie Kendrick falls to them in the 17th round. One day’s bargain becomes the next day’s hangover, as the team with three catchers and no third basemen desperately tries to swing a trade with the team with two third basemen and an undistinguished catcher.
Yes, toxic assets exist in fantasy baseball, especially at the beginning of the season when dropping a player carries emotional baggage: One day, you’re in a draft. You see a player you don’t necessarily want or need, but your draft guide is telling you that this player should have gone four rounds ago. The next day, you look at your roster, as well as yourself in the mirror, trying to figure out how you let profit potential get ahead of team needs.
You’re too invested to drop the player, however.
So you desperately start e-mailing your league-mates, trying to convince them that they made a mistake when passing up your player in the draft. You propose Kendrick for Aubrey Huff. The other team counters with Melvin Mora, who you can’t stand—but then again, you need a third baseman.
You decide to wait. And guess what—your sleeper Kendrick gets off to a really slow start. Should you drop him? Risk the chance that Kendrick eventually becomes some other team’s golden goose egg?
These are just a couple examples of the toxicity factor that sometimes haunts fantasy baseball managers early in the season.
Toxicity varies from league to league, and team to team, thanks to three factors.
First is the number of roster positions a team enjoys. Each roster position has value. Deep benches allow teams to carry players with less immediate value and more long-term potential.
Second is transactional flexibility. Some leagues allow league members to make as many add/drops as they wish throughout the season. Others use a free agent acquisition budget, or cap the number of transactions. Lots of transactional flexibility means a waiver wire that offers great potential replacement value. It becomes tougher to hang onto players with less immediate value in these formats.
Third, and finally, is team performance. A team that is doing well may be able to afford some bench room for potential. A team that is doing poorly finds the imperative to make shakeups.
In the current U.S. recession, banks are doing poorly. Transactional flexibility has withered as the credit markets have frozen. And banks find themselves with a much more shallow bench that holds no room for things like troubled mortgage assets.
So here comes Timothy “Uncle Sam” Geithner with his plan to both lend investors money at below-market rates so they have more funds to buy up the banks' bad assets as well as act as a guarantor against a great deal of the losses. If only fantasy baseball managers had league commissioners who could act with such generosity.
Of course, the bailout is not written in stone. Banks will need to participate in auctions, selling many of their assets at prices below written value. Some question whether banks, in the coming weeks, will see the wisdom of taking this course.
Same goes in the fantasy baseball world. April 15 is the day that taxes are due throughout this nation. How many fantasy baseball managers will wait until then to write off their own toxic assets?
Eriq Gardner is a New York-based writer and founder of Fantasy Ball Junkie, a website for advanced fantasy baseball enthusiasts.
You said: “Toxicity varies from league to league, and team to team, thanks to three factors.” (1) number of roster positions (2) transactional flexibility, (3) team performance.
Isn’t there a fourth factor? Depth of league, or Value of available replacement player. In a deep league, if you drop your toxic asset for something else, that could be just as toxic.
In those leagues, it may pay to wait out your toxic asset, if there is any chance of it paying off.