Transaction Reaction: The Yankees' New Rotation

In a matter of minutes, the Bronx Bombers negotiated a major trade for Michael Pineda and signed free agent Hiroki Kuroda. Bombers and the Japanese haven't combined for this big of a news story since......(edited due to a blatant lack of cultural sensitivity).

These moves addressed and then erased the only doubts about New York's roster for 2012. Many seemed to think the Yankees were content to huddle just under the salary cap and wait for next years' free agent class to address their pitching needs (Cain, Greinke, etc.) These moves immediately push the Yankees to the top of the power rankings in my book, as the middle and back end of their rotation just shifted from being an Achilles heel to one of the biggest strengths of the ball club. Keep in mind they also still have Burnett, Freddy Garcia and Phil Hughes to battle for the fifth spot. This is crucial because they will have two additional pitchers who can step in immediately for spot starts rather than relying on unproven youngsters. This also might give them some time to work with Burnett and see if he can regain his form from a few years ago.

-First, the trade. The Yankees traded Jesus Montero and Hector Noesi to obtain Michael Pineda and Jose Campos, a hard-throwing prospect. How good is Michael Pineda? Well, Pineda was good enough to make the All-Star team as a rookie last year. He also gets his outs by striking out a TON of hitters, which is crucial if he's going to pitch well in the New York Launching Pad. I've heard that Hector Noesi has huge upside, which may eventually make him as good as Pineda. However, I've never seen him pitch and the Yankees have a history of vastly overrating their own prospects (see: Joba). Jesus Montero is also a big time prospect, and he seems like he will end up being an elite bat. The challenge for the Mariners will be whether to keep him at catcher or to put him at first base. Either way, it seems like each team got what they wanted, and on the surface it looks to be a reasonably fair deal.

-Then, the free agent signing. Hiroki Kuroda is a phenominal pitcher when he is healthy. However, his injury history has limited his innings load. This works out pretty nicely for the Yankees given their new found depth. I already mentioned that they have 6 or 7 decent option for 5 spots, so they can use Kuroda when he is healthy, and use Phil Hughes or AJ Burnett if not. I love the look of the new rotation, and Kuroda brings some talent and a different look to the middle of their rotation. I can't imagine how awkward it would feel trying to hit against CC Sabathia one day, and then attempting to regain your timing against Kuroda the next day. The only possible downside to this deal is that Kuroda is an aging, contact pitcher who is used to playing in Los Angeles, which is a very favorable pitching environment. For context, to translate Kuroda's numbers from LA to his new park in New York, you'd have to adjust his stats by an incredible 45% (according to Stat Corner's park effects data). That would push his ERA closer to 4.30 or 4.40. Yankees fans can breathe easy though, because Kuroda does induce a high number of ground balls, and those don't often fly over the fence.

The True Cost of Luxury

An interesting thing happens when a big market team decides to overpay for a free agent. It starts a cycle in which the team has to continue paying for the same mistake over and over again. This is....the more painful, yet unwritten luxury tax. Often, these factors are glossed over because these teams can use their seemingly unlimited resources to cover their tracks, but once a team is labeled as a "free agent big spender" the following problems blossom immediately:

1) By injecting money into your own division with a free agent signing, you are elevating the playing field for all of your competitors and forcing them to spend big.
This is seemingly unavoidable if you want to be successful, but each free agent signing makes the cost of future acquisitions and the cost of a win more expensive moving forward. This hike in cost moving forward occurs regardless of whether or not your big time free agent acquisition produces like you expected him to. For example, the signings of Albert Pujols and C.J. Wilson were obviously very expensive, but if the Rangers then signed Prince Fielder and/or Yu Darvish to counter...a large portion of the value to the Angels was just lost. To further this point, if any of the players involved underachieves, the result is a huge cost AND a net loss in performance relative to your competitors.

2) Farewell to the home town discount.
Every team has core players, and these players expect to be treated as such. Therefore, when a core player sees his team lure a free agent to town with a big contract, he sees this as the floor for his own negotiations (assuming relative talent). Teams such as Tampa or Oakland do have a small amount of leverage in that, they can point to the books and say, "If you wish to stay, here is the highest amount we can reasonably pay you." Although this is a false ceiling, it does tend to ground negotiations and forces the player to weigh their drive to achieve a big contract against staying in a place they enjoy. If the player leaves, small market club can often absorb the PR backlash since the public knows of the club's financial limitations. This is even sometimes directed back at the player with accusations of greed. Without this false ceiling, the club ALWAYS loses the PR battle. For example, no one in their right mind would pay Jeter as much as his most recent contract was worth. However, the Yankees were stuck between fans romanticizing Jeter's past performance and Jeter's knowledge of their endless revenue streams. This same factor assisted in pushing Nomar Garciaparra out the door in 2004 because the Red Sox payroll was going sky-high, just as Nomar's performance was in decline. The reports were that the sides weren't close on an extension, so the Sox rightfully opted to make a trade to bring in Orlando Cabrera.

3) Relativity.
Again touching on the Yankees, any free agent pitcher will certainly have New York's history of spending in mind. Negotiations from the player's perspective will certainly open with a favorable comparison. Starting pitcher? "Well I'm THIS much better than AJ Burnett, and you gave him 5 years and 86.5 million. Let's start at 5 years and $110 million" Mediocre relief pitcher? "Well I'm about the same as your ineffective reliever Rafael Soriano, so I'll just take the 3 years, 30 million." Eek. You can see how that adds up quickly.

These three problems never wear off, and they actually accelerate over time. The value of each dollar spent decreases each offseason, because agents and players alike study these trends and use them to their advantage. This is the reason that Scott Boras and Dan Lozano intentionally draw the Phillies, Red Sox, Cubs or Yankees into every single negotiation. These agents have recognized that for these teams to get a dollar's worth of production, they are required to pay their client closer to $1.50.

Editor's note: I'm wondering if the restraint shown by the Yankees and Red Sox so far this offseason are cursory attempts to break this cycle. Contrarily, the Phillies' offseason spending thus far has shown this inflation pretty vividly (Overpay for an incumbent shortstop? check. Dramatically overpay for a closer? check.)

The Yankees' Inexplicable Dearth of Starting Pitching

Happy two days after Christmas!  I trust that by now, most everyone has returned to work with just a bit of that Yuletide glow still lingering...  

Anyhow, on to baseball!  I was scrolling through some recent baseball stories this morning, and read that the Yankees are probably not going to offer on free agent starting pitcher Hiroki Kuroda. I don't get it.  It is well-documented that the Yankees both (1) spend way more money than anyone else and (2) still have a seemingly endless supply of money rolling in.  Because of these factors, combined with their painfully shallow rotation (Sabathia plus...), I thought for certain that they would be acquiring at least one (if not all!) of the high level free agent pitchers available, by offering them a ludicrous amount of money.  But then Mark Buerhle signed with the Marlins and C.J. Wilson signed with the Angels.  At this point, I thought for certain that they were all in on Yu Darvish (see " 'If I Were General Manager...' Series: AL East).  But then it was announced that the Rangers had the winning bid, and the Blue Jays were likely a close second.  Now, admittedly, the Yankees may have simply been outbid.  But how often are the Yankees bested financially on something that they really want?  Then today, I read that they are probably not in on Kuroda, perhaps the top free agent name left.  So what's the plan?

If the season started today, the Yankee rotation would look like this:

1. C.C. Sabathia

2.  Ivan Nova

3. Phil Hughes

4. A.J. Burnett

5. Freddy Garcia

Sabathia is great, and Nova had a good year last year, and looks as if he could be a decent #2/#3 in the making. But what about the last three spots?  

• Phil Hughes had a solid 2010 campaign, but last year he mixed the undesirable qualities of being (1) unhealthy and (2) horrible at pitching.  Hughes is still young, with upside, so I wouldn't toss him aside.  But I also wouldn't count on him the way that the Yankees seemingly are.  
• A.J. Burnett is both expensive ($16.5 million for the next two seasons) and horrible, with an ERA over 5 for the last two seasons.  For any other team, he would be to expensive to write off, but the Yankees have never been shy about their ability to eat dead money salary.
• 35 year old Freddy Garcia enjoyed something of a career renaissance last year, but that comes after five years of sub-mediocre pitching, and I'm willing to bet he comes back to the mean in 2012.  We no longer live in an era of baseball in which a 37 year old Barry Bonds suddenly hits 73 home runs.

All of that to say, I can't believe that the Yankees and their Thurston Howell III money haven't done anything to upgrade their rotation.  Maybe they are bluffing on Kuroda.  Maybe they are going all-in on Roy Oswalt, who is still hanging around.  Maybe nobody wants to pitch in their stupid launching pad of a stadium.  Or maybe they have dumped all of their starting pitching money into genetic research on cloning Rodger Clemens.  All we can do is wait and see.