What Is The Financial Truth?

I love this site. Without a lot going on in this so-called hot-stove league period, it is difficult to come up with topics that generate any interest. But then Dodgerrick provides an article that piqued my interest anyway. I have been harping that the Dodgers are in a cost control mode, meaning keeping payroll below the CBT threshold for reasons outside of the Dodgers operations.The article may give fans the warm feeling that all is right in the world with the Dodgers finances, but I still hold out that there are reasons to be skeptical. The key paragraphs in the article are as follows:
“The CEO of Guggenheim Partners and his business associates are pledging more than $20 billion of their personal wealth to backstop insurers associated with the firm should they experience financial troubles, according to a Wall Street Journal report.“In what S&P Global Ratings senior analyst Deep Banerjee told The WSJ was “an unusual concept,” the group is using a vehicle called Safe Harbor to provide the funds. The Journal could find no insurance filings referencing Safe Harbor.“However, another investor, Guggenheim outside lawyer Dan K. Webb, said the arrangement makes the Guggenheim-affiliated insurers “likely among the safest” in the country, according to the WSJ. Assets pledged through Safe Harbor include stakes in the Dodgers, another firm that operates one of the biggest Wendy’s hamburger franchises in the country, and shares in Carvana, an online car dealer.“Guggenheim’s Dodger connection came under scrutiny after two annuity holders sued in 2014, saying the firm was using the insurance companies to buy the Dodgers and then hiding the transactions in regulatory filings. The suit was quickly withdrawn, but did attract scrutiny from regulators, who ultimately concluded nothing was amiss.“Walter told the Journal that Safe Harbor’s purpose is to provide security in the event credit markets turn sour. The vehicle makes off-balance-sheet investments in higher yielding instruments that aren’t typical for insurance companies, whose risk-taking is limited generally to investment-grade bonds.”
Mark’s statement that the Billie Jean King’s and Llana Kloss’ net worth was $31MM got me to thinking (which is always dangerous). He is undoubtedly correct that a $3MM capital infusion is not a dent in any liquidity issues. That is true even if the investment was $10MM. The team generated $522MM in 2017, second only to NYY and their $619MM. They should be able to handle a salary level in excess of the CBT threshold if it meant winning, unless there was something else driving the decision to stay below it. Is it MLB or outside Guggenheim investors? Insurance regulators are going to keep an eye on the value of the pledged assets, including the Dodgers. That value has to stay high, and one way to keep it high is to keep salaries low enough that the revenues are sufficient to manage them.Anytime I hear off-balance-sheet investments, the hairs on the back of my neck go straight up. Enron ring a bell? I am not trying to equate the Dodgers with Enron. It is just how major companies want to “hide” actual or potential liabilities. The Dodgers now have potential liabilitiesBottom line is that the Dodgers’ assets are pledged against a market turn for insurance investors (potential liabilities). The insurance regulators are happy that they have an asset valued at more than $3B to protect the insured. But I bet that MLB is not happy with the arrangement. How can Guggs keep MLB out of their business? Keep the salary level below CBT threshold as they told MLB they would do. Keep their heads down, and do not raise any red flags.The point that the Journal could find no insurance filings referencing the Safe Harbor is also troubling. The original intent was to use the insurance company’s assets to buy the Dodgers, but when caught (law suit), they needed to devise another vehicle to support the acquisition. Now they have MLB, Insurance Regulators, and Guggenheim Investors meddling in their operations, and will continue to do so until operations are stable (meaning salaries). The Dodgers and their $3B value, and their $522MM in revenues, exemplifies why the team should be able to stay above further scrutiny as long as they stay below the CBT threshold. That is why next year they will be able to spend, but not this year.The Dodgers are currently scheduled to be $13MM below the CBT threshold, before Kenta Maeda’s incentives. Not enough to absorb a high cost game changing player. Andrew & Co. are not stupid baseball executives. They cannot trade for a high salaried pitcher, RH bat, or reliever unless they offset that cost by purging existing salaries. They are also not going to give away their player assets just to acquire someone else. The existing contracts that can be moved are Puig (estimated $11.3MM), Wood (estimated $9.0MM), Joc (estimated $4.8MM), and one of CT3 or Kike’ (estimated at $3.2MM). Yimi Garcia and Josh Fields are potential non-tenders which will free up another $3.7MM. I would not be in favor of non-tendering Fields. I doubt that they could find a similar reliever for less money.JT Realmuto is scheduled to earn $6.1MM in 2019. The Dodgers will have to offset at least $6.1MM PLUS provide prospects. Doubtful.Kluber and Gomes will earn $20.283MM ($11.533MM AAV). Unless the Indians are willing to match the salaries with Puig and Wood, they are not going to be able to make the deal. The Indians would require Puig, and the salary difference with prospects might entice the Indians. They would still have to move Wood, and he would require non-roster prospects in return. Maybe they could up the return by working with NYY and moving Wood and Muncy for prospects. Is Kluber and Gomes worth it? Doubtful that Andrew & Co. thinks it is. It would benefit NYY in 2019, but not LAD.No, I think a more realistic scenario is that Wood gets traded for prospects, and that Andrew & Co. signs Martin Maldonado as the 2nd catcher.Bellinger (1B, CF, RF)Muncy (1B, 2B, 3B)Freese (1B, 3B)CT3 (2B, SS, 3B, LF, CF)Kike’ (2B, SS, 3B, LF, CF)Seager (SS for me – Others think he will not be able to play SS)JT (3B)Joc (LF)Kemp (LF, RF)Puig (RF)Barnes (why limit him to catcher)Farmer (why limit him to catcher) or Maldonado.Verdugo and Toles back to OKC. The Dodgers value that depth and need to keep these guys a phone call away while they get consistent AB’s, because “we” cannot let loose of Puig, Joc, CT3, Kike’, or Muncy. In 2018 the team lost 11.5 games to the 2017 record and have no replacement for Grandal in 2019. They will get Seager back, so they should be good enough to win the NL West. But that team is not good enough to beat Boston, NYY, and probably Houston. Atlanta, Philadelphia, Chicago, St. Louis, Milwaukee are all planning on spending.Without Wood Starting Pitching:KershawBuehlerHillRyuMaedaRelievers:StriplingFergusonBaezFieldsAlexanderFloroCingraniJansenOr maybe they keep Wood and put him in the bullpen and send Fields to OKC with his one option remaining. Bottom line, IMO, Andrew & Co. will make due with “the makings of a championship team already in place” and forego any significant change. The financial constraints are there for all to see if they want to open their eyes and read a little between the lines in the reports. I hope I am wrong and that the Dodgers will be creative enough to find some improvement even if it means exceeding the limit for one more year. Next year they should be well under the limit and make any changes that Andrew & Co. feel are warranted.

This article has 49 Comments

  1. I think we are eliding different businesses into one another, no?
    These are absurdly wealthy people with divergent investments and interests. Divergent not convergent.
    In other words, what does Safe Haven have to do with the Dodgers other than being funded by the ludicrously wealthy people?
    The Wilpon’s own the Mets and a lucrative eSports franchise. That doesn’t mean the Mets are going to be in trouble if the eSports market crashes.

    1. I mean at the end of the day Guggenheim partners have what? $200b in assets? Do we really think that even if this new investment vehicle goes South, they are sweating anything?
      I may be naive, maybe a lot of those assets are fake (I’ve heard many people insist that the Scurity Benefit company is a Ponzi scheme) But to me, these are smart guys in insurance and finance. You take safe assets and you leverage them to make opportunities.

      1. The new investment vehicle is the assets of three Guggenheim investments that include the Dodgers. If that investment goes south, that means the Dodgers go south. It is irrelevant what some may think of Security Benefit Life Insurance. It is a legal entity regulated by an Insurance Commission, probably by the State. If the Insurance Commissioner does not consider it a Ponzi Scheme then it isn’t until proven otherwise.

    2. It is called a Safe Harbor which is an investment vehicle that creates off-balance-sheet entities to hide liabilities (real or potential). The Safe Harbor is so that Guggenheim Partners can use the assets of three very well operating entities by themselves (Dodgers, large Wendy’s franchises, and Carvana) as collateral to shelter potential bad credit investments of a Life Insurance Company. This Safe Harbor vehicle was created to counteract a potential lawsuit that seemed to catch the Insurance Regulators eye. The Safe Harbor was created to insure the viability of the insurance company. Insurance investments are not supposed to be risky. They are supposed to protect the insureds financial position. The thinking is that the siphoning off much of the liquidity in the insurance company to buy a ML baseball team was not considered a viable risk by insurance underwriters.
      Bottom line, the Dodgers are now collateral for the risk of an insurance company’s losses. Just like your house is collateral in a mortgage.
      The Wilpon’s have their own financial issues. But the Mets are not collateral for the eSports franchise. The Wilpons can bankrupt the eSports franchise and their investors would not have any claim to any of the Mets assets. That is not true with a Safe Harbor investment vehicle. If the insurance company incurs significant losses because of a downturn in the market, then the Dodgers assets are collateral to may be used to cure those losses. There are certainly other strategies that can cure the losses that would not impact the Dodgers, but the Dodgers are collateral nonetheless. Certainly the Guggenheim Investors can use their other personal assets to backstop the insurance company’s losses, but if that is not considered sufficient, then the three assets within the Safe Harbor can be accessed. That is the purpose of a Safe Harbor.
      Admittedly I am not an insider into any of these specific findings. I am not even trying to insinuate that the Dodgers are a financial risk. But I have reviewed enough balance sheets in my days to know that off-balance-sheet investments are very risky and portend concerns. The Safe Harbor is probably sufficiently diversified to minimize any significant risk to any of the three assets individually. But if you do not see this as reason for LAD to normalize their operations and to keep their costs (payroll) in check to satisfy any of the Guggenheim investors, then I think you are being naive. Where there is smoke, maybe it is a backfire to protect assets, or maybe it is a wild fire that destroys them. That is probably a bad metaphor in light of this months wild fires, but it is still appropriate. There is smoke here, and hopefully it is from a backfire. Until proven otherwise, I will believe that it is safe as long as the Dodgers do what they said they were going to do in their leaked investment document.

  2. I have seen this first hand, right in our back yard. Stephen Hilbert built Conseco, based in Carmel, Indiana, from a tiny company to a member of the Fortune 500 through acquisitions. A onetime encyclopedia salesman, he became a very prominent man in Indiana, where the Indiana Pacers played at the Conseco Fieldhouse and the Indianapolis Symphony performs at the Hilbert Circle Theater.

    Mr. Hilbert became a hero on Wall Street, too, praised for his skill at cutting costs and delivering profits. ”We have not missed one quarterly earnings number or one revenue target,” he boasted right before Cponseco collapsed.

    Along the way there were complaints that he accomplished that with misleading accounting. Four times — in 1987, 1989-90, 1991-92 and 1994-95 — the stock lost more than a third of its value, usually as short-sellers ganged up. But each time Conseco rebounded. From going public in 1985 through its 1998 peak, Conseco rose at a compounded annual rate of 47 percent. Since the top, it was down 91 percent when regulators steped in.

    In 2000, the short-sellers were again blasting Conseco, and Mr. Hilbert saw opportunity after the stock price had been cut in half. He borrowed $55 million to buy shares that were worth $13 million.

    Why did the price fall so far? The last acquisitions of health care insurers and of Green Tree Financial, a company that financed mobile home purchases, now appeasr to have been grossly overpriced if not completely foolish. Health insurance profits plunged, and Conseco was trying to sell the finance company for a fraction of what it paid.

    Meantime, Conseco appeared to be desperate for cash. In the first quarter of 2000, it gave Lehman Brothers a 5 percent stake in the finance company just for buying some assets for what Conseco’s books said they were worth. Conseco said it would have no trouble meeting its obligations, which included $1.5 billion in debt that comes due that year.

    There was no cause for alarm if you believed Conseco’s books, but confidence in those numbers had fallen just when banks were becoming more cautious in their lending. Conseco needed to sell the finance operations quickly. They didn’t!

    Conseco did not survive.

  3. Why in the world would mlb let the Dodgers be bought this way? How in the world with all the revenues through attendance, tv deal, merchandising, etc can the dodgers be in jeopardy? I don’t understand the finances but we are starting to look like another McCourt ownership. He had no business with a franchise he couldn’t afford. But yet he finangels this ownership into him keeping the parking lots. Sell and get somebody who can afford the team? For people who are supposed to be so smart, and with all the revenues,it is embarrassing to get into this position.

    1. But, we can’t prove that… what we don’t know is how their debt/service looks. What does MLB think?

      1. While I do not believe this is a Frank & Jamie McCourt reoccurrence, we do not know the debt to equity structure of the acquisition. This time however, I believe there are honorable people running the franchise. Not all of the owner’s assets are tied up in a parking lot. MLB is monitoring the situation and apparently feels comfortable right now. The Insurance Commission is satisfied that the Life Insurance Company is adequately protected. The Dodgers revenues can sustain a healthy payroll, but it cannot sustain the early losses this team had. They had to get it back in control and now that it is, they have to maintain that level of spending. We will not see $300MM payrolls again. And we will not see the Dodgers sign someone to a $300MM + contract. THEY CAN WIN WITHOUT BRYCE HARPER OR MANNY MACHADO.
        My point was not to make fans feel uncomfortable with the ownership structure, but to give some poignant reason as to why the Dodgers are not going to be exceeding the CBT threshold. And if for some reason they do, it will not be the end of the Dodgers as we know them. The Dodgers are being run by professional executives with diverse backgrounds and asset diversification, and this time MLB will not let them get out of control as they did with McCourt.

  4. OK, maybe it’s time to do this, so here’s my proposal:

    We all know the Dodgers could use JT Realmuto and that he is avaialble. How about the Dodgers trade Verdugo, Wong and Farmer fpr JT? If that’s not enough, throw in another pitching prospect. Would that work? I think it would.

    The next prong involves trading Wood, Maeda and Puig. Maeda’s salary is low, but he wants to start, and if he does, he will end up likely costing $7-8 million. So, that gets $27 million off the books. Maybe Wood or Maeda goes to Cleveland, if the Indians want one of them, but Puig would be the hitter they want, unless they figure out he doesn’t hit lefties, but I digress. The Dodgers simply sweeten the prospect pot: May and White?

    That would allow the team to add Realmuto and Kluber and stay under the Luxury Tax. While improving the team, we would have to hope that some of the players can incrementally improve and I do not think that is out of the realm of probability.

    1. Taylor CF
    2. Seager SS
    3. Turner 3B
    4. Bellinger 1B
    5. Realmuto C
    6. Muncy 2B
    7. Kemp/Pederson LF
    8. Hernandez/Toles RF

    Kershaw, Kluber, Buehler, Ryu and Stripling/Urias make up the rotation – they could also move Hill as well.

  5. I know nothing about Safe Harbor or off-balance sheets, but if this indeed becomes an issue it means the Dodgers would have suffered from two consecutive failed ownerships in ten years which does not bode well for long-term stability.

    Perhaps Stan Kroenke should have been awarded the Dodgers and he could have built his new football stadium at 1000 Vin Scully Drive also known as Chavez Ravine. Just saying!

    1. I still say we set up a LLC and sell 10,000,000 shares of stock at $50 a share ($5 Billion) and buy the Dodgers. Rick can be corporate counsel, AC can be the CFO and I’ll be the Water Boy!

  6. I have questions.
    The Dodgers are profitable if payroll stays below a certain point and that point has nothing to do with the CBT threshold, right? Profitability is based on revenues less expenses and not on an artificial number, right?
    What does the Dodger related insurance company insure? Are they at risk of catastrophes like the California fires? What type of claims would hurt them?

    1. From the Security Benefit Life Insurance Web Page: “Security Benefit is a leader in the U.S. retirement market and wealth segments with a reputation for strength, innovation and excellence. As of September 30, 2017, the company had approximately $37 billion in total assets under management and partnered with more than 30,000 licensed and appointed financial representatives through a network of 700 broker/dealers and independent marketing organizations. In addition, Security Benefit Life Insurance Company (“SBL”) and its affiliate, First Security Benefit Life Insurance and Annuity Company of New York, New York, New York (“FSBL”), provide fixed and variable annuities to approximately half a million owners in all 50 states.”
      It is not a Ponzi scheme. Some investors just hate annuities (they are not for everybody). All insurance companies are investors. That is how they make their assets grow. But it is the type of investments that worry clients. Sometimes some of those investments incur losses that have to be covered. Hopefully the portfolio is so diversified that the losses are easily covered.
      California has a similar type situation with CalPers which manages the nation’s largest public pension fund. CalPERS is a defined benefit plan funded by employee contributions, employer contributions, and earnings made on CalPERS investments. When those investments go bad (and they quite often do) the backstop for CalPers is the taxpayers of California. CalPers can make all of the bad investments (as they were heavily involved in real estate in early to mid 2000’s), and the good old California taxpayers will make them whole. If I have offended anyone who is covered by CalPers, I apologize.
      These are legit companies that need to be heavily regulated to protect the insured or have an adequate backstops. The Dodgers, the largest Wendy’s franchises, and Carvana is that backstop.

    2. I don’t even know if there’s a necessity for the Dodgers to turn a profit.
      These guys could use operating loss numbers to offset other profits while the underlying asset continues to rapidly appreciate.
      We are talking about the super-rich here.

  7. Well, I might as well blurt this out:

    Notre Dame looks to be for real – Pete is overjoyed.
    Alabama is unstoppable?
    Urban Meyer owns Jim Harbaugh.
    Does Touchdown Jesus have another miracle left?

  8. OMG – The Guggs pledged $20 Billion in personal assets to back investments in their firm and you guys are acting like you can’t go over the CBT tax threashold. The entire Dodgers payroll is mice nuts to these guys. The will blow past that amount if they think they can win a Championship.
    But, as you can see by to ridiculous amount of money they have and mange, they aren’t in business because they spend money stupidly. They wanted to get below the CBT because of pressure from MLB to stay within the debt ratio and to avoid the biggest penalties in losing draft picks. The commissioner’s office has to at least appear to make all the teams play by the same rules. The Dodgers had questions going into last season (Seager injury) and their best players are still extremely young (Belli, Seager, Bueller). It was smart of them to start the season by getting under the tax CBT. The gloves are off now. They will spend when they think it’s appropriate.
    Muncy at 2B, Belli at 1B and Taylor in CF makes no sense when you can have Muncy at 1B, Taylor at 2B and Belli in CF.
    One of Kike or Taylor is gonna play 2B and the other is going to be the super utility guy. Muncy and Freese will play 1B, Belli CF, Seager SS and Turner 3B. You can take that to the bank. I can’t see them trading Puig and keeping the platoon in LF and another platoon in RF.
    They aren’t going to trade Puig in order to get Kluber unless they can improve their offense in another way and that isn’t a platoon of Kike and Toles in RF. Their lineup and bullpen failed them in the post-season, they will look to improve the lineup and bullpen first. Kluber will be an opportunistic buy. If they can get him while still accomplishing their other goals, so be it. But, they ARE NOT going to weaken the lineup and reduce positional depth to add Kluber.
    The Yankees want left handed power you say? They want LH Starting pitching you say? Why not Pederson, Wood, Hill, Stewart for Stanton, they sign Bryce as well? Indians want outfielders, RH preferred Kemp, Verdugo, Peters for Kluber and Gomes?

    1. Taylor 2B
    2. Seager SS
    3. Turner 3B
    4. Stanton LF
    5. Bellinger CF
    6. Puig RF
    7. Muncy 1B
    8. Barnes / Gomes C
    Kershaw, Kluber, Buehler, Ryu and Stripling/Urias make up the rotation

    1. You forget that MLB TOLD them to get under the CBT threshold. They were allowed to spend wildly early on but were told to get their balance sheet in order within 5 years of purchase and to get under the CBT threshold or there would be consequences. It took them a little longer than they anticipated, and now they believe the primary source of their investment is sufficiently protected. MLB has backed off (or as we believe they have) because of Guggs compliance. But they expect (insist) that the team’s operations be self sustaining. The wealth of the owners is a backstop, not a justification to overspend.
      Because they pledged $20B, does not mean they have it when it is needed. Ordinary people’s primary asset is their home. When they sign a mortgage for $500K that means they are pledging their asset with a value of at least $700K to insure their debt. If they run into a cash shortage and cannot make their payments, as did a whole lot of people after the 2006 real estate crash, they lose that asset. It happens everyday. That apparently was happening with the Dodgers (or so we were led to believe as we read the tea leaves).
      The Safe Harbor was created for a reason, not because Guggenheim thought it was a wise decision. You can choose to believe that because they have the wherewithal to pledge $20B, one of those assets in the Safe Harbor (the Dodgers) can sustain $300MM payrolls or sign Harper and/or Bryce when their payroll commitments are already north of $190MM. Maybe they can and maybe they will. But there is an investor document that says otherwise. Stan Kasten/Mark Walter hired Andrew Friedman and not Dave Dombrowski for a reason. You can say that I am over exercised about this. But I am looking at this as a business and not as a hobby. If the owners manage their portfolios correctly (not overspending), that $20B pledge will never be an issue.

    2. Muncy at 2B, Belli at 1B and Taylor in CF makes no sense when you can have Muncy at 1B, Taylor at 2B and Belli in CF.

      Belli is a Gold Glover at 1B. He is above average in CF.

      Chris Taylor has very little experience at 2B (45 games) and his fielding % is .951. He is also above average in CF

      Max Muncy has played 34 games at 2B and has a .992 fielding percentage.

      I see no way if all three players are in the lineup, that Bellinger is not at 1B and Taylor in CF. A Gold Glove 1B makes everyone in the infield better. It makes no sense to do it any other way.

    1. In 2016, their WS years he was unhittable until Game 7 of the WS. In 2017 and 2018 he was horrid.

  9. According to Forbes, the Dodgers made a profit in 2017 for the 1st time since 2013, and it was a $68MM profit. The team’s revenue was $522 MM. They spent $261 MM on “player expenses”. The debt to value ratio was 14%. (The article didn’t detail the amount of debt carried.)

    According to Bill Shaikin of the Times, “Baseball teams are subject to a rule that “limits debt to no more than 12 times annual revenue, minus expenses”. The Dodgers apparently obtained a 5 year waiver of that rule which was set to expire prior to the beginning of the 2018 season, I think.

    Back in 2016, Shaikin and Doug Padilla of ESPN.com were both reporting that the Dodgers were going to run afoul of the league’s debt service rule. MLB Trade Rumors reported in 2016 that ““I think the Dodgers will be in a position that they can comply with our expectations in terms of the debt service rule, without any dramatic alteration in the kind of product they have been putting on the field,” Commissioner Rob Manfred told Shaikin. Manfred added that “the Dodgers have always had a plan that would give them financial stability over the long haul.”

    The “long haul”? It does look like maybe the long haul has gotten here? The way to deal with the debt burden is a long-term plan to control player costs? MLB Trade Rumors also reported that “The commissioner also made clear that the organization would not be forced to trim payroll to ease its debt burden, as Padilla reports. Under the league rule on debt servicing, he said, “non-compliant clubs are asked to submit a plan demonstrating a path to compliance,” explaining that “clubs are evaluated on an ongoing basis relative to that plan.” Manfred further emphasized that “there are various ways to achieve compliance and there is no mandate to cut payroll.””

    Fangraphs reported (also in 2016) about Guggenheim’s purchase of the Dodgers for $2BB in 2012 “When Guggenheim bought the Dodgers for a record $2 billion in 2012, the new owners assumed $412 million in team debts as part of the deal. They also funded the purchase in part with about $1.2 billion in investments from insurance companies controlled by Dodgers chairman Mark Walter, as The Times reported in 2012. Boehly said then that the companies would be repaid for those investments — over time, and with interest.”

    So Guggs et al owe some portion of $1.2BB to the insurance companies and are carrying an additional $400MM in debt run up by McCourt. Thus the personal guarantees by the individual partners to the insurance companies?

    Fangraphs suggested that “While carrying a massive payroll obviously affects a club’s bottom line and the earnings of the club, it’s the debts from the purchase itself that need to be addressed under the terms of the debt-service rule. A few million dollars of payroll here and there is unlikely to make a big dent one way or another.” In other words, they can afford to pay a lot in payroll as the payroll is small compared to the debt service?

    My scan of what’s available online is interesting in that almost everything written about the debt was back in 2016. The only article that I saw that revisited the issue came out this November. It’s another article by Bill Shaikin. He again cited Rob Manfred, who said “Baseball commissioner Rob Manfred said the league did not mandate that the Dodgers keep their payroll below the threshold this year, or in any future year. He said any such mandate would be a violation of the league’s collective bargaining agreement and said each team determines its own payroll.

    “I think the payroll threshold is a very high number,” Manfred said. “If I’m a Dodger fan, I’m concerned about one thing: Am I competitive on the field? High payroll, low payroll, they have managed to be competitive.””

    “Manfred said Dodgers fans should not be concerned about an investor document that shows revenues would rise while payroll would remain largely flat.

    “Numbers in a presentation, to me, are a lot less meaningful than that ongoing commitment to being competitive,” Manfred said. “I believe that’s where the Dodger ownership group is.””

    1. If I remember correctly, that article also did not describe how the debt equity ratio is calculated. If it is on GAAP basis, then it does not matter what the team is valued at currently. If it is on the Fair Market Value basis, then the increase in value increased the equity. My guess is that it is based on historical GAAP because that standardizes the ratios.
      I agree that there is no formal mandate, but there certainly is an informal mandate. MLB is now satisfied that the Dodgers can sustain their operations. That $68MM was needed to make up for prior losses, thus increasing the Dodgers equity and reducing the debt/equity ratio. Is that $68M profit sustainable? Because of the reduction in payroll in 2018, and because of the increase in revenues due to extended play through playoffs, I would expect the profits to increase. I do believe the Dodgers are now on a strong financial platform, it is just that they have to sustain it.

      1. I totally agree. Last year, the talk was they were limiting payroll, getting under the CBT so they can spend wildly this year. They aren’t going to spend wildly, if it doesn’t impact the team.
        You look at the options on the free agent market and they aren’t all that great beyond Manny and Bryce. Brantley is a very nice piece, but they don’t need another left handed batter and especially one that gets injured as much as he does. Not while they have the Kemp/Pederson platoon for another year. Bryce Harper is still an option, but we still have that platoon, Puig in right and Belli in CF. They’ll have work to do if he decides that he wants to be a Dodger and accepts a contract that’s manageable. Manny’s test drive was far from Mannywood, but will make room for him if the contract is manageable. If they move a bunch of outfielders in other move (Toles, Kemp, Puig and Pederson) maybe go after Brantley? That doesn’t seem likely.

        Management has always said they would be willing to do what it takes to bring the impact player in. Any other free agents that will definitely improve the offense? Any impact players in free agency besides the aforementioned? Nope. An impact bat will come via trade if at all. Othewise, they spend that FA money next year on a deeper class with more choices.
        There will be trades because we have redundant parts, but the market will bear what kind of return we can get for them. They don’t need more prospects, they need to improve the offense and get a catcher to pair with Barnes. Maybe there’s a three way deal where a good team takes some Joc, Hill, Wood, Kemp and sends prospects to the rebuilding team (Seattle for Hanniger or Segura, Reds for Gennet). Maybe the Yankees want out of Stanton to sign Bryce or Manny and want Pederson, Wood and Hill.

        Bellinger is the outfielder that is least likely to be traded. Muncy isn’t going to be traded after what he did last year, he’s the first baseman (Not second baseman, Mark). Seager and Turner won’t be traded and one of Kike and Taylor won’t be traded.

        They have too many outfielders and left handed starting pitchers. These are your most likely MLB player trade chips…
        Taylor or Kike

        You can improve an outfield spot with a more productive bat than the platoon in left or Puig in right.
        A second baseman that’s better than Taylor or Kike and won’t block Lux.
        A catcher that’s better than Ruiz / Smith Barnes.

        There are 16 Full-Time Outfielders that OPS better than Joc and 23 better than Puig. Then factor in defense, right handedness, and availability (Braves aren’t trading Acuna, Nats not trading Soto or Robles, etc.) There’s only a handful of guys that even remotely make sense. Nimmo – Lefty, Haniger – A lot of team control, Castellanos – Bad Defense, Stanton, Schwarber – bad defense. Not a lot of choices for definite improvement beyond Stanton and Haniger.

        Second base is more of the same. Kike’s OPS of 806 and Taylor’s 775 is hard to beat. Taylor’s OPS was 850 the year before, Kike’s 729. Let’s say there’s a pretty good chance the FO thinks one of them or some combination of them will provide an 800 OPS. Jed Lawrie at 801 may or may not be a definite improvement. Merrifield 806 would be with all those stolen bases and on base percentage and a legit leadoff table setter. Zobrist is 37, Baez, Torres and Altuve won’t be traded and Cano is barely a second baseman anymore. Gennett is the last viable option.

        So, basically the Dodgers need to trade all those spare parts and acquire either Merrifield or Gennett for second base or Stanton or Hanniger to play outfield. That’s what we’re dealing with.

        More than likely the lineup doesn’t change much other than playing musical chairs with positions and order
        Taylor / Hernandez 2B
        Seager SS
        Turner 3B
        Bellinger CF
        Muncy / Freese 1B
        Pederson / Kemp LF
        Puig RF
        Barnes / ? C

        Verdugo Toles Wood Hill can be used to improve an SP slot, get a catcher, or to get a late inning reliever. But, I don’t see them giving up assets for a reliever when you can sign a guys like Herrera, Kimbrel, Robertson and a buch of other proven guys on the FA market this year.

        Would Verdugo, Wood, Hill, Peters, May or White bring back Kluber and Gomes? If so, that would be the perfect trade this offseason. Taylor and Lux for Merrifield? May, White and Peters for Hanniger, then include Puig in the Kluber deal? These all seam in the realm of possibility.

        I feel like I’m rambling.

        Friedman is a boss, he’ll make something happen, or spend that money on Arrenado next year.

  10. Unfortunately, I can talk balance sheets and finance all day long, so I apologize if I come across too strong or boring. It is just what I do. I am looking to retire so that I no longer have to worry about these things and I can only worry about where the Dodgers finish in the standings.
    I will now get off my band box and concentrate on the Dodgers.

    1. don’t apologize; i find this reading fascinating, as I”m not an accounting/finance person. Please keep going!!

      Plus, this is a lot more interesting than discussing Yan Gomes or Kevin Quackenbush

  11. Good news for UCLA and Notre Dame fans:
    Embattled USC coach Clay Helton will return for his fourth season, USC athletic director Lynn Swann announced.
    The Trojans finished the season 5-7, their first losing year since 2000.
    “It is my firm belief that we have a good team returning next year and a solid foundation in place, and that Clay Helton is a good coach,” Swann said in a statement. “Let me be clear to everyone, our players, our recruits and our fans. Clay Helton is our head coach and he will continue to be our head coach.
    “I am a strong advocate of consistency within a program, sticking by a leader, supporting them and helping them and their team improve.”
    Sorry, AC. Just messing with you. UCLA fans have little to be excited about.

    1. As a Socal homer, I root for both ucla and usc. BUT, I hope Helton loses his first game next year, as my Fresno St Bulldogs invade the Coliseum to open next season.

  12. Ac your insight and expertise are needed. There are issues somewhere that apparently have been addressed. If it is rumor it will die but if there are problems the truth will show up. Back to the field a moment. I know you are a big supporter of wood and you know I am not. However, why did he lose his velocity? When he had that he was terrific. If his velocity comes back we would be losing an all star in a trade. The dodgers might be reluctant to trade him if it is possible he can get back to the 16-3 guy he was. If he can’t he doesn’t have a lot of trade value. Did he have his career year or did he just health issues last year? Any info?

    1. I’d love to know the same about Stewart. When he lost mph off his fastball he became very ineffective. He did have a couple of injuries.

    2. I am not sure that Wood is entirely healthy. He knows he is coming up to his FA chance and his opportunity to cash in, so he is not going to volunteer anything. Maybe going from the stretch full time lessens any pain. That undoubtedly would decrease his velo, but it doesn’t account for it all. As much as I like Alex, he is not a 16-3 pitcher. He had a magical 1st half in 2017 that I do not believe he is capable of duplicating. But I do believe that he is a good #4 on a good team, and a #3 on an average team. For trade value he needs to go to a team that believes they can contend and need a short term possible solution. Cleveland, NYY, Boston, are all potential landing spots. But maybe the team that may be most interested could be Oakland. I have no idea how Oakland would value him for return.
      I am expecting the Dodgers management to talk with Alex about going to the bullpen. If he hesitates, the Dodgers do need to move him. $9MM for a reliever/emergency starter for the Dodgers is a lot, so it just may make sense to move him for whatever they can get and lose the $9MM in estimated arbitration salary.
      I never believed that Alex was top of the rotation type, but every team needs a good #4 and hopefully a #5. Alex could fill that role as good as anyone in MLB including 2019. Unfortunately for Alex, the Dodgers have Ryu as a #4, and three LHSP, Wood, Hill, and Ryu will all be leaving either before or after 2019.

      1. Thanks for your thoughts. Do you think the Dodgers expected ryu to accept their offer? If they were going to try to save money why make that offer? I think we have wood, ryu, Maeda, stripling who all fit that 3,4,5 role but mostly 4,5. I was hoping for more out of Maeda but nah. Urias has got to step up at some point. I would be willing to trade Maeda, wood, hill or 2 of the 3 but not all three. I really would like to see: Buehler 1, urias2, Kershaw,3, ryu 4 and hill 5 but probably replace urias with kershaw and ryu 3 Maeda 4 with hill 5

  13. Houston may be going for another top pitcher. They are supposedly deeply involved with the Mets for Noah Syndergaard. It appears that the Mets will not require Kyle Tucker or Forrest Whitey in return, leaving Josh James or J.B. Bukauskas as the headline in return. The Dodgers equal would be Dustin May, except James could be in a rotation this year, while May is a year away. If Houston is only willing to include Bukauskas, Dennis Santana and Mitchell White would be comparable. Then it becomes who else are you willing to include. I still think if NYM wants people willing to help this year, the Pads would be the best partner in any trade for Syndergaard.
    If the Stros get Syndergaard, re-sign Morton, and have Whitley as their #5, along with Verlander and Cole, they will arguably have the best rotation in MLB. With their offense they would be tough to beat.

  14. Being the kind of guy who rounds off all entries in my checkbook and says a short prayer after, I wasn’t going to get into it, but my favorite college football teams comments started showing and I had to say something!!!
    Don’t like USC, never have… As my Dad told me when I was in grade school, son you can throw out all the stats when these two(USC-ND) play and that’s what happened… Fire Helton??? Reminds me of that old adage ” You cant fire the players”… He’s an OK coach with at the end of the game yesterday had what looked like tired JC team… J.T. Daniels the prodigal son son??? I think not..
    When Chip Kelly starts recruiying his own kids along with offensive schemes, watch out PAC 12…
    Last but not least, have had the pleasure to watch Jacob Scavuzzo play at several levels and spoke with him a couple time and he is a quality kid and wish him the best…

    1. Peter, that is okay. I am a strong Catholic that has never liked Notre Dame. Our parish has the only USC priest in the US (maybe a slight exaggeration, but the only one I know) so we were commiserating after Mass today with me in my USC sweater that I wear after every USC/ND game…win or lose. I started to follow USC as a 10 year old during their perfect 1962 season, and my first USC game was the fantastic 1963 Rose Bowl against Wisconsin. I had neighbors who were USC alums who took me to the game and every home game from 1963 through 1968 when I graduated HS. My first dog was named McKay. I went to USC and after graduating had season tickets until 1982 when I gave them up because of my kids sports. I still went to every ND game at the Coliseum until early 2000’s when I moved to Northern California. I went to every home and away UCLA game until the same time.
      No, Clay Helton is not a good coach. He is an honorable GOOD man who is coaching at a level that is waaaaaay over his head. There are reasons why 4 and 5 star kids look like a tired JC team. But I will leave all that for another forum. But I had to respond.

  15. Brock Stewart had tendenitis early last season and never built his arm back up. That said, he has no future as a starter, and he has very little value right now, so they might as well kepp him and see how he can do in the pen (I think he’s perfect for that role).

    Hopefully, he goes to the pen in the Spring.

    Wood’s stuff was filthy in the first half of 2017… If you can throw 97 with his control and four pitches, you are Cy Young Material. The thing is: His velocity dropped 7-8 MPH! He’s still a good pitcher (#4 or #5), but for whatever reason, without that velo, he’s not worth what he will make. I think he is concealing an injury, but maybe he can do ok. I can’t see him getting the velo back…

    On Ryu, I think the Dodgers thought it was 50/50 he would accept. It was worth the risk, because when healthy, he was very good… and he’s pitching for another contract. His accepting the QO necessicates moving Wood, Maeda or Hill – very likely two of them.

    Chicken Strip will be very solid in the rotation and then there is Urias… I think Julio is ready to take up where he left off a couple of years ago.

    I hope Hill stays – I love what he brings.

    1. It’s not official, but seems likely. He’s a former Dodger – signed in 1988 and left the organization in 2005 for the Angels. He’s the “Whistler.” Who’s next? Scioscia?

  16. With Wood & Farmer having GA connections, is there any prospect of a trade with the Braves? Maybe prospects?

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