Thread: JVR's ice time
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10-26-2011, 05:02 PM
  #40
WeekendAtBernies
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Quote:
Originally Posted by DUHockey9 View Post
I don't know how many times it has to be said...I completely understand and agree with everything you are saying. I understand the rationale.

My point, and the entire discussion about the extension, is about WHEN it happened. Again, we paid for the small sample, not the big one. All anyone is saying, is that it would have been less risky, to wait a LITTLE longer.

I mean, afterall, what JVR have we been seeing so far this year, playoff JVR or regular JVR? Enough said. And that's the risk.

We paid him as if he DID turn the corner. Well now we are back to HOPING he turns the corner. Waiting could have prevented that.
I disagree. We didn't pay him as if he turned the corner... if we paid in full for the playoff JVR, he would be making about $6M per season. Likewise, we didn't pay for regular season JVR... if we did, he'd be making somewhere around 3.5 million. We paid somewhere in the middle. And that's fine by me...

Because even if you're a total JVR hater, you have to assume he will develop at least a little bit more, putting the absolute floor for JVR's worth somewhere around 4M per season.

Homer was willing to take the gamble that JVR continues to develop in order to cut down on the salary he has to pay him. In finance, this concept would be called a "risk premium". You require a higher risk premium (in this case, a higher discount on the contract) when the future is more unknown. If we waited (as you seem to be advocating) and JVR continued to perform as he did in the playoffs, there would be less risk to signing him to a long term deal, and thus a lower risk premium, so you would end up signing him for about $6M per season instead of the bargain $4.2M you signed him for.

Homer is gambling on his ability to judge talent and JVR is hedging against a future injury or drop in his level of play... it works for both sides.

What the Flyers have essentially done is purchased a $100 investment that has a floor of $90 and a cap of $150 (I just pulled these numbers out of my arse). They have an investment w/ very limited downside and a pronounced upside. Who wouldn't take this investment?

Whereas if we waited, the price goes up (say to $120) and the downside shrinks (say to $115 so the most you can lose is $5), but the upside also shrinks (say to $140, so the most you can make is $20).

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