Free agent signings

players can have widely varying value depending on the team. A classic example is Steve Blake — for many teams, his value would not be as high as it is with Portland. So the oil auction illustration, while good to a point, has limits to its usefulness in analyzing the free agent market — in general, the value of oil isn’t going to vary widely depending on who owns the rights to it.

The usefulness of the comparison is that oil is not an efficient market, and neither is the free agent market.

In finance terms (very roughly), an efficient market is one in which everyone has the same knowledge and there are sufficient buyers and sellers to ensure that exchange prices are close to actual market value.

The U.S. Treasuries market is a classic example of an efficient market. There are no real surprises, everyone knows about the U.S. Government’s financial position. People may have different assessments of the risk of default or of inflation eating away the value of a Treasury bond, but they generally have the same information. There are also lots of people buying and selling Treasury bonds every day, so you won’t have to overpay to find a seller — if this guy wants too much, move on to the next guy. You also don’t have to undersell to find a buyer — if this guy won’t pay enough, the next guy will. You can always buy or sell Treasury bonds at or near the market price. The market price is the consensus of a large number of people as to the value of those bonds today. This is a highly efficient market.

FTSE-100 and DJIA stock markets are highly efficient. Generally, the only variance in knowledge about the company would be if someone is too stupid or lazy to do their research, or if someone is illegally doing insider trading. High volumes of generally equally informed buyers and sellers means that transactions generally occur at or very near market price.

NASDAQ is not as efficient. People may not have equal information about smaller companies. There are fewer people looking to buy or sell the individual stocks, so if you want to sell, there might be a limited number of buyers out there — that may force you to take their price.

Municipal bonds in the U.S. are inefficient. The buyer and seller may not have identical information about the bond and it’s credit-worthiness. Issue sizes are small, so for any individual bond issue, there might not be any bonds currently being offered for sale — you might have to pay extra to convince someone to sell it to you. There might not be any buyers looking for a particular bond — if you want to sell it, you might have to slash your price.

Your oil rights market is highly inefficient. Inefficiencies come because of lack of information or varying quality of information, and because there is only one seller. The auction approach lessens the inefficiency of only one seller, but it brings its own inefficiencies, as you have described.

The free agent market has other inefficiencies as well. But the general principles apply. The greater the equality of knowledge (and teams use very sophisticated analysis to try to gain an edge), the more likely it is that there will be an equivalent valuation of a free agent. But an efficient market requires a large number of buyers AND sellers. If there are significantly more of one than the other, it damages the efficiency.

When Rashard Lewis went to Orlando, there were few sellers (on the open market) of the type of talent he was offering for sale. As a result, the buyer/seller balance was skewed, and the result was that Orlando paid a high price to ensure they got him. If there had been three Rashard Lewises on the market, they would have paid less, assuming that if one of them got away, they would get the second or third one.

This year is fascinating in that there are few quality free agents and even fewer motivated buyers of free agents (both because of cap constraints and economic concerns). Boozer may take himself off the market because the hand-writing is on the wall — few free agent buyers out there. Don’t look for many players to be opting out.

An inefficient market always creates opportunities — someone will benefit by assets being exchanged at prices which differ from a reasonable assessment of asset value. In the oil rights market, this tends towards benefiting the seller, for the reasons given. But the main reason is that there is only one seller — if there were a reasonable balance between buyers and sellers, there would be many parcels sold at or below reasonable value.

In the free agent market, for the reasons you’ve given, the inefficiencies this year benefit the buyers. There are more sellers than buyers. We can buy assets at low prices because few others are looking to buy for anything above MLE, and many don’t even want to spend that.

It is also a buyer’s market on the trade market, as teams look to dump salary and are prepared to give up valuable assets to do it. There are more teams that want to dump salary than there are teams ready and able to acquire salary. Again, the inefficiencies of the current market are in our benefit.

The fact that the inefficiencies of both markets benefit us simply increases the inefficiency. Not only are there teams out there that would like to do a deal with what Portland has to offer (salary relief), there are free agents as well. That means that we can press teams for greater concessions because we can just go get a free agent. We can press free agents for greater concessions because we can just make a trade instead.

This summer is perhaps the best buyer’s market (for a willing and able buyer) we’ve seen in many years, even though there aren’t that many quality free agents available — the trade situation with salary dumps just heightens the opportunities. Next summer may be even better, because there will potentially be so many very high quality free agents — but we won’t be in that market, other than for our own guys and with our MLE.

It is possible we’ll see a blockbuster trade for an elite talent, with cap space used to fill the gaps where KP traded guys away. It’s also possible we’ll pick up a top free agent, even at a position where we are deep, and then see guys at that position traded away. It’s possible we’ll just pick up one or two role players.

It’s possible we’ll do nothing. It’s a buyer’s market for Portland on the talent front, too — we have lots of talent, and KP and Nate may assess that we simply don’t need anymore. If we pick up anyone, it will be because they have no doubt at all that it makes us significantly better.

It is very possible we pick up a veteran talent for a two year run to make us top contenders now, even while our young guys are still developing. We can afford to do that.

you should read yesterday’s hoopshype rumor mill,the way p.allen sounded about the salries are a broken model.would worry me if i’m a blazers fan.

honestly they need another go to guy to take pressure off roy,they can also draft a kid like patty mills out of st.mary’s.see pricthard’s problem is,he likes these clean cut vilnilla wafer type guys.he should trade a combo of 2 or 3 of these wafers and aquire a kato to b.roy’s green hornet.

don’t get me wrong here,pricthard have drafted very very well,but even you guys have to admit he has too many 6’7-6-‘9 guys with lean and length.4 years ago in this very same chatroom,i suggested to dave that pricthard should be the gm.so relax and let’s enjoy the wizardly of pricthard.