The Andrew Miller trade promises to be one of the most discussed, most analyzed acquisitions of the past decade. This makes sense because paradigm-shifting trades should be recognized for there vision and risk.
The July-deadline price was steep—a top-50 prospect in Clint Frazier, a top-100 arm in Justus Sheffield and two interesting pen arms. In return, the Indians received Andrew Miller for two-and-a-half years at $9 million per-annum.
When Miller signed a four-year, thirty-six million dollar deal with the New York Yankees, articles were written about the heightening cost of relievers, the changing model in baseball. Retrospectively, Miller’s deal looks like peanuts. This occurred for a few reasons, but one of the most compelling is how the Indians foresaw a different usage for an asset that would cause significant appreciation.
First, it is necessary to establish that Miller is the best reliever in baseball, just for fun. From 2014-2016 while Miller had the best xFIP and second best FIP, the ERA sparkled too. Check it out below:
If you want to argue Miller is only one of the three best relief pitchers, that is fine. I would counter that Miller is the only one who has displayed an ability to slay over multiple innings in the playoffs which, in my mind, is dispositive.
The second piece necessary to establish is that WAR undervalues top-end relievers. WAR is a counting stat. Dominating in high-leverage scenarios is not properly rated in the metric which understates the value of a pitcher like Miller. Even so, Miller’s fair market value based on WAR in 2016 would be roughly $24 million. The Indians are paying $9 million. If one posits further that WAR does not completely encapsulate high-end reliever production, the price could look more like $27-30 million in fair market value.
A four-year contract would likely exceed $80 million total, perhaps reaching $100 million. The Indians have him at two years and $18 million. This is insane.
What is particularly brilliant is that the Indians both acquired the best reliever in baseball and inflated the offseason price of all other above average relievers. For instance, the middling left-handed, one-out guy.
Marc Rzepczynski deal for $11M, 2 yrs w/ m’s after 1.57 whip last year tells you again that the price is high for relievers
— Jon Heyman (@JonHeyman) December 3, 2016
Over the next two years, Andrew Miller will only make $7 million more than Zeppo. Zeppo has 2.9 career WAR—the same as Miller’s 2016 season. Zeppo can only get lefties out and Miller can get absolutely anyone. Aroldis Chapman a pitcher with enormous baggage, an arsenal likely to age worse than Miller’s will received a five year eighty-six million dollar deal. For the Indians, gains are two-fold.
Mark Melancon, arguably a top-15 reliever, signed today for what is reported to be four years and $62 million. Melancon is the same age and has been half-run-to-a-run worse in FIP/xFIP over the past three years compared to Miller. Indeed, Melancon and Cody Allen are more similar relievers than Melancon and Miller. Over the next two years, however, Melancon will make $12 million more than Miller and also is signed for significant money through age 35. The Giants just swallowed a lot of financial risk because the Indians manipulated the value of Andrew Miller.
The Cleveland have the best reliever in baseball, as well as top-20 reliever Cody Allen, locked in on unbelievably favorable contracts. The result: Other teams are chasing the same advantage. The difference, of course, is that other organizations will have to shift the proportion of assets expended on bullpen improvements while the Indians are now seeking other pieces.
When the proportion of other teams budgets shift towards relief help, it naturally shifts a proportion away from another position. What this position is or how the Indians proceed is unclear, but it is the Indians forcing a market shift heading into Winter Meetings is undeniable.
On Thursday, December 22, 2016 the Indians signed Edwin Encarnacion to a three year deal worth at $60 million with a fourth year team option. For context, MLB Trade Rumors projected Encarnacion to receive 4 years and $92 million from the Red Sox for an annual average value of $23 million. Fangraphs projected Encarnacion at 4 years and $84 million with an annual average value of $21 million. Fangraphs was close the the annual average value but was a year longer in financial commitment, with the Indians significantly outperforming the MLB Trade Rumors projection.
Of course, the Indians also relinquished a pick which has monetary value but that will be discussed later. In order to avoid a 4 year commitment, one would expect the Indians to have to exceed the projected annual average value to balance risk. However, the Indians were able to get Encarnacion for $20 million less in guaranteed money than the market would suggest which is a significant boon in long term flexibility. Once again the Indians struck at a market inefficiency where power with contact skills is being undervalued by the marketplace.
The delightful part of this market hole is that the Indians helped create it when they traded for Andrew Miller. When the Indians dealt for and optimized postseason usage of Miller it caused a market cost for elite relievers. This effectively removed one of the biggest market competitors, the New York Yankees. The Yankees were determined to bring in another elite high leverage reliever be it Chapman or Jansen, understanding that they would be forced to allocate over $80 million to address this problem the Yankees signed Matt Holliday and removed themselves from the market place. Encarnacion would have fit beautifully in Yankee Stadium and traditionally would have been expected to land there but the Yankees shifted resource allocation to the bullpen due to its postseason value and removed themselves as players in the top end hitter market.
Encarnacion is really an A.L only player with designated hitter written on his bat and a few days at first base likely. Crossing off the largest market A.L. team completely changed the marketplace, especially when considering that the Red Sox, the second biggest market where pushed up against Major League Baseball’s new punishing luxury tax. The Indians could cross off the two biggest spending organizations in the 1B/DH market when it was flooded with useful contributors. The Indians acquisition of Andrew Miller had essentially deflated the cost of DH types, a position the Indians needed to address. By winning one trade and beating the market to the relief pitcher spot, the Indians then leveraged that advantage to acquire Encarnacion, an elite hitter at a below market rate.
Though the Indians’ postseason strategy was predictable in many ways, it serves to emphasize the way playoff baseball is changing. By taking advantage of off days and implementing progressive bullpen usage, Chris Antonetti and Terry Francona inflated the value of above-average relief pitchers as they reached each new round.
Antonetti beat everyone to a market evolution then forced an expansive market shift which will force significant asset allocation by competing organizations. These are the sort of nuanced market victories which drives multi-year contention for the Indians.