After getting several dozen e-mails with varying amounts of paranoia, I wrote a story today about how the mortgage industry crisis affects the Cavs. The answer given to me yesterday by the chairman of Quicken Loans and the majority owner of the team, Dan Gilbert, is not at all. I 100 percent believe him.
There seems to be a demand from Cavs fans to explain why they are not signing anybody. It is understandable and explainable but not buyable to all fans, especially those who notice how close the team is to the luxury tax line while they read stories about mortgage companies laying people off or closing altogether.
Cavs fans have had to go through three layers of player additions with no news to chew on, evaluate or get excited about. First it was the draft, where the Cavs had no picks. Then it was the initial wave of free agency, when the Cavs were not in position to land any of the major candidates. Then it was the trade market, when the Cavs were unable to make a deal for Mike Bibby while Eastern Conference rival Boston landed Kevin Garnett and Ray Allen. New York got Zach Randolph and Charlotte got Jason Richardson.
There is a belief among many out there that because the Cavs have not yet done anything, they are worse off. There is a belief that everybody else is better. In July, August and September in the NBA you can make a case for a lot of things. But that doesn’t make any of them true or false.
Here’s the way I look at it: Of the teams that made the playoffs in the East last year, only one of them has made a major addition. That’s Orlando, the No. 8 seed, and Rashard Lewis. In my opinion the only other playoff team to upgrade in a way that will help them immediately is New Jersey, which brought in Jamaal Magloire and will pair him with returning Nenad Krisitc to shore up their weak front line that cost them the series with the Cavs in May.
I am not trying to defend the Cavs, just doing what I always try to do, add perspective.
Regardless of the Quicken Loans issue, the Cavs no doubt have been more cautious with money. From people I have talked to and my reading of the situation, one of the major reasons the Bibby deal did not go down was money. The proposed three-way trade between the Cavs, Spurs and Kings would’ve added about $3 million to the payroll right off the top. Then there would’ve been free agents Luis Scola, Anderson Varejao and Sasha Pavlovic to deal with. The Cavs would’ve been facing a payroll probably near $75 million. Plus Varejao would have better leverage since Drew Gooden would’ve been gone. Next year the payroll would’ve probably exceeded $80 million and you’re passing into nonsense territory.
Apart from the money issue is strategy. The coaching staff and front office have been reluctant to sign a free agent guard that would potentially stifle Daniel Gibson, whom they see as potentially being a Mo Williams type of player. If they are able to trade for a front-line point guard who instantly makes them better, like Bibby, and it doesn’t smother their flexibility they will do it. They have been trying for months now and eventually I believe Danny Ferry will make a significant/major trade. But that trade doesn’t have to be made today or next week or next month regardless of the impact on the NBA news cycle in the offseason. More important for the franchise is that the trade is smart, because they are close.
As for Pavlovic and Varejao, there is nothing going on. Most GMs and agents are off on vacation this time of the year. Varejao and Pavlovic’s position isn’t any different today than it was three weeks ago, so from their standpoint why not wait and see if market events change their demand. If you want to watch something as a fan, keep an eye on the teams that are going to be forced to release players soon. The Knicks, Timberwolves, Mavericks all have too many guaranteed contracts and still need to sign draft picks. Meanwhile there are lots of teams that have decisions to make with partial-guarantee guys and draft picks. So the Cavs sitting there with 11 contracts (10 considering David Welsey’s will be gone at some point) right now and may be able to land a quality player by waiting around.
As for Allan Houston, nothing new I can report. I know the Cavs have interest in him and I’ve read he’s interested in the Cavs. We’ll see. Signing a guy coming out of retirement isn’t something you would normally do until near the end of the summer because you want to see what kind of shape he’s in close to training camp.
And a final note, I don’t think you can expect Charles Oakley playing for his hometown team anytime soon. In this fantastic interview on ESPN.com, Oak says, among other wild stuff, that he’s only coming back for a contract of two years and around $10 million. Good luck.
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oh the hell with it. let’s go to vegas and watch some real hoops. hit me up.
Alan, the amount that Gilbert has at risk here is:
(amount financed) – (value of least valuable NBA franchise)
with “amount financed” being (Price paid for Cavs) – (cash Gilbert put in).
Gilbert paid $375 million and Forbes says the least valuable NBA franchise is the Bucks ($190 million) so the maximum at risk is $185 million. (Actually, Gilbert didn’t acquire 100%, but the Bucks number is two years old, so let’s guess it balances out.)
We don’t know how much cash Gilbert put in. I would guess “not much”, because he bought the team when interest rates were ungodly low. The smart thing to do would have been to finance as much as possible, with his rate locked in.
That way, when rates rose, Gilbert could invest the cash he hadn’t spent, getting a return that might (depending on how high they rose) pay more than his interest on the loan.
That’s speculation, but remember that Gilbert made his fortune in finance. He isn’t some goof who inherited money (Randy Lerner) or a guy who made money in an unrelated field (like Larry Dolan and cable TV).
Anything can happen, but it is highly improbable that Gilbert, who is where he is because he made interest rates work to his advantage, structured a deal that left him vulnerable to fluctuations in capital.
Many super-rich people are very stupid about money in many respects (Paul Allen has lost billions on dumb ideas). But when someone does a deal within his field of expertise, it is usually successful.
You’re making the same argument (in principle) as the folks who said Dolan couldn’t make money on Sports Time Ohio. I don’t think highly of Gilbert as a human being, but I am 99.9% confident in his ability on this specific point.
Neptune, all I’m saying is that one just HAS to affect the other. It’s foolish to believe otherwise. I think it’s a foregone conclusion that James has three years left, four if the Knicks and Nets’ situations need one additional year to iron themselves out. Now combine this with Gilbert’s core business, which is presently on a slow trajectory course to crash into the sun.
I totally agree with your last paragraph. Gilbert is a weasel, but an extraordinarily slick one, particularly when it comes to finances. This guy wanted the Brewers, for God’s sakes, so you know the ego factor of being majority owner of a sports franchise is also important to him. But this guy ain’t no fool when it comes to money, and Rock Financial does not appear to be a rock anymore.
I’m extraordinarily interested and very worried as to what is going to happen to the franchise in five years. All Cavs fans should be. I can easily see a situation where Gilbert and his partners are desperate to get out, but the only way to recoup their investment would be to sell to an outside group that would move the franchise. Gund had talked with outside groups, but his family had prior ties to the community. Now compare this with Gilbert. This guy has no ties and couldn’t care less about Cleveland. I don’t trust him.
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