Understanding the Trade Market: Who is Dealer Dell?

By:
Published: February 20, 2014
Understanding the Trade Market

This whole series has aimed to give you, the readers, a better understanding of the trade market as a whole. We hoped to give you some academic insight and practical knowledge, so you could comprehend the factors that dictate every decision a team makes in the trade market. While we often used examples from our team’s history, we spent a lot of time thinking about the league as a whole. This final piece in our Understanding the Trade Market Series is going to change that. This is all about the Pelicans or, more specifically, Dell Demps.

If you are a Pelicans fan, you really need to understand Dell Demps’ general team building strategy to understand the team’s decisions during free agency and in the trade market. Obviously, Dell has never come out and explained his strategy in great detail. Doing that would have some obvious costs and no benefits. Still, given his history with the Spurs and Pelicans, some important details and preferences have been revealed by the moves he has made.

Dealer Dell and the Asset Market

I assume that everyone who could be reading this article knows the core principle of how to maximize success in an asset market. You buy low, and you sell high. It is the simplest profit maximizing cliché in the world. This little bit of logic is true for the NBA’s asset or player market. As we discussed before, players and draft picks have relative values and they add a certain amount of value to your team’s performance in the long or short term.

In my opinion, this is the cornerstone of Dell Demps’ philosophy. Demps buys very low and sells very high. When I hear dealer Dell, I don’t think of a wild riverboat gambler ignoring the odds and playing on chance. I think of a wise stockbroker playing the market like a fiddle. He takes one man’s trash and convinces the next man it is treasure, while pocketing the nice little profit made in between. Actually, the best comparison for Dealer Dell may be Tom Sawyer. Remember how he traded his chores for knick-knacks and treasures, which he eventually traded to get out of doing his schoolwork? Let’s ignore the whole nickname conundrum for now, and focus on the relevant question at hand, how does one acquire NBA players and assets low and trade them high?

Consider Ryan Anderson, Demps acquired him in a sign and trade with Orlando for Gustavo Ayon. Ryno’s contract is for 4 years at around 34 million dollars. Let’s go back a few moves and look for some evidence of buy low/sell high. In 2011, we signed Ayon to a deal for an assumed 4.5 million dollars for 3 years, and he ended up having a very decent season for us. He played in 54 games, had a PER near 17, and looked to be a decent option for a big man rotation. Dell gave him very low contract and Ayon out performed it. We saw a nice return on that meager investment.

In July 2012, we traded Ayon for Ryno and signed him to the aforementioned deal. Dell saw an asset (Ayon) reach its peak value, so he traded him. Also, on the topic of Anderson’s contract, I have done some economic modeling and multiple linear regression analysis, so I can say what we all already knew. Ryan Anderson has probably been a little underpaid, if not well underpaid. Again, Dell brought low and is seeing the rewards. Basically in less than a year, he turned Ayon into Anderson and didn’t overpay anyone. That is an impressive return on initial investment.

Of course, the Anderson deal is not the only example. Think about the recent Taylor trade that ultimately resulted in Dell trading the draft rights to Edin Bavcic for a seemingly improved Luke Babbitt. Considering Bavcic would have likely never played for the Pelicans, I’d say that is another example of selling an asset to the right team (draft rights to a unknown Bosnian player) and buying a better asset (Babbitt) at a low price.

The key to buying low and selling high is effectively exploiting market inefficiencies. That is to say, you want to find gaps between player’s production and their value on the trade market. Players who produce more than they are worth on the trade market are ones that you want to acquire or keep. The players with an inflated value beyond their production are the ones you want to trade. Obviously, finding a way to exploit a market inefficiency is the difficult thing. The book Moneyball was about a team using different statistical techniques to exploit the player market. However, other teams eventually catch on, so you have to constantly reexamine your techniques and strategy.

The Future

If we know that Dell wants to buy low and sell high, then what are his plans for the immediate and the long term. I personally think Dell wants to get a nice core of young talented players, and then I think he wants to collect assets that he can move for better assets down the line. It is almost the way some firms trade stocks. They hype them up, get people to raise the price, and sell their shares for more money than when they purchased them. I think that is what Dell is going for to build his championship contending team. By the way, that is not exactly legal in the stock market.

The good news is that Dell already has his two core players in Anthony Davis and Jrue Holiday. I think they are here for the long term, and everyone else is just a contract that can be moved for the right upgrades. The bad news has been the injuries. It has been hard to define roles and examine chemistry without everyone on the floor.  Still, I think we are going to see some major moves to this roster before the team really starts competing for titles.

After this season, I think we see Eric Gordon become a more sought after asset due to his contract decreasing in length. I wouldn’t be surprised if his name comes up in more substantial rumors as time goes on. I also expect Dell to pursue a few unknown international prospects this off season. It isn’t the trade market, but a lot of value can be found on the international market. I’m not making a lot of strong predictions about the future, but that is because in some cases we have a lot of flexibility. At the end of the day, look for Dell to continue to fill out his roster by trading his assets at the peak of their value.

Final Word

I hope you all enjoyed this series as we attempted to breakdown and explain the NBA trade market. Hopefully, we will be able to bring you more series like this in the future, if you are interested. The trade deadline happens later today so be on the look out for any late breaking news, and remember Dealer Dell isn’t a gambler. He’s a stockbroker.

 

7 comments
thouse
thouse

Good read and a very nice, informative series. Thanks to all the contributors

My issue with Dell is that his moves seem to be more of the “Look how smart I am" variety. He's quite good at finding marginal guys off the scrap heap and getting some value from them. But to what end?

What skills or traits unify all his buys other than lightly regarded player? How have they coalesced into the larger picture? What even is the larger picture? As far as I can tell there is no over arching theme in the front office or on the bench.

Injuries and a tear down/rebuild play a role, but three years is a long time in the NBA. To still be wondering about these things is worrying to me.

Don't think he or Williams should be fired. They both deserve a shot with the roster they put together, but the clock is ticking.

thouse
thouse

@xman20002000 Can you point out what type of player Demps looks for, besides bargain buy? 

thouse
thouse

@xman20002000 I get all that. 

The question still remains, what type of player are the Pelicans looking for?

Just being young or a good bargain doesn't mean a guy is a good fit. 

Dell has done a nice job of finding reclamation projects. Yet, I don't see a coherence between his moves and what Monty does on the court. 

I'm planning a dinner for a few friends and family for tomorrow night. I went to the grocery store and got items only on sale to cook for dinner: Fruit roll ups, early season avocado, apple cider vinegar, sun dried tomatoes, and hot sauce. I've got a steak and two potatoes at home already, how the hell do I add those new ingredients to make a hole meal?

DavidLeBoeuf
DavidLeBoeuf

Disaster of a season.  I have zero confidence going forward.  zero.  Bad day for the season ticket renewals to come out.

mateor
mateor

@DavidLeBoeuf  I have some dread as well. But we likely have at least 5 years of a top 10 player left. That is so much better than nothing.

Caffeinedisaster
Caffeinedisaster

@mateor @DavidLeBoeuf  I keep looking at the "what ifs" with the main one concerning injuries.  Without all of the injuries, I have no doubt that the chemistry would have developed and this team would at least be a 6-8 seed in the playoffs.