[Trade] Hudler traded to Florida for 2016 2nd + 2018 4th round picks

[Enoch Root]

Originally Posted by Cleveland Steam Whistle

How are expense declining, nothing could be further from the truth, regardless of what the Jets did.

10 percent of their salary is being moved

[Cleveland Steam Whistle]

Originally Posted by Enoch Root

Currency is hedged. Or they're idiots. Which is very unlikely.

I highly doubt the Flames were able to mitigate all impact of the drop in dollar through currency hedging.

[Cleveland Steam Whistle]

Originally Posted by Enoch Root

10 percent of their salary is being moved

What do mean by that?

[Tinordi]

Damn you Treliving for not convincing your bosses to pay money out of pocket to retain salary for player contracts signed by your predecessor.

[Hackey]

Originally Posted by Kavvy

But... a huge % of the draft never plays more then 15 games in the NHL - if you get a prospect, isn't there an argument that you know what your getting and way less risk?

This is probably part of the problem. You know what you're getting. Teams aren't going to trade guys they feel strongly on. They will likey trade guys who haven't shown as much promise. With a pick at least there is still a chance you hit a home run. I'd say its pretty rare to hit a homerun with your run of the mill prospect in a trade. Would you prefer Klimchuk or another 1st to try again? If we could trade Klimchuk for a late 1st I'd probably make the deal.

[Jay Random]

Originally Posted by Enoch Root

Expenses are declining.

WPG and CAR retained. Neff said

Expenses decline faster if the team moves out players without retaining salary.

Meanwhile, revenues from single ticket sales, concessions, etc., etc., are being received in devalued Canadian dollars, and that can't be hedged in any meaningful way. Nor is currency hedging a cost-free operation; it can never be done with 100% efficiency.

So the team's revenues are lower than forecast, playoff revenues will be nil this year, and the payroll has been close to the cap all season. I strongly suspect the Flames are going to finish the year in the red if they don't move out significant salary, and every dollar they retain makes that harder to achieve.

[druetetective]

If it leaks the owners are not willing to pay the 500 000 give or take it would cost to retain 50% of what's left on Huds contract I'd be pissed!

Even if that only nets you a late round pick that is worth it! Look at all the money the Leafs are paying to improve their team. (Flying AHL goalies on private flights between AHL-ECHL to get them extra starts is 1 example of many)

As a paying consumer I expect ownership to be wiling to spend the money to make this organization better, within reason.

* I don't know if anyone follows MLB, but living in the DET area I think it's awesome what Mike Illitch is doing. He's spending big bucks year after year to improve the Tigers, despite his kids wishes for him to start cutting salary, all because he wants a world series before he dies. Nice to see

[heep223]

Originally Posted by Enoch Root

Currency is hedged. Or they're idiots. Which is very unlikely.

The Flames hedge part of their USD exposure (ie player expense) but not all.

There's a reason that the last time the cross was at this level the viability of small mkt Cdn franchises was in question.

[Enoch Root]

Originally Posted by Cleveland Steam Whistle

I highly doubt the Flames were able to mitigate all impact of the drop in dollar through currency hedging.

Will explain shortly

[Enoch Root]

Originally Posted by heep223

The Flames hedge part of their USD exposure (ie player expense) but not all.

There's a reason that the last time the cross was at this level the viability of small mkt Cdn franchises was in question.

If they only hedge part of their exposure (which isn't surprising), it is not because they are lazy or stupid or they can't , it is simply because the amount they have done is all that they have deemed necessary/worthwhile to do.

As for Canadian teams not being competitive at these levels, that is more a function of the following year (when you can only hedge at the new rate), it isn't a function of the limitations of hedging this year.

Edit: And it was more of an issue when there wasn't a cap.

[Enoch Root]

Originally Posted by Jay Random

Expenses decline faster if the team moves out players without retaining salary.

obviously

Meanwhile, revenues from single ticket sales, concessions, etc., etc., are being received in devalued Canadian dollars, and that can't be hedged in any meaningful way.

wrong.

Revenues are received in their base currency: $1CAD will always equal $1CAD. Some expenses are received in USD, which will fluctuate (relative to the base currency). All you have to do is buy USD in a forward contract, locking in the Canadian dollar equivalent. Done. Risk is totally hedged.

Nor is currency hedging a cost-free operation; it can never be done with 100% efficiency.

wrong.
Forward contracts have no cost (other than the bid/ask spread). As for efficiency, 100% isn't necessary. If you have about $50M in expenses and you hedge anything close to $50M, you have eliminated the risk, for all relevant intents and purposes.

So the team's revenues are lower than forecast, playoff revenues will be nil this year, and the payroll has been close to the cap all season. I strongly suspect the Flames are going to finish the year in the red if they don't move out significant salary, and every dollar they retain makes that harder to achieve.

Revenues are not lower - other than playoff revenue, which I would think they did not budget for anyway.

You are a good poster Jay. But you are wrong on how currency hedging works.

[Enoch Root]

Originally Posted by Cleveland Steam Whistle

What do mean by that?

Hudler $4M, Russell $2.6M

Okay, not 10% of total salary expense, 10% of salary costs for the remainder of the year.

[Flames Draft Watcher]

Originally Posted by Kavvy

But... a huge % of the draft never plays more then 15 games in the NHL - if you get a prospect, isn't there an argument that you know what your getting and way less risk?

Teams are typically very reluctant to trade any prospect that looks good. The only prospects they wanna trade are the ones they are disappointed in.

[Enoch Root]

Originally Posted by Cleveland Steam Whistle

I highly doubt the Flames were able to mitigate all impact of the drop in dollar through currency hedging.

They could if they wanted to (easily). Assuming Heep is right (no reason not to) and they didn't hedge it all, that is simply because they didn't feel they needed to. Because they easily could have.

Easy math example:

You have $120M in expected revenues (CAD) for the coming year, and
$100M in expenses (USD, and the exchange rate is 1.000)

So an operating margin of $20M.

If the CAD slides to 1.1000, your expenses rise to $110M (CAD) and you have lost half of your operating margin.

However, if you execute $100M in forward contracts now (while the currency is still 1.000 ), you will lock in your expenses at $100M and guarantee your operating margin of $20M.

Anyone who doesn't do this (or do something - there are far more sophisticated options) is an idiot. If you can hedge away a risk for free and you don't, well you deserve whatever happens to you.

Considering at least some - if not all - of the owners are in the O&G business, it is safe to assume they are intimately familiar with all kinds of hedging strategies.

[Da_Chief]

Good start post acquiring the pick. Florida lost today, next 7 teams behind them are 5 or less points back.

[Cleveland Steam Whistle]

Originally Posted by Enoch Root

They could if they wanted to (easily). Assuming Heep is right (no reason not to) and they didn't hedge it all, that is simply because they didn't feel they needed to. Because they easily could have.

Easy math example:

You have $120M in expected revenues (CAD) for the coming year, and
$100M in expenses (USD, and the exchange rate is 1.000)

So an operating margin of $20M.

If the CAD slides to 1.1000, your expenses rise to $110M (CAD) and you have lost half of your operating margin.

However, if you execute $100M in forward contracts now (while the currency is still 1.000 ), you will lock in your expenses at $100M and guarantee your operating margin of $20M.

Anyone who doesn't do this (or do something - there are far more sophisticated options) is an idiot. If you can hedge away a risk for free and you don't, well you deserve whatever happens to you.

Considering at least some - if not all - of the owners are in the O&G business, it is safe to assume they are intimately familiar with all kinds of hedging strategies.

Aporeciate the explanation (truly). Question, I assume (potentially incorrectly) that future expenses, I.e. Next years contracts, or at the very least new contracts can't be hedged until signed? If so, would it be fair to suggest that the owners will be less able to protect their margins moving forward should the dollar remain weak?

[Erick Estrada]

Originally Posted by Da_Chief

Good start post acquiring the pick. Florida lost today, next 7 teams behind them are 5 or less points back.

Man if Florida hits the skids and misses the playoffs that would be a nice bonus.

[Enoch Root]

Originally Posted by Cleveland Steam Whistle

Aporeciate the explanation (truly). Question, I assume (potentially incorrectly) that future expenses, I.e. Next years contracts, or at the very least new contracts can't be hedged until signed? If so, would it be fair to suggest that the owners will be less able to protect their margins moving forward should the dollar remain weak?

It would usually be done on a more general level, i.e.: we expect our salary structure to be between $55m and $60M, so let's hedge $50M (or whatever is deemed appropriate and sufficient).

As for the other question, teams would run on annual budgets, so they would know their ticket prices and expected revenue, and they would know their expected salary structure, so they could - and would - hedge prior to the season, for the season.

The problem with a declining currency is that next year, you have to hedge at the new, weaker level. However, it would be assumed that league revenues, and thus salaries and budgets, would also be subject to, and reflective of, the new lower currency rate.

This is one reason why the cap system is so important for Canadian teams

[Enoch Root]

Originally Posted by Erick Estrada

Man if Florida hits the skids and misses the playoffs that would be a nice bonus.

I'll settle for them not winning the division, and losing in the 1st round.

[Street Pharmacist]

Originally Posted by Enoch Root

They could if they wanted to (easily). Assuming Heep is right (no reason not to) and they didn't hedge it all, that is simply because they didn't feel they needed to. Because they easily could have.

Easy math example:

You have $120M in expected revenues (CAD) for the coming year, and
$100M in expenses (USD, and the exchange rate is 1.000)

So an operating margin of $20M.

If the CAD slides to 1.1000, your expenses rise to $110M (CAD) and you have lost half of your operating margin.

However, if you execute $100M in forward contracts now (while the currency is still 1.000 ), you will lock in your expenses at $100M and guarantee your operating margin of $20M.

Anyone who doesn't do this (or do something - there are far more sophisticated options) is an idiot. If you can hedge away a risk for free and you don't, well you deserve whatever happens to you.

Considering at least some - if not all - of the owners are in the O&G business, it is safe to assume they are intimately familiar with all kinds of hedging strategies.

Honest question: how do they pay their payroll ahead of time?