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

[Enoch Root]

Originally Posted by Street Pharmacist

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

You don't pay your payroll ahead of time.

You know that your payroll will be $10M per month, let's say. And it's in US dollars.

So you buy forward contracts for $10M for every month of the season.

How a forward works is that you agree to the rate now, but you deliver the Canadian dollars and receive the US dollars at a set date, instead of now.

[mikephoen]

Originally Posted by Enoch Root

Don't think it's ever been mandated. Link if it has been please.

Bottom line is that other teams are doing it. If the Flames don't they are not maximizing their opportunities. Plain and simple.

There is also the chance that the Flames offered, but Florida declined. Maybe Florida, since they don't have pressing cap issues, wasn't willing to give up a better pick for some cap savings.

The only time I can see salary retention on a UFA at the deadline mattering is when the team getting the player is right up against the cap. Probably why Chicago had to pay a premium to Winnipeg for Ladd to get the salary retention that enabled them to do the other deals.

[Enoch Root]

Originally Posted by mikephoen

There is also the chance that the Flames offered, but Florida declined. Maybe Florida, since they don't have pressing cap issues, wasn't willing to give up a better pick for some cap savings.

The only time I can see salary retention on a UFA at the deadline mattering is when the team getting the player is right up against the cap. Probably why Chicago had to pay a premium to Winnipeg for Ladd to get the salary retention that enabled them to do the other deals.

Yes, good chance that FLA doesn't value it much.

But that doesn't mean that other teams wouldn't value it.

The bottom line is maximizing the value of your asset.

[getbak]

Originally Posted by dammage79

It's been an organizational mandate since the salary retention kicked in in the new CBA that the Flames will not retain salary. I'd be surprised if that changes any time soon. .

That is absolutely not true. I asked about salary retention at the Fan Forum a couple of weeks ago and both Burke and Treliving said they'd be willing to do it if it made sense to do it.

The only reason it hasn't happened is because there's been no good opportunity to do it.

[Strange Brew]

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.

You are oversimplifying IMO. Should the Flames lock in today's exchange rate? Or is that locking in a bad rate? Yes hedging reduces risk and upside but if the Canadian dollar stays low, the Flames can't hedge their way out of it.

[CASe333]

Originally Posted by Enoch Root

...

I went in thinking: a 2nd and a 3rd was the line in the sand (i.e. a good return). Two 2nds would be a very good return. A 2nd and a prospect - depending on the prospect - would have been a great return.

Packaging him in a hockey trade was also a possibility.

Lots of different options. So saying 'it's the best he could have got' is kind of meaningless since we simply don't know that.

Another possibility is they try to get a bit more and end up with nothing. Given what we outsiders know there is just as much chance as that happening as them getting a better offer. I think that is the factor you are not considering in your evaluation. They got something quite close to what you had at least expected. There is risk that if they wait the market falls out and they get nothing. I am very happy they took a good offer and ran!

[dino7c]

There are tons of F UFAs...glad the Flames made their deal there will be teams left holding the bag tomorrow

[btimbit]

Originally Posted by dino7c

There are tons of F UFAs...glad the Flames made their deal there will be teams left holding the bag tomorrow

100% agree. Glad this deal got made rather than waiting last minute and risking nothing happening, which with this group of UFA's is entirely possible. Get Hudler out of the way and concentrate on moving others.

Now hopefully Russell gets done, and with the big ones out of the way there's time for some other smaller deals to be had

[Enoch Root]

Originally Posted by Strange Brew

You are oversimplifying IMO. Should the Flames lock in today's exchange rate? Or is that locking in a bad rate? Yes hedging reduces risk and upside but if the Canadian dollar stays low, the Flames can't hedge their way out of it.

That's not how it works. They would have hedged this season's expenses last summer, once they determined their expected revenues and salary structure.

[Finger Cookin]

Originally Posted by getbak

That is absolutely not true. I asked about salary retention at the Fan Forum a couple of weeks ago and both Burke and Treliving said they'd be willing to do it if it made sense to do it.

The only reason it hasn't happened is because there's been no good opportunity to do it.

Great question, thanks for sharing the info. I'd assumed that the Flames simply would not retain salary too.

[PeteMoss]

Originally Posted by Enoch Root

That's not how it works. They would have hedged this season's expenses last summer, once they determined their expected revenues and salary structure.

There's a lot of decisions around hedging and how much you are going to do it. Really depends on the risk level the owners are willing to take on. Its not as simple as everyone is going to hedge unless they are dummies.

[acerbic_1]

Originally Posted by PeteMoss

There's a lot of decisions around hedging and how much you are going to do it. Really depends on the risk level the owners are willing to take on. Its not as simple as everyone is going to hedge unless they are dummies.

And hedging ain't free.

[Enoch Root]

Originally Posted by acerbic_1

And hedging ain't free.

forward contracts are - they are simply changing the date on a currency trade (plus or minus the interest rate differential - which right now would actually improve the rate)

[Enoch Root]

Originally Posted by PeteMoss

There's a lot of decisions around hedging and how much you are going to do it. Really depends on the risk level the owners are willing to take on. Its not as simple as everyone is going to hedge unless they are dummies.

Which is exactly what I said (they would have done what they deemed appropriate), and that forwards are merely the simplest form of hedging (and that they likely execute more sophisticated strategies)

However, with respect to the bold, you're doing it wrong. Hedging isn't a case of taking on risk (that is speculating), it is a means to reduce/eliminate risk.

And when you are talking about reducing risk - and it's free - yes, it is dumb not to.

[Strange Brew]

Originally Posted by Enoch Root

That's not how it works. They would have hedged this season's expenses last summer, once they determined their expected revenues and salary structure.

There is not one magic time of year businesses decide to hedge their exposure. It is a complex decision. Nor are you limited to hedging one year out. You could do more or less depending on your appetite for risk. But even following your example, if the Flames decided to cover their next year F/X risk in the summer, this summer's forward rates are likely going to look pretty grim.

You can't say the Flames aren't exposed to foreign currency risk because "hedging". The difference in the US and Canadian dollars will remain a fundamental component of the Flames business unless one day player salaries are no longer paid in US dollars or the Canadian dollar gets pegged to the greenback.

That's like saying EnCana isn't exposed to price of oil because they can hedge.

[Enoch Root]

Originally Posted by Strange Brew

There is not one magic time of year businesses decide to hedge their exposure. It is a complex decision. Nor are you limited to hedging one year out. You could do more or less depending on your appetite for risk. But even following your example, if the Flames decided to cover their next year F/X risk in the summer, this summer's forward rates are likely going to look pretty grim.

You can't say the Flames aren't exposed to foreign currency risk because "hedging". The difference in the US and Canadian dollars will remain a fundamental component of the Flames business unless one day player salaries are no longer paid in US dollars or the Canadian dollar gets pegged to the greenback.

That's like saying EnCana isn't exposed to price of oil because they can hedge.

Of course there isn't a magic time to hedge. But the standard practice, for a firm like theirs, is to do it once you know what your revenue and expense budgets are.

Of course it's a complex decision, but this is a hockey forum, not a white paper on hedging strategies.

And no, of course you're not limited to one year strategies. But again, this is a hockey forum. And the simple fact of the matter is that, due to the cap and salaries, etc being adjusted annually, it is very likely that most teams do in fact stick to one-year strategies.

I never said "the Flames aren't exposed to foreign currency risk because "hedging", you did. Putting words in someone's mouth and then arguing against that is not a valid argument.

The EnCana argument is also silly. First, I never said that. Second, salaries are tied to revenues, which are tied to currencies. They set budgets each year (and that budget is going to be different each year, based on a lot of things including currency levels). Then, when the budget is done, you hedge.

I have already spent way too much time on this. I am not going to sit here and defend multiple hypothetical arguments.

The Flames - and all Canadian teams - hedge. In a past life, I built currency hedging strategies for corporate clients, most of which were in the same, or opposite situation as the Flames. It actually is pretty straight forward.

But no, it doesn't make the issue magically disappear.

[Calgary4LIfe]

I don't think the Hudler deal was bad - it just wasn't 'great'. I personally expected more, but it is what it is, and that was what the market was. Since the trades started happening, you see some guys going for much more than what people were guessing, and some going for much less. A 2nd and a 2018 4th isn't terrible, and at least the 2nd is very useful currency entering the draft.

I for one think that Florida got a bargain here. Hudler seemed quite undervalued. I guess scouts are a bit confused on him because of his relatively poor showing during the playoffs last year. I don't know why 4 goals and 4 assists in 11 games has become a 'poor showing', but whatever. We know that Hudler was limping into the playoffs, and he still contributed offensively at a time of the year where offence is more difficult to generate.

This season, he has been 'poor' - which is confusing scouts. Seems like he has been battling a groin injury. Also, it seems like that is finally fixed since the all-star game. Hudler has been on a roll and I bet Florida ends up very happy with him.

Nagging injuries caused Hudler to be viewed as 'confusing' I guess by scouts, but there is no denying it - Hudler was the top scorer last year in the NHL 5on5 - that is not a player that screams defensively deficient. Passes the eye test too. Produces well. Shows leadership. Won a cup. Came from the Detroit program where they preach and instill honest 2-way hockey and relish players that have the IQ to play that game. I think we have enjoyed Hudler for the most part right up until this season (at least I can say that - can't speak for every poster here, but I have thoroughly enjoyed Hudler on the team).

As for re-signing him, I think that it just won't happen. Flames want to get bigger. They want to rebuild. IF what Dreger is saying was true about guys like Colborne available for trade, then it screams to me that the Flames are intent on turning over a larger portion of their roster. They apparently didn't even open negotiations with Hudler. I would assume if they wanted Hudler back, they would have opened negotiations at least, even if it is just to get a sense of what he was looking for REALLY, rather than what the initial demands might have been through the agent.

I will personally miss Hudler - the player on the ice and the antics he did off the ice - and I actually am cheering for Florida now in the Playoffs (though I have my doubts at how far they can go). I was already cheering for Jagr - now I get to cheer for Jagr and Hudler.

[wireframe]

Hudler and Stempniak got roughly the same return. I would not have believe you if you told me that last year. What a weird turn.

I like the return on Hudler and I think Hudler is better than Stempniak. So I guess that means that I think the bruins overpaid for Stempniak. Just weird.

[Frequitude]

So if I'm not mistaken, Hudler and Stempniak netted the third highest returns of the UFA forwards behind Ladd and Staal?

[Flames Draft Watcher]

Originally Posted by Frequitude

So if I'm not mistaken, Hudler and Stempniak netted the second highest return of the UFA forwards behind Ladd?

E. Staal