Catching Up on Where the Rockets Currently Stand, in Free Agency and on the Trade Market

Note: New addendum added below for any confusion with sign-and-trades.

February 18th is a special day.  It's not because the Olympics begin, or because Leno's new show gets axed.  Actually, it's because February 18th is the day of the NBA trade deadline.  So while folks in Vancouver may be going crazy over luge and curling, Toronto will be sweating over what will happen to Chris Bosh.  And we here in Houston will have our own worries, of course.

I feel like I haven't done a good enough job of informing you folks on what the Rockets' current situation is.  I do far too much guesstimating and really ignore the research part of it like it's not important.  So I decided to go hunting for some good material to quote from, and I feel like what I have below should work nicely.  We're going to be discussing a few things:

1. Why the Rockets likely won't participate in the 2010 free agent sweepstakes

2. What alternatives we have through trades

I'll admit, I really wanted to write a post on this topic myself.  I've done the necessary research, and I understand most of what's going on here.  But that won't be necessary, because a poster by the name of BimaThug at Clutch Fans has really outdone himself.  Even if I were to write something on my own, it wouldn't be much different from a fantastic piece that already exists.  The point is, everyone should be aware of what the Rockets' salary situation is, regardless of who is providing the information.

Here is the article.  If you cannot access the Clutch Fans forums, I have copied the post in its entirety onto a Google document.  I highly recommend reading the entire post.

The following is an excerpt from the article, outlining exactly why the Rockets won't be able to sign a top-tier free agent:

This year's salary cap is $57.7M. It will likely go down in 2010-11 to anywhere from $54M (very likely) to as low as about $50M (realistic worst case scenario). With the calculations above, the Rockets will actually be OVER the salary cap if they want to keep everyone. Even if they don't pick up Chuck Hayes's team option and renounce their rights to Kyle Lowry, the Rockets will only have about $5-6M in cap room, tops. If they also renounce their rights to Scola, we're only talking about $11-12M, tops. That's only IF league revenues are significantly better than projected by the league. That number could still go down further if the Rockets end up with a lottery pick or if Joey Dorsey's salary is actually guaranteed for some amount above $0.

....

Bottom line: The Rockets STILL don't have any real cap room to speak of, assuming that the team wants to keep Scola and Lowry. Nothing with the current McGrady situation changes this. Letting T-Mac's contract expire will not create significant cap room, if any at all. Re-signing Tracy now appears to be off the table. The team's best options to improve for next season will be to (a) trade T-Mac for a "significant asset"; (b) in lieu of that, trade T-Mac for at least one decent player and smaller expiring contracts; (c) have Les use the extra cash that a lower team payroll, sans-McGrady, will bring in order to improve via the draft and trades; and (d) get Yao Ming back healthy.

To clarify a few other key elements from the article:

A) Even though Tracy McGrady's giant contract will expire this season, it does not mean that the Rockets will instantly have a $23 million shopping spree.  Rather, it means that we won't have to continue paying $23 million to Tracy in 2010/11.  Think that one through for a second.

B) If we were to pick up Landry's $3 million team option for next year (which we most likely will), we will be spending $40.4 million on guaranteed contracts next season.  The expected league-wide salary cap is supposed to be around $54 million.  However, before you assume that we will have $14.4 million to spend on free agents, realize that it is not that simple.  Chuck Hayes has a $2.3 million team option, which we might also pick up.  And then we have to deal with re-signing Luis Scola and Kyle Lowry, which is much more difficult than it seems.

C-1.) Scola and Lowry are restricted free agents next season.  This means that the Rockets will have to extend each a qualifying offer.  Suppose another team offers Scola and Lowry each a better contract, and they decide to sign.  This means that the Rockets will have one week to try to match the offer in order to retain both players. 

C-2.) Because they are restricted free agents, Scola and Lowry each have "cap holds", which are dollar amounts counted against the Rockets' team salary.  These cap holds are in effect during each player's free agency period.  According to the numbers that BimaThug notes in his post, the Rockets' team salary will suddenly jump to $55.6 million because of these cap holds.  If they players are each re-signed, the figures of the new contracts replace the figures of the cap holds.  If they are not re-signed, the cap holds disappear, bringing us back to the $40.4 million number.

D) Add in our projected first-round pick salary - this brings us to $57 million.  This means we will already be over the cap by $3 million just to keep our own guys, assuming the league-wide cap is at $54 million.

Finally, here is the decision the Rockets face, given the fact that most of the top-tier FA's will be asking for much more money than we could afford to pay them, even if we let go of Scola and Lowry:

Is a second-tier (or, more realistically, a third-tier) free agent REALLY worth losing Scola, Lowry AND Hayes? Especially when the Rockets could instead keep all three and still use the MLE and LLE to acquire free agents?  Remember, salary cap exceptions are not available to teams opting to use their cap space.

Any further questions that you might have are likely answered in the article.  If not, another poster by the name of Carl Herrera does a great job of clarifying all of what was said in BimaThug's original post.

Basically, we won't be able to sign a top-tier free agent.  This, however, does not mean that we can't acquire a top-tier player.  It just means we have to do so in another manner.

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Now that we are aware of this, I think it makes the attempt to trade Tracy McGrady (or trade anyone, for that matter) much more important, to us Internet folks at least.  Daryl Morey has been aware of this ever since he first began putting this roster together.

Let's talk about Daryl for a second.  There's no question that he has done a phenomenal job of finding castoffs, outcasts, and former inhabitants of the Island of Misfit Toys to complete a roster weighed down by two enormous contracts.  He practically stole Luis Scola, robbed Kyle Lowry, and yada yada yada.  If you have read us or Kelly Dwyer, you're quite aware of Morey's achievements.

This is a roster that Daryl loves, and he will surely love it even more once Yao returns from his injury.  From Landry to Lowry, from Scola to Ariza - each of the non-stars that this team features are one of Daryl's beloved.  It's nearly a dream roster of cheap, efficient, and smart players who are only getting better every day.  Sounds great, doesn't it?

Now, let's take that roster, that scrappy bunch of underdogs them, and let's blow it all up.  Not literally, of course; you never know what people will respond with in this age of terrorist-phobia. 

But seriously, let's rip it apart as if it were the wrapping paper covering your first of many birthday presents.  It's not that difficult.  So, what's holding you back?  Do you like the wrapping paper that much?  Is the present inside not worth touching what is covering it?  Okay, you get the picture.

I love this roster every bit as much as you or Daryl does.  However, the business side of basketball does not like it.  It likes the big names, like LeBron or Kobe - names who draw jersey sales, tickets, and national TV appearances.  As comfortable as the Rockets currently are financially, whether it's Les Alexander's dedication as an owner or the extra cash that (I assume) Yao brings to the Rockets based on their popularity in China, it's going to become an issue eventually.  With Tracy coming off the books at the end of the season, we're losing a big name.  If the Bima article didn't make it clear enough, the expiring money doesn't matter as much for us as it does for other teams.

Tracy's potential suitors include Washington, Chicago, and Philadelphia.  According to Chris Broussard, a Washington deal would involve Caron Butler and expiring contracts, a Chicago deal would involve Joakim Noah and expiring contracts, and a Philadelphia deal would involve Andre Iguodala and a bad contract or two.  I love a potential Iguodala/Yao combo, but there's a fat chance that we're willing to take on Dalembert or another equally bad contract to get Iggy.  The Noah deal seems pointless, because a Noah/Brad Miller combo isn't going to help us win anything this season before they expire.  If Morey could pull off a Butler and exp. contracts deal, I think that would make the most sense financially, but that's still not imminent by any means.

We also have other options, and they start (and end, really) with Chris Bosh.  Ideally, the Rockets would like to acquire Bosh through a sign-and-trade, which would prevent them from having to deal with re-signing him at the end of the season.  If the Rockets could somehow move Scola and Ariza, as opposed to Brooks or Landry, I would be giddy.  Funny thing is, it's not a farfetched idea.

Mike Prada of Bullets Forever came up with the following idea in today's SBN NBA Power Rankings:

Trade 1: Trevor Ariza, Luis Scola, Brian Cook and David Anderson to Toronto for Bosh, Sonny Weems and Patrick O'Bryant. The Raptors turn a guy they were probably going to lose anyway (Bosh) into three solid rotation players in Ariza, Scola and Anderson, which is way better than getting nothing.

I like this, but it doesn't feel right.  Then again, none of this comes without a bit of Trader's Remorse.  While this deal would likely work for the Rockets, it depends on how much Toronto likes it.  In order to get Bosh to Houston, would the Rockets have to give up Landry or Brooks, or insert Chase Budinger to make the Raptors even consider a deal?  Possibly, since the L.A. Lakers reportedly offered Andrew Bynum.  

Throughout all of this, the Rockets need to consider their ultimate goal.  Trading Ariza and Budinger, two of our top young players, would only make sense if it made the Rockets a legitimate title contender.  Does Yao/Bosh/Brooks/Landry/Battier/Lowry/Andersen seem like a title-contending team to you?  Is this roster worth paying luxury tax for?  It's close, but not quite close enough.

This is why the trade bonanza doesn't end with Bosh.  Re-introducing Iguodala, through Prada's post:

Trade 2: As rumored on ESPN, Tracy McGrady's massive expiring contract to Toronto for Andre Iguodala and Samuel Dalembert. Philly cuts a ton of long-term money, which they need to do considering how much the organization is struggling financially, and finally gets rid of Dalembert. Meanwhile, the Rockets get a solid two-way player in Iguodala who is still very young.

This ends up being Houston's roster in 2010/11

PG: Aaron Brooks, Kyle Lowry

SG: Shane Battier, Chase Budinger

SF: Andre Iguodala

PF: Chris Bosh, Carl Landry

C: Yao Ming, Samuel Dalembert, Chuck Hayes

Now THAT'S a scary team. Houston could then flip Dalembert for two other rotation players (by 2011, Dalembert has an expiring contract) and field an even better team. That sound you heard is the Lakers cowering in fear.

And again, through Rahat Huq of Red94.net:

So we've ruled out Iguodala alone, for financial concerns, and Bosh alone, for asset concerns. But what about making both trades together?

That would give the team a core of Yao, Bosh, and Iguodala, the latter two both still 25. That is a nucleus, which, in concert with Morey's now proven ability to find cheap assets, would almost surely be considered worth paying the luxury tax. In addition, such a combination would make use of the asset that is Tracy McGrady's contract.

There is merit to the argument that Chris Bosh is not worth both Carl Landry and Aaron Brooks (or a similar package).  However, if my previous assumption of Les' reluctance to pay the tax is true, then just through actually enabling a McGrady trade, a Bosh trade is the best course for total asset optimization, regardless of cost.

Makes the NBA sound like a giant Fantasy Basketball league, doesn't it?  But then again, if we've seen thirteen and twelve player trades, then why can't a team make two big trades in a row, assuming they have the assets?  Rahat and Mike are both right: acquiring Iggy and Bosh would be well worth the cost, personnel-wise and financially, and much more so than a Butler/Bosh duo, which would involve less defense, more age (Butler will be over 30), and more contractual headaches (Butler expires in 2011).  Bosh/Iggy also involves two teams in the Eastern Conference, so the Rockets wouldn't be aiding Western foes, and the Raps and Sixers would be more inclined to trade as well.  This should be the Rockets fan's dream scenario, as much of a long-shot as it is.  And it would make John Hollinger and every other efficiency nut out there crap his/her pants.

Finally, I'll leave you with the following questions that the Rockets, as well as other NBA teams, face as the trade deadline approaches:

A) How is our winning formula affected by our financial interests?  This is a question that every team must answer before making any move.  It impacts everything.

B) How much do we really value our current roster?  Should the Rockets continue to build around Yao with the current roster of players (meaning we re-sign Scola and Lowry, and add next year's first round pick) even if the free agent class of 2011 isn't a good one?

C) Do the Rockets want to pay the luxury tax to keep Bosh or Iguodala by themselves?  Do the Rockets feel that adding just one stud player will elevate them to championship status?

D) What is the Rockets' current goal: A championship, or merely to be competitive until a better opportunity comes along?  Championships are incredibly rare.  You may have a championship-level team, but probably won't win it all.  Do the Rockets feel that this is the time to push the squad to that level, or do they want to keep focusing on winning with less talent until a draft pick or other free agent (*cough* Durant) surfaces?

E) What is in the best interest of other teams?  Do the Raps choose Bynum over a Rockets' package?  Does Philadelphia decide to cancel their fire sale and hold onto Iggy?

F) How realistic is any move before the deadline?  Broussard said just over 50/50.  I'm inclined to think the same thing.  There's a good chance something will happen, but there's almost as good a chance that something won't.

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So, while you may not have gotten any trade machine ideas from me, hopefully this clears things up for those who were previously unaware of what will be going on in the next few weeks, and how important it will be for the Rockets' future.  Be prepared for anything.

Addendum: Thanks to "Blanks", I've been made aware of a glaring omission from this post, that being the fact that a sign-and-trade can only be done after the season.  Yes, my opinion is that if we are to get Bosh, it would be the best route to wait until after the season ends, and then hope to complete a sign-and-trade.  I'd rather do that than risk Bosh pulling a Beltran on us in free agency.

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