The 5 O’Clock Club: Fire Sale

The 5 o’clock club is published several times per week during the season, and aims to provide a forum for reader-driven discussion at a time of day when there isn’t much NFL news being published. Feel free to introduce topics that interest you in the comments below.

fire sale
/ˈfī(ə)r ˌsāl/

noun

1. a sale of goods remaining after the destruction of commercial premises by fire.
2. a sale of goods or assets at a very low price, typically when the seller is facing bankruptcy.

A fire sale is a way of trying to salvage some minimal value from a disaster.

It’s not a pretty thing, and no one ever wants to be a position to hold a fire sale, but the circumstances arise from time to time.

From the Journal of Economic Perspectives (Winter 2011):

The term “fire sale” has been around since the nineteenth century to describe firms selling smoke-damaged merchandise at cut-rate prices in the aftermath of a fire. But what are fire sales in broad financial markets with hundreds of participants? How can fire sales matter for generic goods, such as airplanes or financial securities?

In modern financial research, the term “fire sale” has acquired a different meaning. As we suggested in a 1992 paper, a fire sale is essentially a forced sale of an asset at a dislocated price. The asset sale is forced in the sense that the seller cannot pay creditors without selling assets. The price is dislocated because the highest potential bidders are typically involved in a similar activity as the seller, and are therefore themselves indebted and cannot borrow more to buy the asset. Indeed, rather than bidding for the asset, they might be selling similar assets themselves. Assets are then bought by nonspecialists who, knowing that they have less expertise with the assets in question, are only willing to buy at valuations that are much lower.

Assets sold in fire sales can trade at prices far below value in best use, causing severe losses to sellers. Of course, borrowers and lenders can seek to negotiate and renegotiate contracts to avoid fire sales, but sometimes they fail.

The Redskins have reached an early crisis point in the 2019 season with an 0-4 overall record (0-3 in the division), an apparently lame-duck head coach, three quartebacks, none of whom has been healthy enough and skilled enough to lead the team to victory, and a lost season.

The Redskins appear destined for a top-2 position in the 2020 draft, though they may find it hard to out-tank the intentionally tanking Dolophins in Week 6, who have a ton of draft capital and are heavily invested in losing as many games as possible in 2019.

The Redskins have arrived at a similar spot without intending to, and without the kind of draft capital that the Dolphins have very intentionally accumulated. In fact, the Redskins don’t have a second round pick next year.

With the season lost and a total re-boot almost certainly ahead for the coaching staff, it seems like a roster re-boot should be in the cards as well.

Unfortunately, the Redskins don’t have the accumulated draft capital to make their position envious, but there are two “silver linings” that one might find.

First of all, having drafted Dwayne Haskins in the first round of the ‘19 draft, the Redskins will probably be in a position to deal their draft spot to a QB-needy team for multiple draft picks — especially if they can succeed in out-sucking the Dolphins and securing the first overall pick. The team should be able to parlay a #1 or #2 overall pick into several quality players.

Secondly, they can use the four weeks between now and the trade deadline to start trading roster assets (players) for 2020 draft picks. I won’t pretend that the team can get full value for their players, but that’s the nature of a fire sale.

The question is, who should the Redskins put on the trading block?

Well, the most obvious answer is the franchise left tackle, Trent Williams. I imagine every Hogs Haven reader is familiar with the TW saga, so I won’t rehash it here. Suffice to say that the crap sandwich that exists isn’t doing anyone any good. The Redskins need to move Williams ahead of the 2020 draft for whatever value they can.

There are a number of other players that could bring something in trade - even if it is merely a conditional 7th rounder. The trick isn’t to get overly focused on the return value (this is a fire sale after all), but to hold onto the players (like Dwayne Haskins and Terry McLaurin) that will form the young veteran core of the franchise in 2020 and beyond.

Here are my thoughts on the players the team should try to deal in the coming weeks.

Brandon Scherff - If we can’t re-sign him, we might as well trade him. In addition to getting a draft pick, the team will free up around $6m in cap space that can be rolled over and used in free agency next year. There might be some discussion of the potential 3rd round 2021 compensatory pick the team might get if he signs elsewhere as a free agent in the off-season, but to get comp picks, you have to lose more qualifying compensatory free agents than you sign, and I doubt that is likely to happen in 2020. Of course, if the front office believes they can get him re-signed, they should do it, but some team out there (Cleveland?) might believe that a pro bowl offensive guard could be the difference that will help get them to the playoffs this season.

Vernon Davis - He’s at the end of his career, but, again, there may be a team that will see value in having a player with his physical skill set and competitiveness on their roster for a playoff run this season.

Chris Thompson - CT will, like Brandon Scherff and Vernon Davis, be a free agent next year. He may want to re-sign with the Redskins, but with Guice and Love on the roster, I doubt whether the 28-year-old and often injured back will get a lot of interest from the ‘Skins front office. I suspect he’ll wind up following Jay Gruden to wherever he ends up and helping him teach the offense to the younger backs. He may provide an injury replacement this season for a team that sees itself as a playoff contender. Perhaps the Vikings might be interested in reuniting him with Cousins in an effort to give Kirk the type of passing game weapon he knows how to use?

Adrian Peterson - The 33-year-old hasn’t done much this season and may not be able to generate any trade interest at all, but a team that needs an injury replacement to get them through the second half of the season and into the playoffs might be happy to have the future Hall of Famer on the roster.

Ryan Kerrigan - The 31-year-old Kerrigan has a contract that runs through 2020, but he’s already showing signs of slowing down a bit this season. For a team in full rebuild mode, as the Redskins now must become, there’s a place for a guy like Kerrigan, but he’ll need to be replaced by 2021 anyway, and it might be a favor to send him to a 2019 playoff contender looking for some defensive help and some locker room leadership.

Josh Norman - Norman’s actual salaries of around $10m this year and $12m next year are not outrageous for a team that needs some DB help — especially a team that runs primarily zone. It would be worth moving Norman on a swap of 6th & 7th round picks just to get the roughly $4m in cap savings.

Jonathan Allen — If the Redskins are looking for a big return in draft capital, the front office could consider moving Jon Allen, and could probably ask for and receive a 1st or 2nd round draft pick in return. The Redskins have used up 2+ years of Allen’s rookie contract, but he’ll still have a year and a half plus the 5th year option in value for his new team. Similar to the Brandon Scherff situation, you only make this trade if you believe that you won’t be able to re-sign Allen to a second contract. For a guy that hates losing as much as he does, I’m not sure that the Redskins can “get well” fast enough to convince him to stay.

For all of these players except Jonathan Allen, based on the circumstances, I’m thinking that the Redskins get something between a 5th round pick and a ham sandwich for any one of them if they make an October trade, but these players will all be gone at the end of this year or next anyway, and we know now that the team has reached the “blow it up” stage. The front office might as well try to get a few late-round draft picks in exchange for some veteran players, and give their younger backups a chance to play and get some NFL experience.

The building is already on fire; now it’s just a matter of salvaging what we can.