Cap limit and the declining loonie

[KrisLetAngry]

May bring the cap down 1-2 million. IMO I am okay with cap rising not as fast as some projections. Just Imagine how manyt contracts would be steals

 

[Disgruntled Observer*]

Wait a second...
I thought we were allowed to sign all of our players to terrible contracts because the cap is going up and it doesn't matter?
Are you saying that all those TERRIBLE contracts might actually matter?

 

[AlienWorkShop]

The negative effects of a declining loonie can be partially mitigated by a well designed currency hedging program. The extent to which the Canadian franchises use this financial tool correctly will go a long way to determine which teams will be more disadvantaged by the loonie's weakness.

 

[rojac]

Seeing as the Sportsnet deal is in Canadian dollars and the Canadian teams are the wealthiest teams (who also then help float the poorest teams) this will definitely play a part in the cap. I was saying it during the Phaneuf signing and people called me crazy. But here we are lowest dollar in years.

It's been reported in Canadian dollars. But do we have any evidence that the actual deal is in Canadian dollars?

 

[Cams]

I assumed everyone was paid on US dollars... or at least the cap hit is calculated in US dollars. that's the only thing that makes sense.

however, what is not counted is the level of taxation. if you play in Florida, you're going to be allowed to keep a lot more of your paycheck than if you play in Ontario. when you also add in the cost of housing and the cost of living, you're way better off playing in a State like Florida that has no state income tax (not to mention the federal taxes and all the other taxes). But you've also gotta think that players have the potential to bring in more advertising revenue playing in place like Toronto compared to a Florida team. Not sure how much money the players see from things like jersey sales and whatnot... but I assume that some players make some money on the side for various things.

Players have to pay tax in each state/province every year. One of the guys I work with, his nephew plays for Colorado and he was explaining to me how complex the income tax stuff is for these guys. He has pay tax for each state/province they play in. I can only imagine doing a tax return like that! That's what agents are for!

 

[Smif]

While Toronto does help out the welfare teams, I don't think it'll have that much of an impact in terms of the cap. Maybe 1-2mil at most, but I doubt much, if any at all. Currency values change all the time. And while the dollar may be sitting around 89 cents one month, it could be up to 91 a month or two down the road. The CAD has been the weaker currency most of the time when compared to the USD anyways.

What the nhl needs more than anything is lucrative tv contracts. That's where the big bucks are. That, and, well, you know, maybe relocate some of those crummy american teams that nobody cares about to that country north of it, where a small town would be willing to fill that arena for every game. Bettman's strategies are weird. Some are very good in terms of business, others are just, what in the hell are you doing?

Small market Canadian teams will struggle with the loonie taking a dive. I bet this current swing of the dollar means teams like Ottawa and Winnipeg lose money. It's the reason Quebec and Winnipeg moved south of the border in the first place.

Basically, Canadian teams that spend to the cap are now paying approximately 72M compared to American teams paying 64M

 

[666]

Ok all you economic experts.....we are all assuming a cap limit of 70-71 million next year....if our loonie continues to fall how will that affect the cap level going forward.

Google it.

answer

/thread

 

[LolungoReboundo]

Any competent corporation, company etc. doing business in multiple currencies will always have hedging protocols in order to protect itself from losses from currency deflation and inflation, in fact some of these hedging protocols are so well designed that the spread is usually positive and allows for the firm to make money where the would've made a loss due to currency fluctuations. Also we have to remember that currency rates fluctuate daily its not like its a pegged currency in a free market, the USD and CAD are floating so any model that doesn't take into consideration both scenarios of CAD should be less credible even if it is a reliable source.

With the TV broadcast deals etc the league stands to make a lot of money in fact I'd wager the cap will go up but not by as much as was predicted if the looney doesn't rebound.

At the end of the day I'm sure the financial analysts at the head office and of each team aren't idiots theyve planned for scenarios where both currencies drop in value or increase in value and have made multiple models to show the possible outcomes of all sorts of combinations they don't get paid north of 500k for nothing lol. But anyways in my opinion as an analyst/research associate I don't think its something to really fret over at this point the league will have hedging strategies in place in order to deal with any currency related issues.

 

[rimshot]

Small market Canadian teams will struggle with the loonie taking a dive. I bet this current swing of the dollar means teams like Ottawa and Winnipeg lose money. It's the reason Quebec and Winnipeg moved south of the border in the first place.

Basically, Canadian teams that spend to the cap are now paying approximately 72M compared to American teams paying 64M

No, the lack of an NHL quality facility was the number one problem. The Jets returned as soon as the facility was provided. Another important factor was the wage cost certainty provided by the salary cap. Of course the Thompson family was a nice bonus.

 

[rimshot]

Small market Canadian teams will struggle with the loonie taking a dive. I bet this current swing of the dollar means teams like Ottawa and Winnipeg lose money. It's the reason Quebec and Winnipeg moved south of the border in the first place.

Basically, Canadian teams that spend to the cap are now paying approximately 72M compared to American teams paying 64M

Also see the definitive answer provided by Lulongo Reboundo above.

 

[GordieHoweHatTrick]

Any competent corporation, company etc. doing business in multiple currencies will always have hedging protocols in order to protect itself from losses from currency deflation and inflation, in fact some of these hedging protocols are so well designed that the spread is usually positive and allows for the firm to make money where the would've made a loss due to currency fluctuations. Also we have to remember that currency rates fluctuate daily its not like its a pegged currency in a free market, the USD and CAD are floating so any model that doesn't take into consideration both scenarios of CAD should be less credible even if it is a reliable source.

With the TV broadcast deals etc the league stands to make a lot of money in fact I'd wager the cap will go up but not by as much as was predicted if the looney doesn't rebound.

At the end of the day I'm sure the financial analysts at the head office and of each team aren't idiots theyve planned for scenarios where both currencies drop in value or increase in value and have made multiple models to show the possible outcomes of all sorts of combinations they don't get paid north of 500k for nothing lol. But anyways in my opinion as an analyst/research associate I don't think its something to really fret over at this point the league will have hedging strategies in place in order to deal with any currency related issues.

I assumed the predicted 1 to 1.5m dollar cap drops were from the projected cap ceiling, not this year's ceiling. While that may not seem significant in the overall picture, it'll put more pressure on Maple Leafs management to fit their roster under what was already a tight cap budget.

 

[LolungoReboundo]

I assumed the predicted 1 to 1.5m dollar cap drops were from the projected cap ceiling, not this year's ceiling. While that may not seem significant in the overall picture, it'll put more pressure on Maple Leafs management to fit their roster under what was already a tight cap budget.

At the end of the day I just can't see such a large corporate empire like MLSE not preparing for almost every possible scenario when it comes to its cash cows.
Well actually lol I take that back our capologist might be an idiot I don't know but I'm sure Nonis and co. have looked at how they'll be spending according to the different directions the cap may go in, if they didn't I'd want them fired....

 

[Parkdale]

I assumed the predicted 1 to 1.5m dollar cap drops were from the projected cap ceiling, not this year's ceiling. While that may not seem significant in the overall picture, it'll put more pressure on Maple Leafs management to fit their roster under what was already a tight cap budget.

Exactly: The issue is not the financial health of mlse, but how well Nonis and Co. deal with any downward pressure on the cap.