Trading Yao for . . . Nothing?

(Credit to jopatmc, who independently thought up this idea and previously mentioned it in this post.)

There would be a backlash, but trading Yao for "nothing" has benefits

With the trade deadline looming, and with their chances of landing Carmelo Anthony apparently dwindling, the Houston Rockets are surely working every angle they possibly can in order to improve the franchise’s outlook for the mid- and long term.  Several of those angles involve trading Yao Ming and his nearly $17.7 million insurance-covered expiring contract.

Of course, the Rockets will hotly pursue any chance to add an All-Star caliber player to the team.  That will likely be their top preference if they are to part with the face of the franchise for the past 8 1/2 years.  Multiple members of the Rockets’ front office have gone on record that trading Yao is something that, while no longer being dismissed, will only be considered if it can greatly improve the team.

With that in mind, I propose that if the Rockets fail in their attempts to land a star player with Yao’s contract, they should at least strongly consider trading Yao to a team that is significantly under the cap for . . . nothing.

That’s right.  Nothing.

How It Would Work

The basic gist is this:  The Rockets trade Yao (who is owed approximately $9 million more in actual salary for the remainder of the season) to the under-the-cap team, taking up most or all of such team’s cap space and taking back just enough salary to make the cap math work.  The end result is that a trade exception is generated in the amount of the salary difference between Yao and the players coming back.  That trade exception can be used over the following twelve months to acquire one or more players making, in the aggregate, the amount of such trade exception.

With insurance paying out $8 million of Yao’s salary to whichever team ends up with his contract, the Rockets can add a little cash to any deal to cover the rest.  Meanwhile, the Rockets get below the luxury tax threshold and save some money in the process.

The likeliest trade partner for such a deal would be the Sacramento Kings, who are approximately $14.2 million under the salary cap.  A trade of Yao to the Kings in exchange for, say, Francisco Garcia ($5.5 million salary this year) would also generate an approximately $12.2 million trade exception.  While it is unlikely that the Rockets would make this particular trade, given that Garcia has two more years on his contract after this one, it is the simplest hypothetical to illustrate this basic concept.

The Rockets could get an even larger trade exception if they manage to use their other trade exceptions (including the Disabled Player Exception they just received for Yao’s latest injury) to first absorb salary from the under-the-cap team.  Such a preliminary move would create additional cap space for the other team and, thus, allow for a Yao trade that involves a greater disparity in salary coming back directly for Yao.

The Risks Involved

The most immediate risk to such a move would be the public backlash.  “How can you trade Yao for nothing?” or “Why is Les such a cheapskate?” will definitely be heard from many Rockets fans.  But that is a risk that must be taken.  Many fans have already come to grips with the fact that Yao is probably never going to be the player he once was.  And with there being some optimism that the Rockets could re-sign Yao as a free agent next summer–at a greatly reduced salary–this sort of venom for team ownership and management should be muted.

Another risk involves the pending labor negotiations.  With a new collective bargaining agreement (CBA) looming, there are those who fear that trade exceptions like the one the Rockets could generate with a Yao trade will be extinguished.  While this is certainly a possibility, it is highly doubtful that the new CBA would punish teams with then-existing trade exceptions by not allowing them to be used.

By their nature, trade exceptions like these are essentially place-holders for non-simultaneous trades that have not been completed.  The “entire trade” is not complete until the trade exception is used to acquire one or more players or until it simply expires.  The NBA will likely not take action that amounts to the cancellation of non-simultaneous trades in progress, so then-existing trade exceptions should be safe.  If anything, a new CBA that disallows future trade exceptions will only make then-existing trade exceptions more valuable next season.

But, of course, this is not a certainty.  Hence, the risk.

The Potential Benefits

The most obvious benefit to possessing a large trade exception is that it would allow the Rockets to trade for an All-Star caliber player from a team looking to shed salary and/or to rebuild, in part, using young assets and picks from the Rockets.  If the Rockets are unable to make a big splash in the next month or so, they will be able to preserve their cache of assets.  A package of young players, picks and a huge trade exception will make Houston a major player in trades once the lockout ends and leading up to next season’s trade deadline.

Another major benefit of having a large trade exception is that it would allow the team to retain its own free agents.  With three of the Rockets’ five highest paid players (Yao, Shane Battier and Jared Jeffries) coming off the books this summer, the Rockets have the potential to create a fairly large amount of cap room . . . if they renounce the rights to all of their own free agents.  Houston will likely attempt to retain Aaron Brooks (whose cap hold of $6.05 million will continue to count against the cap); but there is less certainty over the futures of two other key free agents:  Battier and Chuck Hayes.

Having a large trade exception can essentially take the place of having cap room, since most players on which it is worth using large amounts of cap room will go via sign-and-trade anyway.  (Just look at this past summer.  Lebron James, Chris Bosh, Amar’e Stoudemire, Carlos Boozer and David Lee all were signed by their former teams and then traded to their current teams.)  Meanwhile, the Rockets could re-sign one or more of Brooks, Battier and Hayes without regard to the salary cap . . . assuming that the concept of “Bird rights” is carried over to the new CBA, which I strongly believe will happen.

Bottom Line

The Rockets will not consider making a move like this until all plausible trade scenarios for a star player are exhausted.  But in the absence of any such trade, moving Yao in order to generate a large trade exception–one that could conceivably exceed the new maximum salary–is definitely worth considering.

The new CBA may largely dictate what can be done with trade exceptions or whether they’ll exist at all, so taking on a large trade exception is not without its risks.  And trading away the face of the franchise for little more than a trade exception is not going to win over the majority of fans.

But if it puts the franchise in a better position to win in the mid- or long term, it may just be the right thing to do.

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