Baseball and the Economy
Do you remember when Jack Ruby paid Teamsters to remove debris from Building 7 and use it to build the soundstage used to fake the moon landing? Sure, we all do. It's a key part of American history. It helped shape my cynical view of everything, and it's why I can SEE THROUGH THE LIES. I'll let the SHEEPLE follow the official story, man.
As such, I'm starting to get a little suspicious about Major League Baseball and the 2008 free agent market. Adam Dunn and Pat Burrell were not offered arbitration, even though they're likely to get multi-year deals. The Yankees did not offer arbitration to Bobby Abreu, even though an overpriced one-year deal would seem like a pretty good fit for he Yankees in a worst-case scenario. Even the Yankees, though, are expecting to cut back.
Everyone seems to be terrified -- terrified! -- of a player making too much money on a one-year contract, and they're willing to forego potential draft-pick compensation because of their terror. What is the reason for this suddenly cautious fiscal approach? Let's go to our panel:
"The poor economy has affected some things." -- Diamondbacks GM Josh Byrnes
"Some teams must factor in potentially serious declines in revenues." -- Jim Duquette
"(Muffled whispers of a discouraging nature, spoken to MLB executives behind closed doors)." -- Former Federal Reserve Chairman Paul Volcker
"I feel things are a little different. We need to review our priorities a little bit." -- Frank McCourt, board member of COBRA, the Foot Clan, and V.E.N.O.M., and owner of the Los Angeles Dodgers
Oh. I see. The economy. If people have less money to spend, baseball gets less of that money. It makes intuitive sense, and...wait...you, in the back. The gentleman with the diamond-encrusted man-servant and the golden hovercraft. You had something to add?
"Since (MLB had) record revenues, every team, whether it be clubs receiving revenue sharing, or clubs with extraordinary seasons at the gate, trickle-down effects of a recession have historically not dramatically affected baseball." -- Scott Boras
That's kind of a word salad there, Scotty. Your dependent clause didn't really have a resolution, but I think I get the point. The important part is at the end: Recessions and baseball aren't as intertwined as recessions and small-business loans, just to give one example. I hate to agree with Scott Boras, but I'm wondering if the economic hullabaloo hasn't given the owners an excuse to say, gee, we just can't spend right now. The economy, and all that. Would you like to buy this apple?
I don't have much more than a hunch. I don't even have a graph other than this one. There isn't any evidence for my hunch, and until free agents actually start, you know, signing contracts, there won't be any. This all just feels like the 2002 offseason, when teams were terrified -- terrified! -- that their young, arbitration-eligible players would start making oodles and oodles of cash, so they just let the players walk. No arbitration, no trades. Just go into the wild, young players, and seek your fortune elsewhere. The Player's Union claimed collusion, and MLB eventually coughed up a few million with no admission of guilt.
Economics aren't really my bag, so this post has all of the polish of a forwarded e-mail chain. Consider this an Open Bud Selig is a Man Worthy of Suspicion Thread. I'd love to read arguments either way.
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53 comments
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Comments
Strangely enough, the Giants seem to be uniquely positioned in regards to the economic downturn as it relates to player salaries. The timing of the ’08 payroll slash, the seat license renewal and the CSN deal has left the Giants as one of the few teams willing to take on salary this offseason.
Don’t get me wrong. I doubt this has anything to do with the ownership group or Brian Sabean divining the economic future last season via crystal ball. More than anything, they are the beneficiaries of fortunate timing.
by Lars The Wanderer on Dec 2, 2008 11:33 AM PST reply actions 0 recs
Another thing I was wondering about, if economic realities start putting the crunch on baseball teams, doesn’t it make overpaid contracts even more damaging? If we see teams paying less for players over the next few years, deals like Barry Zito are going to look even worse than they do right now.
/deer head
Bay City Ball
by xanthan on Dec 2, 2008 11:35 AM PST reply actions 0 recs
Long term contracts with huge financial burdens will look worse if this so-called “economic baseball crunch” continues. But in a few seasons, Zito will be on a three year contract (albeit at like $57.5 million over those three years). The deals like A-Rod’s which will have around six years left and any impending long term deals to Sabathia and Teixeira will probably look even worse than Zito’s because of the extra years, regardless of how well or how poorly they play.
by deuce deuce on Dec 2, 2008 12:01 PM PST up reply actions 0 recs
not if
the currency inflates.
FIRE BRIAN SABEAN... UNLESS HE KEEPS DRAFTING WELL. .. AND SIGNS UNDERRATED PLAYERS LIKE AFFELDT OR PHELPS. .. OR ALRIGHT WHO'S PLAYING WITH THE ALIEN MIND-SWITCHING RAY?
by zenbitz on Dec 2, 2008 12:19 PM PST up reply actions 0 recs
the economy is looking at deflation currently, that’s part of why the teams are hesitant to spend.
by oldjacket on Dec 2, 2008 2:42 PM PST up reply actions 0 recs
the price of some commodities is dropping
that’s due to reduced demand. Monetary inflation won’t slow any time soon (if ever).
by Lovejoy on Dec 2, 2008 9:05 PM PST up reply actions 0 recs
I highly doubt it. You’re comparing Zito to elite level players. I’d rather have any three of those deals (eventual deals in the case of CC and Teixeira) instead of Zito’s.
When I was a kid I used to pray every night for a new bicycle. Then I realized God doesn’t work that way, so I stole one and prayed for forgiveness. - Emo Philips
Neglectful father of David Quinowski
by marcello on Dec 2, 2008 1:11 PM PST up reply actions 0 recs
The main purpose of signing a high profile, high talent player is to make your team better, which in turn would increase overall revenue from ticket sales, merchandise sales, etc. As Keith Law put it the other day on ESPNews, it’s an “investment”. The point that I’m trying to make is that if the economy continued it’s current trend, then player A at $126 million over seven years and player B at $126 million at seven years would be equally bad, regardless if player A was 22-6 and player B was 6-22. In a really rough economy (such as the one that the country is facing now), the draw of a major free agent signing isn’t as strong as if it would be during a period when the economy is really strong. Fans just won’t have enough money to be dishing out for luxury items, such as tickets to a baseball game and merchandise of his/her favorite team.
Keep in mind that the point I’m making is from a business standpoint. As a fan, I agree with your statement: I’d rather have the deal of the player that performs the best.
by deuce deuce on Dec 2, 2008 11:08 PM PST up reply actions 0 recs
but you need to consider return on investment. even if the return is worse in the short/long run on that 22-6 player than it might normally be, its still better relative to the investment in a 6-22 player. Monetary fluctuations and macroeconomic trends will affect the value of any $126million investment. But this isn’t a CD, or a chunk of land – it is an investment in a player and players appreciate and depreciate differently than other investments, as a Zito to ARod comparison starkly shows. Saying investing on player A and B is equally bad, is like saying investing in security A and security B is equally bad, or housing development A and housing development B is equally bad. But that’s just not true. They share common macro charaterisitics to be sure, but they also have individual characteristics. Some things will be useless and valueless in two years, and some will bounce back more rapidly.
Castillo got the DFA. Guestimate for Castillo DFA to come before the 2009 season = 2.
by kennv on Dec 4, 2008 8:01 AM PST up reply actions 0 recs
We're through the looking glass here people
Personally, I blame the reverse vampires.
That said, I voted option 3. MLB has shown, through many examples, that they have no problem with collusion.
When I was a kid I used to pray every night for a new bicycle. Then I realized God doesn’t work that way, so I stole one and prayed for forgiveness. - Emo Philips
Neglectful father of David Quinowski
by marcello on Dec 2, 2008 11:51 AM PST reply actions 0 recs
needs more bullet points
"ever so cynical yet whimsical giants related signature"
by The Gene Hackman on Dec 2, 2008 11:55 AM PST reply actions 0 recs
needs more rosterbation
Before you criticize someone, you should walk a mile in their shoes. That way, when you criticize them, you're a mile away and you have their shoes.
by WilliamVanLandingham on Dec 2, 2008 12:22 PM PST up reply actions 0 recs
Seriously.
Grant hasn’t rosterbated in like a week. He’s gonna get backed up.
by The Double Deuce on Dec 2, 2008 3:17 PM PST up reply actions 0 recs
I’ve already rosterbated twice this morning
Giants! Giants! HELP US GOD!
by j14 on Dec 3, 2008 8:49 AM PST up reply actions 0 recs
Good god, man! Save some for lunchtime!
My Dave Righetti is better than your Dave Righetti.
by howtheyscored on Dec 3, 2008 9:00 AM PST up reply actions 0 recs
I think what we see with Burrell, Dunn, Lowe, Fuentes and Rodriquez will tell us a lot if enough teams are risk adverse to shrink contract lengths. Yes I voted #3 for the reason Marcello stated. But will enough team “toe the line” to make shorter commitments stick for more then a couple years?
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 2, 2008 11:57 AM PST reply actions 0 recs
Firstly, the graph makes an excellent point.
I voted 3. I also think some owners are asking their GMs
Why cant we have the Satan Ray’s payroll and go to the WS?
They say some players get out of bed hitting; Pablo Sandoval doesn't wait that long
by bgunn on Dec 2, 2008 12:06 PM PST reply actions 0 recs
Economics aren’t really my bag
Then what’s this book “Economics: It’s My Bag, Baby” by Grant Frisbee?
FIRE BRIAN SABEAN... UNLESS HE KEEPS DRAFTING WELL. .. AND SIGNS UNDERRATED PLAYERS LIKE AFFELDT OR PHELPS. .. OR ALRIGHT WHO'S PLAYING WITH THE ALIEN MIND-SWITCHING RAY?
by zenbitz on Dec 2, 2008 12:20 PM PST reply actions 0 recs
Please tell me you didn’t find that next to the tennis racket. Please!
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 2, 2008 12:25 PM PST up reply actions 0 recs
More than collusion, I think what we’re seeing is teams making an effort to keep as much flexibility in an economy where no one knows for sure how bad things are going to be. Sure Boras can claim baseball is recession-proof, but is it depression-proof?
To me, it doesn’t seem that surprising that teams might be changing their tact and only offering arb to guys they’re really interested in keeping. In this economy, picking up an extra draft pick might not be worth the risk of being saddles with a big salary of a guy you really weren’t that keen on keeping.
This arb thing is probably also a case of teams blinking wondering what the FA market will look like. What if the the value of baseball players dips like the stock market and home values? At that point, being able to bargain hunt for FAs is lot more appealing than paying some guy a high salary because the arbiter didn’t get the memo that the economy is in the crapper.
If I owned a team, I’d be pretty cautious right now.
My adopted Giant: "Raptor Jesus" Guzman
by Goofus on Dec 2, 2008 12:30 PM PST reply actions 0 recs
To me, it doesn’t seem that surprising that teams might be changing their tact and only offering arb to guys they’re really interested in keeping.
I just can’t except that!
My Dave Righetti is better than your Dave Righetti.
by howtheyscored on Dec 2, 2008 12:51 PM PST up reply actions 0 recs
About two weeks ago Boras was on XM and in responding to this question his first example of recession proof revenue streams was the $400 million the Mets are due to receive from CitiGroup. As well as I can remember his exact words he said something like this: “That revenue stream is already there. It’s not going anywhere. Nothing that happens in the greater economy over the next 6 to 18 months can have any affect of that.”
Given how many sports teams have failed to collect on naming rights contracts in the last couple of decades, I thought it was odd he should choose such an example, but it’s also an indication of fast things are happening right now that just a couple weeks later a pretty rationale argument sounds almost naive. Could some or much of that revenue stream turn into a chimera in the next year or so? Could XM’s $650 million dollar contract with MLB turn into millions of dollars in legal fees haggling with bankruptcy cases? Could cash-starved municipalities start looking for every legal angle to change the terms of some of their sweetheart deals with local teams?
I might not say “yes” to these questions yet, but I’d certainly take my time saying “no.”
Get the hell out the way Bengie, Pablito's hit the show!
by Roger on Dec 2, 2008 1:05 PM PST up reply actions 0 recs
Hoover's on first.
Saving countless runs with my Brian Horwitz
by lyricalkiller on Dec 2, 2008 3:21 PM PST up reply actions 0 recs
To quote Ralph Barbieri (shudder) “Two things can be equally true.” The owners can be reverting to their old, collusion-like selves now, while they’re still flush with cash, and they can be (genuinely) worried about the economy going forward. Lots of teams (the Giants included) have money invested in their broadcast partners; a couple teams own their cable channels outright. Advertising is tanking on TV, radio and in newspapers and it’ll probably only get worse in the long run. Which is to say nothing of falling season ticket sales since corporate budgets are being impacted, and lots of season ticket holders have gotten laid off.
I don’t mean to be an apologist for the team-ownin’, top-hat-and-monocle-wearin’ crowd, but they may only be partially, not completely, full of shit on this subject.
My plans for 2009: getting married and attending Tim Lincecum Bobblehead Day.
by Kitspool on Dec 2, 2008 12:31 PM PST reply actions 0 recs
Valid points.
The other thing to consider Baseball is the only major sport were those not in the Hat & Monocle crowd can still attend. So in that case it should be able to position itself for adverting because an add there is seen by a wider demographic. Considering we leave in an era were most TV have more then 57 channels (and nothing on) that is no small thing to offer advertisers.
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 2, 2008 12:44 PM PST up reply actions 0 recs
Collusion can be really tough to pull off (especially w/o getting caught), it may take something like a nasty downturn in the economy to spark teams to give it a go.
by oldjacket on Dec 2, 2008 12:54 PM PST up reply actions 0 recs
You say that as though collusion were a bad thing…
by Johnny Disaster on Dec 2, 2008 7:53 PM PST up reply actions 0 recs
Average attendance, all MLB games:
1927 8,028
1928 7,394
1929 7,802
1930 8,211
1931 6,850
1932 5,657
1933 4,967
So yeah, they ought to be worried.
by Evan on Dec 2, 2008 1:04 PM PST reply actions 0 recs
I doubt we will see a 20% unemployment rate, though.
by rotorueter on Dec 2, 2008 1:10 PM PST up reply actions 0 recs
During the “great” depression, not only did unemployment rates soar, but those who had jobs saw their wages decline ~40%.
We were planning on going to maybe 8-10 games this summer, the economy has surely changed those plans! We will probably scale back to 2 or 3 now. I’m sure others are in the same boat. If your job isn’t secure going to games is a luxury you can skip.
by Merope on Dec 3, 2008 5:23 AM PST up reply actions 0 recs
It’s worth remembering, too, that the 20% unemployment rate doesn’t count huge swaths of the country that were really suffering as well. Independent farmers (at that point still a significant percentage of the American population) were not considered in the employment rates (as they aren’t to this day, though there are far fewer of them now). Neither were nearly all women. Women officially either had a job or weren’t considered to be part of the workforce. So that 20-25% figure we hear bandied about a lot is in fact considerably understates the amount of the population that was unable to provide for themselves.
Get the hell out the way Bengie, Pablito's hit the show!
by Roger on Dec 3, 2008 5:59 AM PST up reply actions 0 recs
So you’re saying the Marlins would have been the most popular team in baseball had they existed during the Depression.
My plans for 2009: getting married and attending Tim Lincecum Bobblehead Day.
by Kitspool on Dec 2, 2008 1:15 PM PST up reply actions 0 recs
I LOL’d
a little
inside
My adopted Giant: "Raptor Jesus" Guzman
by Goofus on Dec 2, 2008 1:16 PM PST up reply actions 0 recs
Meanwhile
Back in the Hall of Doom…

Frank McCourt addresses economic priorities to his minions and Dark Lord Bud Selig.

Sergio Romo will gladly hand you a bench to sit on / GIANTSPACE™ / Adopted brother of the AnVil
by SoFa King Mike on Dec 2, 2008 1:20 PM PST reply actions 6 recs
THAT is a fantastic picture!
"He called the sh** POOP!" -- Adam Sandler
by JRPhillips on Dec 2, 2008 1:23 PM PST up reply actions 0 recs
quibble
How the heck is Zork not there?
Otherwise awesome work.
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 2, 2008 1:26 PM PST up reply actions 0 recs
Victorino made his own basepath and ran him over
Sergio Romo will gladly hand you a bench to sit on / GIANTSPACE™ / Adopted brother of the AnVil
by SoFa King Mike on Dec 2, 2008 1:28 PM PST up reply actions 0 recs
Makes sense. You probably wanted competent Evil there anyways.
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 2, 2008 1:38 PM PST up reply actions 0 recs
Can you really call Selig competent?
Sergio Romo will gladly hand you a bench to sit on / GIANTSPACE™ / Adopted brother of the AnVil
by SoFa King Mike on Dec 2, 2008 2:01 PM PST up reply actions 0 recs
Well when has he done good?
Ivan Ochoa - Heir to the legacy of Rob Andrews & Rikkert Faneyte!
Here comes Captain Obvious wearing his Atomic Wedgie!
by daveinexile on Dec 3, 2008 11:38 AM PST up reply actions 0 recs
(also, Victorino at the table is priceless)
/deer head
Bay City Ball
by xanthan on Dec 2, 2008 1:30 PM PST up reply actions 0 recs
May I add my own fawning over this?
Thank you. I will be fawning now.
Catcher are base running. Hitters are offense.
by thehavenot on Dec 2, 2008 5:01 PM PST up reply actions 0 recs
I LOVE YOU
Matt Cain: He'll save children, but not the Dodger children.
PABLO SANDOVAL AM STEAL DEATH, DESTROYER OF WORLDS.
by jponry on Dec 2, 2008 6:04 PM PST up reply actions 0 recs
Victorino is a nice touch
Matt Cain: He'll save children, but not the Dodger children.
PABLO SANDOVAL AM STEAL DEATH, DESTROYER OF WORLDS.
by jponry on Dec 2, 2008 6:04 PM PST up reply actions 0 recs
I think we have a winner
for best image (non-gameday) next year.
/contest
Giants! Giants! HELP US GOD!
by j14 on Dec 3, 2008 8:52 AM PST up reply actions 0 recs
While the economy is in the crapper, my 401(k) is taking a dive, unemployment may be going up… I refuse to get too worked up over whether or not any millionaire gets10 million more on this contract than he would have gotten on that contract.
And if Scott Boras drowned while burning alive as his intestine were being removed while he’s fully awake and his testicles get dragged through broken glass, it STILL wouldn’t be as much as he deserves.
"He called the sh** POOP!" -- Adam Sandler
by JRPhillips on Dec 2, 2008 1:22 PM PST reply actions 0 recs
Don’t forget the chili powder!
My adopted Giant: "Raptor Jesus" Guzman
by Goofus on Dec 2, 2008 1:34 PM PST up reply actions 0 recs
A lot of businesses are not spending money, even if they have it, because they are very uncertain of the economic future. This isn’t that surprising that teams will be much more careful about shelling out $10+M contracts.
Plus, you have to consider that a lot of the owners of baseball don’t JUST run baseball teams. They run other business as well that may be struggling (not that they’re personally poor), they’ve personally lost a lot of wealth in the recent market downturn and are being a bit more frugal.
Just because everybody acts similarly doesn’t mean there’s collusion. There doesn’t need to be collusion. The players scream collusion whenever owners tighten up their wallets, but that’s just a tactic and doesn’t mean it is so.
Also, Boras is just puffing. He’s sold all of his clients on all the money the owners should spend on them and raised their expectations. He can’t come around now and tell those same guys “Sorry, but you’re not gonna get Jorge Posada money”. http://www.mlbtraderumors.com/2008/11/epstein-boras-t.html
Proud adopted parent of future big league slugger Thomas Neal
by nostocksjustbonds on Dec 2, 2008 3:29 PM PST reply actions 0 recs
Really?
I’m surprised by the results of this poll.
I see as very cynical those who say that the owners will merely use the public’s concern about the economic downturn as an excuse to cut the amount they will pay to free agents.
I see as unrealistic those who say that owners will continue to spend as though nothing were happening.
Many, who didn’t even have a clue a year ago that the recession was already starting, feel this will be the biggest recession our country has seen since the Great Depression. I certainly haven’t seen anything like this in my lifetime, even if it DID take the governement a year to admit it was happening.
Attendance at baseball games isn’t really the biggest issue IMO. It’s the advertising dollars, the ones that just made baseball teams richer due to the new major league TV contract of about a year or so ago.
As for collusion, I don’t think that is happening. The biggest collusion we have seen came between the 1986 and 1987 seasons. That was the off-season when the owners agreed not to give even a $1 raise to any player. That’s how Chris Speier became a Giant. When told by Cubs’ GM Dallas Green he wouldn’t receive a raise, he said “Just give my one dollar.” Green said no, he couldn’t do that.
Soon thereafter, a long-time Giants fan happened to spend time saying with Chris and his family as the fan gave the eulogy at the funeral of a former employee who had retired to Sun City. The Giants fan told Chris the Giants were very close to being a good team and in fact had as one of their primary needs a utility infielder, a role Chris had filled well with the Cubs the two preceding years.
The fan told Chris to call Don Zimmer, who had just been named a coach of the Giants after serving in that role with the Cubs during Chris’ time there. Chris, who was one of the few players to act as his own agent, called Zim, who called Al Rosen.
Just a few days later, almost 22 years ago to the day and coincidentally on the very birthday of the wife, who had also stayed with the Speiers, of the Giants fan, Chris signed for his second tour of duty with the Giants — who also didn’t give him a single dollar raise.
Now THAT was collusion — and the baseball owners paid dearly for it after being sued by the Players’ Union.
I don’t believe what we’re seeing now is collusion, nor is an easy excuse the owners are milking. I believe what we are seeing now is the reality of a market trying to re-establish itself based on an uncertain economy at best.
I don’t think the big boys will be too badly affected. But I think baseball’s middle class will find a little less at the end of their free agency rainbow than they otherwise would have expected. And that’s not necessarily a bad thing for the health of baseball.
To be honest, I think next off-season will be an even more difficult one for free agents.
As for Scott Boras, I don’t think he is unethical. Some seem to think he is unethical because he has challenged baseball draft and salary system in an effort to get top dollar for his clients. Isn’t that a good part of his job? And he’s unethical because he’s GOOD at it?
Scott tries to represent his clients to the best of his ability, just as general managers try to represent the interests of their owners. Scott’s a lot better at it than most general managers, in part because he’s really good at spotting loopholes. He’s also very good at building strong cases and situations for his clients and is a very strong negotiator.
Fans don’t like him because they believe he increases the price of their tickets. But prices are set by supply and demand. If fans want to see the price of their tickets come down, they might want to refrain from buying them for a while. It is the FAN who ultimately sets ticket prices.
As they said in the old days, what if they threw a party (or war) and no one came? How about if they threw a baseball game (Threw a baseball game,not threw THE game.), and no one came? Think prices would decline?
Ticket prices likely WILL come down if the economy causes a significant decline in attendance. Or perhaps the owners will decide to charge VERY high prices, thinking they can make more money off the rich than they can by pricing tickets for a (hopefully temporarily) shrinking middle class.
by sharksrog on Dec 3, 2008 12:31 AM PST reply actions 0 recs
Boras
negotiating in bad faith would constitute “unethical.” I’m not saying he definitely did that, but it seems like it, in the Pedro Alvarez case. Alvarez and the Pirates had a deal done right before (or after) the deadline. But after the deadline had passed, he got the union to challenge the contract and used that as leverage to re-negotiate with the Pirates, who couldn’t afford to lose out on Alvarez and caved. This challenge put the contract of Eric Hosmer, another Boras client, in jeopardy.
It seems as if Boras was trying to get Alvarez the biggest bonus in the draft and he had failed to do that by the deadline b/c Buster Posey got the biggest bonus. So, Boras put his needs and that of Alvarez in conflict with Hosmer’s, a likely violation of the rules of professional conduct that Boras, a lawyer, must abide by. That also seems unethical.
Proud adopted parent of future big league slugger Thomas Neal
by nostocksjustbonds on Dec 3, 2008 8:53 AM PST up reply actions 0 recs

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