One of the most difficult things to explain to a newcomer to thoroughbred racing is the phenomenon of the high prices paid for yearlings from first year stallions. In any rational market investors demand to get paid for taking on risk. However, in thoroughbred sales, buyers will usually pay a premium for the progeny of unproven first year stallions even though they are taking on the additional risk that the stallion will fail.

On average, the first yearlings of a stallion to go through the ring will be the most expensive yearlings the stallion will ever produce. Even though, it is also true that the stallion’s first yearlings will usually be out of the best group of mares that he will ever be bred to, there is no guarantee that these yearlings will prove to be a good value.

One of the reasons for the premiums buyers pay is the amount of media attention given to first year sires. Virtually every reporter spends an inordinate amount of time to covering the stallion’s progress and giving his opinion on what the future holds for said horses. This type of coverage creates a great deal of ‘buzz’ among industry professionals and amateurs alike. This ‘buzz’ attracts prospective buyers to look at foals by these stallions and eventually to purchase them. Read the rest of this entry »

Where have all our bubble markets gone?
The internet boom has long past and the housing market is about to experience what some foresee as a soft landing and others a hard crash. But there is one market that continues to rally against all logic – the racehorse market.

On Monday, September 11, the Keeneland Yearling Sale, the largest sale of thoroughbred racehorses in the world, will begin in Lexington, KY. More than 5,000 horses will go through the ring during the sale’s 14 days. It is the premier sale of thoroughbreds in the world.

This market has experienced amazing growth in the past five years. The mean price for a thoroughbred has risen an incredible 60% from $25,000 in 2001 to $40,000 in 2005. While the average price reached a record high of $108,420 at last year’s sale which included a sale topping colt that sold for $9.7 Million.

These prices, mind you, are for unproven one year-old thoroughbreds that have yet to run a race at the track. All a buyer can do to evaluate these horses is to review the pedigree page printed on one of the seven catalog books given out by Keeneland to prospective buyers and to inspect the horse’s physical attributes. It is a little like drafting 8 year-old boys to play as adults for NFL teams - it’s all guess work at this stage! Read the rest of this entry »