The Keeneland September sale is upon us. Buyers from all over the world will be coming to Lexington to shop at the largest and most prestigious yearling sale in the world. Without a doubt astute horseman will be able to find great deals at this sale.

I would like to make a list of what I consider the best sires by value at this sale.

Sires standing at $100,000 or more:

Awesome Again (Deputy Minister): Hard to believe that his yearling median was only $46,000 with 20 sold last year. The sire of Ghostzapper is probably the best value of the bunch if these numbers hold. An AEI of 2.53 make him a legitimate heavy hitter.

El Prado (Saddlers Wells): Consistent sire gets no respect at the sales with a yearling median of only $65,000. With a 2.17 Average Earning Index, El Prado is a consistent source of class and graded stakes potential.

$50,000 to $99,000

Rahy (Blushing Groom): Last year’s $90,000 yearling median may taper a bit this year. For a proven horse with an AEI of 2.43 that is cheap. His horses do well on Turf and are strong in the politrack. In addition his fillies are becoming hot commodities in the breeding shed.

Smart Strike (Mr. Prospector): An incredible horse with an AEI of 2.70. His offspring get no respect and he has been called the ultimate non commercial sire. With the success of Curlin his average of $73,000 may increase this year. But even at the higher price he will still be a steal. Smart Strike also leads many of the sires of his level in % of runners from foals and in number of starts per foal. Very solid.

$25,000 to $50,000

Arch (Kris S.): A $17,000 median is a joke for this horse with an AEI of 2.06. Buyers who used to overlook his stock because of turf preference may take a second look this year as his foals will be good prospects for politrack.

Cozzene (Caro): Another of the great old turf sires does not deserve the $55,000 median. His progeny have class and he has shown the ability to sire great horses in all surfaces. His 2.41 AEI makes his prospects a must buy.

Successful Appeal (Valid Appeal): Speed and precocity come cheap with this solid up and coming sire. His median of $37,500 for his AEI of 2.27 make him an interesting buy.

Theatrical (Nureyev) still going and another of the old great turf sires on the list. With Rahy and Cozzene he makes up one of the best value groups especially considering the types of mares he is bred to. $63,000 median and a 2.42 AEI.

More than Ready (Southern Halo) Difficult to see why his foals only command a median of just over $57,000 as he produces an AEI of nearly 2. But with 66 foals to be offered at this sale there will be plenty of them that will fall through the cracks.

Under $25,000

Stravinsky (Nureyev) Value seekers have to love the offspring of exported sires. The farm stopped marketing the stallion a long time ago and there is usually a drop in the number of buyers who actually look for the offspring of these horses. Expect the median from last year ($49,000) to drop dramatically this year. Making him a great hidden value.

Mutakddim (Seeking the Gold) Always good value, Mutakddim has always offered early maturing speed. With a median of only $14,000, there is really no down side on purchasing horses by him.

Pleasant Tap (Pleasant Colony) More people are beginning to figure out that there is great value with him. Some of his offspring have brought in some pretty high numbers recently. However, his $16,000 median is still far away from where it should be for this stallion that has shown that he can produce a home run horse.

Cape Canaveral (Mr. Prospector) has shown that his offspring can run. A very low median sale figure of only 5 digits ($9,000) make him a stallion one has to consider if you are looking at the lower end of the market and want something that can run and run early. With a 1.51 AEI the 23 of his offspring being offered at the sale will offer some of the best value.

Sultry Song (Cox’s Ridge) has only two in the sale but this breeder’s cup winner producing sire only had a median of $3,600 last year. His AEI is over 1.47 is not bad at all considering that his offspring can run on anything.

As if the off-track betting industry needs any more problems, the New York Times today reported on the recent W.T.O. Ruling that may impact on-line betting of horse racing. The decision dates back to 2004. In 2005, the appellate body upheld the decision and finally, in March the organization upheld that ruling for a second time and declared Washington out of compliance with its rules.

The decision is based on a complaint filed by Antigua and Barbuda, two tiny Caribbean nations, which challenged the United State’s ability to ban on-line gambling. The islands also claim $3.4 billion of damages based on the fact that some off-shore betting shops were set up in their territories. As the attorney for the Islands explained “This [the United States] is the world’s biggest consumer and exporter of gambling services trying to prohibit a small country from developing its economy by offering these same services. And we find that deeply hypocritical.”

The New York Times reports:

“Complying with the W.T.O. ruling, Professor Jackson said, would require Congress and the Bush administration either to reverse course and permit Americans to place bets online legally with offshore casinos or, equally unlikely, impose an across-the-board ban on all forms of Internet gambling — including the online purchase of lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing.”

Either of those results would impact racing heavily. (i) If Americans are allowed to bet casinos over the internet, horse racing would suffer because it has proven that it is not able to compete with casinos or other types of gambling that do not carry the large takeouts and huge overhead costs associated with racing. (ii) If off-track wagering is prohibited then the largest vehicle for recent growth in the industry would be immediately eliminated. The damage to race tracks would be immense.

There are alternative solutions on the table, but those solutions seem equally unlikely to be granted by the US government. The alternative solutions proposed by Antigua include “permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others.”

So far the US government shows no signs or willingness to comply with the W.T.O. order. However, the impact of the decision for the W.T.O. could be huge. In the balance lies its credibility as the international community closely scrutinizes the W.T.O.’s actual power to enforce its own rules.

For the US, the attitude so far has been of non-compliance:

“One day they’re out there saying how scandalous it is that China doesn’t respect W.T.O. decisions,” he [Lode Van Den Hende, an international trade lawyer] said. “But then the next day there’s a dispute that doesn’t go their way and their attitude is: The decision is completely wrong, these judges don’t know what they’re doing, why should we comply?”

Only time will tell how this problem will be resolved and whether or not the W.T.O. has any power to enforce this ruling.

Perhaps it is time for the industry to stop the bickering between TVG and HRTV and starts focusing on major problems that can mean the end of the sport as we know it.

Full Article: http://www.nytimes.com/2007/08/23/business/worldbusiness/23gamble.html?pagewanted=2&ei=5087%0A&em&en=45639b242bae8fd2&ex=1188014400

With the 2 year-old racing season fast approaching, I wanted to look at this year’s Freshman Sires and try to predict who will do well with his First Crop of 2 year-olds. My goal was to use only quantitative factors that I could measure, leaving aside subjective judgments that are difficult to prove. For this article the term Freshman Sire is used to mean any sire whose First Crop will be two year-olds of this year.

First Crop success seems to be of paramount importance in making the long-term career of a sire. The market tends to punish stallions that fail to produce good numbers with their first two-year-olds. Even if a stallion subsequently begins to produce good horses, he may still be perceived as a poor value.

In order to predict the success of the 2007 freshman class, I analyzed two years worth of data for 50 Freshman Sires. I looked to find out which factors, if any, would predict the success or failure of a sire’s First Crop. I singled out many factors that were quantifiable and that could be indicative of First Crop earning potential including:

(a) Running ability of the sire,
(b) Quality of mares bred,
(c) Number of foals produced in the First Crop,
(d) Initial stud fee, and
(e) Yearling average of their first yearlings.

Read the rest of this entry »

Commercial Breeders will have to make important decisions soon about what stallions to use in the up and coming breeding season. The decisions they make will have an impact two years from now during the yearling sales of 2009 and later on at the races. Making such a long-term decision carries with it a huge amount of risk. I will touch upon the main risks to which breeders are exposed to each year and give my opinion on the stud fees that offer the best and the worst values for breeders for 2007.

There are four main risks that breeders face.

First, Breeders must contend with market risk. The thoroughbred industry has been going through a bull market in recent years and as a result stud fees have been steadily rising and outpacing the market, especially in the upper stud-fee ranges. Because of this, breeders are seeing their profits diminish. If the market was to fall, breeders will be stuck with significant losses, as the market would not provide them with enough income to cover their costs.

Second, breeders are exposed to mare specific risk. The risk that a mare will not get in-foal, will abort or produce a stillborn foal. In evaluating risks and costs of a breeding program breeders must take into account the fact that mares do not get in foal on certain years. Virtually every healthy mare will miss a year or more during her productive life. This risk increases dramatically as the mare gets older. Read the rest of this entry »

The new breeding season is almost upon us. Starting in early February, stud farms, that are now quiet and peaceful places, will begin to function with the efficiency of large factories. Stallions all over the US will go to ‘work’ and start covering mares that will produce one of the most expensive and beautiful of agricultural products–the racehorse. As the beginning of the season comes closer, no group of stallions invites more speculation and is awaited with more fervor then the freshman Stallions. Fresh off the racetrack, these stallions have nothing but promise ahead of them. Any of them could be the next Northern Dancer, Mr. Prospector or Danehill.

Unfortunately, the reality is that most of these new stallions will fail at stud. This year will bring them the best book of mares they will ever breed to and the highest fees they will earn. Even those that are successful will still charge a lower stud fee in the next year or two. However, breeders know that market demand will be very strong for the first yearlings out of these stallions. They know that there is no better return on investment available to them than the returns that are produced by the offspring of the first year stallion.

It is important to find value when selecting a freshman sire. Although this group consistently produces superior returns than the general market for breeders, overpaying for a stud fee can greatly diminish the upside of the investment.

There are 58 sires with stud fees above $3,000 that are entering stud in the US this year. Below are my predictions of the best and worst values in this group. Read the rest of this entry »

On average, in 2005, only 25% of yearlings that sold at auction actually produced a profit for their breeders. That figure dropped to 23% in 2006. The decline in profitability has placed added pressure on breeders to sell a set number of their horses for a large profit in order to compensate for the losses generated by 80% of the yearlings they sell. Indeed, if breeders are unable to produce one or two horses that will sell for a large amount of money, they will show substantial losses for the year. As a result, breeders have to become increasingly strategic in their choice of stallions. One of their best alternatives is to choose a first a year stallion.

We will examine how first year Stallions have performed for the breeders that have supported them in their intial year at stud and why breeding to a first-year stallion provides powerful economic incentives for commercial breeders.

There are three main factors that commercial breeders should look for in deciding which stallions to use. First, what percentage of the yearlings by that sire are profitable. Second, what is the degree of profitability of those yearlings. Third, what is the risk that those values will not hold up by the time the yearlings produced hit the sales ring. Read the rest of this entry »

The auction room is full of expectation as lot no 11 takes center stage. There is that palpable energy and excitement that makes you feel like anything could happen. The sale has been strong so far but few lots in the sale have the quality of this one. All the big buyers are present and ready to spend very large sums. A small man with white thinning hair in the aisle seat nervously folds his catalog in expectation of the most important moment of his life, he is, without a doubt, the consignor. The bidding starts at 1 Million and quickly climbs;2,5,8 and then reaches the final number ; 11.2 Million, the crowd watches silently;the hammer falls;the man with the white hair looks down to his catalog;in disappointment!

That is not a scene from a Keeneland sale but rather this is what happened on May 2 at Christies in New York during the Impressionist Evening Sale. Christies is one of the leading auction houses in the world. This sale sold 50 lots in one evening for a total of 180,280,000 that is an average of more than $3,600,000 per lot. It took Keeneland two select books and close to 500 cataloged hip numbers to arrive at a similar gross figure (182,860,000). Sure, horses are not fine art paintings but more and more the prices demanded for the very best equine prospects approaches the type of prices fetched by the elite of the art world. With these kinds of prices, should buyers expect more from top sales companies like Keeneland? Read the rest of this entry »

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 »

Bluegrass Cat is yet another top 3-year-old that has been retired prematurely from the track; this time due to an injury to his hind pastern. The injury came at a very bad time for Bluegrass Cat, he had just exhibited what Todd Pletcher described as a “break-through performance” in the Haskell and he seemed to be maturing well and getting better with each start. At that pace Bluegrass Cat could well have become one of the important players next year in the misnamed ‘handicap’ division.

But WinStar Farm, the owner of Bluegrass Cat, had no intention of ever racing him next year. Readers of the Bloodhorse already were seeing the clues after the Haskell. At first it came as a stylized claw with blue outlines in a white background and nothing more. As the issues kept coming, the advertising campaign became clearer showing pictures inside the claw of Bluegrass Cat winning the Haskell. I, like many others, was scratching my head trying to figure out if Bluegrass Cat had been retired before the Travers and I had somehow missed the announcement. After all, it is not standard practice, nor logic, to spend so much advertising money in a teaser campaign if the horse’s retirement is not immanent.

It is obvious to all that the horse was not yet as good as Bernardini and for that matter Invasor, Lava Man or Sun King. So it is not likely that he would have caused a huge impact in the Breeders Cup. He also seemed to be out of the running for top 3 year-old honors. But the injury to Blugrass Cat, as tragic as it is for the horse and for racing fans, could not have come at a better time for WinStar. Bluegrass Cat had just had a runaway performance in the Haskell and now all involved are hinting that he may have done better in the Travers had the injury not occurred. “I guess we will never know how close he was to Bernardini” will no doubt be the sales pitch. Read the rest of this entry »