On Friday, I had the pleasure of seeing the movie The First Saturday in May. I had been a little reluctant to go because of the mixed reviews it received. However, Alan from Left at the Gate pushed me in favor of going with his review of the movie.

The movie is playing at Cinema Village in New York until Thursday May 1, as well as in select theaters across the country.

The documentary follows six horses, including Barbaro, on the road to the Derby. Throughout this journey, the movie captures beautifully the equine and human stories behind the greatest race in America.

All of the six very different trainers that are profiled talk about what it would mean to them to make it to the Derby. Some of them have waited twenty years or more to make it to the big race. This sets up the drama for the horses’ subsequent races, as each tries to get enough earnings to make the field.

The human stories are all powerful. From Frank Amonte, an assistant trainer with years in the business that finally gets a shot with a top prospect to Michael Matz who went from Olympian medalist to Derby winner. We meet the trainers, their families and the staff who day in and day out take care of these magnificent animals.

In a deeper level the movie captures the power and mystique of the Derby. Its ability shape the dreams and aspirations of everyone associated with the sport and the overwhelming odds that any trainer and owner face of actually getting there.

But perhaps the greatest achievement of the directors was to pick, very early on, five horses that actually made the derby, all of whom had a great chance of winning. From Brother Derek and Lawyer Ron to Belmont hero Jazil, the movie captures most of the horses that turned out to be the favorites for what Barclay Tagg called the most competitive Derby field he had ever seen. And of course, there is Barbaro, the eventual winner by one of the largest margins in history.

The movie would have been fantastic had it ended there but the directors did go on to tackle the issue of Barbaro’s tragic accident in the Preakness – albeit very tastefully. Making the ending seem like patch work, an epilogue put together last minute to accommodate the tragic event.

The movie itself is designed to build up to only one thing – the Derby. So whatever comes after that is not only anticlimactic, it is not supported by anything in the plot. It leaves the viewer feeling lost and a little depressed.

I spoke with one of the Hennegan brothers after the film and asked him about the ending. He confirmed that when they set off to do the project they had only intended to film up to the Derby but when Barbaro won so impressively, they decided to keep shooting in case they had a Triple Crown winner in their hands.

After filming, they were not sure how to end it but they were completely surprised by audiences when they screened the film. He told me “you would be surprised how many people don’t know what happened to Barbaro. Some think he is still alive, others think he got hurt in the Derby itself.”

The Hennegan brothers see this film not just as a simple documentary but also as a time capsule, designed to capture the reality of that particular Derby. They were very fortunate to share in the rise of Barbaro to the highest place in thoroughbred history; so they felt responsible to also speak about his tragedy. Especially, when they found that many people just don’t know what happened. They want people to know and they want people to care. In achieving this, the ending of the movie is successful.

The documentary is a powerful film, about people and horses. The stories are heartwarming, sometimes funny, sometimes sad, but always engaging. We share in the dreams and disappointments of those involved as they keep fighting for their chance, their day in the Derby. We are taken through a great emotional ride, and in the process we get a close look at what makes the Derby one of the bet races in the world.

It is a film that no horse enthusiast should miss! Especially, not on Derby week!

The Kentucky Derby is only a few weeks away and press coverage of each contender is already at full blast. During the next few weeks we will hear about every aspect of the training, health, eating habits, right down to the choice of shoes of each of the potential participants.

It is easy to get carried away by all the commentary and the hype and lose sight of the elements that are most important in sorting out the contenders from the pretenders.

Today, I want to discuss one of the factors that will receive much of the attention from both turf writers and fans -Pedigree.

How important is an individual horse’s pedigree in evaluating potential Derby success?

Ever since Leon Rasmussen wrote in the early 80s that “no Kentucky Derby winner since 1929 had a Dosage Index higher than 4.00” handicappers and journalist have analyzed the pedigrees of Derby contenders almost obsessively.

The Dosage Index classifies horse pedigrees by type and assigns a number that reflects the ability that a horse has to compete at a specific distance – the lower the number, the greater the aptitude to compete at classic distances.

The idea that a number derived from pedigree alone could single handedly eliminate almost half the field from contention in the Derby was simple and alluring. And it worked!

It worked, that is, until in 1991 when a horse by the name of Strike the Gold won the Derby despite the fact that his Dosage Index was 9.00. His win was followed by wins by Real Quiet, Charismatic and Giacomo all of whom had Dosages in the higher than 4.00. These results put an end to Dosage as a theory for predicting Derby winners.

However, the idea that pedigree can be used to somehow gain an edge in selecting Derby winners did not die with Dosage. The race is now on to find the next magic number, explanation, or gimmick that will give a handicapper an edge in predicting Derby success.
Pedigree, as a general matter, can only give us the probability that a particular horse will have certain characteristics. The law of genetics is random in selecting traits that will be handed down to through the generations.

Therefore, we often see horses that display very different characteristics from the ones we expect to see by looking at their pedigree. For instance, a sprinter type who is able to succeed in the classics (Smarty Jones) or a turf horse that really likes dirt racing (Cigar).
For me, although a hard-core Pedigree enthusiast, Pedigree is not very important in handicapping this race. I believe that the usefulness of Pedigree is inversely proportional to the amount of additional information available on a given horse.

Pedigree is most important when planning a mating because there is no information available on the prospective foal (except of course the physical characteristics of the parents which should be taken into account).

At the yearling sales, pedigree is still crucial but it loses some of its importance because we have plenty of information on the build, conformation and temperament of the foal in question.

Finally, by the time a horse is ready to run, pedigree may still shed some light on certain factors like the ability of a foal to mature early or her preference for a specific surface but as soon as the gates open the usefulness of pedigree as a predictor of success is diminished even further.

The only relevant use of bloodlines in this Derby may be to try to determine which of the horses that have been successful in Polytrack may actually take to the dirt surface of Churchill downs – a surface they have never tried. But even here other factors such as workouts prior to the race may be much more telling.

We have too much information on Derby entrants to focus on bloodlines. Looking at genetics to predict Derby success is like using a meat cleaver to perform a fine surgery, it’s blunt and unnecessary.

Today we will discuss stallions standing between $20,000 and $49,999 and we will try to identify which stallions offer the best value and which offer the worst value for breeders.

The group is joined by former star Fusaichi Pegasus, a once thriving Coolmore Sire that los 40% of his value and is standing for $45,000. The group has been pretty steady in terms of their fees and offers some very good value in the form of older proven sires and some well placed younger sires.

Best Values

Exchange Rate ($25,000) A fee increase of 150% should not deter anyone from breeding to this stallion, he is a young proven sire with strong numbers and offers a unique opportunity for breeders at this price range. His AEI of 2.26 is extremely strong. He also produces 8.6% stake winners from foals which is huge for modern standards. His yearling median lags a little but his sales numbers should improve dramatically given the performance of his horses at the track.

Cozzene ($35,000) Has been standing now for a couple of seasons for this low fee. He has an Average Earning Index of 2.39 and produces 8.9% stakes winners from foals both figures are easily the highest for any stallion at this price level, these numbers are even attractive at the $50,000-$99,000 bracket. His yearling median is only $60,000 which still make him a commercially viable prospect but his real value will be for those who breed to race. Hard to find a better value in any price range.

Theatrical ($40,000) Another sire with big numbers that seems to be punished because of his age. He has a 2.43 AEI and 7.9% stakes winners from foals. His median yearling median of $70,000 makes him a contender for the commercial breeder but as with Cozzene it is the breeders who breed to race that will find this offer most attractive.

After Market ($30,000) Very well priced sire offers those who want to take a chance on a first year sire very good value. He is an incredible physical specimen who was effective at middle distances on the grass at every level. He is impeccably bred being out of G1 winner Tranquility Lake by Rahy so he has the same cross as Giant’s Causeway. He retired with 8 wins from 13 starts and his yearling should be well sought after at the sales since he will appeal to both domestic and foreign buyers. In addition, if he passes on just a fraction of his looks, his yearlings have the potential of selling well into the six figures.

Worst Values

Aptitude ($20,000) Has not been performing well and this fee just seems too high for a sire with his numbers. He only has a 1.34 AEI and produces a pathetically low 1.8% stakes winners from foals. From a commercial standpoint his $25,500 yearling median does not warrant anything close to his fee.

Sky Messa ($30,000) Danger signs of a major flop are flashing. Sky Messa had a disastrous year with his two-year old runners and although I like to give stallions a couple of crops before judging, his numbers are just too bleak to warrant any breeder taking the plunge at this fee level. AEI of only 0.57, a pitiful 9% winners from foals and no stake winners to speak of make him a really bad gamble at this stage. If you like him, wait a year or two to get a better view of his ability and his fee is almost certain to fall.

Today we will discuss stallions standing between $50,000 and $99,999 and we will try to identify which stallions offer the best value and which offer the worst value for breeders.

This year, overall stud fees are down 12% for the group when compared to 2006. The average decline in yearling average was only 5% compared to last year. This is good news for breeders at this price range.

The group is joined by former six figure all stars Gone West, El Prado and Elusive Quality. The group has been pretty steady in terms of their fees as most horses return for the same fee as last year. They did lose one member in Fusaichi Pegasus whose fee was dropped by a huge 40% to $45,000.

Best Values

El Prado ($75,000) With a 40% fee reduction, El Prado may finally offer value and quality to breeders. He has an Average Earning Index of 2.14, the second highest of the group after Rahy, and has 8.4% stakes winners from foals. His yearling median of $190,000 also makes him very attractive at this price range.

Gone West ($85,000) has also been reduced from $125,000, he is a proven sire of sires and offers a unique opportunity to breeders at this price range. He still has a strong demand at the sale for his yearlings with a median of $210,000. He produces 8.6% stake winners from foals.

Elusive Quality ($75,000) Another sire with a big fee reduction (25%) that screams value for breeders. He has a 2.11 AEI and 6% stakes winners from foals. His median yearling median of $205,000 makes him a strong contender for the commercial breeder.

Worst Values

Johannesburg ($65,000) does produce some useful horses but his numbers are not that good. His AEI of 1.36 is pathetically low for a stallion in this range (it’s lower than for many stallions in the $5,000 range) and his 4.3% stakes winners from foals Is only marginally acceptable. He still has plenty of room for improvement as he has sired some good horses but I would not be surprised to see him in the $30,000 range soon. Especially given the way that Coolmore discounts its stallions. His yearling median of only $95,000 make him hard to swallow on the commercial front.

It is that time of the year when we evaluate the best and worst values in the stallion market. Today we will discuss stallions standing above $100,000 and we will try to identify which of them offer the best and the worst value for breeders.

This year was a tough year for this group; overall stud fees are down 2% for the group when compared to 2006; mostly due to the drastic reduction of Storm Cat’s fee. At the sales this group of sires also saw their yearling average decline for the third straight year; they suffered a 15% drop compared to 2006. This is not good news for breeders trying to breed to the top echelon of horses since stud fees are declining at a slower rate than average prices thus reducing the profitability for breeders.

However, Storm Cat was not the only sire who saw his stud fee reduced. Unbridled’s Song’s fee was reduced by $50,000, Forestry by $25,000 and Giant’s Causeway and Kingmambo previously standing for a private amount are also standing for less than their last advertised fee.

In addition, other stallions that were once members of this selective group have fallen out of this very exclusive club. They include El Prado, Elusive Quality and Gone West. On the other end of the spectrum two more stallions have joined the six figure sires, they are Smart Strike and Street Cry.

Best Values

A.P. Indy ($300,000) A.P. Indy has been an ultra consistent sire; his yearling median of $675,000 make him the most attractive sire in this price range from a commercial standpoint. He has a 3.22 Average Earning Index and produces a great 12.9% stakes winners from foals. Most important of all he is quickly cementing his reputation as an important sire of sires, a most for a stallion in this price range.

Storm Cat ($300,000) Yes his yearling median was off this year for the first time in a while; his median was ‘only’ $350,000. Yet the 40% reduction in stud fee make him very attractive. He has a 3.41 AEI and produces 13.3% stakes winners from foals. He is also the best sire of sires of any active sire.

Worst Values

Mr. Greeley ($125,000) We thought he was a bad value last year when he stood at $75,000. Unbelievably his fee is increased by 67% for this year. His yearling median does not make him attractive at $150,000 although he is very capable of hitting homeruns in the sales ring. At the track, he has been able to sire top runners especially in Europe where he boasts an outstanding filly in Finsceal Beo. Be that as it may, his AEI of 1.53 is what I would expect to see in the $15,000-$25,000 stud fee range and his 5.1% stakes winners from foals is the lowest percentage for any stallion standing for more than six figures. In conclusion he is one of the worst values in any category!

As some of the sires that have traditionally occupied the top of the thoroughbred breed are getting older; a new group of sires has emerged to replace them. They are the new cream of the crop and will be stepping into the shoes of some of the current greats- Storm Cat, A.P. Indy, Kingmambo, Seeking the Gold, Gone West etc. These older stallions have upheld a tradition of excellence for Kentucky Sires that once included the likes of Northern Dancer, Mr. Prospector, Danzig, Nijinsky II, Nureyev, Bold Ruler, Princequillo, Buckpasser, Nasrullah, Blenheim II among many others.

The best new top sires that are most likely to lead Kentucky in the near future are the following (the year when they retired to stud in parenthesis):

DISTORTED HUMOR (1999) $300K
UNBRIDLED’S SONG (1997) $150K
AWESOME AGAIN (1999) $150K
SMART STRIKE (1997) $150K
GIANT’S CAUSEWAY (2001) $125K
MR. GREELEY (1996) $125K
FORESTRY (2000) $100K

But the question remains, are these sires up to the task? Are they worth their high stud fees? Can we realistically expect great things from a group that includes one sire with an Average Earning Index of only 1.53, another one that drags his mares down by more than 26% and yet another that can barely produce 5% stake winners from foals?

How did it come to be that our best sires are so, well… mediocre? Is it a sign of the times? Is the effect of the large books of mares bred to them? Or could it be that Kentucky’s position of a top class provider of thoroughbreds is coming to an end? In order to answer these questions we will briefly analyze the history of the Kentucky thoroughbred and some of the factors that may be contributing to this decline.

HISTORY

The rise of Kentucky as a commercial powerhouse was launched in the 80’s; when John Magnier and Robert Sangster decided to buy the very best yearlings in the hopes of making future stallions. At that time, private breeders had given way to commercial producers and top stock was available to the highest bidder.

Their business plan worked very well. Surrounded by the best advisors they selected the cream of each crop – yearlings by the best sires and the most distinguished female families. They knew that they needed to produce only a few top runners to make up for all their expenditures. And produce top runners they did. Under the care of the great Vincent O’Brian, Coolmore flourished producing such horses as The Minstrel, Danehill, El Gran Senor, Saddler’s Wells, Giant’s Causeway, Royal Academy among many others.

Even when the rulers of Dubai arrived at the scene, pushing the prices of top stock to unprecedented highs; the Coolmore business model worked. Year after year they were able to offset their expenses with the success of their race horses and sires.

Since that time, the Coolmore formula has been copied by many top buyers that enter the game. They threw away millions during the 90’s to obtain top racehorses, trying to win classic races and come up with the next top stallion. But in the world of today the same business model that propelled Coolmore to unprecedented success will undoubtedly fail.

The advantage that Coolmore had in the 80’s was that it purchased its stock only from a very select group of sires. These top stallions were able to produce stake winners at a 20% clip. In addition, by selecting the very best foals from the sire’s progeny they were able to tilt those numbers even more to their advantage. This level of success would be impossible with today’s top sires that can only turn out 6% stakes winners from foals.

Another advantage that Coolmore had in the 80’s was that there was a strong market for their second tier runners, those that were useful stakes performers but ranked just below classic quality. Today’s mega books make these second tier runners almost useless since breeders today have access to the top performers of each crop.

The difficulty and expense now associated to buying yearlings with the aim of turning them into stallions may be part of the explanation of why Darley has recently switched its strategy and stopped trying to create future sires from the bottom up. They have focused instead in buying the best runners from the racetrack. Their recent shopping spree includes Street Sense, Hard Spun, Authorized and Manduro. Although they spent a huge amount to secure these horses under the new market realities that expense was much less than trying to purchase yearlings in the hopes of coming up with these types of horses.

THE EFFECT OF THE MEGA BOOKS ON THE STALLION POPULATION

The turn of the century brought with it the age of the mega-books for stallions. Led by Coolmore itself, which wanted to increase its profit margins to finance their ever more expensive yearling purchases; they accepted an increasing number of mares to be bred to their stallions.

The move instantly revolutionized the industry. In a span of a few years stallions that were covering 40 mares a year were covering well over 200. It did not take long for other farms to follow suit and obtain larger profits from their stallions.

This trend was further enhanced by dual hemisphere breeding, where Stallions are shuttled to Austrailia, South America or South Africa where they continue to breed large books year round.

In practice, the effects of this trend of increasing the number of mares bred to a stallion has a huge impact on stallion values. On the one hand, it dramatically increased the value of good sires and top prospects. On the other, because the mare population has been relatively constant and more mares are now bred to popular sires; other sires are seeing their books dramatically reduced or have been relegated to regional markets. Every year the Jockey Club report of mares bred reports fewer and fewer sires in use. In addition, Southern Hemisphere markets where the second tier stallions often ended up are now getting the services of the prime sires exclusively.

Therefore, horses that are not among the best runners of their crop will no longer get a chance at stud. As Seth Hancock of Claiborne reminds us, in the current market place, Danzig would have never gotten a shot at stud. Can anyone imagine a breed without Danzig? Certainly not the Australians or the Europeans. How many great sires will we lose because no one will gave them a chance?

Another effect of the increase in book size still has not become evident. Economists tell us that when there is an increase in supply, there should be a decrease in price. So, shouldn’t it be that with an increase in number of seasons there should be a correlated decrease in stud fees? However, this has not happened, top sires that cover large books still command high six figure stud fees.

Four interrelated forces have contributed to fuel a rise in stud fees: a) the strength of the yearling market, b) the weakness of the dollar, c) the increase of participation of international buyers in the Kentucky market place and d) the psychological conditioning of buyers that have not re-evaluated their valuations given market realities.

There are signs that the effects of these forces are reaching their saturation point and that stud fees should be reduced in the near future.

First of all, even with the market at historical highs, breeders are experiencing a reduction in profitability across the board. A large part of the revenue obtained by breeders is being needed to pay for stud fees. Commercial breeders must pay less for stud fees and increase their profitability or be forced out of the market.

Secondly, we are experiencing a period of unprecedented volatility in the market. For next year alone, we have seen stud fees move wildly even for the proven sires. Giant’s Causeway was priced between $200k and $300k last year and now will stand for $125k, Storm Cat was reduced by $200k, Unbridled Song was reduced by 50k, Smart Strike increased by $75k, Mr. Greeley increase by 50k, Elusive Quality down 25k, Forestry down 25k, Distorted Humor up 75k. These are not small changes; farms are scrambling to find the right price for their sires as the realities of the new market settle in. They are banking on fashionable trends to extract the most value from recent performance and adjusting fees downward, sometimes heavily after a disappointment in the top of the yearling market. With the exception of Smart Strike who was heavily undervalued and had a breakout year there is no reason for the fees of proven sires to vary so widely. Is Unbridled Song really worth $50,000 less than last year? Did Mr. Greeley really improve to the tune of 33%? We don’t think so.

Third, economic forces have reached their peaks. The top of the yearling market showed an important slowdown this year. There were fewer yearlings sold for more than $1 Million and the median for the elite sires seems to be stuck in the $200-$300,000 range. Even the mighty Storm Cat saw his average decrease and his fee reduced by 40%.

Finally, buyers are being more realistic in the valuations for top stock. It seems that they understand that it makes little economic sense to spend more than $200-$300,000 for any horse regardless of quality. The reason for this is, of course, that modern top sires produce a much lower percentage of stakes winners than the sires of the past.

However, buyers are still overpaying for certain stock regardless of the overall numbers of that sire: a)for progeny of stallions that have proven to be able to sire a top stallion, the so called ‘sire of sires’, b) for horses that have recently produced one or more very good runners, or ‘fashionable sires’ c) first year sires.

A DECLINE IN QUALITY

There are a few theories that try to explain why the new top sires have low statistics when compared to the top sires of the past.

For all sires an increase in the book of mares also means that they will be servicing, on average, a lower quality of mare than they would if they were only serving a small select book. This must have an impact on the performance of their overall stock.

A second theory states that the quality of the sperm of the sire suffers when bred to a very large group of mares. We have found no evidence to support this theory and find it to be rather indefensible, at least scientifically speaking. The DNA of a horse does not change with the number of matings and microscopic tests show that sperm vitality does not seem to change dramatically with the current number of mounts.

Another interesting theory states that because the top sires have more products on the racetrack competing against each other it becomes more difficult for any one of them to dominate top races. Whereas in the past, there would be only a few elite horses by elite sires running against mostly mediocre competition, they used to win often, now they encounter situations in which every horse in the filed is by another good sire. Under this theory, because large books are a relatively new phenomenon, the statistics of top sires will continue to decrease and the pressure on stud fees will intensify.

Finally, some state that there is a fundamental change in the breed that has closed the gap between the very good runners and the average horse. Under this view, there would also be a reduction in the gap between top sires and average ones. Again if this is the case, the gap in fees between top sires and average sires should tighten as well.

IS KENTUCKY LOSING ITS EDGE?

The other obvious reason why the top sires are not performing as well as in the past could be because sires in Kentucky are not longer the elite in the world market and the new generation of sires are just not as good as those in other parts of the world.

In order to put the theory to the test we looked at some of the young top European sires and compared their percentage of stakes winners with those of their American peers. Our preliminary view is that the phenomenon of reduced performance by the new top sires is a global phenomenon and, at least in Europe we are also seeing much lower statistics for the next generation of top sires. For instance Danehill Dancer who stands for €125k has 5% stakes winners to foals; Montjeu also €125k has 6.9%; compare that to top older stallion Saddler’s Wells who has an astonishing 14.7% stake winners to foals! What a difference!!!

THE NEW TOP SIRES UNCOVERED

So who are the sires in Kentucky that will replace the great old guard? The following sires standing currently for more than $100,000 are the next wave of top stallions:

1. DISTORTED HUMOR (1999) $300,000: With an Average Earning Index of 2.56 and 10% Stakes Winners from foals, Distorted Humor is truly a fantastic sire. More incredibly many of these numbers were achieved with mares that were covered at a $10,000 stud fee. But is he worth the large stud fee? Compare him with Storm Cat, standing for the same fee, who is already a proven sire of sires, has an AEI of 3.40 and produces 14% stakes winners from foals. The $300,000 fee seems too ambitions for Distorted Humor, especially when his yearling median is also $300,000.

2. UNBRIDLED’S SONG (1997) $150,000: he stood for $200,000 last year and is now being reduced 25% despite selling a couple of very nice foals for more than seven figures. His AEI is a very low 1.98 and he drags his mare down quite a bit (CI 2.69). He does produce a very good percentage of stake winners (for modern standards) at 7%. However, his yearling median is only $220,000.

3. AWSOME AGAIN (1999) $150,000: We wrote about Awesome Again in a previous post and named him one of the most undervalued sires of 2006, when his yearling median was a paltry $46,000, less than 1/3 of his stud fee. An solid AEI of 2.67 but only produces 5% stakes winners from foals. It is difficult to justify paying so much for this horse.

4. SMART STRIKE (1997) $150,000: We also have written much about Smart Strike as a heavily undervalued sire and back in December of last year in an Article entitled ‘Best and Worst Stud Fee Values for 2007′, we predicted that his stud fee would “soon be in the over $100,000 range.” Well here we are, a year later at $150,000, doubling his 2007 fee! He has an AEI of 2.91 obtained with much cheaper mares as he has been undervalued for a long time and he has a very solid 9% stake winners from foals. However, his yearlings have been usually punished at the sales and he has never enjoyed a good level of commercial success with the physical types that he throws.

5. GIANT’S CAUSEWAY (2001) $125,000: He is another sire whose fees have varied widely. Last year he stood for a Private Fee and you could not get to him late in the season even if you were willing to pay $300,000 for him. Now a considerable reduction that makes you wonder about the lack of value for those who have bred to him in the past. He breeds a large group of mares in is usually overrepresented at the sales. He has an AEI of 2.04 but produces only 5% stakes winners from foals. He has shown that he can get the big horse and some of his best runners are also hitting the breeding shed led by Shamardal, First Samurai and Aragorn which can boast his reputation in a big way.

6. MR. GREELEY(1996) $125,000: The last time that Mr. Greeley gave value to breeder’s he was standing for $35,000. Since producing El Corredor and showing that he can get the big horse in Europe his sale numbers have skyrocketed. However, his AEI is only 1.53 which is a number that you would expect in a sire standing for less than $15,000 and the fact that he produces only 5% stakes winners is a red light that this horse is standing for much more than he is worth.

7. FORESTRY (2000) $100,000: is also standing at a reduced fee this year, down from $125,000. He has an AEI of only 1.86 and a more solid 7% stake winners are good numbers but still may be a high price to pay for this horse.

The first two days of Keeneland are over and the results of the select portion of the sale are mixed. On the one hand, the gross and average number suffered significant set backs; on the other, the median remained relatively flat compared to last year’s numbers. What does that mean for the market?

No Fireworks

The first thing that the numbers indicate is that there was an important slowdown in the very top of the market. This year there were no Green Monkeys and no $10 million horses. The sale topper was a $3.7 Million purchase; a colt by Unbridled’s Song purchased by Demi O’Byrne. This is not a cheap purchase, but it was the cheapest sale topper since 2002 and compared to last year when 6 horses were sold for more than $4 million, it is easy to see where the reduction in average and gross came from.

Fueling the drop in gross was the fact that John Ferguson only spent a total of $16,230,000 on 15 horses this year. This drop of activity by him is a major force behind the drop in average. It was also interesting to note that the Darley v. Coolmore rivalry, responsible for last year’s $11.7 Million sale topper and the $16 Million world record ‘The Green Monkey’, did not play out at all during the sale.

Could it be that the rivalry is over? Probably not, Darley still did not purchase any yearlings by Coolmore stallions. In fact the only clash between the two clans came for a son of Dynaformer a stallion that neither of them stands.

The good news at the top comes from the fact that there were 30 individuals that sold for $1 million or more. That is the same number as last year signifying that although the very top may be hurting the middle top is still very healthy. Also of note is the fact that Geoffrey Russel stated that this year there were more individual buyers willing to purchase the $1 million plus yearlings.

End of the Storm Cat Era?

Another interesting feature of the sale is that Storm Cat did not perform as expected with his yearlings. The perennially leading sire by average and median ranked only fifth this year behind such horses as Dynaformer, A.P. Indy, Distorted Humor and Unbridled’s Song. It is interesting to note that none of the top 7 sires stand at Coolmore or Darley.

Of the first crop sires with horses to sell in book 1 none of them were among the top 20 sires by average. A stark contrast to last year when 3 of them Vindication, Mineshaft and Empire Maker did very well . The best freshman sire was Speightstown who did exceeded expectations in this part of the sale.

Strong in the Middle

The middle marked remained very strong. The median was $300,000 which matched last year’s all time record median. It seems clear that there are plenty of buyers that are willing to spend serious money for good horses but not many of them are willing to spend the ridiculous amounts that have been spent by Coolmore and Darley in recent years. This is good news for breeders that make up the majority of the sale; unless, of course, they had one of the very few standouts of the sale.

The Engine Roars

The bad news for book 2 is that the big jets have left the airport. The sale will now have to do without its best buyers as the Darley team heads home. They will certain leave John Ferguson behind to look at yearlings but it is clear that their spending will be very curtailed in the days to come. Last year they did not leave until Thursday so expect a correction in the next book.

As the select portion of the sale gets on its way, first year sires will test the Keeneland market for the first time. Most of them have already been showcased at Fasig-Tipton or other sales and have begun to offer clues on how the market will receive them. But the real test will come at Keeneland. The fact that each sire will offer a large number of yearlings means that full cross section of their offspring will be sold which will give us a good idea of how the market is receiving them. Although there are no real Vindications, Empire Makers or Mineshafts this year among the first year sire crop with the potential to sell multi million dollar yearlings (with the possible exception of Smarty Jones). The crop does have depth to it and there will be something for everyone among these stallions.

Among the stallions that have sold yearlings in past sales below are some of the most anticipated:

Smarty Jones (Elusive Quality): The cream of this crop Smarty Jones captured the imagination of the nation as a racehorse. The Kentucky Derby winner has already sold 3 yearlings so far this year for an average of $316,666 and a median of $150,000. These prices may be a disappointment to breeders who paid over six figures to breed to him. Smarty Jones is a very plain chestnut horse; he is very well balanced but is not particularly impressive physically. He was bred to a spectacular book of mares during his first year and his median should improve as the sale moves forward.

Pleasantly Perfect (Pleasant Colony): The late developing Breeders’ Cup hero has sold only 2 yearlings so far this year for an average of $219,458. It is usually hard to sell horses by sires in the Pleasant Colony line since some very nice racehorses from that line such as Behrens, St. Joivite etc have failed to produce anything of consequence. He does have the ability to produce big, athletic, good looking yearlings that may find homes with the high end buyers.

Speightstown (Gone West): The speedy son of Gone West was also a late maturing type. The Gone West line has shown to be very versatile as buyers both in the US and Europe have rediscovered horses like Mr. Greeley. He has a lot of pedigree and is a strong, well built chestnut that should appeal to a broad cross section of end users. His median so far has been of $160,000 with 13 sold from 14 offered.

Medaglia d’Oro (El Prado): Has come out swinging at the sales with a median of $155,000. He is an extraordinarily beautiful horse that should be transmitting his great looks to his offspring. The Travers Stakes winner should also be appealing to a large base of buyers and may still offer some value to potential purchasers. He will offer 84 yearlings at Keeneland.

Strong Hope (Grand Slam): He defeated Empire Maker in the Jim Dandy. The good looking son of Grand Slam has a good race record but lacks the pedigree depth of some of his pears. The 9 he has sold have done very well reching a median of $120,000.

Lion Heart (Tale of the Cat): One of the best looking horses in the group, Lion Heart lost the Kentucky Derby to Smarty Jones and finished a game second in that race. He has been one of the most active sires so far in terms of sale presence with 36 offered and 28 sold. His median of $130,000 is probably reflective of what his final numbers will be like at Keeneland. With 95 yearlings to be offered he could have had his own sale.

Perfect Soul (Saddler’s Wells): The well balanced late maturing turf miller has only sold 2 thus far for a median of $129,750. With 33 to sell at Keeneland we will get a better idea soon of just how much demand there is for a pure turf horse this year who may be more attractive to US buyers with the advent of Politrack.

Johar (Gone West): Another pure turf horse but this time from the more fashionable Gone West line will be interesting to follow. The Breeders’ Cup Turf champion has shown that he can get big numbers by selling one for over $300,000. His median of $70,000 is low considering his ability of the racehorse. May offer value for brave buyers who don’t mind a long distance turf horse.

Chapel Royal (Montbrook): Another very good looking horse. He has been the king of the auction ring, at least by number offered so far with 44. Of those he has sold 35 for a median of $50,000 but he has been able to sell for as much as $320,000. With lots of speed and early maturity he may offer the best value among the first year sires with the large number of yearlings still to sell. 56 of his yearlings will go through the ring.

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