Six industry experts offer their thoughts on global financial conditions and the state of the horse business as the Lexington Selected Yearling Sale is set to begin Monday night.
By Dave Briggs
Last year, the COVID-19 pandemic had no impact on the Lexington Selected Yearling Sale, which set 18 records including gross ($56,692,500), average ($65,692), median ($44,000), number of for $100,000 or more yearlings sold (159). . The gross surpassed the previous record by not a bit, but by about $10 million, up 22 percent from the previous record.
It would be a challenge to surpass all of this even in economically strong times.
But this year, the sale must contend with major challenges in the global economy, including rising inflation, rising interest rates, wide currency swings and major uncertainties surrounding Russia’s invasion of Ukraine. How will that affect this year’s sales? Six industry experts had their say.
By Dave Briggs – Six industry experts comment on global financial conditions and the state of the horse business as the Lexington Selected Yearling Sale is set to begin Monday night – Photo by Dave Landry
“No one is less rich than they were 15 months ago,” said Blue Chip Farms owner Tom Grossman. “Despite what you read, most people with disposable incomes in this country have never been richer, which is quite an odd concept.
“I think the horse economy has quietly diversified. Our confidence in our top 10 buyers is a lot lower than ever, I think. The next group of 40, 50, 60, 70 people who can and will sign $100,000 Standardbred and $250,000 Thoroughbred is much deeper than ever.
“The only part that worries me a bit, especially at the trot, is the value of the (US) dollar, which is extremely strong. In the past this has certainly hurt sales of Thoroughbreds and to a lesser extent Standard breeds. However, I think a lot of these foreign buyers already have a lot of dollar assets and have successfully earned dollar purses on their racehorses, so they don’t just go to the bank and withdraw euros and now buy a horse that’s 20 percent more expensive than just a few weeks ago… Also, I feel like a lot of Canadians made a lot of (US) dollars, so it works both ways.
All American’s Rob Tribbett said the economics of the horse racing business is different than the broader economy.
“I think the horse racing business is different from the general economic trends that we’re seeing,” Tribbett said, “because it’s a very good time to be racing racehorses, really on every level, from yearling sales to the racehorse market, because the only one The way we have racehorses is that people buy yearlings. You can make a lot of money racing in all of these countries, and when a horse turns 3 or is about to turn 4, you have an opportunity to sell those horses. There are many opportunities and the demand in the racehorse market is very strong.”
With over 50 years of knowledge and experience, Northwood Bloodstock’s Bob Boni feels comfortable in the current horse racing economy.
“I’ve been saying that for a very, very, very long time,” Boni told Debbie Little. “I think the horse business, with rare exceptions of tragic events – 9/11 was one of them, the stock market crash of 1987 was another – other than I think the horse racing business is sealed off from what’s going on in the Rest of the world. People want to buy horses. This is your opportunity to buy horses. I don’t see the economy affecting many people who buy horses.”
Diamond Creek’s Shaun Laungani said, “It’s definitely a sellers’ market, but buyers are bound to be very picky. Everyone is running for more money, so our microeconomics is very good. The cost of goods and services has increased for everyone. I’m not forecasting any records in the last year, which was crazy and good, but I expect – because our microeconomics are so good – that it will be very healthy… There’s a lot to be excited about.”
David Reid, owner of Preferred Equine and co-manager of the Lexington sale, said he just couldn’t predict how strong the sale will be.
“I’m not smart enough to understand … how currency valuations are going to affect anyone anywhere,” Reid said. “The inflation numbers are going to impact someone somewhere, but I can’t quantify that. So these are two concerns that come to every market – the world economy, world currencies and of course inflation.
“But we are optimistic about our catalogue. We’re bullish on the industry so I’m more positive than negative, that’s for sure.
“I’m not an economist. But the horse economy was resilient. If you’re a horse owner, it depends on what industry your primary business is in and how it’s affected… that has a trickle down effect. I don’t know how badly the restaurant industry is affected, for example, or the car business, construction… other industries that people have for a real living. I don’t know how this will affect their horse business.
But as Steve Jones of Cameo Hills told Jerry Connors, record stock markets in almost every jurisdiction mean horse ownership has rarely been more attractive and consequently sales should be strong.
“Of course you have to worry (about the economy),” Jones said. “But there’s so much money in the different programs — Pennsylvania, New Jersey. In New York, you can send a filly to Batavia and there’s a chance she’ll compete for $110,000. Ontario’s program is obviously good. And the addition of Kentucky has really helped increase the value of certain horses. We have riders in New York who wouldn’t normally leave the state very often, but they’re looking at the program in Kentucky because there are so many rich opportunities in the current (dual-eligible) program.
Tribbett agreed.
“I think what we’re seeing is that people in the racing industry are a little insulated from some general economic terms. The biggest thing is the wallet structure, what’s happening in Kentucky is very promising and has stabilized in a few other jurisdictions,” Tribbett said.
Often the Standardbred industry looks to their Thoroughbred cousins to gauge the strength of the horseracing economy.
“We just completed the sale of Keeneland in September, the highest grossing sale in Keeneland’s history, and without really… very limited international, particularly Arab, participation. It was a large group of buyers with spending in excess of $400 million,” Tribbett said.
“The (Keeneland) thoroughbred sales were even stronger than the headlines,” Grossman said. “The sell-through rate, the amount of money that was left at the sale for days 6, 7, and 8. I’ve been to Lexington for a few days and spoken to a lot of people and they were almost really amazed at how good, solid and strong it was. It wasn’t four or five crazy people, it was what you want out of a horse sale, so that’s encouraging.”
However, Reid warns that the thoroughbred industry is “more of a global business and there have been participants who have been weaker than in the past. Some of them were stronger too. It goes back to the source of their core wealth.”
Boni said the sales strength of thoroughbreds can be a bad barometer.
“You’ll hear people want to compare what’s happening to the Thoroughbreds in our market,” Boni said. “I think these are separate markets. I don’t think one has much impact on the other. Some years it will be a little stronger than others. The past year has probably been as strong as you can imagine. And will it be the same (this year)? Maybe, maybe not, but I wouldn’t say no.”
Ultimately, selling yearlings at one of the two most prestigious auctions in the sport is about selling dreams to people with plenty of disposable income, regardless of the current economic conditions.
“With our yearlings, we’re giving people the opportunity to endorse a star, win some of the sport’s biggest races and be in the spotlight,” Jones said. “Basically when we sell yearlings we are selling a dream… a dream that our customers can relate to, strive for and have a chance of achieving with a star horse, hopefully one of ours. We all sell the dream of having a champion racehorse.”
with files by Debbie Little and Jerry Connors
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