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Dede Biles Bloodstock Sales Editor

Wednesday November 16, 2005

With Thoroughbred auction grosses up around the world and record-setting prices almost routinely being paid in every sales ring, join our Bloodstock Sales Editor Dede Biles as she answers your questions about the rise in prices at recent select yearling sales and the trend that's now continued through the Fasig-Tipton and Keeneland November sales.

MODERATOR:
With the Keeneland November mixed sale continuing at a strong pace, including all the buzz about Ashado bringing a record $9 million, and the success of the Fasig-Tipton mixed sale, Bloodstock Sales Editor Deirdre Biles takes time out from her busy schedule to answer your questions about sales and other bloodstock matters. Keeping in mind that some of these issues are complex and cannot be answered in short replies, here we go.

Olive Hill, KY:
Ashado sold for $9 million. This is an incredible investment. What stallion would you see as the best choice for breeding?

Biles:
This will come as no surprise: Storm Cat. It would provide a mixture of blood that has some similarities to the one that produced Giant's Causeway (toss in some Halo blood with that Northern Dancer). According to Mark Taylor of Taylor Made Sales Agency, which sold Ashado: "She is also going to be a great cross with Giant's Causeway if someone wants to double all that blood back up again. A lot of the pedigree experts say that would be just phenomenal."

San Clemente, CA:
I thought a topic for an article might be the "down" time for the stallions after the breeding season is over. How do the stallions handle that? What do the farms do? Thanks, Mindy Corbin

Biles:
I really can't give a complete answer to that. I have done some stallion care articles in the past, but most have focused on the time during the breeding season. I do think that many of them get more turnout time during the off-season. Sorry I can't provide any details.

Washington, D.C.:
How could you get a horse if the Dubai folks want it? Seems like they have a bottomless pit with those oil fortunes. Could you try to buy the horse in advance of the sale?

Biles:
Not to be a smart aleck, but you'd better have a whole lot of money. You could try to buy the horse before it goes through the sale ring, but most buyers know when the Sheikhs are interested, and they're not going to pass up the possibility of a premium price to sell it to you. Many people try to avoid head-to-head confrontations with big-spending buyers like the Maktoums by avoiding the sales and going to farms and buying stock privately.

Memphis, TN:
Is it possible for someone new to buying horses to just go look at the yearlings and go sit in the pavilion? I'd just love to see how things are done. Would they think I was weird or wasting their time?

Biles:
Yes, you can go look at the yearlings as they are being shown. Although if you don't plan to buy, it's probably would save the consignors a lot of wasted time if you just watch while they are being shown to other people rather than requesting they be shown just to you. The really popular yearlings are out almost constantly, so there usually is no problem seeing them. Some of the sale pavilions have assigned seating, but some don't and you can sit inside. While Keeneland has assigned seating, after the first few days, many of those buyers are gone and there is plenty of room to sit inside. Some of the buyers bid from elsewhere and rarely use their seats. However, be prepared if someone wants his seat and asks you to move.

Asheville, NC:
Do the current trends in sales make it difficult for small/new breeders to get started in breed-to-race operations? Most people think I'm crazy for saying I'd keep a promising yearling instead of selling them to the highest bidder.

Biles:
The fun thing about the Thoroughbred game is that good horses can come from just about anywhere (even though you increase your odds by purchasing quality stock). Also, even if your yearling doesn't have a tip-top pedigree, if he looks athletic, he can still bring a lot of money in relation to the stud fee you paid. And if you get the right mix of blood, you can get a very good racehorse. Sure, you're going to have a lot of trouble buying a filly like Ashado unless your wealthy, but there are plenty of other options out there if you do your homework, and there lots of horses bred in similar fashion to the superstars. You can still have a nice racing stable. And, if you plan to race and not to sell, you can breed your mares to some of the stallions that are not fashionable commercially or have lost their popularity in the sale ring, but still have proven track record for producing good runners.

Ben Lomond, CA:
Why do buyers continue to pay high figures, up to and including millions, for young prospects even though there doesn't seem to be any correlation between high auction price and performance on the racetrack? Or is there a correlation?

Biles:
Wealthy buyers are like collectors of art. They want the best, and they'll pay what seems a ridiculous amount to acquire a masterpiece. Purses are high enough that an elite racehorse can earn back his million-dollar purchase price. However, it is a long shot. It is possible also to hit the lottery with a well-bred expensive yearling who becomes a champion and classic winner and becomes worth $30 million or $40 million, but again it is a long shot. Sometimes these deals work out financially, but most often they don't.

Palo Alto, CA:
What are your recommendations for people who are just starting out in the thoroughbred business? Should a trainer and/or an agent be found first and should the trainer have the first and last say over which horses to buy? How many horses would you recommend for a start? Thanks.

Biles:
I recommend starting slowly. Decide whether you want to race or breed and buy a horse or two for modest prices. They will be your teachers, and you will learn a lot. I was in a partnership on an inexpensive mare for a short time, and I know I earned a lot about expenses, what can go wrong, etc. Do a lot of homework on your own and read trade publications. If you hire a trainer or agent, ask people in the industry about their reputations. Make it clear to them what you want to do and how much you want to spend. Get it in writing. Don't do it by handshake agreement even if they seem to be nice people. Learn as much as you can and be an active not a passive participant. Don't rely on someone else to make all your decisions. Be involved in the decision-making process. Some people get involved in racing through partnerships and have found that a good way to be introduced to the sport. Again, do your homework and find out which ones have good reputations and a good record for success. Talk to people who have been involved in the partnerships and ask them what they think.

Joliet, IL:
What's the strangest or funniest thing you've ever seen at a horse sale?

Biles:
There are a lot of strange and funny things that happen at sales. There was a man at an Ocala sale one time who bought an expensive horse and claimed to be buying it for president "Georges" Bush. He was taken into the sale office by sale officials and then was escorted off the sale grounds by security. There was a woman who bought numerous inexpensive horses at a couple of different sale company's auctions and then couldn't pay for them. From what I was told, she was able to get credit because she had an elaborate scheme in which a family member masqueraded as a bank officer.

Weston, CT:
Do you think that Ashado's price of $9 million was justified, as well as Riskaverse's price of $5 million? A lot of these sires are unproven as yet as broodmare sires-do you think these mares can produce top horses?

Biles:
I think these mares do have the potential to produce top horses. According to the late sale company executive, John Finney, most quality mares have at least one good foal in them that will become a good racehorse. Were the prices justified? Not based on my or a lot of people's finances. For Sheikh Mohammed, who bought Ashado, he is so wealthy that her price probably represented a mere drop in the bucket. However, the prices are in line with the escalation we have seen at the top of the Thoroughbred market in recent years and shouldn't be a surprise. After seeing a $9 million yearling this past September, it shouldn't be a surprise to see that kind of price for the potential factory.

Chambersburg, PA:
Ms. Biles, Thanks for taking the time. With upward price pressure for every type of Thoroughbred at all the major sale, will the small owner/partnerships be pushed out of the quality horse market? Shawn M.

Biles:
I touched on this a little bit earlier. Even if you can't buy the Ashados and the Riskaverses there are still many other options that will produce nice horses to race and sell. You'll just have to work a whole lot harder. You might not get what you want, but you just might find you get what you need (a thank-you to the Rolling Stones). Remember Funny Cide didn't cost a whole lot in the whole scheme of things even though I could have bought a nice car for what it cost to buy him. Here's a little story for inspiration: James Jones, a blacksmith in Kentucky, claimed the mare Thorough Fair for $5,000 at Turfway Park. He bred her to Mr. Greeley, and that mating produced Whywhywhy, who became a grade I winner. Jones sold Thorough Fair at the Keeneland November breeding stock sale this year, while she was in foal to Giant's Causeway, for $825,000.

San Francisco, CA:
If the racing industry is declining, why is the breeding industry growing?

Biles:
Good question, and one I have been asking myself a lot lately. Racing has its problems – especially with the uncertainty in New York and California -- and the American economy is OK, but not great. Why such a frenzy? One person you can thank is Sheikh Mohammed, who continues to buy a large quantity of horses while spending a large amount of money. This year, especially, he has been very determined to get exactly what he wants. He hasn’t backed down when he really wants a horse and that is a big reason why the top of the market continues to grow. He also has a keen competitor in Coolmore Stud, which also has helped drive up prices. At the lower levels, when you ask people why they are spending money for horses with an optimistic attitude, many will mention the prospect for slot machine expansion, which at least, in the short term, will lead to an increase in purses. NYRA may be having trouble, but New York breeders are still anticipating that things will be good because of slot machines. There are some people who see a significant improvement in racing’s recognition because of marketing efforts by the NTRA. There also are some tax advantages.

Nashville, TN:
What are the factors that make an unproven sire popular when his first foals are sold as weanlings?

Biles:
One attraction of the progeny of first year sires used to be that because the sires weren’t proven at stud, their offspring generally would bring less than the colts and fillies by successful proven sires. The lure of a bargain made it worth the risk of the unknown for some people. But in recent years, the prices for the progeny of first year sires have escalated, so they aren’t quite the bargain they used to be. Buying the progeny of a first year sire is especially attractive to pinhookers. When they buy a weanling and resell him as a yearling, there will be no knocks against his stallion as a sire. The risk of a down side is much less. In other words, the weanling’s value isn’t going to go down as yearling because his sire’s progeny had a bad year at the racetrack or just couldn’t run at all.

Buying a weanling of a first-year sire is also attractive to an agent who is buying horses for someone else. No one can go to his client and knock the sire of that weanling because he has no production record yet. It’s a “safe” buy for an agent that probably will attract little criticism.

Also, in our society in general, people seem to love the latest thing. They love the promise of something that could possibly be great. It’s fun to be part of the next big thing. Hope is an exhilarating emotion. Dealing with reality sometimes isn’t a lot of fun.

Los Angeles, CA:
Considering that Ashado sold for a record $9 million as a broodmare, how much do you think Azeri would have been sold for considering, in my opinion, she was a better race horse and she was as sound as they come?

Biles:
There are a number of people willing to spend in the $2 million to $4 range for high quality broodmare prospects and young mares. To get much above that amount, you’re probably going to need Coolmore and Sheikh Mohammed to square off against each other. If both really, really want a horse, the price can be mind-boggling and we are flirting with the $10 million-level that was passed in the boom of the 80s.

So, if Azeri were being sold and Coolmore and Sheikh Mohammed didn’t square off, I think she brings $4-$5 million for sure and maybe $6-$7 million. Lady’s Secret, another female Horse of the Year, sold for $5.4 million. If Coolmore and Sheikh Mohammed did do battle, $9-$10 million is achievable and maybe more. It’s been difficult for me to predict the upper end of the market lately; my predictions have usually fallen short.

I don’t think people today put much of a premium on soundness. They prefer brilliance. But Ashado was no slouch in the soundess department, she raced 21 times in three years while Azeri raced 24 times in four years (16 of the races came during her first three campaigns). Azeri definitely was more decorated, rising to Horse of the Year status, but I’m not sure how much that would have added to her price.

Seattle, WA:
Are some of the sales figures biased by the exclusion of the RNA horses? Wouldn't it be fairer to somehow report the 'actual' bidding prices with these numbers included, or at least post the figures with and without the RNA animals?

Biles:
I like the way we report it in The Blood-Horse is the best way. Horses that are RNA’d are not sold, so they represent no revenue for the consignor. We do list the RNA prices in The Blood-Horse, so people can look them up.

Now if you want to figure out the sale company’s actual revenue, it does get commission for RNAs. So you do have to figure out commission collected from horses sold and not sold. But so far, we haven’t reported actual sale company revenue figures. Maybe it would be an interesting thing to look at sometime.

Cedar Rapids, IA:
Thank you for taking the time to answer some questions, I really appreciate it! I was wondering your thoughts on who the hot freshman sires are to watch? I like Songandaprayer and wondered your thoughts about how his babies look this year at the sales? Thanks again.

Biles:
I like Songandaprayer a lot. I saw his son, What a Song, at the Barretts March 2yo sale and he was very impressive, both in temperament and an athlete. It’s tragic that an injury ended his life. The ones I have seen are precocious-looking. I also like El Corredor and Broken Vow. I didn’t get very excited about Tiznow as a first-year sire, but Folklore proved me wrong.

As far as sires with their first weanling selling this year, I like Vindication, Proud Citizen, Aldebaran, and Mineshaft. I love Empire Maker’s breeding but am not real fond of horses that only win the Belmont out of the three Triple Crown races as sires. But you know what, he did finish second in the Kentucky Derby, so maybe I’m being too critical. To be honest, I did not get a chance at this round of November sales to look at the weanlings physically or to talk to many people about specific young sires, so my choices are based on what I know about the stallions themselves.

Toronto, ON:
Are most of the middle priced horses at the current sales going to pinhookers?

Biles:
A lot of them are, although I couldn’t give you a percentage. When it comes to young horses, pinhookers are common at many levels of the market. Even people who race like to exercise the option of reselling if the price is right. In fact, there are some very high end pinhookers, like Ken Luke’s Eldon Farm, who buy expensive horses and offer them for resale, but if they buy them back they just go ahead and race them. Interestingly, trainer Nick Zito was at Keeneland in November looking for weanlings for Robert LaPenta, who using buys horses as yearlings and offers them at public auction as 2-year-olds. It’s very competitive.

Cincinnati, OH:
Why has the market for weanlings gotten stronger in the past few years?

Biles:
Because prices at yearling sales have gone up so that makes weanlings more attractive as pinhooking prospects. The upswing at yearling sales also makes weanlings attractive to end users because they hope they can get them for lower prices than they would have to pay when they are yearlings and avoid some of the competition at the yearling sales. However, it is getting more difficult to find bargains among weanlings offered at auction.

Shreveport, LA:
Sometimes at the end of a long sale like Keeneland's Mixed Sale, pregnant mares sell for less money than the advertised stud fee. In cases like that did the breeder overvalue the mare or did market conditions change?

Biles:
Sometimes the breeder did overvalue the mare and sometimes those mares have production problems (aborted foals, barren years) that reduce their value to a prospective buyer, regardless of who they are in foal to. Some buyers at that level of the market are more interested in getting the foal out of the mare than the mare herself.

Ocala, FL:
Despite some of these bigger sales companies offering more and more horses for sale, it seems like the prices continue to go up. This seems to defy the laws of supply and demand and price. Do you forsee the bubble bursting any time soon?

Biles:
I thought it would burst this year but it did not. I have seen some indications that the market could be slowing down a little bit. For example, the market for 2-year-olds in training did not grow as fast this year as it did the year before. The yearling selling season got off to a shaky start prior to the Keeneland September sale. The Thoroughbred business like any other business is cyclical and there will be an end to this current upswing. I don't think the downturn will be as dramatic as it was in the 80s because there is speculation by outside investors, such as buying stallion shares for investment purposes rather than breeding.

Baton Rouge, LA:
I read where a horse was purchased to be pinhooked. What does that term mean?

Biles:
It means that the buyer has purchased the horse to re-sell.

Lexington, KY:
How much does an agent normally get paid to buy a horse for someone?

Biles:
The usual commission is 5% but that can vary depending upon the agent's business relationship and contractual obligations to his/her client.

Rochester Hills, MI:
The emphasis seems to always be on the new. In your opinion, where is there value in the more established, and often overlooked, stallions in a moderate price range?

Biles:
I think there is lot of value in such stallions especially if you are breeding to race. However, if you are breeding to sale you need to remember the lack of a sire's commercial appeal could reduced the selling price or your yearling. Buyers probably will be less likely to forgive any faults and lack of sire appeal is something they can use against your horse.

Monkton, MD:
Megahertz was supposed to be sold as Hip #47 and she was out of the sale. Do you know what happened to her? Was she sold privately?

Biles:
It is my understanding the owner decided to keep her.

Churubusco, IN:
what is the minimum amount of stud fee do you see being able to compete and realize a profit in today's commercial weanling and yearling market place.

Biles:
I don't know that there is a certain figure, but it is hard to make money with inexpensive stock. The greatest strength in the market is in the middle and it's hard to find stallions that are commercially appealing that stand for just a couple of thousand of dollars. If you don't have much pedigree, then you have to depend almost entirely on the physical appearance of the yearling to bring a good price. I owned part of an inexpensive mare for couple of years and I found it very difficult to make money.

MODERATOR:
Thanks, Dede. I am sure our readers and questioners appreciate your insights.

Editor's Note: BloodHorse.com moderators retain editorial control over Talkin' Horses discussions and choose the most relevant questions for guests; guests may decline to answer questions. Opinions expressed by guests of Talkin' Horses are those of the guest and do not represent the opinions of Blood-Horse Publications, its employees, associates, or affiliated organizations. Guests, dates, and times of Talkin' Horses discussions are subject to change.