Ray Paulick<br>Editor-in-Chief

Ray Paulick

Boom Town

The boomers are coming! The boomers are coming! And that should be nothing but good news for Thoroughbred racing and breeding.

"Love those boomers! Their new attitudes and lifestyles are a marketer's dream," BusinessWeek recently proclaimed in an Oct. 24 cover story. "Ready or not, boomers turn 60," Newsweek reported on its Nov. 14 cover.

That's right, armed with new attitudes about the retirement years and enormous spending power, the first of 77 million American baby boomers--people born between 1946 and 1964--will turn 60 years old in 2006. Those boomers represent 27.5% of the United States population.

A Merrill Lynch & Co. study quoted by Newsweek and BusinessWeek indicated less than 20% of boomers say they will stop working altogether as they age. But it's not about the money for most of them. Sixty-seven percent said they want to remain mentally active; 57% say they will continue to work to remain physically active.

Boomers between 50 and 60 years old have more than $1 trillion in spending power each year, BusinessWeek said--twice that of people currently between the ages of 60 and 70. Many of those dollars will be spent on dreams deferred while children were raised and college educations funded. Yachts, vacation homes, and sales of other luxury items are skyrocketing as the boomers' nests empty.

Thoroughbred horses--both racing and breeding stock--also will be on the shopping lists of many boomers over the next two decades. Breeding or racing horses unquestionably can be a business to keep someone mentally or physically active once they've retired from their primary occupation. The challenges of putting together a broodmare band or racing stable are stimulating, and the results can be profitable. For those who want the action without having to learn the sometimes daunting details of the industry, racing or breeding partnerships will come into play.

Either way, there are tax advantages to Thoroughbred investment, just as there are in other capital assets. Under current law, purchasers are able to write off up to $100,000 of the cost of horses provided total purchases of all depreciable property during the year does not exceed $400,000.

The late William T. Young, though not a baby boomer, is the best example the horse industry has to offer of a successful businessman who, relatively late in life, turned his attention to breeding and racing Thoroughbreds with great success. Young, who started Overbrook Farm in Lexington while in his early 60s, went on to breed, race, and stand at stud leading sire Storm Cat. He also had the rare opportunity to race horses that won the Kentucky Derby (gr. I) and Breeders' Cup Classic (gr. I). He set a standard that will be difficult for anyone to surpass.

That won't keep others from trying, whether or not they're baby boomers. California winemaker Jess Jackson, 75, has quickly put together a formidable racing and breeding operation, including farms in Kentucky and Florida. In an interview with Deirdre B. Biles, The Blood-Horse's bloodstock sales editor, Jackson said the industry "does give a lot of satisfaction to people who are in the transition of life from one business into retirement, and they don't want to retire."

But Jackson, who has filed a suit against three former bloodstock advisers alleging fraud, suggested the industry may be its own worst enemy. "Some of the most successful businessmen in the world would love this, if this industry didn't have the reputation it has for burning the neophyte investor," he said.

Indeed, the boomers are coming. But is the industry truly ready for them?

Correction: An early version of the "What's Going on Here' commentary of Nov. 19 (Boom Town) misstated the expiration date of the $100,000 expense deduction that applies to federal income taxes. The deduction does not expire until Dec. 31, 2007 and applies to purchases made between Jan. 1, 2003 and Dec. 31, 2007.