Blue Skies?

Now I know how the weatherman feels when he predicts rain showers for a day that comes up nothing but sunshine and blue skies. If you're going to be wrong, I suppose it's better to err on the conservative side.

It was with our raincoat and umbrella that we trod out to the Keeneland sale pavilion last month, awaiting the storm that seemed almost certain to arrive with the first major yearling auction of the season, the July select sale. With a soft economy, strong dollar, and uncertain stock market, a Thoroughbred industry wounded this spring by mare reproductive loss syndrome seemed particularly vulnerable to a market correction after six strong years in a row. Just prior to the yearling sales, this column said: "Sustaining price increases in the yearling market will be a tall order."

On the first of two nightly sessions, there were, to be certain, some ominous clouds, as buy-backs topped 36%. By the time the sale concluded the following night, however, those clouds had been chased away by record prices, including an all-time high average price per yearling of $710,247. The average was triple what it had been just seven years earlier.

Same thing over the next two days at the Fasig-Tipton Kentucky July yearling sale at the Newtown paddocks, where average price jumped by 26% from 2000. The $97,671 average was the third-highest in the sale's history and, like Keeneland, had tripled over seven years.

The July sales at Keeneland and Fasig-Tipton each offered and sold fewer horses than they had in recent years. Thus, while the average price soared, gross revenues collected by the two sale companies declined.

With that in mind, the Fasig-Tipton Saratoga sale, with an expanded catalogue this year, looked to be a much truer barometer for the industry's economic climate--at least the top end of the market.

The three nights of horse trading that went on inside the Humphrey S. Finney Pavilion Aug. 7-9 were electrifying, particularly during the final session, when the average price toyed with the $500,000 mark before winding up at $459,019. The three-night average of $385,259 was up by 26% from 2000, and the gross increased by nearly 50% to $62,412,000, both all-time records. There was depth among the ranks of buyers, with several big names getting shut out because of the competitive bidding.

The real storm clouds that passed over the sale grounds that final night resulted in a heavy downpour, fallen trees, and power outages. But at the end of the night the talk wasn't of the stormy weather, the uncomfortable conditions inside the pavilion (illuminated by power from a back-up generator that was not able to support the air-conditioning system), or of the fact late-night diners couldn't get a meal at Siro's (where the kitchen had lost its power). The talk was about the strength of the market, and, in particular, the strength of the Saratoga yearling sale.

Why are prices continuing their upward trend in the face of bad news in most other industries? Some speculate that jittery investors who pulled out of securities have turned to the horse industry for a portion of their investment portfolios. Others point to a general optimism about the horse industry, fueled by real or perceived progress of the National Thoroughbred Racing Association and Breeders' Cup, or by the bullishness of Magna Entertainment and Churchill Downs. Others credit purse increases in several markets where slot machines add to the revenue stream.

No one can say for certain what's driving the market, just as no one could have predicted before this yearling season began that it would be all blue skies and sunshine.

Incidentally, the long-range forecast for the first part of Keeneland's September sale? More of the same, followed by clouds and a chance of showers later in the sale.