What the Auction Business Needs: A Sustained Stock Market Rally

Some people believe newspapers are dead, but I still enjoy reading USA Today in its print form. In the Sept. 26 edition, there was an interesting article quoting Federal Reserve Chief Alan Greenspan, who said in a speech that a sustained stock rally would be the "most effective" stimulus for the sluggish American economy.


It also would be a big boost to Thoroughbred auction prices.


According to the story, the three benefits of a rising stock market to the economy are that it makes people feel richer, it inspires confidence, and it signals optimism in the future.


Horses are luxury items and those same three benefits are needed to convince people to purchase them.


In 2008, when the American recession turned into a global financial crisis, "I don't care how much money you had, it seemed like the world was coming to an end and you just didn't want to spend money," said racehorse owner and pinhooker Robert LaPenta recently.


And many Americans are still feeling jittery in that economic disaster's aftermath.


Even though the rally in stocks this month is the best September performance since 1954, there are questions about how long it can continue, the USA Today story said. While there has been an increase in the percentage of individual investors who say they are optimistic, they are continuing to pull cash out of the stock market and that trend works against the development of a bull market.


It will be interesting to see what happens over the next few months. I know I'll be keeping a close eye on the Dow Jones Industrial Average and rooting for it to keep moving upward, especially as Kentucky's November breeding stock sales approach. Buying a broodmare is the ultimate reflection of confidence, because breeding her foals to race or sell requires a long-term commitment.


If the stock market is booming, maybe all the Thoroughbred industry's internal woes won't seem so insurmountable.    


Leave a Comment:


The USA Today?  That takes a total of five minutes to read.  The NY Times, Wall Street Journal, and DRF are the only real newspapers left!  

28 Sep 2010 9:22 AM

Anyone who believes the stock market will rally to prosperous heights as a result of the Federal Reserve coordinating with the Treasury Department to continue with their efforts to plow funds into trading stocks through Goldman Sachs and "black box" trading practices is grossly mistaken.

28 Sep 2010 10:45 AM
Carole Hemingway

Amen to Johann's Comment.  We won't see prosperity in this country until at least 2016...

Carole Hemingway

Freeport, Maine

28 Sep 2010 4:55 PM

Horse racing has been in decline now for decades due to bad management, poor customer service/dirty facilities, poor marketing, poor promotion, lack of innovative thinking, poor organization, poor economic model, fractured industry groups and state goverments treating racing as a cash cow.  During that time, the economy has been both up and down.  A down economy may depress racing somewhat.  But racing's leaders need to stop blaming external factors for racing's decline and start doing the things that any business in any industry needs to do to grow their industry and thrive (ie. promotion/marketing, customer service, clean and classy facilities and innovative thinking).  Improvement in horse auctions will follow if the racing end moves towards prosperity.  And, for pity's sake, stop thinking that slot machines will save racing.  Slot machines are not horse racing, and the only long-term result of slots will be that racing will be thrown aside.

28 Sep 2010 5:14 PM

Really??? Ya Think???

29 Sep 2010 12:12 PM

The averages were probably up at Keeneland because the alternative investment opportunities are no better - the stock market has experienced incredible volatility, treasury yields are minimal with little upside, and gold and silver are at all-time highs.  Might as well buy an expensive lottery ticket known as a racehorse.

30 Sep 2010 7:09 PM
Dino Romano

There is a very interesting historical link between increases in yearling markets and THEN stock market rallies.  The exact opposite of what USA Today suggests.  

In fact it is one of the most accurate barometers of upcoming stock rallies.

The people that move yearling prices upward don't buy horses when they think there WILL be a rally, they buy when they KNOW they are in a rally.

Step up and catch some of the market movement back to 14,000++.  

After that...it's anyone's guess.

25 Oct 2010 3:25 AM

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