By William Shanklin
The August 2010 Fasig-Tipton Saratoga selected sale had the lowest average purchase price since 2002. However, in view of the macroeconomic environment in the United States and Europe, that result is not as negative as it appears to be at first glance.
The sale was held in a time of waning gross domestic product in the U.S. (3.7% in the first quarter of 2010 versus 2.4% in the second quarter), stubbornly high joblessness, record federal and state deficits, a languid housing market, and extraordinarily high uncertainty among investors about future fiscal and monetary policy.
Consider the 2010 sale in comparison with the previous nine sales—but do so within the context of the state of the overall economy in each of these years, as measured by U.S. Real Gross Domestic Product—inflation-adjusted and seasonally-adjusted—and also benchmarked against the annual percentage return for the S&P 500.
The 2001 sale had the highest average sale price in the past decade, and was held two months prior to the terrorist attacks on the World Trade Center that wounded Americans’ collective psyche and put the economy into a tailspin. Consequently, the 2002 prices were abnormally low, as reflected in the 24.5% rebound in the average purchase price in 2003.
The 2009 sale was also atypical. An associate of Sheikh Mohammed had recently acquired Fasig-Tipton, and the sheikh was an active buyer at the high end. Five yearlings sold for a million dollars or more (and three others received bids over $1 million but did not sell). Four of the five were purchased by John Ferguson on behalf of Sheikh Mohammed, including the sale-topper at $2.8 million.
By contrast, in 2010, only one yearling sold for more than $1 million.
Sale metrics for 2002 and 2009 are clearly outliers. When the 2010 results are compared with the other seven years in the past decade, the average and median figures from 2010 are not surprising given that the U.S. economy began to falter in 2005, turned down in 2006 and 2007, and then tumbled badly in 2008 and 2009.
For this decade, the Fasig-Tipton returns are consistent with the volatility shown in the performance of the S&P 500. Further, the S&P 500 index now stands at a lower price than it did at the turn of the 21st century.
Fasig-Tipton Saratoga 2010 can be described as having a Goldilocks outcome—not too hot and not too cold. In this global economy, that equates to high marks for management.
William Shanklin, a longtime contributor to The Blood-Horse, is the publisher of the Website horseracingbusiness.com