Do Keeneland November Results Predict Downturn?

(By Avalyn Hunter)

Generally speaking, the auction picture in 2012 has been rosier than in 2011, with most sales reporting increases in average and median prices. Keeneland November suffered big drops to both figures, but when the Edward P. Evans and Saud bin Khaled dispersals of 2011--which grossed more than $72.7 million between them--are factored out, the 2012 numbers are quite encouraging for players at the top of the market.

But the news is not so good for everyone, and anyone expecting a continued bull market in the horse world next year, even on a modest level, would be wise to proceed with caution. At the middle and lower levels of the market, returns were not as solid as at the top. On the ninth through 11th days of Keeneland's sale, the median prices were down compared to the same days of last year's sale, and while the average for day 11 of the 2012 sale was higher than for the final day of the 2011 sale, this was largely thanks to the sale of Royal Irish Lass for $210,000--the highest price by far brought by any horse during the sale's final three days.

Historically, soft markets at the middle and lower levels have been warning signs of a lack of stability in the overall market. Sales of relatively modest stock don't create headlines, but they have much to say about both the confidence in the future held by smaller owners and breeders and the amount of money such people are able and willing to spend. With the overall economy still shaky at best and the threat of significant tax increases looming for next year, it seems that the owners of most medium- to small-sized Thoroughbred businesses are doing the same thing that other small business owners are doing: playing matters conservatively and waiting for more favorable times before deciding to expand. That means that the market in 2013 is likely to see modest gains at best and may still be quite vulnerable if conditions in the overall economy decline. Let the seller, as well as the buyer, beware.