Commercial Sales In a Down Market

re: Commercial Sales In a Down Market

WhatamIdoing — Wed, 24 Sep 2008 08:59:34 GMT

I like what Atthebarn says about the old days when owners were like mushrooms (keep em in the dark and feed em 'manure'). Really though I don't mind some involvement, it's their money, course then again just cause you've got a bunch of money doesn't mean you know that much and like those mega rich going to a Dr, they aren't supervising the surgery well maybe some of them try. I would never work for a wage like that guy. If the owner has a preference where they want to run or what jock they want on, we all listen but if I took a wage and had someone making all the decisions I'd be hitting the trail just like Larry. I think it was Wayne who said once that he doesn't want a real job (no we'd rather have one where we're getting to work, about now 4:50 a.m. where we work 7 days a week and don't take vacations)it's a freedom thing.

I think Larry just got overwhelmed with it all. The jump to the top like he's made would be difficult but not impossible, I think the aftermath of EB was just more than he could handle when combined with the rest of it. Sort of a be careful what you wish for deal. He's a real likeable guy but you saw the accusation on here, multiply that by 1000 and I think that was what he was feeling, then the tampering, you feel like you can't trust anyone but you cannot do it all yourself at that level. Sad day when he leaves. You look at the guys like Jerkens, Lukas, Mott, Frankel, Tagg and wonder how those guy do it at their ages, but I guess they wouldn't have it any other way. They will probably be like Charlie and die with their boots on so to speak. Not a bad way to go, doing what you love.

re: Commercial Sales In a Down Market

Wanda — Tue, 23 Sep 2008 20:34:53 GMT

Your right about the bulk deal I didn't mention it cause I figured I'd keep it simple. Up here there's guys who train on a wage. I'm talking about owners with mega cash that breed/buy their own. Of course the down side is that you have no control when they get ahold of a condition book.We have friends in that postion and sometimes a guy just shakes his head. I guess some of these guys got way to much money and don't care to make any in racing.

Just read the Larry Jones piece and man am I sad to see a good guy walk away from a lifetime of work. That he should feel that way after spending all his life to get where he is.. it's not right and it's not fair.

re: Commercial Sales In a Down Market

Whatamidoing — Tue, 23 Sep 2008 19:19:06 GMT

Also, you are right, they do talk. But most of them have a head for business and understand why some might get a lower rate, at a different track or so on. Although they still like to be the focus of attention, if you're real lucky you don't have many of those.

re: Commercial Sales In a Down Market

Whatamidoing — Tue, 23 Sep 2008 19:17:02 GMT

Wanda, thanks. On the day rate deal, if you have an owner that has 20 horses with you, chances are you have a deal worked with that owner and the owner who has 1 horse with you is going to understand that. Same theory as buying in bulk. You probably know too, that there's a lot of taking a percentage of the horse in lieu of a portion of the day rate, maybe not with some of the huge outfits, not one so don't know but a lot of the smaller outfits have trainers with a partnership in the horse that's even listed. Looks like Larry finally has tired of the whole deal especially the hate and accusations and everything is our fault attitude of so many people.

re: Commercial Sales In a Down Market

katsan — Tue, 23 Sep 2008 19:11:17 GMT

Scot, read Dede's as well. Some great insight there as well. Dan sure took a positive outlook though when he sort of said we're in pretty good shape for the shape we're in.

As far as the remarks by KAB, just saw that Larry Jones is going to retire. The negativity had a lot to do with it. Pretty soon all 'owners', who can be incredibly demanding, (that's why we love our long time clients, they're fair at the same time), may be using the same 10-12 trainers that can handle the huge outfits, demands and costs. Add into it the hypercritical attitudes and whenever we take exception to that, the judgement of us being sensitive or protesting too much comes up then more and more are going to say enough is enough. Racing won't go away, it will just be like the old days when a few elite owners and trainers ruled it all.

re: Commercial Sales In a Down Market

Wanda — Tue, 23 Sep 2008 16:37:44 GMT

Whatamidoing: You took the words right out of my mouth. I take exception to the comment about differint day money rates.If you have a good owner with 2 or 3 nice horses of course you would give him a break on the day money. But to say that trainers charge differint rates to their owners is professional suicide. You got owners making small talk and one guy finds out his paying 20 more a day than the other guy. You'd have a bunch of empty stalls by the end of the week.

re: Commercial Sales In a Down Market

kastsan — Tue, 23 Sep 2008 16:27:17 GMT

Scot, I think Dan hit the nail on the head in his blog.

KAB-BAT please read it. It's realistic and mirrors what is going on in the country right now.

Everyone could cross their t's dot their i's write in calligraphy til the cows come home. The market is what it is and have you ever tried telling someone how to run their own business, doesn't work too well especially when it's unsolicited advice. They will get 'defensive' just like you put it. Tell me what line of work you are in that you would tolerate that.

Scot's reply: Thanks for bringing up the "What's Going On Here" article by editor-in-chief Dan Liebman -- his Taking Stock piece is a wise look into the state of the Thoroughbred market today. Another of my colleagues with expertise in Thoroughbred sales looks at the subject from a different angle. Dede Biles contends that it's time to Buy, Buy Buy in November, in her Hammer Time blog.

re: Commercial Sales In a Down Market

BIGHORSEFAN — Tue, 23 Sep 2008 15:32:20 GMT

I'm with Jordan, think that's the problem.

Also listen to the baby boomers, they're nervous wrecks over their retirement, 401K's etc. the Mid-boomers are close to retirement and don't have enough time to recoup. Us younger Conscientious people can only see a bailout of everyone who bought a house they couldn't afford.

KAB, I'm a gambler, own a business and have a couple of retiree's (horses) that I support. If an owner goes into any business unprepared, they aren't foolish, they are STUPID. More of that stuff of wanting everybody to make sure their lives are taken care of for them. I would never bid on a job unprepared because I absorb the overages, not the person paying me for the project.

Help out the prospective owners? Like someone said that is what the TOBA seminars are for. There are lots of books on the subject, the NTRA offers seminars. It's up to person wanting to get into the business to do the research and who better to talk to than other owners. I've asked some trainers about the cost and every single one has been up front about it, I can't afford it and I make very good money. Will keep my hobbies as travelling, skiing, surfing and handicapping.

Defensive? I would be too if I was a trainer, that issue has nothing to do with the market.

The sales put a lot of rules in place to control agents.

In fact, there were quite a large number of new buyers at the sale. Some of the regulars were missing or had cut back drastically, I think you're barking up the wrong tree. When someone new is wanting to own a horse they see the cost and it is expensive, like the guy said, all horse related stuff is, why do you think there's so many partnerships springing up? Most people actually look at buying a horse, then find out the day rate. It's upfront that owners pay vet, farrier, shipping, jock, pony etc.

Then you weigh risk against reward, realize it's pretty risky and if you have enough money you go for it if you want to have fun. If you're REAL lucky you have enough winning years to not have to consider it a hobby.

If I was a trainer, I think I'd get defensive, you're discounting every other factor and saying they are the reason new owners don't come in and then if they leave it's not full disclosure. We're big kids, we should be pretty astute. Do you own a business by chance?

re: Commercial Sales In a Down Market

JordanA — Tue, 23 Sep 2008 13:51:50 GMT

In my opinion, humble it is and young. The economy is influencing the market.

The other thing is the breeders all seeing the next Green Monkey and everyone jumping on the bandwagon to breed the next big seller. Anybody with the big bucks, was there for the first few days of the sale and however good anything after that was, was just too much to have looked at.

re: Commercial Sales In a Down Market

KAB-BAK — Tue, 23 Sep 2008 12:28:31 GMT

"ME THINKS THERE HAS BEEN A DEFENSIVE PROTEST TOO MUCH"

I DID NOT MAKE A BLATANT, TOTAL, ACCUSATION (CROOKS?) OF THE THOROUGHBRED INDUSTRY, AND OF THE PEOPLE WHO GIVE THEIR LIVES AND LOVE TO THE THOROUGHBRED. IF OFFENSE HAS BEEN TAKEN, IT WAS NOT MEANT.

MY MEANING WAS ONLY THAT CHANGE IN SOME FORM IS NEEDED IN ORDER TO SELL A RACE HORSE IN THESE TIMES. MY EXAMPLE OF HOW NEW OWNERS CAN BE DISCOURAGED IN THEIR OWNERSHIP, WAS NOT A BLANKET CHARGE OF ALL, IT WAS ONLY A EXAMPLE, MEANT AS A THOUGHT ON HOW NEW OWNERS MAY NEED UNASKED GUIDANCE FROM THOSE WHO HAVE THE EXPERIENCE.

WITHOUT FURTHER MISUNDERSTANDING OF MY WORDS, "FOOLISH NEW OWNERS CAN ACT RASHLY AND BE UNWISE, THEY WILL LEARN THEIR LESSONS AND NO LONGER BE FOOLISH. IT IS HOW THE LESSON IS LEARNED THAT WILL KEEP THEM IN THIS INDUSTRY OR CAUSE THEM TO LEAVE IT".

THAT MINOR ISSUE ASIDE, SOME TYPE OF CHANGE IS NEEDED IN THESE TIMES IN ORDER TO KEEP ALL PARTS OF THIS INDUSTRY HEALTHY. IT IS WHEN WE GET LOST ON THE T'S CROSSED & I'S DOTTED THAT CHANGE WILL NOT COME.

re: Commercial Sales In a Down Market

Whatamidoing — Tue, 23 Sep 2008 03:30:03 GMT

As a trainer and purchaser at the sales I can only say 5000+ horses? The later books have always faded and with so many to choose from there was no reason to look at the undersized, less regally bred yearlings in my opinion. There were some pretty decent yearlings available and we all have our favorites bloodlines, as do our owners. Conformation plays a huge part and a lot of us take a closer look at the female family since the studs are so prolific.

I know we're all worried about the economy and you can almost pinpoint upturns in American buying to the economic climate. Whether those were legitimate or inflated upturns mattered not.

I kind of look at people getting involved in horse racing as similar to the disaster in the housing market. A lot of people wanted the biggest fanciest house, the fact that they couldn't afford it made no difference and now it's everbody else fault for the buyer not being informed. Same in horse buying. People want the best bred higher priced horses and the breeders may have delusions of grandeur as well, thinking their yearlings are better than they actually are. Owners that can't really afford to be involved at the top levels are getting in over their heads, read the articles here on the Bloodhorse for the latest example of that.

The top of the market is still selling pretty well, we can just afford to be picky with so much to choose from.

The small fields are a concern but those are due to a lot of different reasons.

Getting people interested in horse racing is a tough sell. There is so much for folks to choose from now and young kids want constant action, even the 20 somethings that are all part of the video game era.

It's tough to fill a baseball park, basketball arena and a football stadium right now everyone is fighting for the entertainment dollar.

And KAB, guess what. Horses are expensive, costs fluxuate due to many different reasons, costs of training at different tracks mirror the cost of the locale.

This isn't unique to horse racing.

Horse show entries are way down, rodeo people are limiting their travel and buddying up. Vet bills are going up, farrier bills etc and we as trainers can't control those costs. We can only hope to keep the horses fit and healthy and cut down on the vet bills for our owners.

re: Commercial Sales In a Down Market

katsan — Tue, 23 Sep 2008 02:51:36 GMT

I think the downturn of the market is just a natural cyclical thing, a bit of overabundance of foals and the economy going into the toilet. We breed, own and train. I'm not quite sure where KAB is getting his/her information but most trainers I know have a straight day rate. They may do a discount for a percentage of a horse or those owners who have more horses, sort of the norm for volume. I don't really think the trainer rate or disclosure has anything to do with the downturn of the market because the market has been great in the past and training protocol was the same. Most of the owners that we and our colleagues deal with are not the upper level owners like the Sheiks, Coolmore, Reddam, Jacksons, or the super wealthy and all of our owners are concerned about the economy. THAT is what has driven the market for decades, since the sales became the source of horse purchase as opposed to private purchase, breeding your own and claiming like the 50's and 60's. They have had downturns before like in the 90's. Everything that's wrong with horse racing cannot be pinned on the trainers. Most owners that can afford to be in racing do it for the sheer joy of it. Very few are in it as a money making proposition, it has too many variables that make it a risky business. That's what the partnerships are all about is the fun of the game. Although some of our owners have done fairly well. I think what Brad was trying to say is that anyone who gets involved in it for fun can afford it, but most are very successful business people who don't go into it blindly are astute and know how to get the facts. Many trainers and farms advertise their rates but to stay in business we have to be flexible. Feed costs vary that plays into cost. Also if you had a long time client who had supported you and stayed loyal for years, would you not give them a better rate or a discount? That's a common business practice in many types of businesses. Anyone who takes anything at face value WOULD be foolish for not doing their own research. As far as the ski analogy, if you look at it with an open mind you know what he meant. Any hobby is expensive and you look at what YOU personally can afford. Just like one might have to settle for Vail over St. Moritz, one might have to run their horses at Louisiana Downs rather than Saratoga. And no KAB we're not a bunch of crooks out to rip people off if that was the case there wouldn't be ANY horses being purchased at the sales and there never would have been.

re: Commercial Sales In a Down Market

Bill — Tue, 23 Sep 2008 01:47:01 GMT

One additional note....I expect fully 10% of the current stallion crop to either be offered up at mixed sales auctions over the winter, or sold overseas, or to simply disappear off the stud farm rosters. And at least 50% of the remaining stallions will have lower stud fees. The stud farms are taking a beating.

re: Commercial Sales In a Down Market

Bill — Tue, 23 Sep 2008 01:43:29 GMT

The market is down, but I hesitate to attribute this to having too many horses for sale...if that were the case, why are the racetracks crying about a lack of racing stock? From my vantage point as a small breeder, there is a disconnect between what the sales are pushing, and what ends up on the track, and the "perfect storm" that we have is 1) a faltering economy, 2) no new players entering the game, 3) the players on hand being wiser with every sale -- they are increasingly buying racing individuals, not pedigrees now, 4) inflationary pressures caused by #1 above making it harder and harder to generate a profit on a yearling...look at the rising maintenance costs today.

So, factor all of that in, and you end up with those prices. We are going to go through this for at least 2-3 more years...either sinking prices or just holding steady. I'm not sure if the tracks are going to be able to handle this. They have their own problems right now, but field sizes are going to get even smaller. On the plus side, more foals are going to be bred to race, not for the sales, which is encouraging. I also expect quite a few small farms to go under in the next 2-3 years....you cannot make a go of it, selling your yearlings off at 60 cents on the dollar invested, which is about what they are bringing now....there are only so many "home runs" in the pool, and they are disappearing fast.

Blood-Horse should publish a "Small Breeders Survival Guide In Recessionary Times". I'm only half-kidding. Look at the recent OBS August yearling sale....it was a slaughter. Those are the small breeders, even more so than Keeneland. And I can't imagine what is going to happen later this year in Maryland.

The mixed sales are going to continue the trend..too soon for anyone to get optimistic about buying a nice mare for a cheap price...maybe 1-2 years from now, that will change.

re: Commercial Sales In a Down Market

KAB-BAK — Mon, 22 Sep 2008 21:00:02 GMT

SKI PACKAGES ARE ADVERTISED, ONE CAN COMPARE COSTS.

INNOVATION MEANS FINDING WAYS TO REACH OUT AND STIR INTEREST IN YOUR PRODUCT. IT ALSO JUST MIGHT MEAN GIVING A HAND TO THE "FOOLISH" AND SHARING INFORMATION.

TRAINER DAY RATES-JUST ONE SMALL EXAMPLE OF HOW A NEW OWNER CAN BE MADE TO FEEL "FOOLISH", WHEN HE FINDS THE TRAINER HAS FIVE DIFFERENT RATES AT THE SAME TRACK, FOR THE SAME NUMBER OF HORSES, BUT DIFFERENT RATES FOR DIFFERENT OWNERS.

THE ECONOMY IS A FACTOR, IT IS PART OF THE REASON FOR THE CURRENT DOWNTURN, BUT IT SHOULD NOT BE THE EXCUSE TO CONTINUE BUSINESS AS USUAL, WAITING FOR MAGIC UPTURN TO CURE ALL.

re: Commercial Sales In a Down Market

Bradgm — Mon, 22 Sep 2008 17:13:05 GMT

p.s. The market was somewhat oversaturated especially this sale. A lot of new breeders with $ signs in their eyes based on past sales results and who knows what you might get that would make you a fortune, its a game of chance.

re: Commercial Sales In a Down Market

Bradgm — Mon, 22 Sep 2008 17:11:12 GMT

The market is taking the same hits as the economy right now. It ebbs and flows and has always followed suit with what is going on in the real world except for those very wealthy buyers. There were a lot of reasonably priced yearlings but the lower level operations seem to breed their own, buy privately or go to the lower level sales. Those who don't have the huge amounts of disposable income aren't able to buy the top level horses and may think they can get something better than the lower level ones for less money at a different sale or in a different manner.

For the commentor talking about the average person buying into a partnership, even those are expensive and in the day and age of people trying to support their families and baby boomers having to help their adult children, their disposable income goes to other things.

If someone is interested in becoming an owner, there have been books discussed on other blogs and one sold on BH that breaks down costs very well, not too many surprises. Anyone who is interested in getting into the industry would be foolish not to get a book like that, attend the TOBA seminars. As far as advertising to the outside world, the person has to be interested to even glance at an ad or a commercial and there are quite a few of those on ESPN talking about the various partnerships available.

Day rates are up front and research can tell you what a trainer charges, most trainers will tell you the added costs and the New Thoroughbred Owners Guide tells you in detail of the costs. Just like any business or hobby you don't jump in until you find out the costs,ie skiing-your equipment, lift tickets, lessons, ski packages etc. Business takes even more research and no one is going to hand that information to you.

Also, I noticed a lot of regular buyers being absent or buying less than they have in past. The pinhookers didn't seem quite as active and what about Coolmore?

I saw an interesting cost prospectus on costs of breeding and raising a foal to racing age and I'm sure it's pretty costly to buy a yearling and send it to be broke and trained up to the races so a 2 year old less so, and a private purchase of a finished colt or filly may be the real way to go, claimers for the financially challenged and a Curlin or Big Brown for the upper level. I think the top of the market did okay, the Storm Cats, the AP Indy's but we'd have to be fools to think that people aren't jittery with the economy the way it is right now.

re: Commercial Sales In a Down Market

KAB-BAK — Mon, 22 Sep 2008 14:15:18 GMT

WE CAN NOT LEGISLATE BREEDING RULES. THE MARKET WILL DO THAT.

I BELIEVE THE OWNERS OF MARES WILL BE LOOKING CLOSELY AT THE STUD FEE, DURABILITY, ETC, AS WELL THE OWNERS OF STALLIONS WILL BE LOOKING JUST AS CLOSE AT THE BREEDING AND/OR RACE RECORDS OF THE MARES THEY ACCEPT FOR THEIR STALLIONS IN 2009.

PRESENTLY, IN THIS MARKET I WOULD VENTURE TO GUESS THAT INNOVATION IS REQUIRED TO SELL A YEARLING/TWO YEAR OLD.

EXAMPLE # 1 "YOU WANT $50,000-SELL THE HORSE FOR $40,000-WITH AN ADDITIONAL $10,000 REQUIRED FROM 10% OF ALL FUTURE PURSE MONIES UNTIL THE BALANCE IS PAID. NO PURSE MONIES EARNED-NO ADDITIONAL MONEY OWED".

EXAMPLE # 2 "OFFER TO GUIDE NEW OWNERS WITH ADVICE ON TRAINING FARMS, TRAINERS, ETC. IN ADDITION REFER THEM TO TOBA".

EXAMPLE # 3 "REACH OUT BEYOND THE COMMUNITY OF THE HORSE TO ADVERTISE YOUR PRODUCT. INVITE GROUPS,ie UNION, CORPORATE, ETC FOR TOURS/MEETINGS AT ONE OR A NUMBER OF FARMS. ALLOW NEW PEOPLE TO KNOW IT IS POSSIBLE TO BECOME A MEMBER OF THE THOROUGHBRED FAMILY".

ADDITIONALLY ENCOURAGE (REQUIRE?) TRAINERS AND TRAINING FARMS TO COMPETE ON DAY RATES BY ADVERTISING THE COSTS. TO MUCH OF THE COSTS ARE KEPT HIDDEN, AND UNFORTUNATELY NEW OWNERS ARE SOMETIMES TAKEN ADVANTAGE OF. WHEN THEY FIND THIS OUT, (WHICH THEY DO), THEY ARE DISCOURAGED FROM STAYING IN THE BUSINESS.

JUST SOME THOUGHTS, BUT WHATEVER, INNOVATION IS NEEDED.

re: Commercial Sales In a Down Market

Helen W., relatively stable equine fan — Mon, 22 Sep 2008 13:17:37 GMT

As a small owner/breeder/horse player I see many factors for the ‘down’ yearling market.

Factors for ‘down’ yearling market:

(1) Just as with the stock market, ‘short sellers’ buying a sub prime product as cheaply as possible and then reselling as a prime product for a huge gain thereby artificially bolstering or damaging the sales marketplace.

(2) By sub prime product I mean from a pedigree only standpoint regardless of the sires and dams race records and progeny race records.

(3) Stallion managers for the most part taking any and all mares presented, maybe adjusting the fee downward for stakes mares, but no true evaluation of compatibility thereby contributing to overproduction.

(4) Any male horse not gelded can now stand as a stallion in some market.

(5) Lack of adequate market demographics evaluation by sales companies such as Keeneland and Fasig-Tipton to identify changes and opportunities of the players or potential players in the market thereby not fulfilling their responsibility to attract buyers to the sales. Currently it is the same old players making the same old plays, thereby restricting the marketplace.

(6) Whatever happened to marketing our products?

(a) The wealth of America is in the hands of the baby boomers. Millions of baby boomers are getting ready to transition to new fun-filled activities. What are we doing as an industry to attract some of the spending to horse racing? All I hear anymore is how to attract new, young blood to the sport. All well and good for the long term when they will have plenty of disposable income, but baby boomers have the money to spend now.

(b) The horse racing industry is no longer just for the very rich racing at the highest levels. Partnerships are springing up everywhere many still for the very rich, but some also for the average income person.

(c) The partnerships for the very rich account for a small part of the horses being raced. However, many sales are still targeted toward these buyers. What can we do to also target the sales for the partnerships of the average income person? What can we do to market (and regulate) the partnerships for the average income person (baby boomers)?

(7) Last but not least, after 12 years in this business I am convinced the only place you see a perfectly conformed, perfectly sound thoroughbred is in the sales ring and not in the winners circle. Opposing forces at work wasting valuable enegry.

I am convinced that once ‘we’ as an industry remove our blinkers we will come together and address the root causes of not only the volatile thoroughbred sales market, but the decline in the interest in horse racing in general.

The economy of the US is in turmoil and down right now. This will not last for long and we in the horse racing industry have the opportunity to plan and prepare today so we will be in a position to capture our share of the market as spending resumes.

re: Commercial Sales In a Down Market

RAJMah — Mon, 22 Sep 2008 02:57:37 GMT

Fact is that we have way 2 many mediocre foals everyyear. What we need is to incorporate what the Warmblood breeders do and thats APPROVAL so that only the best is berd and we also need to SEVERLY REDUCE the books of mares stallions can cover. Its disgusting. Stallions should be able to cover a maximum of 50 mares per year. And stallions shouldnt be able to breed untill age 5 which will in fact make only the better quality animals become available. The sales are reflecting the fact that the economy is not the greatest on top of the fact that we over breed the TB's and people need to step back. Mares should be allowed to breed at 4 because there is less of a rush any how. And any stallion with problems that would become genetic (IE: Big Browns shotty feet) should be prohobited from breeding unless mares are inspected and approved to be believed that their conformation will make up for lack there of the stallions or vice versa. Lets get some quality vs quantity and you'll see those prices fly up