What's Going On Here : what's going on here

Partnership - By Dan Liebman

Blood-Horse Staff — Tue, 24 Nov 2009 18:35:00 GMT

The most important aspect of any business is the relationships that are built. We are not immune to that in the publishing business, our relationships being with our customers, whether they be subscribers, advertisers, Web site visitors, etc.

The Thoroughbred owner has many important relationships, but none more so than the one that exists with the man or woman entrusted to train his or her horses. We were reminded of this with the Nov. 16 death of Bobby Frankel, who trained for numerous owners, but was most closely associated in recent years with the Juddmonte Farms operation of owner Khalid Abdullah. The two clearly had a special relationship.

That type of special relationship was evident on racing’s biggest stage just nine days prior to Frankel’s passing when Zenyatta won the Breeders’ Cup Classic (gr. I). The bond between owners Ann and Jerry Moss and trainer John Shirreffs seems to be yet another example of how close people can become through racing.

There was another example during the Breeders’ Cup World Championships when Alain and Gerard Wertheimer won the Mile (gr. IT) for the second straight year with Goldikova, trained by Freddy Head. The Wertheimer and Head families have been intertwined for several generations.

Of course, the flip side was the Breeders’ Cup Juvenile Fillies (gr. I) won by She Be Wild. Owners Mike and Nancy Mazzoni just met trainer Wayne Catalano this spring, and She Be Wild is one of two fillies he agreed to take for them.

Whether an owner has had horses with a trainer for decades or months, the relationship is vitally important. It has always seemed ironic that a person who does extensive due diligence in his primary business before making any decision may hastily, and without much of any background work, hire a trainer—or boarding farm or sale consignor, for that matter—to oversee his investment in the Thoroughbred industry.

With modern-day statistics, it is easy to find information about trainers. Data are readily available, for example, on which trainers do better with 2-year-olds, or with turf starters, or have a higher percentage of horses that race until age 4 or 5.

Of course, the hiring of a trainer comes down to many factors, and what is most important surely varies from owner to owner. For instance, an owner may be influenced by such simple things as the region of the country he wishes to race in or the value of his racing stock.

This is far from a one-sided equation, however. Trainers should also do their homework, listening to the business plan and understanding the goals of the owner.

While there are numerous examples over the years of longtime affiliations between owners and trainers, there also are just as many notable break-ups.

Asked this summer why he seemed to have fewer horses, a prominent trainer said succinctly, “the owners that weren’t paying their bills were told to come and get their horses.”

Owners often take heat for changing trainers, but the man paying the bills should certainly be allowed to move his horses for any reason, or for that matter without explanation. So, too, the trainer should at any time be able to tell an owner to send a van to pick up his horses.

The owner/trainer relationship is an interesting one because it is about more than business; it is about equine athletes, each of whom requires individualized care.

A well-known trainer once said it was best to treat owners like mushrooms, meaning feed them manure and keep them in the dark. Another was often quoted as saying the worst owner was one that could read a condition book.

But the key to any business relationship should be open communication—especially between a Thoroughbred owner and trainer.

Small Fall - By Dan Liebman

Blood-Horse Staff — Tue, 17 Nov 2009 17:57:00 GMT

There appears to be a “glimmer of hope,” Keeneland associate director of sales Tom Thornbury said Nov. 16. For those who make their living breeding and selling Thoroughbreds, that glimmer shines brightly as they try to make sense of the bloodstock market.

Thornbury’s comments were echoed by several consignors who saw positive signs in the results of the Keeneland November sale, in particular that the gross was “only” down about 10% through six of 13 days of selling and that the RNA rate was 20.6% compared to 32.8% a year ago.

The Keeneland sale saw a dramatic decrease from 2007 to 2008, when the global economy took a real toll and the gross plummeted 45.5%. In two years’ time the gross receipts of $340 million in 2007, an auction record, will fall this year to roughly $160 million.

Through Nov. 15 the cumulative gross for North American Thoroughbred auctions of horses of all ages was $637.7 million. Projecting THAT number through the end of the year shows a gross of about $660 million, a drop of 32% from last year when the total year’s gross was $972.8 million. The gross in 2007 was $1.2 billion.

You would have to go back to 1997 to see a gross for all North American sales near the projection for 2009; in 1997 the figure was $693 million.

The decrease in the number of horses bought back indicates an acceptance of the marketplace, as well as the thought that many horses had to be sold to satisfy creditors.

It should be noted that at the Keeneland sale the dispersal of Overbrook Farm, again through day six, accounted for just under 20% of the gross. No one likes selling into a down market, but the fact is the Overbrook horses stood out at a time when many breeders are holding on to top mares and foals. The 93 Overbrook horses averaged $297,000, compared to $108,000 for the entire sale. W.T. Young built a premier breeding operation at Overbrook, and breeders seized the opportunity to buy into the farm’s female families.

KENTUCKY’S LOSS

The definition of irony arrived this week in the form of a press release announcing that Ro Parra’s Millennium Farms in Central Kentucky was selling a portion of 30 mares to Moon Lake Farm in Louisiana and relocating the mares there (read online at www.bloodhorse.com/horse-racing/articles/53398). Parra had previously announced he was moving some stallions to Moon Lake.

The ironic part is that the release was distributed by Damon Thayer, who owns Thayer Communications and Consulting and counts Parra among his clients. Thayer, a member of the Kentucky State Senate, has angered many Kentucky horsemen by refusing to work toward the passage of legislation to allow slot machines at the state’s racetracks.

“We will likely move more mares over time,” said Parra. “We feel that the Kentucky program is not as competitive as other regional programs like the one in Louisiana.”
Parra is the type of person we need in the Thoroughbred industry. He made money as an executive with Dell computers, started in Texas, and moved to Kentucky. That one of Thayer’s clients is moving mares and stallions out of Kentucky to a state bolstered with slots revenue, is, well, the ultimate in irony.

A GIANT DEPARTS

Racing lost a Hall of Fame member Nov. 16 when trainer Bobby Frankel died at age 68 after a battle with leukemia. Frankel began with claimers and rose to the top of his profession, in the process moving from his native New York to California.

To some, Frankel’s personality was an acquired taste, but to all, his training prowess was easily recognized. He had a special way with horses, and, in fact, all animals, being a true dog lover as well.

Two statistics tell you all you need to know about how good a trainer Frankel was: He saddled the winners of more than 160 grade I races, and since the Eclipse Awards began in 1971 only one trainer, Bobby Frankel, has won five times.

Golden State - By Dan Liebman

Blood-Horse Staff — Tue, 10 Nov 2009 21:03:00 GMT

Despite the legitimate gripes by Easterners about the Breeders’ Cup World Championships being run two consecutive years in California, there is much to like about having the races at Santa Anita. It is a beautiful place to watch horses train, offers majestic scenery (when the haze allows you to see it), and the weather Nov. 6-7 was nearly as spectacular as the racing.

Granted, the continuous on-track announcement proclaiming Santa Anita as “the most exciting place on earth” was laughable, but for two days, the racetrack lived up to its label as “The Great Race Place.”

Despite the fact Santa Anita is an excellent place to host the Breeders’ Cup, it should not have had the event two years in a row. Nor should any track. The founders designed the Breeders’ Cup to change locations each year, moving around the country, and that is as it should be, for many reasons.

Only a handful of tracks can play host to the Breeders’ Cup, and it is good the organization’s leaders appear ready to announce a rotation for several years into the future, as is done routinely in other sports.

Clinging to the marketing-speak that the reason the Breeders’ Cup was held in Southern California in successive years was to attract Hollywood stars may have actually been a dream some marketing person had, but suffice it to say it was a pipe dream at best. While some sports and entertainment stars show up annually for Kentucky Derby weekend, there has never been a huge turnout from that community at the Breeders’ Cup, including the past two years.

Because of the economy, and because some Breeders’ Cup races seemingly were contrived and have no real divisions to support them, the organizaton’s board should seriously discuss changing the event back to one day and trimming the number of races from 14 to nine or 10.

One is left with some impressions from this year’s event:

It was pleasing that in a year when the Breeders’ Cup was held in California, two winners—California Flag and Dancing in Silks—were bred in the Golden State. Not unlike what is occurring in some other states, California’s breeding industry has suffered mightily in recent years; farms have closed; mares have left or are not being bred; and the number of stallions is decreasing. Hopefully, this Breeders’ Cup success will help.
Breeding and racing is about the dream, no matter who you are. We were reminded of this during winner’s circle celebrations. There were winning owners of considerable wealth as well as others in a far lower tax bracket. A good horse can come from anywhere.
The Breeders’ Cup Classic (gr. I) win by Zenyatta opens up the Horse of the Year discussion. Her victory was exhilarating. But the vote should not be about one race or who won the most recent race. It should be about the body of work over the entire year. Just as a horse should not get an Eclipse Award for winning one race in this country, neither should a horse be rewarded for showing up, or be penalized for not showing up, on a particular day.
Repeat wins by Goldikova and Conduit and then watching the first female win the Classic were simply as good as it gets.
Zenyatta had a bit of trouble loading, had to suffer with the rest of the field through Quality Road’s antics, broke on the wrong lead, was throwing her head the first 200 yards…and then won with a dramatic run to deny a most game Gio Ponti. She walked onto the track with her head bowed, reached her right front out in a sign of majesty, and on the way back to the winner’s circle, stopped to pose before parading in front of her adoring fans. She is class personified in the Thoroughbred. Even members of the press, as jaded and cynical as they are, stood and clapped.

Less Than Classic - By Dan Liebman

Blood-Horse Staff — Wed, 04 Nov 2009 18:45:00 GMT

You would think Eileen Mayer never heard of P.T. Barnum.

Mayer is Chief of Internal Revenue Service - Criminal Investigation. Her job involves overseeing probes into claims of tax fraud. Barnum, of course, was the famous 19th century master of hoaxes, founder of the outfit that would become the Ringling Bros. and Barnum & Bailey circus, and the man erroneously credited with saying, “There’s a sucker born every minute.”

After three principals of the former ClassicStar horse breeding operation—David Plummer; his son, Spencer Plummer; and accountant Terry Green—were reported last week by the U.S. Department of Justice as having pleaded guilty to charges of defrauding the United States, it was Mayer who said, “Investment schemes that seem too good to be true should be a signal to individuals to stay clear.”

Furthermore, Mayer said, “The IRS is actively pursuing promoters who market these tax-evasion schemes.”

P.T. Barnum was a self-proclaimed promoter. So, too, was David Plummer, who founded ClassicStar and recruited investors to participate in the company’s mare lease program. A release from the government about the guilty pleas said Spencer Plummer “assisted David Plummer in the operation of the mare lease program,” and Green assisted investors by “preparing and filing income tax returns on which they reported fraudulent deductions” and “assisted customers in their IRS audits by creating false and backdated documents and presenting them to IRS auditors,” the government alleged.

The information presented in the government’s case by the justice department claims participants in the ClassicStar mare lease program filed tax returns with the IRS claiming false tax deductions of more than $500 million, resulting in a tax loss to the government of more than $200 million.

Other allegations against ClassicStar include: lacking sufficient mares to fulfill its obligations to investors and at times substituting Quarter Horse mares; providing loans to investors through National Equine Lending Co., said to be an independent company but actually owned by ClassicStar; and often, at the conclusion of an investor’s participation, having the outstanding loan “extinguished through fictitious trades involving an entity that purportedly owned interests in coal bed methane gas wells” through ClassicStar’s parent company, GeoStar.

ClassicStar began buying mares earlier this decade: $4,171,000 for 15 mares in 2001; the leading purchaser by money spent in 2002 and 2003, with 27 mares for $17,535,000 in 2002, and $13,570,000 for 20 mares the following year; and $9,835,000 for a dozen mares in 2004.

It didn’t take long for things to unravel.

In 2006 ClassicStar’s Kentucky farm was raided by federal agents, as was David Plummer’s Buffalo Ranch in Utah. Later that year a group of ClassicStar mares was sold at auction for $20.8 million. The following year 48 ClassicStar mares were purchased for $9.8 million by John Sykes of Cloverleaf Farm in Florida, who would also purchase ClassicStar’s Central Kentucky farm in partnership. The money was used to pay creditors.

In September 2007, ClassicStar filed for Chapter 11 bankruptcy protection; court documents listed claims from more than 200 persons totaling nearly $1.4 billion.
Numerous civil suits alleging fraud involving ClassicStar and its practices are still pending. Newspaper reports have said the Plummers and Green, who each face a maximum sentence of five years for conspiracy to defraud the government, are cooperating in the continuing investigation.

It is hard to imagine anyone who makes his living breeding Thoroughbreds fully believed the veracity of the mare lease program’s claims that were the underlying principle of ClassicStar.

People have been breeding horses for many years, and there are many intelligent and experienced attorneys and accountants who handle nothing but equine accounts. They are well versed in the tax codes as they apply to breeding and racing horses, including those leased from one entity to another.

Eileen Mayer is an experienced attorney herself, and as she said, if it sounds too good to be true, it probably is.

Stallion Sale - By Dan Liebman

Blood-Horse Staff — Tue, 06 Oct 2009 17:38:00 GMT

The six week period between the Keeneland September yearling sale and Keeneland November breeding stock auction is typically when stallion managers announce stud fees for the coming season. Well, maybe not this year. Several have hinted they might wait until after the November sale.

There is a high degree of nervousness right now in the breeding industry, and the operative word in the previous sentence is “might.” The fact is no one knows exactly what to do in relation to stud fees, and no one wants to be the first to pull the trigger.

As expected, when fees were announced last fall many went down, but following the November sale many fees were cut again. Breeders were balking at the prices, showing their disdain by not booking mares. Those who were booking mares were demanding deals; others merely waited until the season had begun, figuring the odds were more in their favor at that time for a favorable rate.

Breeders spoke of sending fewer mares to the breeding shed, and indeed they did. The Jockey Club recently announced a projected drop in the 2009 foal crop of more than 8%. One would expect a further decline in the foal crops of 2010 and 2011.

Fewer mares bred; fewer stud fees; fewer stallions needed; fewer horses to sell; fewer dollars to deposit.

Now the commercial market has experienced a sharp decline, accentuated by the September sale, the largest in volume by far.

(The September sale was going to show declines simply because of market conditions, but other factors caused it to drop further. Keeneland officials need to hold a serious meeting to discuss ways to revamp the auction. One thing is for sure—Keeneland is lucky there aren’t more barns at Saratoga.)

Next to the value of a breeder’s mares, his biggest expense is the amount he pays for stud fees. For those who stand stallions, the amount they can charge for stud fees is their greatest source of income.

For years now, however, the breeding industry has run amok, driven by the commercialization of the breed. More mares thrown into production; larger books for stallions; growing catalogs assembled by sale companies.

The industry went through a correction in the mid-1980s, caused by a change in the tax code, and it took many years to reach stable ground again. Now comes a correction that is much more severe. And this correction is not forced by actions of the federal government, but rather by self-inflicted wounds such as greed and gluttony.

During the next few weeks, farm owners, stallion managers, and shareholders will be discussing stud fees. The decisions they make will affect not only their income, but the income of everyone in the industry, and perhaps even the sustainability of the industry.

Asked during the September sale about the expected drop in stud fees for 2010, one stallion manager said simply, “It will be unprecedented.”

Another, though not as succinct, was just as pointed, saying, “For some stallions, a 50% cut will not be enough. They will have to either be cut more, be relocated, or be pensioned.”

Congratulated on the successful year a stallion’s runners were having, one farm manager said, “Three or four years ago I would be drooling thinking about how much I could raise his fee. Now, I would be a fool to raise it at all.”

Indeed, common sense says that in all but the most extraordinary case, it would be foolish to raise a stallion’s stud fee. Breeders must cut costs; stallion managers must help them do so.

Econ 101 - By Dan Liebman

Blood-Horse Staff — Tue, 22 Sep 2009 18:58:00 GMT

The day off from selling at the Keeneland September yearling sale provides consignors and buyers alike a chance to catch their breath after the first four days of the auction while preparing for the remaining days of the two-week long sale.

The harsh reality of the severity of the drop in the market had set in (for the first four days, the gross was down 42.5%, the average decreased 31.6%, and the median was off 38.9%), and as consignors showed horses Sept. 18, they universally agreed the law of supply and demand dictated they were in for more of the same.

Oh, not just more of the same for the remainder of the sale, but more of the same for years to come. Markets don’t correct themselves overnight, especially ones like for Thoroughbred horses that take a long time to bring the product to the buyers.

It is tough to admit when the market problem you encounter is caused by none other than yourself, but breeders and consignors recognize they are paying dearly now for years of sending too many mares to the breeding shed. They couldn’t resist temptation to take the money off the table in the short term during a lengthy up market which has caused harm to the breed in the long term.

The economic downturn has certainly exacerbated the current market correction, but in this case, too many horses and too few buyers, as one breeder/consignor said, “is Econ 101 no matter what the product is.”

As they discussed the market conditions, and the situations that caused them, on this day of non-selling, most breeders were not singing the blues, but rather offering solutions for the future. Breeders are a resilient group, and as business people, are good thinkers about why things happen and what can be done to change them. That they were not hanging their collective heads and preaching gloom and doom is a positive sign. More than anything else, they appear to be looking for leadership as they face the recovery period in their industry.

One breeder/consignor, who also stands stallions, wants The Jockey Club to limit the size of stallion books to 110 mares, starting with next breeding season. “The breed registry is responsible for the breed, plain and simple,” he said. “They have the power to do this; this action is what is best for the overall health of the breed.”

Asked about the inevitability of a lawsuit claiming restraint of trade, this horseman was even more pointed in his remarks. “They should anticipate it and budget for it. They have regulations now to ensure the integrity of the breed and the sustainability of the breed. They are the only organization that can do this. They have the power to do what is right.”

A second-generation horseman, whose family breeds and consigns horses and stands stallions, is looking to the American Graded Stakes Committee for a policy he thinks will help the industry.

“Let’s make Saturday the big day at the races,” he said. “The (American) Graded Stakes Committee can inform tracks that if they get a race graded, on that card they cannot run any state-bred races or any claiming races. That card has to consist of some of the best races the track offers. Fans will understand that on Saturday, racing is offering its best product.”

A third-generation horseman, again a breeder, consignor, and person who stands stallions, wants to see far fewer racing dates, and wants the NTRA to lead the way in working with racetracks on a fair and equitable schedule.
“No one wants to watch a baseball game the day after the World Series ends,” he said.

While a few months off is certainly good for the horses, it also could mean fatter purses, which would help incentivize new owners to enter the business. Attracting new owners should be the goal of everyone in the industry.

Keep Up the Heat - By Eric Mitchell

Blood-Horse Staff — Wed, 09 Sep 2009 19:49:00 GMT

The U.S. Congressional hearings are over. Network camera crews are documenting other stories. PETA demonstrators have gone back to protesting fur coats.

The sting of Eight Belles’ death on Derby day last year is waning, so the National Thoroughbred Racing Association and The Jockey Club no longer roll out press releases with the same frequency about new programs to improve safety, eliminate the overuse and abuse of drugs, and trumpet efforts to shore up racing’s integrity. While the Eight Belles tragedy attracted a lot of intense and unpleasant scrutiny, it lit a bonfire under industry leaders who produced some admirable results within a year. Most notably, all North American racing jurisdictions now ban the use of anabolic and androgenic steroids within at least 30 days of a race; and, the NTRA has implemented its racetrack accreditation program, with 10 tracks approved so far. The accreditation program, which is administered by the NTRA Safety and Integrity Alliance, has led to substantial changes at some tracks. One track is now directly affiliated with a racehorse retirement facility and another has implemented pre-race testing for total carbon dioxide (the test for milkshaking).

These accomplishments and others were heralded during last month’s Jockey Club Round Table with lots of well-deserved congratulations.

But here’s the kicker. We can’t stop. We can’t let up the intensity just because the protestors and the cameras have gone away.\

During the Round Table it was stated that in one year the industry has “effectively eliminated the use of all anabolic steroids in the training and racing of Thoroughbreds in this country.” True, rules were adopted to ban race-day use of steroids, but to say steroid use has actually been eliminated is a stretch. Consider the comments by Dr. Scott Palmer, chairman of the American Association of Equine Practitioners’ Racing Committee, who said our current medication policy, though well-intentioned, is compromised by a lack of uniformity and financial support in multiple racing jurisdictions. Here is the heart of Palmer’s message the industry needs to embrace: The time for extended diplomacy is over. To the extent that medication reform can help save our industry, we must act now with deliberate speed and conviction.

Do I hear an amen?

Yes, the industry has made progress, but it’s still behind the curve. Deliberate speed and conviction is needed on all fronts.

NTRA president Alex Waldrop said he visited 25 industry leaders last week in California and believes no one is backing off. Maybe the overt display of urgency following Eight Belles’ Derby is gone, but the will to reform remains strong. It will be the Safety and Integrity Alliance’s responsibility to keep the pressure up, Waldrop said. He added that the gains made to date are modest but are getting noticed outside the Thoroughbred industry and are rebuilding racing’s reputation among sports fans. A recent NTRA survey of 1,200 general American sports fans and 608 people identified as “core fans” shows a slightly better impression of Thoroughbred racing now than existed a year ago and a belief that the efforts to improve safety and integrity are sincere. The survey estimates 44 million sports fans are aware of the Safety and Integrity Alliance. Really? Forty-four million seems high, as it’s one in seven U.S. residents. The survey also shows 57% of sports fans watched the Kentucky Derby this year. Out of an estimated 153 million U.S. sports fans, that’s more than 87 million people. Nielsen reported 16.3 million watched the Derby telecast on NBC this year. Were the rest in sports bars, Las Vegas sports books, and at tracks and off-track betting sites? Maybe it’s possible. I’ve been assured the statistics and methodology of the survey are solid.

All the more reason to push hard for reforms. We have a lot of potential fans out there watching.

Eric Mitchell is Executive Editor for Digital Media at The Blood-Horse

Numbers Game - By Dan Liebman

Blood-Horse Staff — Tue, 01 Sep 2009 17:16:00 GMT

Not that many years ago it seemed fine to know, and record into past performances, that a horse had run six furlongs in 1:11 1/5. Today we wouldn’t stand for that because we now understand the difference between 1:11.01 and 1:11.19. Those times, and those fractions in between, formerly all showed as the same time (1:11 1/5) when in fact they weren’t.

But it took the industry to recognize that timing in hundredths rather than fifths was the best thing to adopt as a standard, which it began doing in 1991.

It had become obvious that timing Thoroughbred races in hundredths was more accurate for compiling track, stakes, and world records, just as it had been for timing swimmers, runners, and car drivers.

Recently, the world of track and field saw the world’s fastest man, Usain Bolt, break his own world record in the 200-meter sprint, dropping his mark of :19.30 to :19.19. Consider that when Bolt ran the :19.30 in Beijing, he bettered the record of :19.32 set by Michael Johnson in 1996.

Like track and field fans, racing enthusiasts can now also watch as records are set, or missed, by hundredths of a second, giving them more appreciation for the effort and more attachment to the history of the sport.

In addition, the more accurate timing of horse races aids handicappers, and any improved piece of handicapping information is good for everyone because the bettors are the customers.

Changing from fifths to hundredths didn’t just happen; it took improved technology by timing systems. But it has been well worth the time, effort, and, cost, to make it happen.

Today, as the world changes at a dizzying pace and more things become both humanly and technologically possible, racing needs to consider another change: moving from fractional to decimal reporting of odds.

A column by a racing journalist, discussed during a recent meeting with some racing officials and the press in Saratoga Springs, N.Y., illustrates why this change is necessary.

The horse in question was 5-2 when he sprung from the gate, but his odds changed during the running of the race to 2-1. He won, of course.

Even casual bettors have noticed an occurrence that is frustrating to all who wager on racing: late odds changes. It happens, and racing officials openly admit it happens, though they claim nothing sinister is afoot.

In this instance, using decimal odds, the horse in question was 2.52-1, but when the late money in the pool was added 10 seconds after the start of the race, the horse’s odds changed to 2.48-1. Doing the math, 2.52-1 equates to a $7.02 payoff and thus shows as 5-2 odds, while 2.48-1 translates to a $6.96 payoff and so appears on a tote board as 2-1.

Most bettors could cope with knowing that while all bets have been made, the reporting of wagers continues until 10 seconds after the start of a race. The problem is, in the example above, the race was two miles long and the final pool was calculated more than 80 seconds after the race started. Final odds: 2.45-1.

Officials said the problem was a telecommunications failure at one off-track betting site.

The easy solution is to close all pools with zero minutes to post or when the first horse enters the starting gate. Claims that money will be lost by doing so are probably valid, but only for a short time. Those who want to wager will quickly train themselves to bet with a minute to post instead of waiting. Computer bettors, many of whom are big players allowed access to pools to search for last-second value, will adapt their systems as well.

The technology exists to compute odds by decimals, and to close pools in a timely fashion so as to provide a person who wagers on a 5-2 shot an actual 5-2 shot.

Crop Chop - By Dan Liebman

Blood-Horse Staff — Tue, 18 Aug 2009 18:19:00 GMT

The question was not whether fewer mares were bred this year, but exactly how many? With a struggling economy, stallion owners were talking about a reduction in mares for all but the hottest stallions. Now, The Jockey Club has answered the question: roughly 12% fewer.

Though the complete Report of Mares Bred will not be released for a few months, officials of The Jockey Club announced Aug. 14 that it is projecting the 2010 North American foal crop at 30,000, the lowest level in more than 30 years. It also dropped the earlier estimate of the 2009 crop from 35,400 to 34,000.

Ever since the rapid growth in the commercial market caused the foal crop to top 50,000 in 1985-87—the top being 51,296 in 1986—it has been steadily declining, dropping
under 40,000 in 1992 and now down to 30,000, a number not seen since the 30,036 of 1977.

For further historical reference, the size of the foal crop first topped 5,000 in 1935; 10,000 in 1956; and 20,000 in 1966. But a rise or drop from one year to the next of 12% has never happened before.
There are many ramifications from a smaller foal crop, some positive and some negative.

What happens to the nearly 3,500 mares that were not bred this year? Will their owners return them to the breeding shed in a year or two, or do we now have more “unwanted” horses, a problem becoming more visible after years of overbreeding?
When the full report is issued, we will see which stallions had trouble attracting mares this year. Some will surely be sold, while others will be pensioned from active duty.
The need for fewer stallions may cause some horses not to be even tried at stud, a possible negative. Some of those same horses may remain in training longer, a possible positive.
A reduction in stud fees lightens the load on breeders but means less income for breeding farms. Those that paid hefty prices for stallion prospects in recent years will have a longer period
to “get out” on their investment.
Fewer foals means fewer sale horses and fewer racehorses. Less supply could translate to more demand in auction rings, but fewer racehorses could bring hard times on some trainers.

It is not farfetched that a drop of this magnitude could ripple down to mean fewer farms, stallions, mares, owners, breeders, trainers, and racetracks. Whether that is a positive or negative depends on your point of view.

WAIT 'TIL NEXT MONTH

Even in a down market, a blip of positive news is possible, as evidenced by the upswing in business at the Aug. 10-11 Fasig-Tipton Saratoga yearling sale. The auction was up in gross, average,
and median.

However, though any good news right now is sorely needed—psychologically as much as anything—to make too big a deal of the Saratoga sale results, with just 160 horses sold, would be foolish.

After Fasig-Tipton was purchased last year by an associate of Sheikh Mohammed, sale company officials said one of the goals was to make the Saratoga auction the elite place to sell summer yearlings, much as it was in the first half of the 20th century and the Keeneland July sale was thereafter. They worked hard to increase the catalog and presented quality individuals that impressed prospective buyers.

For the first time in 20 years, sale company officials persuaded Sheikh Mohammed to attend the sale personally, and though his agents have purchased horses there every year, his sheer presence
made an important statement.

The Maktoum family and associates spent $18,345,000, nearly 35% of the gross. That certainly is not unprecedented; the Maktoums spent more than $76 million at the 2006 Keeneland September
sale, more than $63 million at that venue in 2005, and as far back as 1984, bought horses for $51 million at Keeneland July (more than 50% of the gross).

We will get a truer read on the overall market next month at Keeneland.

Bounce Back - By Dan Liebman

Blood-Horse Staff — Tue, 11 Aug 2009 17:36:00 GMT

The general economy in the United States is starting to show signs of recovery, elements of which are necessary to improve individual industries, such as the business of breeding and racing Thoroughbreds.

On Aug. 6, the U.S. Senate approved a measure already passed by the House for $2 billion in additional funding for the program known as “Cash for Clunkers.” Though the program, which provides a hefty incentive to trade in old vehicles getting bad mileage for newer, more efficient models, is a short-term stimulus, it does seem to be working to help dealers sell cars and encourage consumers to spend money.

The following day an announced fall in the unemployment rate was unexpected, so even though the economy lost 247,000 jobs in July, the rate improved from 9.5% to 9.4%. During all seven recessions in this country since 1970, unemployment has continued to rise for months following the official end of the recession. While most economists believe the unemployment rate will hit 10%, the fact that it is slowing is certainly a positive sign.

At the close of business Aug. 7, the Dow Jones Industrial Average registered 9,370, a new high for the year. The index, often used to measure the health and direction of the stock market, sat at 8,776 at the end of 2008, dropped to near 7,000 in February, and then saw a big jump in July as confidence in the economy grew.

The racing and breeding industries have not been immune from the economic pains gripping not only this country, but most others around the globe. Handle began dropping early in 2008, and purses naturally followed suit. The trend continues.

In July the amount wagered on U.S. races dropped 13.4% from the corresponding month a year ago, and year-to-date, handle is down 10.9%, according to Equibase statistics. Purses paid to owners decreased 7.35% during the month and for the year are down 6.27%.

In 2008 U.S. handle declined 7.2% from 2007 to $13.67 billion, its lowest level since $13.115 billion was estimated to have been wagered in 1998. The 2008 figure represented a 9.9% drop from a record $15.178 billion wagered in 2003.

Purses did not start falling until the third quarter of last year. They were actually up 2.63% through August 2008 but at the end of the third quarter had fallen 2.37%. That is not surprising, however, considering September 2008 is seen as the tipping point when unemployment reached its highest point in five years, the housing crisis deepened, and several major banks failed, most significantly Washington Mutual.

Purses last year dropped 1.3% to $1.16 billion, the first time that figure had decreased in three years. This year’s decline in purses will certainly be more dramatic.

The downward trend in purses is not solely because less is being wagered on races, but because the public is also retreating from alternative gaming, which helps fund purses. Not only are racinos feeling the pinch, but so, too, are Nevada casinos. The latest revenue report from the Nevada Gaming Control Board, for May but released in July, showed casino winnings down 8.3%, the 17th consecutive month of decline. A larger drop was seen in the race books, off 12.3% for the month.

Racing industry officials are quick to place the blame for the declines in handle and purses on the economy. Certainly the recession is a major factor, but many other issues have also contributed, such as disputes between tracks and horsemen over advance deposit wagering; issues with large gamblers, such as use of illegal medications and a refusal by some to bet on synthetic surfaces; and a lack of funds to market racing in its competition with other sports and gambling options.

The U.S. economy will rebound; it always does.

Decisions made today will affect whether the Thoroughbred industry will rebound along with it.

Great - Chel - By Dan Liebman

Blood-Horse Staff — Tue, 04 Aug 2009 17:36:00 GMT

It is what every person who has worked in the horse industry, ever watched a horse race, or ever tossed away a losing ticket, waits to see: greatness in the Thoroughbred.

Those within the industry, who come from so many special interest groups that they never seem to agree on anything, can surely agree on this. Rachel Alexandra defines greatness in the Thoroughbred.

For a few moments the very real and pressing needs of an industry in sharp decline vanish as Rachel Alexandra reminds us again of why we love this sport so much. Seeing jockey Calvin Borel holding a loose rein, realizing he doesn’t really even have to ask her to run, we forget all that is wrong in horse racing and remember all that is right.

During the telecast of the Haskell Invitational Stakes (gr. I), the TVG announcers pondered which performance of Rachel’s had been the most dazzling, which is like trying to figure out which of Michael Jordan’s dunks was the most spectacular. Her 19 1/4-length tour-de-force in the Mother Goose Stakes (gr. I) was mentioned, as was her victory over males in the classic BlackBerry Preakness Stakes (gr. I).

After the 3-year-old daughter of Medaglia d’Oro beat males again, taking the Aug. 2 Haskell by a facile six lengths, one of the commentators immediately wanted to change his vote. And who could blame him? Borel and Rachel moved by Summer Bird, the winner of the Belmont Stakes (gr. I), and Munnings, winner of the Tom Fool Handicap (gr. II), in the turn for home and opened up by four at the head of the lane with seemingly little effort.

From this viewpoint, however, the moments of greatness Aug. 2 were not in the turn for home or at the wire, but prior to those moments. The first came as Rachel Alexandra walked out of the tunnel and toward the racetrack. With Monmouth Park fans pressed against each other to see her, waving signs while clapping and cheering, Rachel never turned a hair. She was cool, calm, and focused on the business at hand.

The second came just a few moments later, when, during the post parade, Rachel was shown walking toward the TVG camera. It was hard not to notice the size and scope of the filly’s hindquarters, the breed personified in her muscular yet confident walk.

Rachel Alexandra won the Haskell just a few minutes drive from the Atlantic Ocean while another that illustrates greatness in the Thoroughbred, Zenyatta, who is undefeated in 11 starts, was safely in her stall at Del Mar, the Southern California track from which you can see the Pacific Ocean.

Like Rachel, Zenyatta embodies special qualities quite evident to even the casual racegoer. When walking from the paddock to the racetrack, Zenyatta drops her head in a regal manner, and reaching the racing surface, paws at the track in fanciful fashion. Her competitors know they are in trouble.

A 5-year-old mare by Street Cry, Zenyatta also projects an imposing figure, standing 17 hands tall and rippling with muscles.

Rachel Alexandra versus Zenyatta is the match-up racing fans everywhere are clamoring for, though the odds of that happening appear much longer than either filly has been in their recent races.

Zenyatta, last year’s champion older female, has raced outside California only once. Her owners, Jerry and Ann Moss, and trainer, John Shirreffs, have indicated she will make her next starts in California, where the Breeders’ Cup World Championships will be held for the second straight year in early November.

Rachel Alexandra has won eight straight and 10 of 13 overall, and her co-owner, Jess Jackson, has made it quite clear that he and trainer Steve Asmussen do not intend to run her on a synthetic surface, which rules out the Breeders’ Cup.

With Zenyatta not leaving California and Rachel Alexandra not running on synthetic surfaces, we have a stalemate.

Perhaps Fair Grounds, which opens around Thanksgiving and would be a good neutral site, should start working now on a race that could help define true greatness in the Thoroughbred. Or at least give racing fans what they most want to see.

Going Public - By Dan Liebman

Blood-Horse Staff — Tue, 28 Jul 2009 16:58:00 GMT

Having been unveiled at the Fasig-Tipton Florida sale of juveniles earlier this year, new video kiosks were used for the first time at a yearling sale July 20-21 at Fasig-Tipton Kentucky. And they were hugely popular.
It is vitally important for prospective buyers to gain information while a sale is underway, and the video kiosks make that much easier.

After the bidding stopped on a Distorted Humor colt at $290,000, a few minutes later the screen showed—in high definition, by the way—the horse as not sold. Later, the RNA price was removed and instead the colt showed as a $225,000PS, meaning he had been privately sold (PS) back at the barn for that amount.

Kudos to Fasig-Tipton for not only using the video kiosks—which at the 2-year-old sale were able to show the under-tack works—but also for quickly displaying that a horse bought back by its owner had later been sold privately, and for how much.

More than 20 horses at the July sale later showed up as private sales, and their figures were included in the final totals for gross, average, median, and those not sold.

According to Boyd Browning, president of Fasig-Tipton, any horse reported to the sale company office as sold privately before the end of an auction’s final session will be changed on the result sheets.

The major reason for a consignor to do so, Browning said, is simple: “We then assume the credit risk.” But he was quick to point out nothing in the conditions of sale compels a private sale to be recorded, and many are not. As Browning noted, for example, an owner might sell 25% of a horse, a partner might decide to buy out another after a horse did not find a new buyer, or a person might trade an interest in one horse for an interest in another.

Once upon a time, this writer was against the reporting of private sales because of the belief a public auction should only reflect what happens in the ring. That thinking has changed, however, because the private sale of a horse while on the sale grounds still reflects a transaction between buyer and seller during the current marketplace conditions.

The only thing that would even further promote transparency at an auction is if both the RNA price and private sale price were shown on the hip-by-hip summary.
Recording private sales obviously raises the gross, lowers the average and median, and reduces the number of horses listed as not having been sold. But it gives a more accurate picture of the business of trading horses at a particular sale.

Whether private sales at all Thoroughbred auctions should be similarly reported should be a matter for discussion at the next meeting of the Society of International Thoroughbred Auctioneers. It is hard to imagine a valid argument against doing so.

AT WHAT COST?

While the Fasig-Tipton July sale was happening, a long-time participant in the sport was helping a group develop a business plan for a new partnership. He wondered aloud how much it currently costs to keep a horse in training for a year. “Does $35,000 sound right?” he inquired.

That figure is usable, but in fact is probably low in many instances. This bloodstock agent was figuring a trainer’s day rate at $80, and that alone adds up to $29,200 over the course of a year. A figure of $35,000 may include such things as routine farrier and veterinary care, but it could not include things such as breaking and training, shipping, and insurance.

Of course, it is hard today to define “routine veterinary care.” More than anything else with the day-to-day training of horses, Thoroughbred owners complain loudly about the cost of veterinary care.

Watching yearlings go through an auction ring while contemplating how much it costs to keep a single Thoroughbred in training for a year and how much purses have fallen makes one realize further adjustments are needed on the balance sheet.

A Little Tolerance - By Dan Liebman

Blood-Horse Staff — Tue, 21 Jul 2009 19:26:00 GMT

The unwritten rule has always been that police officers won’t stop you if you are driving five miles over the speed limit. You might call it their “threshold level.”

As the case of trainer Steve Asmussen clearly illustrates, the Thoroughbred industry is in need of medication threshold levels.

On July 16 Lone Star Park stewards, following Texas Racing Commission guidelines, suspended Assmussen for six months (and fined him $1,500) for a medication positive dating back to May 2008, when the filly Timber Trick’s spit box urine test showed a metabolite of the local anesthetic lidocaine.

Asmussen, who has appealed, has denied administering the drug, and his request to have the filly’s blood tested was denied because Texas has a zero-tolerance policy, thus making the level of the drug irrelevant.

It is relevant, however, because the blood level might prove whether the drug was administered or the positive was due to contamination.

In a perfect world, zero tolerance might work. But this is far from a perfect world, and zero tolerance doesn’t work.

In 2000 Bob Baffert was facing a similar suspension, though for a much stronger drug, after a filly he trained, Nautical Look, won an allowance race at Hollywood Park and tested positive for morphine. Dr. Steven Barker, chief state chemist for the Louisiana Racing Commission, testified the amount of morphine in Nautical Look was 73 billionths of one gram.

Barker testified at Asmussen’s hearing as well and stated he believed the positive to be consistent with contamination.

After nearly five years of fighting the charges, Baffert was exonerated after testimony before an administrative law judge showed that during May and June 2000, 13 of 95 samples were deemed to be “suspect” for opiates, which seemed to indicate environmental contamination.

Dr. B. William Bell, the California Horse Racing Board veterinarian, testified the amount of morphine found in the filly was, “pharmacologically insignificant and most likely due to environmental contamination.”

California has probably had more cases that fit this bill than any other state. Trainer Bobby Frankel had two horses in 2001 test positive for small amounts of morphine, but the charges were dropped after the now infamous “poppy seed” defense. Indeed, studies have proved the ingestion of poppy seed bagels or poppy seed cake can produce false positives for morphine.

In 1989, charges were dropped against California trainers D. Wayne Lukas, Laz Barrera, Albert Barrera, Anthony Hemmerick, and Bryan Webb after accusations that horses they trained were positive for cocaine or its principal metabolite. It was believed the testing samples were contaminated.

In another California case, trainers Richard Mandella, Ron McAnally, Willard Proctor, Mark Hennig, Lewis Cenicola, and Bill Shoemaker were absolved of wrong doing after 1994 positives for scopolamine in post-race urine samples. The trainers proved the depressant was traced to the presence of jimsonweed in stall bedding.

Now comes the case of Asmussen, the leading trainer in the country last year by wins (a record 622) and atop that category again so far this year; the man who guided Curlin through two Horse of the Year campaigns and now oversees the training of the brilliant filly Rachel Alexandra.

There is no arguing about what zero- or no-tolerance means or that those who support it are trying to rid the sport of cheaters, but it doesn’t separate the cheaters from those unfairly tainted by contamination positives.

If the blood levels were tested, we would know if Asmussen indeed administered lidocaine to the filly, and, therefore, whether he should be punished by such a harsh penalty. Should the blood test indicate contamination, a more appropriate punishment of 15 or 30 days could be ordered.

In the Baffert case the administrative law judge stated, “These facts and (Baffert’s) success as a trainer support the conclusion he had nothing to gain and a great deal to lose by the use of a banned substance on this horse.”

The same could be said today of Steve Asmussen.

Cut the Cup - By Dan Liebman

Blood-Horse Staff — Tue, 14 Jul 2009 17:47:00 GMT

It sounds like something Yogi Berra would say, but in this recessionary economic time, many companies were in healthy financial shape until they weren’t.

It is hard to imagine a company or business anywhere in the world that hasn’t been forced to make major decisions over the past 18 months due to the numerous factors that have impacted global financial markets. This certainly includes racetracks, sale companies, racing organizations, and breeding farms, as well as any business that supplies or serves them.

In the past week the Breeders’ Cup has elected new board members and announced it will continue the development of a strategic plan to chart its future course.

This much is known:

Breeders’ Cup announced late last year it was cancelling its stakes program, but then it rescinded that decision after nominators objected and dipped into its reserves to fund the 100 races at 40 tracks for $5 million.

Due to a lowering of most stud fees, and the decision by some breeders not to have mares covered—as well as the deaths and pensioning of some stallions—revenue from foal and stallion nominations has decreased significantly the past two years, a trend that may continue for the foreseeable future. Breeders’ Cup nominations account for about 40% of revenue, and those revenues are off as much as 20%.

As with most other organizations, Breeders’ Cup has seen a decline of about 25% in the value of its investment portfolio, an eight-figure hit.

Breeders’ Cup will operate this year at a deficit estimated at $6 million.

Something has to give.

No one ever needs corrective lenses for hindsight, but many openly questioned and criticized the Breeders’ Cup when it rapidly expanded the number of year-end event races that make up its World Championships. In 2007 the eight races became 11, and a one-day event was stretched over two. Last year three more races were added.

Suddenly, the purses for the championship races had risen in just a few short years from $14 million to $25.5 million, the level at which the races are currently scheduled for this year.

A big jump occurred in 2006 when the Breeders’ Cup Classic purse was raised $1 million to $5 million; the Filly & Mare Turf, Juvenile Fillies, and Turf were all raised $1 million; and the Juvenile and Mile (all gr. I), which had been bumped $500,000 in 2003, were raised another $500,000.

The three new races in 2007 each carried a $1-million purse, and last year three new races with total purses of $2.5 million became a part of the program.

What the organization should consider:

Announce immediately that purses for this year’s event will be scaled back. Owners will still show up to run for a $3-million Classic or $1-million Juvenile. Yes, many nominators will not be happy. But these are extraordinary times, and owners cannot expect to run for the same purses as when times were good. Handle is dropping, causing tracks across the country to trim dates and cut purse levels.

Announce immediately that next year’s event will be returned to one day and the six races added the past few years will be dropped from the schedule. At that time, the purses for the eight remaining races will be raised to their former levels. Horsemen will be able to continue pointing for 14 Breeders’ Cup races this year but will know next year’s event will consist of only eight.

Speed up the process of naming host sites. The reasons for running two straight years at Santa Anita seemed contrived, and many horsemen were displeased with the decision to run for two consecutive years on a synthetic surface. The 2012 Super Bowl will be played in Indianapolis, but the Breeders’ Cup has not announced a host beyond Churchill Downs in 2010.

Breeders’ Cup is going through nothing different than many other companies. Nominators anxiously await the strategic plan from its newly constituted board.

Party Time - By Dan Liebman

Blood-Horse Staff — Tue, 30 Jun 2009 19:03:00 GMT

Carl Rollins is not a horse owner, breeder, trainer, nor jockey. He doesn’t work for a racetrack, sale company, racing organization, or bloodstock agent. He has never mucked a stall, hotwalked a horse, bred a mare, or broken a yearling. But Carl Rollins gets it—he understands the importance of the horse industry to Kentucky.

For nearly 15 years Rollins worked in Lexington as a represent-ative for Ashland Oil, and those he sold fuel and oil to included some of the largest horse farms in Central Kentucky. The drivers, he noted, also delivered petroleum products to small farms, medium-sized farms, cattle farms, and many that grew crops but had no livestock to speak of.

“If you were counting the number of jobs directly impacted by the horse industry, most people would not have counted me back then,” Rollins said. “But I can tell you my job depended on the horse industry.”

Rollins was raised in Lexington and today resides in Midway, Ky., an area surrounded by farmland, much of it home to horses of various breeds. He is the marketing manager for the Kentucky Higher Education Assistance Authority, a not-for-profit quasi-governmental corporation that assists college students.

Oh, and Rollins is a member of the Kentucky House of Representatives, representing all of Woodford County (Midway, Versailles), part of Fayette County (Lexington), and a sliver of Franklin County (Frankfort, the state capital). The Democrat is one of 52 House members who June 19 voted in favor of a bill to allow slots at Kentucky racetracks, only to see the legislation die a few days later in a Republican-controlled Senate committee.

At an industry rally at Keeneland June 24, when the Speaker of the House, Greg Stumbo, was unable to attend, it was Rollins who spoke in his place. And, like many others, Rollins placed the blame for the death of the bill squarely at the feet of Senate President David Williams, a Republican from Burkesville in southern Kentucky.

“We had great leadership in the House, but a void of leadership in the Senate,” Rollins said. “It is time we do something about it.”

Gov. Steve Beshear, who spoke last to the more than 1,000 in attendance at Keeneland, was succinct when he said, “You can either change the minds of some of the senators, or you can change some of the senators.”

Many singled out Republican Senator Damon Thayer, who makes his living in the Thoroughbred industry. Though not a member of the committee that quashed the bill, Thayer did not stand up and voice support for the some 100,000 Kentuckians who depend on horses to put food on their tables.

Quite eloquent at the rally, and earlier in the day on the floor of the Senate before the special session adjourned, was Senator Ed Worley, a Democrat from Richmond who is the Senate Minority Floor Leader.

To drive home the point about how many jobs in Kentucky are dependent on the horse industry, Worley told the crowd that, “If you look at the horse industry in Kentucky, and you take Lexmark, Toyota, UPS, Ford, and Delta, and combine the employment of every one of those industries that we jump through our skin for every day to help—and we should—it is half the employment of the horse business of Kentucky.

“What you all deserve is to have your cause be advocated for in Frankfort and in Washington, and what you do not deserve is people who represent districts with horse tracks in them or horse farms in them, whether they be Thoroughbred, Appaloosas, walking horse, Standardbred, or old mules, if they vote against the horse industry. You need to remember them on election day.”

Members of the horse industry do not need to defeat David Williams, but merely enough members to change Ed Worley’s title to Senate President and David Williams’ title to Minority Floor Leader.

Getting the Kentucky Senate back in the hands of Democrats is what it will take to secure slots for the horse capital of the world.

View video coverage of the Kentucky Horse Industry Rally at Keeneland on June 24, 2009.