In the first hour of this week's Keeneland Yearling Sales, a big, good-looking colt entered the auction ring bearing a pedigree that would make any horse owner entertain dreams of glory. His sire was Seattle Slew, who is unquestionably one of the five best stallions in the world. His dam was La Griffe, a mare whose son, Blushing John, was America's champion older racehorse of 1989.
"This was the nicest Seattle Slew colt we'd ever taken to Keeneland," said seller Robert Clay of Three Chimneys Farm, who was nevertheless cautious and realistic in his expectations. Like everybody else in the business, he has watched horse prices plummet since the mid-1980s, a collapse that has driven even such illustrious breeders as Calumet Farm into bankruptcy.
So Clay put a modest reserve price of $300,000 on the yearling before he was to be sold Monday afternoon. "It was sort of a cinch that he'd bring that price," Clay said. "My expectation was that he would bring $500,000 or more."
Clay and everybody else in the sales pavilion watched with amazement and disappointment as the bidding sputtered and finally stalled at $275,000. Later, Clay did sell the son of Seattle Slew privately to a Japanese buyer for $300,000, but the lack of bidding was a harbinger of what was to come at the most important horse sale in the world.
The average price of a yearling dropped 19%--to $258,634--from last year's sale, which produced the lowest average since 1981. And the average price does not fully indicate how bad the week's sale was, because it reflects only the horses who were actually sold. Nearly one-third of the yearlings who entered the ring, like Clay's Seattle Slew colt, were bought back by their consignors.
Many economic factors were involved in this decline. The Arabs, who have dominated these sales for a decade, now breed so many of their own horses that they don't buy as many yearlings. When they do, they are more restrained in their bidding.
Japanese buyers--who had bought the most expensive yearling in each of the previous three years--didn't increase their activity. Their enthusiasm may have been dampened by the condition of the Tokyo stock market. Wayne Lukas wasn't the force that he has been in the past. He trains mostly for American clients, and nobody at Keeneland needed any reminders about the condition of the American economy.
But the results at Keeneland didn't merely represent troubles in a high-stakes game played by a small number of wealthy buyers and sellers. They reflect problems that permeate the sport from top to bottom.
Every year during the yearling sales season, I seek the opinion of Bill Oppenheim, the astute editor of the industry newsletter Racing Update. Oppenheim had recognized the excesses of the early 1980s and forecast the decline of thoroughbred prices. He viewed the falling prices of the last few years as a necessary if painful correction that brought sanity and stability back to the market.
But when I asked him Thursday about the meaning of this week's Keeneland sales, he said: "I'm truly alarmed about the future of the horse business. And I'm concerned that there are so few people who seem aware of the potentially terminal nature of our problems."
The prices that buyers are willing to pay for yearlings are a reflection of the fundamental economic condition of the horse-racing business. This is a rather new development. Before 1986, affluent Americans had tax incentives to buy horses; if a risky investment turned out badly, benevolent Uncle Sam would absorb some of the losses.
And in the years when the thoroughbred market was booming, racehorses had a huge earning potential when they were retired and send to stud (At the apex of the boom, Seattle Slew was worth $140 million as a stallion). Buyers could rationalize spending millions on yearlings without even worrying what they might earn on the track; they were shooting for a jackpot at stud.
Now, of course, these conditions have changed. The Tax Reform Act of 1986 eliminated incentives to buy horses, and the general decline in thoroughbred prices has ended the bonanzas for stud prospects. Anybody who buys a horse must assess his chances of recouping the purchase price in purse winnings. And this is difficult to do on any level of the game.
At the top end of the business, the mathematics are equally daunting. Buyers will find it hard to rationalize spending $1 million for a yearling when only a dozen racehorses each year may earn that much or when a genuine superhorse might be worth $20 million, tops, in earnings potential and stud value.
That is why even some of the wealthiest people in the world could look at a prospect such as the son of Seattle Slew and La Griffe, admire him, believe he could be a top racehorse and still balk at spending big money for him.