Little Sign of Vertigo as Market Continues to Soar

Off the charts, no question. You just have to hope that it doesn't turn out to be off the rails, too.

Indices measuring the business done at Keeneland over the past fortnight trail sparks and smoke. Pondering the state of the market before the September Sale, it had been clear that to maintain the arc set by Fasig-Tipton's summer yearling sales would require something “fairly historic.” In the event, the market carried right on through the roof. The numbers strewn behind the world's biggest bloodstock auction represent the statistical equivalent of splintered rafters and shattered tiles.

A $129,335 average represented another 7.3% gain on last year's record. Total turnover weighed out at $377,130,400, up a giddy 22.5% and the fourth highest ever at a sale that has, over the years, seen it all. As this table shows, the aggregate between Fasig-Tipton's summer and Keeneland September reached a staggering $478,188,900, up from $393,161,000 last year-and $347,889,000 in 2016.

These are pretty wild numbers. The cauldron, heated by a post-crash decade of central banks kindling the economy with cashflow, just keeps bubbling away. With a bunch of tax breaks now also lobbed onto the fire, the market's biggest players were able to maintain their unflinching fidelity to a handful of mega-sires.

Never in the history of the universe, of course, has a horse sale ended with each and every consignor totally satisfied. And the September median did slip back from last year's $57,000 record, to $50,000. That was all about the second week, and perhaps echoed warning signs in the early European sales about the impact of overproduction on the lower tier.

At the top end of the sale, however, it was hard to give much credence to anyone reprising the perennial complaint that the market reserves its love only for a faultless specimen. Across the opening two Books, in fact, the median rocketed from $200,000 to $300,000.

Albeit with fewer sales (596 against 681), that's as near as we can get to comparing like-with-like, after the switch from last year's single-session Book 1 and three-day Book 2 to a four-day Book 1.

The latest change of format prompted several consignors to confide discomfort in parading borderline Book 2 types alongside their show-stoppers. Some agents also seemed vexed, though perhaps their moods had simply been soured by the appalling viewing weather that lucklessly hit the eve of the sale. Who can say what these people will spend on a horse, if someday everybody leaves town without anything to grumble about?

Another thing you often hear is that the rise of heavyweight partnerships has eroded the prices that might be paid if each partner were instead bidding in opposition. But this table suggests that the trend is sooner a reaction to the sheer rate of inflation at the top of the market.

Year-on-year, the number of seven-figure dockets more than doubled from 13 to 27. And, as a share of the gross, the “millionaire” hips represented nearly twice the proportion of two years ago.

Even rich guys, it seems, might nowadays need a little help to stay competitive amid this kind of spending. The top ten buyers have naturally been spending more, in step with the rising gross; nonetheless their share of that gross has risen, over the past six years, from 18.17% to 23.02%.

One significant factor here was the return, in person, of Sheikh Mohammed after an absence of several years. Godolphin (together with its Japanese arm) edged out his brother Sheikh Hamdan's Shadwell operation at the head of the spending table, committing $19,960,000 to 27 hips. Compare this with two years ago, when John Ferguson bought the Godolphin boss just five yearlings at $2,245,000.

Needless to say, the industry is long indebted to the faithful support of the Maktoum brothers. Phoenix Thoroughbreds, in contrast, remain a startling novelty–but they continued their purposeful start with 21 hips for $8,790,000, the fourth highest spend, one spot behind SF Bloodstock/Starlight West with 19 at $9,315,000.

Next came Ben Glass, whom I salute for including three of the four top yearlings by Giant's Causeway among his 27 purchases for $7,775,000. This great sire only covered 48 mares in 2016, so his stock were already becoming collector's items before his death in April.

Judging from his overall shopping list, Glass seems to like a stallion who has earned his stripes. As such, this business could do with a few more of his ilk. Because we all know that it is crazy to devote so much attention and investment to unproven young sires who, in most cases, will never again stand at their opening fees.

In principle, the beauty of a market should be that if you are wrong to clamber aboard the latest, newly painted bandwagon–ignoring sires of proven roadworthiness–then you will pay a price when the wheels come off, on the track. Unfortunately, however, it won't quite work that way when so many commercial matings are chosen according to results in the ring.

Lookin At Lucky (Smart Strike), for instance, has now got his breakout star to underline his extremely consistent stats in producing elite runners–but was still only able to average $59,344 for his 16 sales at Keeneland.

And did the Europeans finally come stampeding for Kitten's Joy (El Prado {Ire}) after finding the best 3-year-old colt in Europe here a couple of years ago for $160,000? Well, Shadwell bought one for $725,000, but his average came in at $107,489, i.e. their conception fee and some keep. Let's hope his transfer to Hill 'n' Dale, with a wider client base and reduced fee, will bring the horse the European support he so plainly deserves.

Even the young guns who hit the bull's eye can't seem to guarantee the attention of the feckless commercial market. The averages achieved by Bodemeister (Empire Maker) and Maclean's Music (Distorted Humor), a year after producing GI Kentucky Derby and GI Preakness S. winners at the first attempt, were surpassed by 12 and 19 untested new sires, respectively.

Uncle Mo (Indian Charlie) has proved a rare example of a sire able to multiply his opening fee since introducing his first yearlings to market in 2014. Conceived at $35,000, they realized an average to place him second in the rookies' table–and he now commands $125,000.

But the horse who topped the averages that year was Trappe Shot (Tapit), who had five yearlings sell over the past couple of weeks for an average $19,200; third was Gio Ponti (Tale of the Cat), whose fee has fallen from an opening $20,000 to $5,000; next came Tizway (Tiznow), likewise now a quarter of his debut fee; and then came Cape Blanco (Ire) (Galileo {Ire}), since shipped off to Japan.

Of course, there will be stronger and weaker intakes. But the sales mega-sires have generally earned their reputations on the track first: War Front (Danzig) having done so from a base of $10,000, Tapit (Pulpti) from $12,500, and Into Mischief (Harlan's Holiday) from $7,500.

In fairness, we had an unusually important newcomer this time in the first Triple Crown winner since the 1970s. By managing to process 47 animals at an average more than twice the advertised fee of their conception, American Pharoah (Pioneerof the Nile) continued a debut impressive enough to make his 2019 fee of $110,000 look eminently workable.

He leads a warmly received bunch of newcomers overall. Let's take a closer look at how they fared–measured not by average per horse sold, as is conventional, but by average per horse offered.

I always feel it strange that a stallion should in effect be rewarded, in terms of his sales averages, for failing to sell his least attractive stock. True, the odd RNA will only reflect the reluctance of vendors to part with such a paragon. But we all know those will be an exception to prove the rule.

I'm not saying whether the market's right or wrong about any of these. Some who are struggling to get started retain every right to become the next Into Mischief, as their fees dwindle. Because, as so many seem to forget, these horses should be going to stud in order to produce racehorses, not showponies.

Among the established sires, meanwhile, the usual suspects were to the fore in War Front (Danzig), Tapit (Pulpit) and Medaglia d'Oro (El Prado).

These were the top three by average, but their relatively controlled books accommodate many end-users and the three busiest American sires of 2016–Uncle Mo, Into Mischief and American Pharoah, with 253, 218 and 208 covers–duly finished the sale as first, fourth and third respectively by gross. Medaglia d'Oro managed to join them in second. These four stallions alone processed $80,720,000 of stock, or 21.4 cents of every dollar paid at the sale.

In contrast with the Fasig-Tipton Select Sale, the big money was concentrated on colts. Only two of the top dozen dockets, in fact, were for fillies. So it looks as though the striking demand for fillies at Saratoga must simply have reflected a random preponderance possible in any boutique catalogue.

The notion that some big investors might be contemplating a more sustainable programme for their stables in the medium term, by seeking potential broodmares, looks a rather fond one in view of the clamour for home-run colts here.

Mind you, the whole point about bloodstock values is that they have their own, self-fulfilling logic. The more expensive yearlings remain, the more expensive it will be to acquire a stallion prospect off the track. It was interesting to see the Arqana August Sale, for instance, topped by a colt purchased for Ballylinch Stud. When an astute outfit so astute in its stallion recruitment takes such a punt on a yearling with a plausible page, perhaps it is time to take notice.

As for the overall boom, we should not forget how faithfully this market registers the precarious loading of the economic recovery, following the crash of 2008.

No less than in the markets for classic cars or collectable art, the quantitative easing decade has favoured precisely those few already blessed with the affluence adequate to this expensive game of ours. And though many of them–as we are fortunate to know, in a game that is also a great leveller–are terribly decent people, nobody can afford to be complacent when the global political landscape is so unstable.

In last Tuesday's TDN, we read how the previous day's trade (only the seventh of 13 sessions) had already taken the sale gross past last year's figure. But other publications, with the less gratifying duty of recording events in the wider world, had meanwhile been full of anxious commentaries on the tenth anniversary of the crash.

These noted how fiscal stimulus from the incoming administration in 2009, along with cash steroids prescribed by central banks, had helped the economy to bulge again. Yet that success found voters unforgiving. For the time being, populist emotion on both sides of the Atlantic has been directed outwards, for instance in the resentment and obstruction of free trade and migration. But it may yet turn inwards.

If it does, the spending of the most affluent is unlikely to remain so unfettered. You know what they say about the berries on the holly tree. The more cheerfully and copiously they grow, the harder the winter ahead.