Strong Tailwind for Saratoga Sale Achieving Balanced Growth

[Wandering Eyes]

Above all in Saratoga, the Turf can seem a world apart. Look at all the discord in society–yet mostly we all get along so nicely, learning fatalism and (its close kin) sportsmanship from those capricious horses of ours. Often, in fact, the whole premise of participation is release from the stresses and strains out there in the “real” world.

Yet there is no getting away from the fact that the bloodstock market, as a prelude to all this escapism, is inextricably linked to the ruthless, hard-bitten calculations of Wall Street and the Federal Reserve.

So it is that those speculators convening for the Fasig-Tipton Selected Yearling Sale at Saratoga can be expected to persevere in the kind of spending that has made bloodstock such a faithful index of the quantitative easing (QE) era.

Better qualified observers can judge how much longer a model devised for an emergency should also sustain a growing economy. They might also care to predict how the erratic political tides of populism, around the world, will ultimately respond to the gains enjoyed by the affluent through QE. But it seems safe to say that at least some in the Humphrey S. Finney Pavilion on Monday and Tuesday will be quietly pondering the way interest rates are now being stoked from their slumber. Perhaps central banks feel that a decade of QE has released enough liquidity into such markets as luxury cars, fine art and, well, Thoroughbred racehorses.

The Fasig-Tipton July Sale processed yearlings at a 7% gain in both average and median, so the season has resumed with familiar momentum. At a boutique sale like Saratoga, admittedly, you have to be careful about reading too much into the weather on so narrow a peak. After all, it registered its second highest tally ever in 2009, on the face of it a wild response to the financial crash of the previous year. Keeneland September, in contrast, promptly nosedived to $192 million from $328 million.

Over time, however, the Saratoga Selected Sale has corroborated the broader trends of the market as QE steadily freed up spending. In 2011, morale still remained so fragile that it had to be propped up by a heroic spree by Sheikh Mohammed. John Ferguson, on his behalf, signed for seven of the top nine lots, all by Darley stallions.

If turnover remained more or less stationary for the next three years, at least the diversification of investment spoke of a deeper rally. Equally, however, the much higher aggregates registered in the last three years–the average gross for 2012-14 was $32,385,000; and for 2015-17, $48,440,000–offer only a limited insight into the boom shared by other elite auctions.

True, the $52,995,000 of business done last year overtook that 2009 aberration to become the second highest in the sale’s history. But the recent elevation in turnover has coincided with catalogue inflation, from an average 110 sold (2012-14) to 152 (2015-17). So while average prices have advanced somewhat–from $295,301 (2012-14) to $317,989 (2015-17)–they have hardly matched the gains made, for instance, by Tattersalls Book 1 (where the average has more than doubled since 2011).

That said, the sale last year was clearly strong by any measure and certainly rebounded from some relatively hesitant numbers in 2016. The median, indeed, was a record–and this, perhaps, is a signpost to a more legible reading of the Saratoga market over the past six years.

Let’s cut it into two sectors, either side of the $500,000 yearling. As the table below shows, those selling for that sum or more have consistently accounted for just over a third of aggregate turnover at five of the last six sales. The advance to a 38.15% market share last year compares with 35.81% in 2012, an increment that echoes the relatively modest elevation in averages over the same period.

$500,000-plus yearlings at Saratoga
	No sold	% of sold	aggregate	% of gross
2017	30/156	19.23	$20,220,000	38.15
2016	23/156	14.74	$16,130,000	35.4
2015	24/145	16.55	$17,155,000	36.69
2014	17/114	14.91	$12,060,000	36.23
2013	13/108	12.04	$8,975,000	28.16
2012	13/107	12.15	$11,460,000	35.81

In the same period, however, the $500,000-plus sector has substantially increased as a proportion of those yearlings sold overall, and has done so in expanding catalogs. From barely

12% of sales in 2012 and 2013, they have accounted for just shy of 15% in 2014; 16.55% in 2015; 14.74% in the 2016 blip; and a whopping 19.23% last year.

Paradoxically, that would suggest not only that big money is being spent on plenty more horses but also that stock remaining below the elite tier is also doing well. Business below $500,000 comprised 64.19% of sales in 2012, and 61.85% last year; but the average value of yearlings within that sector has risen nicely from $218,511 to $260,119.

The cake is considerably bigger than it was, but the relative proportions of the two sectors are more or less the same. So it is the middle-to-lower market, now divided among a reduced percentage of overall sales, that is being served in bigger slices.

Complaints about polarisation at so many other sales, then, may not apply to this one. As a boutique auction, bringing together classy individuals with good pages, it has been able to bring more horses into the top tier even as it has fortified values lower down.

On the face of it, you might even say that this market has all the balance and breadth QE has not really managed to achieve in the wider economy. But it’s an elite auction, top to bottom, so perhaps it’s just another case of the rich getting richer!

Now let’s just take a quick look inside that $500,000-plus category.

It was back in 2012, the year after the whole sale seemed to hinge precariously on Bernardini and the man who stands him, that Tapit sold his first $500,000 yearling at Saratoga. He has since shifted another 22.

In the same period, only four other stallions have mustered more than five $500,000 yearlings at this sale: Medaglia d’Oro with 15; Malibu Moon, 10; Uncle Mo, nine; and War Front, eight. Between them, these five have accounted for no fewer than 65 of the 120 yearlings sold here for $500,000 or more since 2012.

Clearly this quintet are all at different stages. Malibu Moon and Medaglia d’Oro are approaching the evening of their careers, whereas Uncle Mo has sold his nine $500,000-plus yearlings in just the last two years. War Front’s relatively restricted books, meanwhile, will always make him a collector’s item.

But for all that they represent a pretty random group, here’s their collective foothold in the Saratoga Select market over the past six years:

Market share of top five Saratoga Selected Sale sires (by $500,000 yearlings sold 2012-17)
(Tapit, Medaglia d'Oro, Malibu Moon, Uncle Mo & War Front)
	No sold	Aggregate	% of sold	% of gross	#others w/$500k yearlings
2017	27/156	$14,005,000	17.3	26.4	9
2016	29/156	$15,480,000	18.6	34	5
2015	19/145	$11,360,000	13.1	24.3	11
2014	16/114	$8,675,000	14.1	26.1	8
2013	19/108	$7,235,000	17.6	22.7	4
2012	24/107	$9,755,000	22.4	30.5	7
TOTAL	134/786	$66,510,000	17.1	27.4

On the face of it, these figures show monster sales stallions predictably punching their weight in the ring. But it’s worth noting that the same five sires accounted for 33.7% of yearlings sold in a single-session Book 1 in Keeneland last year, and 50.8% of the aggregate. That’s a bigger difference, between percentage of sales and turnover, even than they achieved here in 2016 (when cornering 18 of the 23 $500,000-plus yearlings).

So while sire power will always be a factor at a select sale where only classy physicals will be admitted, there is possibly a slightly higher premium here on certain other assets. For one thing, we know that consignors will only risk animals of redoubtable temperament in Saratoga. There are a hell of a lot of people in town, and not that many horses to pull out between cocktails.

Maybe that is why–in contrast with 2016; not quite such a vintage sale, remember, by some recent measures–there was a conspicuously eclectic feel to those stallions with $500,000 yearlings here in 2017 and 2015. Last year there were nine others, besides this dominant group; and in 2015, 11.

Nonetheless the emphasis here tends to be on sires with stripes on their shoulders. An $825,000 Strong Mandate filly sold last year is the only yearling by a freshman to make more than half a million in the last two sales.

That said, we plainly have something out of the ordinary this time round in American Pharoah, who has been dignified with no fewer than 15 lots after racking up a $467,307 weanling average. That’s out of a catalogue boosted back up to 255, from 224 last year and 252 in 2016 (156 ultimately sold on both occasions). Back in 2013, American Pharoah himself took a tour round this ring as one of just 152 catalogued.

Other champions to have preceded him here include a colt sold for $5,000 to Samuel Riddle exactly a century ago, the last summer of the war in Europe. Racing was a sanctuary from the real world then, too. Its own foundations were only shaken, a year later, when Man o’ War suffered the solitary defeat of his career, against Upset, just over the road. Which just goes to show that you that even the interest rates of the QE era will sometimes be a safer bet than the very greatest of Thoroughbreds.

 

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