Fletcher Jones’s Unusual Racing Legacy

Warmed by the fireplace, or perhaps by sipping yet another glass of a Santa Ynez vineyard’s rich and full-bodied red, I was contemplating the new year and how it needs to be better than the fiasco that was 2020. The wine, by the way, was issued by a label called Westerly and named Fletcher’s Red, and it happens to be the namesake of a man who burned a short but bright trajectory through horseracing. He’s also had a positive impact on young people’s lives in ways in which he could never have imagined or predicted.

By most accounts, the handsome, tough, and brilliant Fletcher Jones had it all. He was enthusiastic about the future; about his two sons; his extensive art collection that included a famous Picasso; his horses; and his company that made it all possible, which was the cutting-edge Computer Sciences Corporation (CSC) that had turned him a multi-millionaire in his 30s. But unless you’re in your 70s or older, you’ve probably never heard of him.

On a rainy evening in early November of 1972, shortly after an election that subsequently featured one of the greatest crooks of presidential history in Richard Nixon, Jones left his offices in Century City and piloted his small plane towards home. His destination was the nearly 4,000-acre Westerly Stud Farm in Santa Barbara County near the Danish-settled village of Solvang, about an hour northwest. He’d bought the place in 1965, a smaller parcel first, the Sigvard Hansen Ranch of transplanted eastern socialite, painter, poet, author, and breeder Amory Hare Hutchinson, who’d died the previous year. Later, Jones added a massive chunk of adjoining acreage from the Rancho Piocho and developed Westerly into what’s been universally described as an immaculate state-of-the-art facility for breeding, foaling, and training–a home at one point to more than 300 horses, half of them owned by Jones, with the others boarders. Promised Land was one of three stallions at Westerly at the time, and it’s where his California-bred daughter Spectacular was conceived. She would foal Spectacular Bid in 1976.

The only place comparable to Westerly in California back then was nearby Flag Is Up Farm in Solvang, which was developed by publishing heir Hastings Harcourt and Monty Roberts and housed a number of stallions, including Petrone (Fr) and Successor, the Bold Ruler champion 2-year-old colt of 1966 who’d been purchased for a reported $1 million from Wheatley Stable. Both showplaces were nestled in a verdant northern Santa Barbara valley between the Pacific Ocean and the foothills of the Santa Ynez mountains, in a region not known at the time as a place for breeding and raising high-class racehorses. Later, other prominent farms would follow, including in 1975 Marty Wygod’s River Edge Farm near Buellton, a leading California nursery for years and the home of California leading sire Pirate’s Bounty. Wygod, incidentally, once worked for Jones at CSC, and Jones reportedly gifted Wygod with Wygod’s first two horses.

Jones never made it home from that election night, reaching neither the Santa Ynez airport nor the landing strip on a driveway at Westerly that he also sometimes used. Instead, he crashed into a ridge about eight miles from the airport and died, aged 41 and in his prime. He was a skilled pilot in good health, by all accounts, and there’s never been an explanation of how and why the plane crashed.

In late October of 2020, shortly before an election that featured one of the most divisive, civics-challenged, and chaotic presidents in history, The Fletcher Jones Foundation announced that it was granting $1 million to endow a chair in Citizenship and Civic Virtue in the Honors College at Azusa Pacific University. “Students will learn what democracy requires of its citizens and will benefit from an education that promotes moral and political principles and practices concerned with the welfare of the community as a whole,” the Christian university said in a statement upon receiving the grant.

In 2019, the foundation awarded $6.4 million in grants and it has altogether given more than $230 million since it first began operations under John Pollock, who was Jones’s longtime attorney.

Pollock knew Jones well, liked and admired him, and wrote a succinct and unvarnished biography of him. According to Pollock, Jones wasn’t a particularly charitable man. He wrote: “Although today the world remembers the philanthropic accomplishments of The Fletcher Jones Foundation and its special support for the colleges and universities in California, Fletcher did not, in his lifetime, spend money or time to help his fellow man. His income tax returns for the last few years of his life show charitable gifts of less than $200 per year. The creation of The Fletcher Jones Foundation as the beneficiary of the bulk of his estate was prompted more by his desire to minimize estate taxes than it was to support in perpetuity the various charitable and educational organizations that today receive over $7 million a year.”

It wasn’t Jones’s intent to help and educate young people, but it’s his legacy that he has done so, transcending anything he did in racing, where he did quite a bit in a short time.

Typecast Versus Convenience

Jones bought his first yearlings in 1964, a year before establishing Westerly, and one of them was Fleet Host, a California-bred son of My Host who won the California Derby and a division of the San Luis Rey and later went to stud at Westerly. His best, however, was the Prince John mare Typecast, who at six in 1972 defeated males in the Sunset H., Man O’ War S., and Hollywood Park Invitational Turf H. and was named the Eclipse champion handicap mare.

Craig Bernick, 42, who runs Glen Hill Farm, is that rare youngster who knows of Jones, and it’s not only because he happens to be well read and a student of pedigrees and racing history. His grandfather Leonard Lavin, then president of the cosmetics giant Alberto-Culver Co., established Glen Hill in Ocala at about the same time Jones was setting up his Santa Ynez property, and the two titans clashed when Jones issued that time-honored challenge to Lavin: My horse is faster than yours and let’s put up money for a match race and settle it.

Reports at the time said that Jones was irked that Lavin’s trainer, Willard Proctor, had suggested that Convenience, a 4-year-old daughter of Fleet Nasrullah who’d defeated Typecast in the Vanity H. by a half-length with a five-pound advantage, was just as good as Jones’s mare, who’d finished second with trouble.

The Typecast versus Convenience match race materialized at Hollywood Park in mid-June of 1972 with each owner putting up $100,000 and the track adding another $50,000 for a winner-take-all purse of $250,000 over nine furlongs on dirt at level weights–a record purse for a match at the time. The race was memorable, with Convenience winning by a head in 1:47 3/5, and Jones, always pragmatic, was a gracious loser.

Five months later, Jones was dead, and the following January his stock was dispersed for $4.4 million at a special auction at Hollywood Park that drew buyers from around the world. Heron Bloodstock, as agent for Shigeo Yoshida (not to be confused with Zenya Yoshida, who purchased eventual leading Japanese sire Northern Taste as a yearling for $100,000 in 1972), bought Typecast for a then-world record of $725,000 for a horse at auction. She was bred to Sir Ivor that spring and sent to Yoshida’s farm in Japan, where her second foal, the filly Pretty Cast, was the champion older mare in Japan in 1980. There’s been only one other stakes winner from the family since then, the aptly named Australian-bred Group 3 winner There’s Only One, whose fourth dam is Typecast. Convenience, on the other hand, is ancestress of too many stakes winners to list here, and Bernick said that Glen Hill still owns four mares that trace to her – which is also a connection to his grandpa and tangentially to Jones.

As for Westerly Stud Farm, it was split into parcels and sold. Most notably, D. Wayne Lukas utilized part of it for his Westerly Training Center, where horses such as Gl Kentucky Derby winner Grindstone were prepared for the track. It later morphed into part of what’s now Tommy Town Thoroughbreds.

Perhaps the biggest growth in Santa Ynez since the breakup of Westerly has been in the wine-growing sector. Michael Speakman bought the Westerly label three years ago, and he’s been curious about Fletcher Jones since. By chance, I spoke to him about Typecast and suggested that he name a bottle after her, and he loved the idea and promised to do so in this new year.

I suppose Fletcher Jones’s racing legacy isn’t quite done yet.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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Taking Stock: Performance vs. Stud Fee for the Small Owner-Breeder

By the time a stallion has established himself at stud, his fee is usually determined by performance, not the hype that surrounds new horses when they first enter stud. There are, of course, many ways to measure performance, including progeny earnings (which determines placement on the General Sires list), percent of black-type winners to named foals, quality of runners, number of Grade l winners, etc.

There are seven thoroughly proven stallions that will stand for $150,000 or more in North America in 2021, and these elite horses–Into Mischief ($225,000), Tapit ($185,000), Uncle Mo ($175,000), Curlin ($175,000), Medaglia d’Oro ($150,000), War Front ($150,000), and Quality Road ($150,000)–more than make the grade whichever way you slice and dice statistics. For instance, this select group sires black-type winners from named foals at rates of between 7% to 12% (see accompanying charts), which is the gold standard nowadays in the era of big books. [Note: Younger stallions will have lower percentages because their 2-year-old crops will be a larger percentage of the whole.]

Each year as the breeding season rolls around, a dwindling number of smaller owner-breeders frequently ask us at Werk Thoroughbred Consultants to recommend the best proven stallions standing for $15,000 or less. These people, who once made up a larger percentage of owners, need sires with track records, because they race what they breed and have no room for error. A shiny new horse at $15,000 is unproven and too much of a gamble for them, whereas that same first-year horse might well be the choice for a commercial breeder shopping in that price range. It just so happens, however, that the types of stallions best suited for small homebreeders are inexpensively priced these days, not because they lack performance but because they tend to be old and are mostly ignored by a large swath of folks who breed primarily to sell. And it’s the young stallions that sell.

Old stallions, like old people, tend to be underappreciated in a climate that rewards youth.

In fact, older proven stallions that aren’t elite are frequently priced lower than they should be if performance itself were the sole criteria for fee determination, but with them it’s not. They are simply not fashionable, even if they once were.

For those of you who breed to race, I’ve listed in another chart 10 favorite older stallions that will stand next year for $15,000 or less, and they were chosen primarily because they satisfy two criteria aside from my preferences for them: they are (or were last year) ranked on TDN‘s General Sires List; and they get a minimum of 5% black-type winners from named foals, which is a rate close enough to rub shoulders with some of the elite sires standing for $150,000 or more, but at a significantly lower fee that makes them both attractive and affordable for homebreeders. This group can get you a horse good enough to play with the big boys. There are a few others I could have included–my apologies–but didn’t for space considerations.

Here they are by descending stud fee; statistics are for the Northern Hemisphere:

Midnight Lute ($15,000) – This son of Real Quiet at Hill ‘n’ Dale is ranked #12 on the General Sires List, which puts him ahead of both War Front and Quality Road this year, and note also that he’s one of the younger horses in this group with nine crops of racing age. He gets 5% black-type winners from named foals and has demonstrated the ability to sire runners of the highest class, such as Eclipse Award winner Midnight Bisou, one of the best fillies of her generation. Altogether, he’s sired 33 black-type winners and four Grade l winners, including 2020 Gamely S. winner Keeper Ofthe Stars.

Lemon Drop Kid ($15,000) – Through 17 crops of racing age, this well-bred son of Kingmambo has sired 7% black-type winners from foals, the same as his mate Quality Road at Lane’s End. Lifetime, he has 96 black-type winners, including nine Grade l winners, and he’s ranked #44 on the General Sires List this year with such horses as Canadian classic winner Belichick, Glll Ontario Derby winner Field Pass, and 7-year-old French Group 2 winner Red Verdon. In Japan, he’s represented by Godolphin-owned 2-year-old Lemon Pop, who won a non-black-type Kentucky Derby points race on Nov. 28 at Tokyo after winning his debut before that. Though he gets top-level turf and all-weather runners, his daughter Lemons Forever won the Grade l Kentucky Oaks on dirt and has since become a Kentucky Broodmare of the Year.

Mineshaft ($15,000) – A sire of 51 black-type winners through 14 crops–six at Grade l level, including $3.3 million earner Effinex and successful Darby Dan sire Dialed In–he stands at Lane’s End alongside Lemon Drop Kid and is a son of A.P. Indy. He’s at #55 on the General Sires List and is represented this year by Glll Canadian Derby winner Real Grace in what for him is a slow year. He gets 5% black-type winners from foals.

Sky Mesa ($12,500) – This son of Pulpit has sired 73 black-type winners and four Grade l winners through 14 crops, and it’s notable that he’s also the sire of three Canadian champions that aren’t on his list of Grade l winners. Last year, his 2-year-old daughter Perfect Alibi won the Gl Spinaway S., and this year he’s represented by two 3-year-old black-type winners, both of them graded placed. He gets 7% black-type winners from foals, is ranked #66 on the General Sires List, and stands at Three Chimneys.

Stormy Atlantic ($10,000) – The elder statesman of this group, he’s a son of Storm Cat at Hill ‘n’ Dale with 19 crops of racing age. Throughout his career, he’s maintained a 7% rate of black-type winners to foals and altogether has so far sired 103 black-type winners and seven Grade l winners (eight, if you count one in Argentina). His gelded son Stormy Liberal won the Gl Breeders’ Cup Turf Sprint twice and was an Eclipse Award-winning turf male, while in Canada he’s had three champion juveniles and Horse of the Year Up With the Birds, also a Grade l winner in the U.S. Among his top performers this year are Grade ll winner Big Runnuer, a 5-year-old; Grade lll winner Neptune’s Storm, a 4-year-old who won a Grade ll race last year; and 7-year-old Stormy Antarctic, a previous Group 2 winner who was second in the G1 Prix d’Ispahan in France in July. Though he’s unranked on the General Sires List in 2020 (he was ranked last year), he consistently gets sound and durable runners with a high degree of class.

Midshipman ($7,500) – This son of Unbridled’s Song at Darley is the youngest horse here with only seven crops of racing age – the same as Quality Road. He’s #47 on the General Sires List and to date is represented by 28 black-type winners in the Northern Hemisphere, a rate of 6% to foals. Though he doesn’t have a NH Grade l winner yet, he has three in Brazil, one of which, Royal Ship (Brz), is Grade ll-placed in California this year. His leading earner to date is Grade lll winner and Grade l-placed Lady Shipman ($902,387), whose son Golden Pal won the Gll Breeders’ Cup Juvenile Turf Sprint this year.

Mizzen Mast ($7,500) – Based at Juddmonte, this son of Cozzene has eight Grade l winners to his credit (nine, if you include another in Peru) from 60 black-type winners, for a rate of 6% black-type winners from foals. One, Flotilla, is a Gl Breeders’ Cup Juvenile Fillies Turf winner and a French classic winner, taking the G1 Poule d’Essai des Pouliches at three. Another, Full Mast, is a Group 1 winner at two in France, while Sea Defence (also known as Giant Treasure) won a Group 1 at five in Hong Kong. His best-known runner, the mare Mizdirection, twice won the Gl Breeders’ Cup Turf Sprint, and in California he’s had the winners of such races as the Gl Hollywood Derby at 10 furlongs on turf; the Gl Charles Whittingham Memorial at 10 furlongs on turf; and the Gl Hollywood Gold Cup at 10 furlongs on all-weather, among other prestigious races. Yes, he’s a turf sire with his best runners, but note that his daughter Sailor’s Valentine won the Gl Ashland S. at Keeneland on dirt. He’s #74 on the General Sires List.

Silent Name (Jpn) (C$7,500) – This son of Sunday Silence stands in Canada at Adena Springs and is represented by 27 black-type winners, or 7% from foals, and he’s #83 on the General Sires List. He doesn’t have a Grade l winner yet in the Northern Hemisphere (he has one in Brazil), but his graded winners include several who have placed at the highest level, including Grade ll winners Silentio and Fanticola, plus listed winner Mr. Online. His current runners are headed by Grade ll winner Silent Poet, a 5-year-old.

Freud ($6,500) – A Storm Cat brother to Giant’s Causeway, he’s a New York-based sire at Sequel with enough proven form nationally to take him out of the regional ranks, though he’s a must-use sire for the lucrative restricted program in New York. The sire of 55 black-type winners and four Grade l winners (plus an additional three in Argentina) through 16 crops, he gets 6% black-type winners from foals. His best include Gl Cigar Mile H. winner Sharp Azteca, now at stud at Three Chimneys. Freud isn’t ranked on the General Sires List this year, but he was last year.

Include ($5,000) – This son of Broad Brush at Airdrie is responsible for 45 black-type winners through 15 crops, including five Grade l winners (plus another five bred in Argentina), and he’s ranked #98 on the General Sires List. He gets 6% black-type winners to foals and has a notable bias for fillies: all five of his top-level winners are fillies, headed by millionaire Panty Raid. If you included his five Group 1 winners from Argentina, nine of the 10 are fillies. His top current runner, 3-year-old Grade ll winner Sconsin, also is a filly, but he does have champion Canadian juvenile colt Riker and Grade lll winner and Grade l-placed All Included among a smaller group of accomplished males.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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Taking Stock: Fifth-Year Stallions and Brody’s Cause

Much has been made lately in Kentucky on farms reducing stud fees in response to the blighted economy, but there’s a group of stallions whose fees would have mostly dropped as a matter of course even in booming times. These are second- through fifth-year stallions; frequently, fees for horses entering their fifth season at stud as their first-crop runners turn three show particularly pronounced drops from their initial fees.

A small commercial breeder contacted me the other day to discuss the reduced 2021 stud fee for a stallion whose first crop is racing at two now. She noted how well the stallion matches her mare on pedigree and physique and the 50% reduction in fee from his first year at stud but worried that “his first 2-year-olds are not yet lighting the racetrack on fire, and his sales figures plummeted this year.”

This is a common dilemma for breeders and stud farms alike. Farms need to price fifth-year horses caught in this tricky bubble attractively enough to attract breeders in order to keep both groups in the game on stallions whose long-term viability in Kentucky will be determined in the next year or two. One false move in pricing could spell commercial disaster for one, the other, or both.

And it’s not just pricing, either, as I told this breeder. “You’d be breeding in his fifth year at stud. You’ll have 5-year-olds, 4-year-olds, 3-year-olds, and 2-year-olds [racing] when you sell [your yearling], so you’d have to really like him, because if they are not successful, it will be tough. And even if they are successful, there’s a ceiling [on price] unless he turns into Curlin.”

Curlin, who’d entered stud at Lane’s End in 2009 for a $75,000 fee, got his first winner in the most dreaded of places–the Central Moscow Hippodrome in Russia, on June 17, 2012. He finished the year ninth on the freshman sire list with no 2-year-old stakes winners to his credit and stood for $25,000 in 2013–his fifth year at stud. The stallion’s yearling average in 2012 was $70,000 versus $137,000 in 2011 for his first-crop yearlings. However, the Horse of the Year eventually turned things around, and by 2015, when his first crop was five, his yearlings averaged $211,000. Curlin will stand for $175,000 in 2021, the same as this year. His 2020 yearlings to date have averaged $342,000.

Stallions with first-crop 3-year-olds next year can change perceptions quickly with a few early-season stakes winners, particularly if they’re on the Classic trail, guaranteeing patronage for another year or two by finishing out the season strong with two crops–3-year-old and 2-year-olds–at the races.

Daredevil did some of this in 2020 with Gl Preakness S. and GI Alabama S. winner Swiss Skydiver and Gl Kentucky Oaks winner Shedaresthedevil after a poor run with his first 2-year-olds, but by then he’d already been jettisoned from Kentucky after only four seasons at stud.

However, it’s the rare stallion that can carry that momentum forward, because he’ll need to do it with mares of decreasing quality in years two, three, and four. Most stallions tend to have their highest output of stakes winners from their first crop, when they get their best mares, and numbers tend to decrease commensurately with a decrease in mare quality.

I noted in this space Feb. 27 (Third- And Fourth-Year Sire Issues) that of the top 10 freshman sires of 2017, five had left Kentucky by 2020–when their first foals were five–including the leader, Overanalyze, along with Shanghai Bobby (#3), Animal Kingdom (#4), Flat Out (#7), and Justin Phillip (#10).

Brody’s Cause

A strong opinion on a horse, formed by an analysis of facts and an evaluation of price versus the competition, is the best way to approach a fifth-year stallion.

For example, Spendthrift’s multiple Grade l winner Brody’s Cause (Giant’s Causeway), a $350,000 yearling purchase for Albaugh Family Stables trained by Dale Romans, will stand in 2021, his fifth year, for $5,000, down from the $12,500 he started out at in 2017 and the $7,500 he was listed at this year. He is ninth on the freshman sire list through today behind leader Not This Time (Giant’s Causeway), another Albaugh horse whose fee has jumped to $40,000 in 2021 from an initial $15,000 in 2017 and the $12,500 in 2020.

However, Brody’s Cause has eye-opening stats versus the competition and at the price.

Both Not This Time and Brody’s Cause are each represented by two black-type winners so far–the most among freshman sires, along with Nyquist (Uncle Mo), whose 2021 fee is $75,000; and Outwork (Uncle Mo), who stands next year for $15,000.

Brody’s Cause is also tied with Not This Time and Nyquist in the top 10 by number of black-type runners with four apiece, but he’s done this from 55 foals to 95 for Not This Time and 80 for Nyquist.

As for the quality of his runners, five of his six winners have won maiden special weights while another, the Bob Baffert-trained filly Kalypso, won for the first time in the Listed Anoakia S. Oct. 18 at Santa Anita after placing in two Del Mar maiden special weights. Kalypso, by the way, was a $240,000 Fasig-Tipton Kentucky July yearling.

On the same day of Kalypso’s win, the gelding Gospel Way ran second in the Listed Display S. at Woodbine–his second stakes placing after a third in the Victoria S. at the same track.

Earlier this month, Brody’s Cause showcased another talented maiden winner. A $185,000 Fasig-Tipton Saratoga yearling for Albaugh and Romans, Smiley Sobotka graduated at Keeneland in his second start in the style of a horse who looks to have a bigger future next year at three. The colt had dead-heated for second in his debut at Ellis over 6 1/2 furlongs but found the mile and a sixteenth at Keeneland much more to his liking.

This brings me to Sittin On Go, Brody’s Cause’s most accomplished runner to date. A $65,000 Keeneland November weanling and $62,000 Keeneland September RNA, he also races for Albaugh and is trained by Romans. Sittin On Go won his debut at Ellis in a five-furlong dirt sprint by four-plus lengths in mid-August and returned last month in the one-mile Glll Iroquois S. at Churchill to win impressively by 2 1/2 lengths. The runner up, Midnight Bourbon (Tiznow), ran third in his next start in the GI Champagne S. at Belmont, though he was beaten by more than 14 lengths by the leader of the division, Jackie’s Warrior (Maclean’s Music). However, the third-place finisher in the Iroquois, Super Stock (Dialed In), also came back to place third to Essential Quality (Tapit) in the Gl Breeders’ Futurity at Keeneland, less than five lengths behind the winner.

Sittin On Go has solid Grade l formlines, and he will test Jackie’s Warrior in the Breeders’ Cup Juvenile next.

Brody’s Cause has one other stakes horse, Girther. A $2,500 Keeneland November weanling, $4,000 Keeneland September yearling, and $20,000 OBS March 2-year-old, Girther won a Del Mar maiden special weight in July in his second start and came back a month later at the same venue to run a neck second to Weston (Hit It a Bomb, also at Spendthrift) in the Gll Best Pal S.

Brody’s Cause won three of eight starts, including the Breeders’ Futurity at two and the GI Toyota Blue Grass S. at three, both at Keeneland, and earned $1,168,138. His sire Giant’s Causeway doesn’t yet have an elite son in North America, but he did in Europe with Shamardal, who died earlier this year. Here, he has the good First Samurai at Claiborne plus several others trying to rise to that level, but in Not This Time and Brody’s Cause he’s still got his name in the hat with two promising young guns, and who knows?

Spendthrift’s flagship horse Into Mischief also started off for $12,500, dropped to $7,500, and is now booked full at $225,000. And the farm’s elder statesman, Malibu Moon, began his career at Country Life in Maryland for $3,000 and went on to sire a GI Kentucky Derby winner among many others of note.

My advice to the small breeder looking for value at $15,000 and down? For the price, Brody’s Cause is worth the gamble.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

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Taking Stock: Keeneland Numbers Are Troubling

With a pandemic that’s led to the loss of 200,000 lives, the loss of jobs, and overall economic instability that’s affected most people except for the super wealthy that are heavily invested in the stock market, no one expected the Keeneland September yearling sale to be anything but down by gross and average versus last year. This was as predictable as saying that an egg dropped on concrete from six feet would break.

So, what’s the damage? Through the first 10 sessions that ended with Book 5 on Wednesday, 2,129 yearlings had sold for a gross of $245,278,700 and an average price of $115,208, with a median of $50,000. The final two sessions on Thursday and Friday that comprise the most inexpensive horses in the sale in Book 6 will not add much to the gross, dropping the average further. Last year, the penultimate session added $2,299,500 to the gross with an average price on the day of $10,646, and the last day added $1,340,300 with an average price of $6,382.

Based on the numbers for the last two days in 2019, you can project that this year’s sale will end with a gross of about $249,000,000 for about 2,500 head sold, which suggests an average of about $100,000 or slightly under, versus 2,974 yearlings sold for $372,348,400 with an average price of $125,201 and a median of $47,000 one year ago. The sale gross will probably be down about 33% and the average down about 20%. Those are big hits nowhere in the neighborhood of anything since the Great Recession of 2007 to 2009.

In 2009, the worst year of the recession, 3,279 yearlings grossed $198,055,200, averaging $60,401 with a median of $22,000. The gross and average figures represented declines of 40% and 34%, respectively, versus the previous year.

Two years prior to that, however, when the economy first showed signs of trouble, the gross of $385,110,600 and the average of $101,317 were down 4% and 10%, respectively, from 2006, suggesting that the declines this year could be a harbinger of worse to come if the economy doesn’t rebound over the next few years. In other words, the first year of deep economic turmoil doesn’t usually tell the whole story of what’s about to unravel, and if we’re already down a third by gross and about 20% by average now, what will happen next year and the year after if troubles continue? Those are sobering thoughts.

One other crinkle worth mentioning: every year from 2006 to 2019, 63% to 72% of the catalog has sold. This year, however, for the first time, the sale is on pace to see a transaction rate of less than 60% from horses catalogued, including “outs” and RNAs. Many of those that were outs or didn’t make reserves were higher-priced horses, and their absence significantly impacted the gross. For example, if you add about 5% of the catalog back into the mix at an average price of $200,000 (and that’s a low estimate considering the number of buybacks out of Book 1 alone), that’s conservatively about $43,000,000 that could have raised the gross to $292,000,000. Under this scenario, the gross would have declined 22% instead of the projected 33%. Likewise, the average would have been about $117,000, or a decline of 7% instead of 20%.

Top of the Market

Keeneland’s Director of Sales Operations Geoffrey Russell addressed this issue in TDN after Book 1 concluded, saying, “We are in that Book 1 market where people are willing to send horses to the racetrack. As we go through the sale, there are people who are commercial breeders with commercial crops who have to sell, so hopefully we see a change in that.”

What that translates to is that the people who sell at the top end of the market are more financially secure and can keep those horses they don’t sell, but those below the top are less solvent and have to sell to generate cash flow, particularly in the bottom half of the market. The numbers bear this out. In Book 1, only 228 of 448 catalogued, or 51%, sold. In Book 5, in contrast, 500 of 792, or 63%, sold–a figure on the low end of historical trends but still within the parameters.

Therefore, as predictable as the declines were this year, it was just as predictable that the top of the market would be the least affected by the conditions. One reason, as noted earlier, is the strength of the stock market. Unlike other economic indicators, the stock market was near all-time highs through the first week of the two-week sale and is mostly in a bubble that’s not representative of the general economic malaise that’s plagued the rest of society. Those folks invested in it haven’t lost money, and they spent commensurately at Keeneland at the top end. Last year, there were 22 lots that made $1 million or more, and this year the number was 15, though the group from a year ago brought significantly more in aggregate, headed by the $8.2 million American Pharoah filly from Leslie’s Lady purchased by Mandy Pope. This year the top price was the $2 million Tapit colt from Tara’s Tango purchased by the partnership of Eclipse, Robert LaPenta, Gainesway, and Ron Winchell. Eclipse, LaPenta, and Bridlewood had earlier been partners in the purchase of Tapwrit (Tapit) for $1.2 million at Fasig-Tipton in 2015. Gainesway and Pope later joined the group in the ownership of the colt that would win the Gl Belmont S. and is now at stud at Gainesway.

An increase in partnerships for stallion prospects has been a feature of select portions of yearling sales in recent years, fueling some of its growth, but it probably reached its apex this year. It had heated up particularly after the success of Justify, purchased for $500,000 at Keeneland in 2016 by WinStar, China Horse Club, and SF Bloodstock and later sold for big bucks to Coolmore. Justify was followed closely by a trio of successes for the reconstituted buying group of SF Bloodstock, Starlight, Madaket, and partners, self-dubbed “The Avengers,” whose scores include Grade l winner Eight Rings (Empire Maker), sold for stud to Coolmore; DQ’d Grade l winner Charlatan (Speightstown), sold to a syndicate headed by John Sikura at Hill ‘n’ Dale; and Grade l Kentucky Derby winner Authentic (Into Mischief), whose breeding rights were sold to Spendthrift. All three were purchased at Keeneland in 2018 and represented massive returns on investment like Justify.

The Avengers were back and bigger again this year, along with other groups following the same plan. The Jockey Club’s 140-mare cap rule, which takes effect for horses foaled in 2020 or later, probably helped to fuel prices and prop the market even higher despite current economic conditions, because current yearlings were foaled in 2019 and will not be limited to the restriction should they make it to the breeding shed–meaning, that they have a chance to make more money at stud. Next year’s sale featuring foals of 2020, however, will likely be dampened by the 140-mare restriction–an industry-made valve that will have the unintended consequence of closing off money flow for yearling colts during what could be another economically challenging year.

And if the stock market, which is highly volatile, does crash in the next year or two–remember that it was in 2009, two years after the economy started melting, that the Dow Jones bottomed–the industry could be in for even tougher times. It was after the 2007-2009 recession that foal crops settled at the 18,000-20,000 foals-per-year range, which was down from the 35,000 range before 2007. Further upheaval will drop crops down more, shrinking all aspects of the industry with it.

In March in this space, I wrote this about the last decade, when the stock market recovered and grew to new heights: “The sizes of annual foal crops, however, were completely unaffected by a rising stock market over this time span. This striking anomaly indicates that even in the best of times, the foal crop will not rise, but under adverse economic conditions, it falls significantly and will likely fall again if the market bottoms. This peculiar relationship of flat foal crops within a rising stock market also suggests that the top parts of the yearling market are healthy–mirroring society at large, where the wealthy keep getting a greater piece of the pie–and those participating in this sector are expanding their equine holdings as those at the bottom are being squeezed out, keeping foal production stable through a statistical sleight of hand.”

That is what it is.

Sid Fernando is president and CEO of Werk Thoroughbred Consultants, Inc., originator of the Werk Nick Rating and eNicks.

 

 

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