Keeneland September Sale

[LB]

The fact that they sold for 1,000 speaks for itself, but perhaps you know better?

The fact that they sold for $1,000 means that nobody wanted them. It doesn't mean that they were ugly or crippled or useless. They just weren't special.

I've been spending 8-10 hours a day at Keeneland since before the sale started. I've seen many of the horses that are bringing low prices and I've spoken with many dozens of breeders/buyers/sellers/agents about the yearlings and the sale. So perhaps I do know a little more than someone who's following the action by computer.

[oliverstoned]

Hi LB,
Any idea on why the full sister to Euroears went for peanuts?

[LB]

Sorry, I don't oliverstoned. I wasn't near the pavillion when she sold.

And interesting dynamic that's been happening is that because many breeders are simply needing to move stock, they send decent horses into the ring with low or no reserve. But when the bidding doesn't immediately take off (as it does when there's a good sized reserve, whether or not there is any live money on the horse) bidders/buyers get spooked and think there must be something really wrong that they don't know about. So a horse that might have brought 10-20k suddenly struggles to bring 1 or 2.

[Tappiano]

I'm sorry but I'm a realist and it does not make sense to me that either a seller would be glad to be rid of a horse for just over what a meat buyer would pay or that someone would suddenly not want to bid because there had been little action. Either you like a horse or you do not.

The reality is that 1,000 is 1,000 more than I spent on a stud fee but I would still not let that foal go for that price. I'd just as soon find it a home and give it to someone then pay all the fees associated with sending it to the sales.

[oliverstoned]

Don't think anyone would be glad to get only get a $1000 for their yearling but at least there is a good chance it went to a racing home where it may earn you breeders awards someday and improve your mare's page as opposed to selling in your local paper. As for bidders getting spooked I could see that happening, I wouldn't think many scope etc. on real cheap yearlings so I can see people getting skitish. Shipping them home, feeing and caring for them a few months then re-prepping them and shipping them back for a later sale doesn't sound like a good idea either. I think one bright spot to all this carnage will be in a couple of years you will be reading about quite a few rags to riches stories that may attract people in the future.

[madelyn]

Don't think anyone would be glad to get only get a $1000 for their yearling but at least there is a good chance it went to a racing home where it may earn you breeders awards someday and improve your mare's page as opposed to selling in your local paper. As for bidders getting spooked I could see that happening, I wouldn't think many scope etc. on real cheap yearlings so I can see people getting skitish.

Actually I've met quite a number of sporthorse buyers who come to the last days of the Keeneland sales waiting for the <$2K horses to fall through the cracks, so the racing home is a non-starter in that case.

[LB]

I'm sorry but I'm a realist and it does not make sense to me that either a seller would be glad to be rid of a horse for just over what a meat buyer would pay or that someone would suddenly not want to bid because there had been little action. Either you like a horse or you do not.

The reality is that 1,000 is 1,000 more than I spent on a stud fee but I would still not let that foal go for that price. I'd just as soon find it a home and give it to someone then pay all the fees associated with sending it to the sales.

Nobody brings a horse to the sale thinking that it's going to sell for $1,000. It costs a whole lot more than that just to get them there (prep, sales entry fee, consignor minimum, shipping, full set of xrays, halter, stall card, etc.) But then what do you do when your horse is on the grounds and no buyers show any interest? Do you eat those expenses and withdraw (for which Keeneland will charge you an additional fee) or do you let the horse go through the ring and hope for the best?

For those owners who don't have their own farms, expenses for those yearlings run about $1,000 a month. And that starts accruing again as soon as you withdraw and ship out. Plus of course there's the van ride home ($100 minimum). Hold that yearling and put him into training and you'll spend about $20,000 on him over the next year just getting ready to get him to the track.

There comes a time--especially in this market--where many people are just looking to cut their losses.

It doesn't make any difference whether or not you love your horse. Banks around here are no longer in the horse business and when the breeders around here are choosing whether they'd rather hang onto their farms or their surplus horses, the realists are letting the horses go.

[LB]

I'm sorry but I'm a realist and it does not make sense to me that either a seller would be glad to be rid of a horse for just over what a meat buyer would pay or that someone would suddenly not want to bid because there had been little action. Either you like a horse or you do not.

Forgot to add...

Imagine this scenario: you've come to spend $10,000. Rather than chase from barn to barn you've decided it's a better use of your time to join the "wall sitters" waiting in the back walking ring for each of the yearlings to pass by. You see something you like and can maybe afford. It will be in the sales ring in 10-12 minutes which means there's no time to vet it. Besides in this price range it costs too much to have a vet check every horse you find interesting.

So you ask the consignor if you can see the vet report he's carrying. It looks good enough and you follow the horse to the ring. He's a good looking horse so you're sure there must be other people on him. And yet when the bidding starts, no one jumps right in so the bidding stalls, then goes backward.

Suddenly you begin to wonder what everyone else knows that you don't. Was the consignor's vet report falsified? Did he lie about the good scope? Sure the horse looks good--but maybe he has a paralyzed flap or an old fracture in his hock from when he was a foal. The problem is, you just don't know. And because there's safety in numbers, you keep your hands in your pockets and don't bid.

Even though you thought you liked the horse a lot.

It happens all the time.

[Fireslam]

Terrific commentary, LB.

[Tappiano]

That's nice insight. I would still not hesitate to bid though if the whole reason I was there to try to buy that particular horse. It would be a big feather in someone's cap if they said "nobody else except me bid on the horse" and look what it went on to do.

[madelyn]

I've bought a few horses EXACTLY like that - one filly I paid $1,000 for (yearling) I sold off the farm two months later for $3500, went on to win $110K so far (she last raced 9/18 and is still going). I think of the silence of other bidders can be a GOOD thing.

[Sysonby]

LB's explanation is spot on. A friend of mine was thinking of that very scenario when he advised me that I couldn't "send them in naked" ie give the auctioneer no reserve or very little reserve to work with. This is especially true if there is only one person on the horse bidding against the reserve. If your reserve is essentially nothing or upset price, the next bid ($1000) will take home the horse. But if your reserve is $4900, the next bid is $5000.

The risk of course is that they RNA and how strong you are is based on how strong you think the buyer might be and who's on your horse. But that's all part of the psychology of selling at auction.

[LB]

That's nice insight. I would still not hesitate to bid though if the whole reason I was there to try to buy that particular horse. It would be a big feather in someone's cap if they said "nobody else except me bid on the horse" and look what it went on to do.

Certainly you would bid if the only reason you had come to the sale was to buy a particular horse--because in that case you would have done your due diligence beforehand. You would know what the horse was worth to you. But unfortunately only the very richest buyers have the luxury of knowing ahead of time which horses they're going to buy as everyone else has to wait and see who will be bidding against them and what they will end up being able to afford.

Consider the scenario when Zenyatta was purchased at KeeSep. Bloodstock agent David Ingordo has said that he valued her at 100K and was shocked when the bidding stopped at 60K. So shocked that before signing the ticket, he ran out to the walkway to make sure that he had been bidding on the right horse. Because he couldn't understand why no one else wanted her as much as he did. Like I said above, many bidders feel that there's safety in numbers--and when they're spending money they want to believe that other buyers see the same value in the horse that they do.

Now back to those 1K horses...here's a question. Which has more value, a horse that sells in the ring for $1,000 or a horse that is bought back for $50,000 but never has even a single live money bid? The former at least has someone willing to invest in its potential; the latter does not, even though the "price" might seem much higher while the horse is in the sales ring.

Now suppose the owner of that "50,000 yearling" has a bank loan for $250,000 and the collateral for that loan is 5 well-bred yearling colts. In my hypothetical scenario, one of those colts might be a train wreck. Nevertheless the owner still needs to demonstate to the bank that his collateral is sound or he runs the risk of having the loan called in. So in order to put a "value" on the colt he runs him through the ring with a good sized reserve.

The buyers look at him and not a single one is interested. And yet, to those who are simply watching the auction the horse appears to be hammered down for $50,000. He magically becomes a $50,000 yearling--even though everyone else including the seller (but hopefully not the bank) knows the truth.

The auctions are like an onion. There are many more layers than you see from the outside.

[Sysonby]

Now suppose the owner of that "50,000 yearling" has a bank loan for $250,000 and the collateral for that loan is 5 well-bred yearling colts. In my hypothetical scenario, one of those colts might be a train wreck. Nevertheless the owner still needs to demonstate to the bank that his collateral is sound or he runs the risk of having the loan called in. So in order to put a "value" on the colt he runs him through the ring with a good sized reserve.

The buyers look at him and not a single one is interested. And yet, to those who are simply watching the auction the horse appears to be hammered down for $50,000. He magically becomes a $50,000 yearling--even though everyone else including the seller (but hopefully not the bank) knows the truth.

Or worse and a little more sinister, the $10,000 horse is run through the auction as a $50,000 horse, is an RNA and then gets syndicated for $40,000 based on the phony reserve.

Auctions are sometimes more smoke than mirrors.

[Crystal]

Sometimes it is worth $1,000 to just to get out from underneath the bills! It was smart of the owner to know he/she may have had a train wreck, rather it have RNA'd for $1,000 they set no reserve and let the horse go. The worst thing to have to explain to a client is when they have high expectations for a subpar animal. LB was dead on in her comment.