A racing certainty: Inside the high-stakes world of bloodstock sales
The transactions at thoroughbred horse sales are extraordinary – and they signal where our economy is headed. Dominic Prince watches the action at the first day of Tattersalls, where untried horses become superstars
Thursday 06 October 2011
Just before 11.30 yesterday morning, the languid and debonair figure of Edmond Mahony, the chairman of bloodstock auctioneers Tattersalls, took to his rostrum for the most important sale of his year, the October Yearling Sale: Book One. The town of Newmarket in Suffolk where Tattersalls is based is synonymous with thoroughbred horse racing and is thronging with equine experts. After imploring the gathered punters to read the terms and conditions ("particularly first-time buyers"), he read out details of the first lot to go under the hammer. Colour, sex, mother and father. The pretty, but somewhat truculent, bay filly was backed into the ring having put up some resistance to walking forward. The bidding then started for an all-day auction that will go on until nightfall and see more than 150 lots of prime horseflesh being traded.
These animals will carry the hopes and expectations of a cast of owners, breeders, trainers, agents and indeed the man in the street, whose only interest in racing is the £5 flutter he might have on Derby Day.
It didn't take long for the hammer to go down on the first lot. The untried, unraced yearling was knocked down for 14,000 guineas – somewhat quaintly, horseflesh sold at public auction in England is still traded in guineas (worth £1.05), but also euros, yen, Hong Kong and US dollars – reflecting the international scale of the bloodstock business. More than 450 lots will be sold over the next two days. And if yesterday was anything to go by, the racing world has bucked one of the deepest recessions in living memory and – if history repeats itself – then the general economy may follow suit.
Come Lot 2 and the drama unfolded when John Magnier, the billionaire Irish horse breeder, took his place at the top of the gallery and started bidding on a bay filly sired by the famed retired thoroughbred Galileo. Magnier, one of the canniest readers of bloodstock markets, took the filly up to 250,000 guineas before ceding to a bid of 260,000. But he wins both ways. The sire of the filly belongs to him and by helping the market out, Galileo becomes ever more valuable for mating duties.
Soon after, Lot 9, a well-bred pretty chestnut filly had the crowds gasping. The bidding started at 100,000 guineas and after a battle that ping-ponged around the room the horse was knocked down for 700,000 guineas (£735,000) to Alan Cooper, the racing manager for the Niarchos family (of Greek shipping fame). This for a horse that has never set foot on a racetrack, has never had a saddle on its back or a rider on top. Cooper, an affable and kindly bloodstock professional, said: "She'll be sent to Sir Henry Cecil, let's just hope she's good." Cecil, of course, is a trainer noted for his extensive trophy cabinet. She'll have to be very good too for Cooper to make a profit on her – but then he's pretty good at making the racing game pay. The Niarchos operation is one of the more successful in the high-risk world of horseracing.
The buyers come from all over Europe, the US, India, Russia, Chechnya, Kazakhstan and the Middle East. And it is the Middle East, in the shape of Sheikh Mohammed, the supreme ruler of Dubai, that drives the market. In the past 40 years the Sheikh and his family has plundered billions of pounds (some estimates put it as high as £20bn) buying horses and tending to their every need at luxury studs and racing stables dotted all over the world. From the US to Ireland and taking in France, Dubai and the UK, the Sheikh is a patron extraordinaire of the turf.
Strangely, yesterday's sale should give a much-needed fillip to the Chancellor, George Osborne, because historically the market trading young horseflesh reflects the world economy – only with an 18-month time lag. What happens now in the horse business should happen to the world economy in a year-and-a-half's time. It happened in the 1970s, 1980s, 1990s and on into this millennium.
The last boom reached its nadir in January 2006 when John Magnier bid $16m for a horse later named The Green Monkey, after a golf course in Barbados. It was, and remains, a world record for a yearling sold at public auction. Sheikh Mohammed was the very lucky under-bidder. The Green Monkey raced three times but failed on every occasion to impress and was retired to stud to Florida in 2009 where he is now charged out at $5,000 a mating. Not good business.
Tattersalls is where the cream of horseflesh comes to be sold. It is a temporary home for horses destined to be champions and a must-visit destination for some of the richest men and women in the world. Set on a hill on the outskirts of the town, the buzz around the sale shows there's no business like the bloodstock business.
The agents, stud owners, trainers and investors all congregate conspiratorially; these are men and women prepared to splash out millions on an unnamed, unraced, unbroken and untried yearling colt or filly. Although the purchase of young racehorses is often dressed up as an investment, the reality is a little different. It is one huge gamble in a pretty much unregulated marketplace – which is, surely, one of its great attractions. Buy fine wine, a classic car or a painting at public auction and the price might fluctuate, but it will have an intrinsic value below which it will rarely fall. Meanwhile, the bloodstock boom, in contrast, appears all the more perplexing.
Buy a yearling colt or filly for, say, 500,000 guineas and if it's too slow or too idle to perform on the racetrack, it'll be worth around its weight in dog food... approximately £500. That is one hell of a gamble to take, but one that a group of horse nuts – people who are addicted to the thrill of all things equine – seem prepared to take year after year.
On the other hand, if you buy a superstar then it can be life-changing both emotionally and financially. But it is a mystery why men will pay such astronomical sums for horses when it really does seem like the cheap ones are the best ones.
For instance between January 2009 and July 2011, Tattersalls yearlings costing 75,000 guineas or less have won more than 240 Group or Listed races (the most valuable type.)
And the omens are good for the rest of the week too. Tattersalls yearling sale is the last in a list of premier horseflesh sales that span the US, Ireland and France.
In all those countries this year the sales have boomed. They were up 19 per cent in the US, 17 per cent in France and even debt-strangled Ireland saw a rise of 7 per cent in sales.
But the industry has a remarkable way of rebalancing itself. During the boom years every man and his dog seemed to want to breed a champion. Fuelled by the financial profligacy in Ireland, 15,000 live foals were born there and in England during 2006. This year the figure is nearer 6,000.
The upturn in prices could not have come at a better time. In Ireland alone, more than 100,000 people are employed directly in the racing and breeding industry. It used to be one of the biggest employers in the UK during the 1970s when ancillary activities such as bookmaking were taken into account.
But the racing game has been in the doldrums for some time. A lack of prize money, scandals involving jockeys and a lack of television support have all driven the downturn.
It may be that an eclectic bunch of international eccentrics prepared to gamble all on the potential speed of a horse will have gone some way to revitalising an ailing industry. Tattersalls certainly thinks so.
Toward the end of the first day, the average price paid was up by more than 30 per cent on the same sale last year. Tattersalls director Jimmy George declared himself "delighted" by the outcome. "It really reflects the quality of the stock on offer."
Lord Lloyd-Webber's Watership Down stud consigned two yearlings at the morning session, amassing a total of 180,000 guineas. Lady Bamford's Daylesford stud, funded through the great riches of her JCB road diggers and tractors fortune, sold a well-bred grey colt for 100,000 guineas and Sir Tony O'Reilly's Castlemartin Stud hit the bonanza when selling Lot 14 for 400,000 guineas. Lady O'Reilly looked delighted.
As if to prove the upward trajectory of the trend, and what it might mean for wider economics, Alan Cooper's record was pretty short lived. Lot 112, another filly by Galileo, was bought by Paul Makin, an Australian owner, for 800,000 guineas. But there again, there's no sign of a recession in Australia just yet.
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