Tuesday, June 10, 2008

Clay's Folly?

I'll use the same sentence I used to start off yesterday's entry: What a difference a race makes! A horse never went from saviour to scapegoat any faster than Big Brown. One moment he seemed the horse to lift racing back into the stratosphere of elite sport but not even a race later his legacy more closely resembles the sub prime mess.

That is as good a place to start as any. The entire industry resembles Wall Street too much these days. There is no patience, everyone wants the big payoff now and those in error are willing to make everyone else pay for their mistakes. Hopefully, Big Brown will become an unwitting saviour and begin to put an end to the ridiculous scheme of the breeding industry.

The Clays are rumoured to have paid between $50 and $60 million for Big Brown. If you were in their place what would you be feeling right now? I'll tell you what: PANIC! They have no one to blame but themselves. They have been in the breeding industry for almost a quarter century. While that's not a long time compared to many families in the industry it's long enough to be able to know value. One can only hope that there are a lot of contingency clauses in that agreement. In my opinion Big Brown's pedigree is not a $150-$200k pedigree, even if he won the Triple Crown. I'm sure as I write this the ads stating "Unbeaten Triple Crown Winner BIG BROWN," have been reworked with the fee left out for the time being (does $75k interest you? Me either. Not at this point for sure. In the future I'd consider purchasing one of his daughters).

Can any horse really be worth that much? Maybe if they prove themselves over time like AP Indy or Storm Cat - and I would argue that Storm Cat was grossly overpriced for a long while - but the industry continues to push this upside down scheme. They put all the risk up front. It is no different than the stock market. They need to recoup all or most of their investment within the first three years so that in the event a horse gets no runners the balloon doesn't pop leaving them holding the proverbial hot potato. It's no different than the sub prime mess. Those mortgage institutions and banks that practiced the policies that led us into this mess knew what they were doing. They got their money, sold their problem off and everyone is paying except for them. Well that's exactly the same principle here. While a commercial breeder isn't forced to breed to the new kid on the block many will, even at inflated prices because he's the new fashion. It leaves a lot of people holding 'bad paper.' Well, I think that Big Brown will have to go on to win the Travers and the Breeder's Cup Classic to become a fashion instead of a fad. I say both races because, let's face it, this crop ain't much! Da'Tara had won only one race coming into the Belmont Stakes and was beaten more than 23 lengths by Big Brown in his only other graded stakes. While the field wasn't spectacular aside form the maiden Guadalcanal the remainder were expected to outrun him!

I also have to wonder who Three Chimneys were bidding against. Darly is a lot like Lola, what they want they get, so I can't imagine they were interested. With the Northern Dancer sire line one would expect Coolmore to have had some interest but with their wallet I can only assume that they either were not interested or were more astute in assessing his value in the breeding shed than Three Chimneys. I find it difficult to imagine that anyone so steeped in the industry got so wrapped up in the excitement of the Triple Crown chase that they lost sight of the bigger picture.

How can this flaw be remedied? Well how about graduated contracts with owners of a horse? A much smaller sum is paid up front for a stallion prospect with bonus and windfall payments throughout the life of the stallion to the owners based on his popularity, success and breeding fee. In this way the risk is spread around. If all involve truly believe in a horses value and they are proven right it certainly wouldn't take long to reap large rewards. Distorted Humor is a good example of this truth. With this system if a stallion prospect goes bust, as most do, the loss is much easier to be absorbed by all involved. Certainly full breeding rights can be purchased later when a truer value can be assessed instead of just speculated upon. Also the cost to everyone from the breeders to the buyers would (at least should, in theory) be more realistic considering the risk involved.

I am tempted to continue here with thoughts of this new 'Legend Fund' but I'll save it for another day. All I will say is one would have to be crazy, or EXTREMELY wealthy to invest in that venture. I'm sure the organizers are planning on the later. No, I take that back they must be counting on extremely rich and crazy!


Anonymous said...

I know nothing about dosage indexes etc. but I know if I were a breeder I'd look for value in a stallion, like Hard Spun for example. Last I saw, he was in as much or more demand as Street Sense. A tough,honest horse who tried every time out, with pretty good breeding himself.

George said...

I agree. I really like Hard Spun and believe he will be the best sire of his crop. I like that Raise A Native appears only once in his pedigree and I think his bottom side breeding is superb.