Barretts average falls 21.1% and total receipts decline 41.7% in a sparse market

The signs were ominous on March 11 at the final preview for the 2001 Barretts March sale. In the mid-1990s, rows and rows of Japanese buyers filled the Fairplex Park grandstand, and their presence produced some of the best two-year-old sales catalogs in history. But in 2001 the grandstand of the Pomona, California, track definitely looked more like a glass half empty than one half full.

Barretts highlights

• Average declines 21.1% to $142,042
• Total receipts plummet 41.7% to $10,085,000, the lowest total since 1993
• Median price declines 33.3% to $70,000
• Buy-back rate rises even higher to 45.4%
• Top price drops from a record $2-million to $750,000

With as many sellers as buyers filling the seats, the outlook of consignors was as cold and dreary as the rain-pregnant clouds that obscured the California sun.

"There's nobody here," said consignor Becky Thomas Montgomery of Sequel Bloodstock after watching her Bertrando colt zip a quarter-mile in a sale-record :21.70.

"We're very unsure about the depth of the market," said Barretts President Jerry McMahon. "We consciously went after the lower end of the market, highlighting the less-expensive horses we have sold trying to attract local trainers, but I don't know whether that's going to work or not.

"It's particularly chancy because the stock market hasn't seemed to reach a bottom yet. The free fall really backs people up."

Harsh reality

With many other factors affecting the final figures, it was unclear whether this strategy, forced by the realities of the marketplace, worked, but the numbers focused unwavering attention on some particularly harsh realities:

• Average declined 21.1% to $142,042;
• Total receipts plummeted 41.7% to $10,085,000, the lowest total since 1993;
• Median price declined 33.3% to $70,000;
• Buy-back rate rose even higher to 45.4%; and
• Top price dropped from a record $2-million to $750,000.

"The numbers were by definition going to be bad," McMahon said after the sale. "Pinhook prices going in were significantly lower. We weren't ever going to be comparatively where we had been.

"There were a lot of examples of people paying retail price for two-year-olds when the horse and the consignor suited their needs."

Despite the grim sale ledger, there were, indeed, a few positive signs. Although the top price was less than half the top figure just 12 months earlier, four horses sold for $700,000 or more, compared with three a year ago, making it clear that horses perceived as the best available still went for very good prices.

Those four horses turned out to be the four colts that best met the criteria for success at juvenile sales over the last half-dozen years. Each worked very fast; each was by a popular sire; each had an acceptable female family; and each was an outstanding physical specimen with at worst minor faults.

Maurice W. Miller III had purchased his Cherokee Run colt out of Choobloo, by Bolger, for $360,000 at the 2000 Fasig-Tipton Saratoga sale of selected yearlings, and when he worked a quarter in :21.90 at the first preview on March 5, it was obvious that Miller and his partners would make a profit on that investment. But the colt's sale for $750,000 on a phone bid by trainer W. Elliott Walden was a welcome relief to Miller.

"It's a little scary, isn't it," Miller said. "After not being able to sell two nice horses earlier, we were a little nervous. I thought I'd sell all three."

Colts by Seattle Slew and Phone Trick consigned by Miller failed to reach their reserves on final bids of $525,000 and $240,000, respectively. Perennial leading Barretts consignor Jerry Bailey did better overall, selling 11 of his 14 offerings for a total of $2,138,000, including the other $750,000 horse, a Saint Ballado colt out of Fanny's Frolic, by Green Dancer, purchased by Ahmed bin Salman's The Thoroughbred Corp. With that co-leading colt, Saint Ballado was leading sire by average at Barretts for the second straight year.

"That was pretty much where we thought he would be," said Bailey, "pretty near the reserve. You're lucky to have one bidder, much less two."

Agent John Moynihan had purchased the colt for $475,000 at the 2000 Fasig-Tipton Kentucky July yearling sale for a group that Moynihan declined to identify.

Calling all buyers

It was abundantly clear at Barretts that the number of buyers attending the sale has declined sharply since the mid-1990s.

"I've never seen anything like this here," said veterinarian Billy Marrs. "I've got a couple of pretty strong Japanese groups that normally give me 12 to 15 horses (on which to perform veterinary exams). They gave me two."

One reason for the decline in Japanese interest was a change in the Japanese Racing Association's rules on the number of horses Japanese trainers are allowed in their stables.

"As of January 1, 2001, the limit on the number of horses a trainer could have in his barn changed from 24 to 60," said Naohiro Goda, whose Regent Co. assists Barretts and other American sales companies in promoting their sales in Japan. "That changed the equation for some Japanese buyers. For example, (in past years) Dr. Koichiro Hayata spent a tremendous amount of money paying all the expenses for perhaps a dozen trainers to come to Barretts, and then spent a weekend in Las Vegas in order to maintain good relations with them. He no longer has to do that."

Hayata, a leading buyer at Barretts throughout the 1990s, did not attend the sale this year. Japanese buyers or their representatives purchased only six horses for $1,045,000, their lowest investment ever at Barretts.

"We had quite a bit of interest from the Japanese," McMahon said, "but, bottom line, they couldn't find what they needed in a market as small as it was. The combination of not having enough horses and deep problems in their economy impacted them more than the Americans. The number of horses in the catalog had an impact.

"The critical mass is not the number in the book but the number actually there to be sold and the number actually well prepared. We lost gobs of horses that simply weren't well prepared. A high percentage of the local horses came out."

Leading buyer

With Demi O'Byrne in attendance but inactive, Salman's The Thoroughbred Corp. easily led all buyers, purchasing five horses for $2,675,000. Those five included Sequel Bloodstock's Bertrando colt out of St. Helens Shadow, by Septieme Ciel, who was widely expected to top the sale but brought $700,000.

"You know that in any other year that colt would have brought more," said Sequel's Montgomery. "He's the best two-year-old I've ever had at this sale."

"He ran fast, and he's a California-bred like Arabian Light (purchased by The Thoroughbred Corp. from Sequel for $600,000 at the same sale last year)," said Richard Mulhall, The Thoroughbred Corp.'s racing manager. "I thought he'd go somewhere between $600,000 and $1-million." Mulhall said the Bertrando colt, the joint-sale-topper by Saint Ballado, and the sale-topping filly, a $450,000 Tabasco Cat from Sequel Bloodstock, would be trained by Bob Baffert.

Moynihan secured the other $700,000 colt, a handsome son of Pulpit with a clubby left front foot, for Stanley Gumberg's Skara Glen Stables.

"It was a lot of money for him considering his faults," Moynihan said, "but if he hits, he's got a stallion's pedigree."

Out of a half sister by the club-footed Easy Goer to Serena's Song, the colt proved trainer and consignor Jim Chapman can get horses other than his top sprinter Caller One to go fast, working an eighth-mile in :10 flat.

Statistical slump

The accompanying decile chart illustrates the depth and breadth of Barretts's predicament. Despite the company's attempts to shore up declining buyer strength by attracting local trainers with lower budgets, every facet of the market declined. While it is true that the bottom 20% of the market declined less than other segments, it is obvious that the company really wanted to shore up the increasingly elusive "middle market." Instead, the middle-to-lower market segments were precisely those deciles that declined the most-more than 30% each.

Results for pinhookers also revealed how desperately difficult the market was. Although the bottom-line figures in the accompanying chart of pinhooking results show a marginal $483,000 overall profit on the 45 pinhooked horses sold, that profit in fact would be completely wiped out by commissions and expenses.

Pinhookers scored substantial profits on the 54% of their offerings they managed to sell with a 94.8% rate of return, but selling essentially half of their offerings is not good enough. To make real profits, pinhookers must sell about two-thirds of the horses they offer.

"Looking at what's gone on around us, I think we did great," said Rudy Delguidice of Sequel Bloodstock, which purchased the $700,000 Bertrando colt for $175,000 at the California Thoroughbred Breeders Association's Del Mar sale last year. "It's a very tough market. Horses like the Bertrando are hard to come by, and when you have a horse that looks like that, that works like that, you want it all."

"What is hard to digest is that you come out of buying horses in a market like last year's and you get surprised by the lack of buyers here," said Moynihan, who was both a buyer and a seller at Barretts. "The grim reality is that times have changed."

It is increasingly clear that times have indeed changed for the Thoroughbred market as a whole, but they have changed even more dramatically for Barretts. In the market as a whole, prices are still very good at the top of the market, but the spectacular eight-year run-up in prices is almost certainly over.

Sellers can expect at least marginally lower prices for even their best offerings at yearling sales this year. Projections for horses perceived as less than the best are likely to be based more on hope than that grim reality.

For Barretts, the outlook is even grimmer. Japanese buyers were once the heart and soul of the Barretts market. They accounted for less than 10% of the market in 2001. Without substantial Japanese support, Barretts must depend on other such major international buyers as Salman and O'Byrne at the top and local trainers-who have always perceived Barretts March as beyond their means-to provide a market.

It was also notable that owners such as David Shimmon, whose wealth appeared to be at least partially dependent on the faltering technology boom, were completely absent at both Barretts and Fasig-Tipton Calder.

In addition, Barretts currently depends on Florida consignors who are more than 3,000 miles and a $3,500-per-horse plane trip away from the Fairplex sales pavilion. Although the California breeding industry currently seems healthier than at any other time in the last 40 years, that improvement has not yet translated into a flourishing local pinhooking industry.

"Unfortunately, each sale seems like a separate chapter in the story of building up California consignors," McMahon said. "If we succeed with the better horses here, then the obvious premise (to attract Florida consignors) would be that you need to bring a few of your best horses here to spread them around. "That doesn't really solve the supply problem, though. It needs to go deeper than that."

Barretts did succeed in selling its best horses well. With soaring stud fees in the forefront of everyone's mind, however, that glimmer of success most definitely does not solve the commercial breeding industry's current problems.

They go much deeper.