“Money, Money, Money, it’s a Rich Man’s World” (And, Alas, a Poor Man’s): Moral Dilemmas of FOBTs and Bloodstock Sales

In last month’s blog I had a look at the prices vs. returns of NH horses at the Tattersalls’ Cheltenham Sale in May 2016. The total spend including purchasing the horses and then training them came out at £1,922,300. Yet they only went on to win five races in total, and the measly prize-money of £63,169, at an average per horse of £6,317. That gave a total return on investment (or as I like to refer to it, Return on Ownership) of a staggeringly dismal 3.2%.

This struck a chord with a number of blog readers who sent me similar examples, including Tattersalls’ Book 1, October 2015. I’m sure you can guess the record of the top 10 there as well. Many of you, I know, will shrug your shoulders and say that if rich people want to waste such prodigious amounts of money, that’s up to them. But before I list out those lots, why not just reflect on the moral dilemma that is now facing politicians and in turn British Racing over Fixed Odds Betting Terminals (FOBTs).

The Department for Culture, Media & Sport launched a review 15 months ago in response to widespread concerns about the addictive nature of FOBTs. This culminated in a decision in October 2017 to cut the maximum stake from £100 to somewhere between £2 and £50. The Department then launched a 12-week consultation period which came to an end last month. The review also encompassed wider socially responsible measures to protect the vulnerable. This is definitely a case of a poor person’s world.

The Sunday Times led a scoop front page announcing that the Government was going to cut the FOBT stakes to a maximum of £2. Many of you, I know, will strongly agree with this. However it didn’t take long for the bookmaking industry and British Racing to examine the impact of a £2 maximum stake. Whether the figures are accurate or not I don’t know, but Martin Cruddace, boss of Arena Racing Company, caught the headlines when he forecast that an FOBT limit reduction would lead to 4,000 to 5,000 betting shop closures. Some took a more cautious view that maybe only 3,000 shops would close, but apparently the average shop pays £30,000 for media rights so the loss of income could easily be in excess of £90 million per annum with a view that, in turn, at least £55 million could be axed from prize-money.

Clearly, this is a very sobering story and it cannot be easy to deal with. Racing needs every pound that it can get its hands on, but surely not through the “crack cocaine” of FOBTs. A moral dilemma indeed.

In this context, the lunacy of bloodstock prices at sales such as Tattersalls almost appear like comic relief. Here are the top 10 from October 2015.

Lot 304, Dubawi – Loveisallyouneed. £2,205,000. Hasn’t raced, prize-money zero.

Lot 30, Galileo – A Z Warrior. £1,365,000. Named Key To My Heart. Won twice, prize-money £47,652.

Lot 43, Galileo – Alluring Park. £1,312,500. Named Douglas Macarthur. Won twice, prize-money £122,189.

Lot 255, Galileo – Jacqueline Quest. £1,260,000. Named World War. Won once, prize-money £26,068.

Lot 254, Oasis Dream – Izzy Top. £1,155,000. Named Dreamfield. Won twice, prize-money £12,291.

Lot 293, Galileo – Like A Dame. £1,050,000. Named Longing. Won once, prize-money £9,285.

Lot 71, Dubawi – Badee’a. £945,000. Hasn’t raced, prize-money zero.

Lot 204, Dark Angel – Folga. £866,250. Named Dirayah. Hasn’t won, prize-money £385.

Lot 439, Street Cry – Shastye. £840,000. Named Secret Soul. Hasn’t won, prize-money £,684.

Lot 107, Oasis Dream – Caphene. £787,500. Named Watchman. Hasn’t raced, prize-money zero.

Dear, oh dear. If we add a million or so for training fees and commissions, then the ROI / Return on Ownership is 1.72% on a total prize-money of £219,554. Indeed it must be even worse than the return on FOBTs, which says something.

Just to finish on a sobering note though the gross gambling yield, i.e. the amount kept by the betting shop operators after winnings are paid out, in the year to March 2017 was £1.39 billion from traditional betting ….. and a staggering £1.86 billion from FOBTs. It will be very surprising indeed if the Government doesn’t crack down hard on these machines and in turn, bookmakers ….. and I’m afraid, on racing’s income.

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Trust, Transparency and Integrity in Racing – The Concluding Part 4 of the Series.

It’s been interesting as I’ve written the blog series around the subject of trust, transparency, integrity and corruption that not a single owner I’ve talked to about it has disagreed with anything I’ve raised. As in everything to do with life and commerce, perception really matters and unfortunately the overriding perception is that the breeding supply chain that brings horses through to owners is inherently stacked against the owner. On occasions it is almost certainly corrupt, and almost daily there are practices being perpetrated that while probably not illegal, lack the necessary standards of integrity.

It is clearly very difficult to gauge the overall impact of this on racing and ownership, but I definitely believe that the BHA is taking the right stance by putting a much greater focus on integrity in all aspects of our sport and is prepared to examine breaches of the necessary standards in the context of the whole sales process.

There must be an irony that I’m writing this blog having just bought a foal today at Goffs in Ireland, and when this blog goes live I’ll be attending the Tattersalls Cheltenham sale with some friends who are prepared to invest deeply. Unfortunately I can’t help but feel that owners are receiving inadequate value for money on too many occasions and cumulatively that must be acting as a potential barrier to new owners coming into the sport while discouraging retention of the owners who are already active supporters.

So I thought it timely to reflect on my “top ten” recommendations for addressing these problems. They are not in any priority order but I do believe that if the BHA puts a searchlight on them, it will definitely be to the greater benefit of the whole ownership community.

1. Develop an end to end integrity framework. What I mean by this is to map out every stage in the equine supply chain from breeding through to the eventual retirement of the racehorse. At every step in the chain there is potential for corruption, and this should be mapped out so that the level of risk is made explicit.
2. Set integrity standards. Having mapped out the supply chain, it is then possible to state unambiguously what the necessary personal, professional and commercial standards should be, and what is acceptable or unacceptable behaviour.
3. Monitor and police those standards. Having developed an integrity framework and set the appropriate standards, the BHA then needs to have inspectors who can then monitor and identify the perpetrators of unacceptable practice. The whole industry through the various stakeholder groups to have been warned in advance of what is unacceptable behaviour and for this to be built into the rules of racing.
4. Identify and copy best practice. Other countries, particularly Germany, are determined that the breed is strengthened on an ongoing basis by not allowing substandard mares to produce foals. The performance record of stallions should be tracked and minimum standards set for mares. The recent requirement for horses with first-time wind ops to be reported is a step in the right direction because over time it should be possible which stallions are passing on higher than average wind problems.
5. Give every horse a log book from day one. In the last blog I commented that you wouldn’t buy a £100,000 car without a log book, and I don’t see why you should do the same with horses. The racing authorities in England and Ireland as a minimum should make it a requirement that any veterinary treatment to any racehorse is logged, and that when the horse goes into any sale, a PDF of that document can be accessed online for one month before the sale date.
6. Improve pre-sale veterinary inspections and change the charging policy. All horses being sold at public auctions should be inspected properly and thoroughly once, with the cost of that being paid by the vendor. A full inspection report should be available. Furthermore the vet making that inspection should be held liable for the quality of it. If the report is inaccurate, the vet should be held to account both commercially and professionally.
7. Full declaration of anything performance-enhancing. I know that many trainers argue that owners and the racing public don’t understand the pros and cons and limitations of many veterinary treatments and procedures, but I do believe that they should be declared. It is why I’m in favour of transparency on wind operations, but I would extend that to all major interventions.
8. No limits to transparency. The simple guiding principle should be that if access to a piece of information can provide a trainer, owner or punter with a commercial advantage, then that information should be in the public domain wherever possible. So for example should there be a requirement to disclose when a horse’s tendons have been fired?
9. Fund more evidence-based research. Owners are losing money every day buying horses which are genetically predisposed to certain maladies and conditions that will significantly constrain their performance during their life as racehorses. The BHA should fund research to collect evidence over time that will identify more of these conditions. As they will be recorded in the horse’s log book, then an informed owner can make an appropriate decision not to invest.
10. Have all the information readily available. In the age of social media, all information should be at owners’ and prospective buyers’ fingertips. There may well be an accusation of information overload, but it would be better for the information to be there if an owner wants to access it, than to be left in the unacceptable position of buying horses where there is significantly asymmetrical information, i.e. where the prospective purchaser knows far less than other interested parties upstream in the supply chain.

I’ve now been involved in buying and owning about 100 horses, either on my own or with co-owners. Unfortunately I believe that if I’d had full information I wouldn’t have bought at least 20% of them. Assuming an average total cost of £50,000, that’s £1m of money in effect wasted. This issue is that serious. I hope that in ten years’ time I won’t have to write another series raising the same ten recommendations. I fear that the first horse of the sale today ought to be called “Pigs May Fly” (Apologies to Lot 1, Ilsnepasserontpas, who I hope turns out to be a magnificent horse giving superb pleasure to whoever buys him.)

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.

Tales from the Sales: All Too Often the Cards are Stacked against the Owner. Caveat emptor.

October is such a busy month for trainers, their agents and owners, particularly if they are involved in both Flat and National Hunt. The yearling sales have been through their crescendo in the UK with Tattersalls’ Book 1, involving horses with multi-million pound price tags; Champions’ Day at Ascot is on today (and we’re hoping for another superb run from Karl Burke’s brilliant filly, Quiet Reflection) and the first Cheltenham meeting is only a week away. Much to look forward to, as an owner, as long as your horse is fit, well and full of promise.

However, there will be quite a number of horses for whom plans are on hold because they are anything but “fit, well and full of promise”. We all know that even getting a horse to the track in one piece can be a huge challenge, and I often think that in itself often counts as a win. But there is one aspect of owning that gives me a huge amount of concern: where you buy a horse at a sale and then find it has a serious problem that could and should have been disclosed.

Because Owners for Owners has been buying both Flat and NH horses over the Summer and this Autumn, I’ve had my nose well and truly into the sales catalogues of Goffs, Tattersalls, Arqana and Osarus. I am not sure how many people bother ploughing through the voluminous Conditions of Sale, which run to 24 pages in the one that I have in front of me at the moment – Goffs’, and they are a similar length in most other catalogues – but because of my interest in procurement and contracts from my consulting days I am interested in how they are framed and who they are actually protecting. It was always one of my simple views of commercial life that you should be very wary of accepting or signing someone else’s contract because by and large, if they have produced it, it is primarily protecting them and not you. The Conditions of Sale are stated as being of relevance to “all potential vendors and purchasers”, so you would like to think that the contractual terms are balanced and even-handed, protecting both sides equally.

So it came as a huge surprise to see one particular clause in the Goffs catalogue (but also in the Tattersalls one) under the heading of: Lots Returnable, 12.2(e). Basically Section 12 lays out the grounds for returning a horse that you have bought to the sales house, and thence to the vendor. If you buy a horse that is a wind-sucker, weaver, box-walker, wobbler etc., then you can return it. As the buyer you would normally know about these conditions in advance as they are announced by the auctioneer ahead of the horse going through the ring. But Section 12.2(e) deals with wind:

(The lot is returnable if the horse) “has been tubed or otherwise operated on for unsoundness in wind…”

which is absolutely right and proper, as no-one wants to buy a horse whose wind is shot. Unfortunately though there is an important set of qualifiers in parentheses:

“… (Operations to treat the displacement of the soft palate, including the operations tie-forward, cautery of the soft palate, trimming of the soft palate and myectomy are not operations for the correction of an unsoundness in wind within the meaning of this condition.)”

I find this clause absolutely unbelievable, and intend to seek clarification from both the BHA and the ROA on it. In effect it means that if you were a vendor you could operate on the horse to correct what could well be a serious wind problem, then put the horse through the sale where it would be difficult to detect some of these operations, and when the unsuspecting buyer finds out about it, there is absolutely no redress whatsoever.

It may be apocryphal, but apparently there are vets in Ireland who will even perform a minor laser procedure on a horse’s wind box so that it neutralises the sound of bad wind. The operation only succeeds in keeping the horse quiet for a few weeks, but this is enough for the animal to go through the sales.

While preparing this blog I queried this with a well-known vet and he went even further. Apparently you can’t put a horse through the sales if it has bute or Lasix in the system, and that would be detected if there were a blood test. Apparently this doesn’t apply to cortisone, so any vendor can medicate a horse, maybe with serious tendon pain, and even though cortisone could be detected it won’t be declared to the prospective purchaser.

I have a horrible feeling that these are only some of the more public examples of the ways in which the owner is being taken for a ride (if that’s the phrase to use) by the bloodstock industry, sales houses and agents. This is a hugely controversial area, and one that I will come back to again on the blog.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.

The Long and the Short and the Tall: Reflections on the Autumn Buying Campaign

Probably the biggest change since we set up Owners for Owners 2½ years ago has been the resurgence in bloodstock prices, particularly on the Flat, but increasingly for National Hunt as well. When we started the average for us was c.£30,000 per horse, whereas now it is climbing nearer to £50,000. It has also meant that from a standing start we have nearly half a million pounds’ worth of bloodstock and there is over £¼ million a year going through the books in training fees, entries and all the miscellaneous costs that make owning such an expensive business. Thank goodness we have a great bunch of committed owners to spread the risk and share the enjoyment.

We’re almost through the Autumn buying period, with one more NH horse to find for Martin Keighley. Then as we go into 2015 the plan is to stop buying for a while and run the current stock of horses through their various campaigns, be it Flat, hurdling or chasing. We’ve also found that the whole process of organising and administering the partnerships, as well as going to see them race, is quite a bit more time-consuming than we expected, which is why we’ll cap the number of horses in training at any one time at 12.

Another very interesting learning over the last year or so has been the way in which certain agents work well for Owners for Owners, whereas others, for all sorts of reasons, don’t. Increasingly in National Hunt we’re now using Gerry Hogan and also last week, Aiden Murphy at the Tattersalls sale in Ireland, described as “the world’s most comprehensive NH sale”, which had 1,492 horses, mainly foals, listed in the catalogue. We ended up buying two bay colt foals – Lot 735, a Sholokhov who will go to Aiden’s stud near Stratford-upon-Avon, and Lot 920, by Oscar, who will stay at a farm in Tipperary near Gerry, until ready to come into training. This is the first time we’ve ever bought foals, and we’ve invested in them because the price of three-year-old store horses and ready-to-race jumpers is climbing incredibly rapidly. In effect we have bought two for the price of one, even when adding in the cost of keep. We’ve bought them to race, not primarily for pinhooking, although obviously we’ll keep an eye on both their development and their value as we go through the next couple of years.

We don’t always buy through agents, and indeed Rachael Green was also looking for a yearling, and she and Anthony Honeyball will continue their search for a youngster, which when bought will go to them. Equally on the Flat the whole of the Burke family have an excellent eye for a horse and to go to the sales with them is like participating in a master class on buying (and rejecting) Flat horses. The most pleasing common denominator is the way in which all these people have Owners for Owners’ best interests at heart. They won’t let us over-pay and are quick to reject unsuitable horses. Since the initial buying decision is probably the most important decision any owner makes, it is fantastic to have all this expertise on our side.

So it only seems fitting to introduce some photos of current youngsters. As you’ll see there is one of the mighty Lord Ben Stack who we bought at Arqana, Deauville last Autumn to race on the Flat with Karl Burke. We’re hoping he will come out in the Dante next Spring and we can plan a campaign from then onwards. Amusingly, all our jumps trainers have already said how much they would love to have him! Then at this year’s Arqana sale we bought a lovely Medicean from a superb dam line for the knock-down price of €40,000. He is a great example of finding value at the sales because he went into the ring with an abscess on his near fore which inhibited bidding. Karl and another of our contacts, Lars Kelp, felt that this was relatively minor and could be easily treated, which is turning out to be the case. He is a tall horse and like many Mediceans will need time. As you can see, he has just started the breaking process and is learning the ropes at Middleham. Finally there is an endearing picture of the baby of the trio, the foal colt by Oscar. You can now see why I headed this blog, “The Long and the Short and the Tall”. We wish all three of them the very best over future Flat seasons.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.

Bloodstock Prices on the Flat Still Climbing: Ordinary Owners Have to Work Harder!

Despite the real economies around the globe still being in post-recessionary deficit reduction modes, there is little evidence of that in the rarefied world of global bloodstock, particularly on the Flat but increasingly in NH as well. Regular readers of the blog will know that several of us connected to Owners for Owners have been trawling through the sales catalogues over the autumn, trying to find a well-bred and racy filly. Indeed, Tim Dykes and I have probably looked at 500 fillies ….. and amazingly haven’t bought one, for the simple reason that the well-bred ones didn’t impress as racehorses but the ones that did were not bred in the purple, or at least within our budget. Reluctantly we’ve come to the conclusion that to find both criteria fully met we would have at least to double our budget, to over £150,000. So we have postponed this hunt until there is a softening of the market.

For a graphic illustration of this, here is a summary of the average and median prices from the Goffs’ Orby and Tattersalls’ Book 1 sales:

Sale	Year	Average	Median
Tattersalls’ Book 1>	2014	235,935 gns	150,000 gns
	2013	207,501 gns	130,000 gns
	2012	162,825 gns	100,000 gns
Goffs’ Orby	2014>	€109,234	€70,000
	2013	€101,571	€57,500
	2012	€90,331	€58,000

As you can see, yearling prices have basically gone up by 50% during the time that Owners for Owners has been in existence. We surveyed our owners recently and there is no desire whatsoever to chase these sorts of prices. So the only way forward has been to work harder at the various sales, scrutinise more horses using the skills of trainers and agents, and on occasions take a bit of a risk in the purchase itself.

Our latest yearling purchase illustrates our approach. We swerved both Goffs and Tattersalls and went back to the Arqana Deauville sale on 20th October. This is the select day of that particular sale, and where we bought our 90+ rated horses, Lord Ben Stack and Jolievitesse, last year. Hopefully lightning struck again with the purchase of a beautiful Medicean yearling colt for the hammer price of €40,000 (£31,431). All the details and a video are on www.arqana.com And there will be further information about the partnership on the web site shortly. Karl and Elaine Burke bought him for us and both felt that if he had gone through Tattersalls’ Book 1 he could well have been double or even treble that. Indeed, when I checked, the average for a Medicean at that sale was £171k, and even in Book 2 it was £47k. Unfortunately for them the vendors, Haras de Bourgeauville, were unlucky because the colt developed an abscess on his foot shortly before the sale and they ran out of time in which to treat it properly. We took advice from Lars Kelp (who, as well as being a former trainer in Scandinavia, is a hoof expert) who felt that it should be relatively straightforward to treat, and it certainly won’t stop the horse being broken at Spigot Lodge. As a late April foal, we will need to be patient and give him all the time he needs to develop.

All the breeding of our horse shows real quality. Medicean was owned by Chieveley Park Stud and trained by Sir Michael Stoute, while the dam, Bellona, was owned by US owner / breeder George Strawbridge, and trained by Freddy Head. Medicean didn’t race at 2yo, but improved steadily from 3 to 4, winning the Celebration Mile, Lockinge, Queen Anne and Eclipse over 1m to 1m 2f. Notably game, he raced 12 times and was in the money on ten occasions. These qualities have been passed on to his progeny, of whom more than 10 have been Gr.1 winners, mostly over similar distances, including Neatico, Bayrir (Secretariat Stakes in Arlington), Capponi, Siyouma (Sun Chariot), Al Shemali, Almenta, Nannina (dual winner at Royal Ascot, Coronation Stakes and Windsor Forest), and then the speedier Dutch Art who was unbeaten as a 2yo, winning the Norfolk at Royal Ascot, the Prix Morny and the Middle Park.

On the dam side, Bellona won a Listed race and was placed in Gr.3s. Her winning daughter, Es Que, produced Dominant, who was sold by Highclere for over £1m to Hong Kong and went on to win the Gr.1 Hong Kong Vase, and Es Que Love, who is still in training with Clive Cox and won the Lennox at Glorious Goodwood this year. It really is a great dam line with black type all over the page, with one of the more recent ones, We Are, winning the 1m 2f Gr.1 Prix de l’Opera for fillies and mares on this year’s Arc day.

Sixth shares are available in this cracking colt, and if you want to view him at Spigot Lodge over the autumn, just let me know. 50% of the horse has already been taken!

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.