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Industry looks to Fasig-Tipton for signs of what lies ahead

WE'VE been talking about it for a long time, and now there will finally be some action - the critically important 2009 yearling sales are about to get underway.

You might call this the pre-season opener, as the Fasig-Tipton Summer Selected Yearling Sale in Lexington, Kentucky on July 20-21 falls three weeks before the same company's Saratoga sale, and a month before Arqana's auction in Deauville, which kicks off the European yearling sales season.

The Lexington sale has been an unreliable predictor of the market over the years, with a catalogue size that has swelled and receded like the tides, with commensurately changeable sales statistics - perhaps a result of the company itself trying to predict which way the market will go.

Nonetheless, Fasig-Tipton Kentucky will offer some insight into the yearling sales ahead. Because these sales will be vital to the future of the commercial breeding industry and bloodstock markets, any insight is eagerly anticipated, although with a twinge of trepidation. This sale in particular highlights two elements of the market - unproven sires (first- and second-crop stallions) and pinhookers - both of which are exceptionally vulnerable this year.

The new sires showcase has long been a feature of the auction, but lately there has been some debate as to whether it dragged down the sale's statistics. More immediately, a question has arisen since the financial crash last autumn as to whether new sires, so popular during the boom times, will hold up in the downturn. Or, will the market move to more fundamentalvalue in the form of proven sires? The answer will be an important clue as to how much speculation investors can stomach.

All buyers of racehorses are speculators to some degree, and the purest of these are pinhookers, who will attempt to cash in their yearlings as two-year-olds in training early next year. Pinhookers are tremendously important to yearling markets, particularly to US yearling markets, and probably more so to the Fasig-Tipton sale than to any other single American auction, as the sale has carved a niche by cataloguing individuals with more physical quality than pedigree - a type of horse pinhookers can make a profit on.

But this summer pinhookers are in a shaky position. Their market was down by 30 per cent compared to 2008, but with clearance rates that dove lower than 40 per cent at some sales, based on horses catalogued to horses sold.

Pinhookers are buyers who depend on three things: income from inventory sold, credit from the banks, and confidence in the future. At this point their stocks of all three are generally pretty low.

The scenario is the same for US and European pinhookers, but with the added twist of an exchange rate which has less attraction toEuropeans than it did a year ago. There is also some pressure from within the British industry to buy British, along with the impetus towards supporting the Racing Post Yearling Bonus, so it will be interesting to see whether pinhookers from Britain and Ireland are active in Kentucky.

The auction will be conducted for the second time under the management of the Dubai-based Synergy Investments Ltd, and officials have clearly anticipated the pitfalls. The catalogue is smaller - 494 lotscompared to 568 last year - and the new sires showcase has been reduced, while the company indicated it was focusing on attracting trainers (versus pinhookers) as buyers.

Ultimately the vibrancy of the market should depend on the amount of money people have to spend on buying and maintaining racehorses. What we are likely to glean most at Fasig-Tipton, though, is an indication of the level of confidence among the speculators in the market.

My guess is that this will be in short supply, but it may actually help the later sales to identify a level at which to aim their expectations.

 

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