The Value of Race Horses

[Pell Mell]

There's something I don't understand about racing and thought maybe some of the brighter bulbs here might enlighten me.

Back in the early fifties I could buy a 1/4 lb candy bar for a nickle, a 12 oz. soda for a nickle, a shot and beer for .35 and a gal. of gas for .15.

In 1943 my parents bought a home for $1,500. which sold a few years back for $250,000 and in 1955 I bought a top of the line Ford Crown Vic for $2,500.

It looks to me like everything today costs more than 10 times what it did back then.

I started going to the track in 1950 and there were tracks that had 1,200 claimers but that was in places like the old Lincoln Downs. At MTH the claimers started at 3,000 and on up. Once in awhile I would see claimers at NY entered for 100,000.

So I guess my question is; using the inflation rate of 10 times the value, the horses that were entered for 3,000 should be worth 30,000 today and a 100 grand claimer would be worth a million. So what happened? Where did the 3,000 claimers of today come from, Central Park or retired milk wagon barns?

I know it's not important but it puzzles me. The price of hay, oats and other stuff needed to race, to say nothing of labor costs, must have all increased tenfold. So how come there are still horses running for 2,500 and a ton of them for 5,000?

[therussmeister]

Back when I started going to the track in 1985, the minimum bet was $2. Today it is $2, or $1, or $0.50 or $0.10. According to the CPI inflation Calculator (http://146.142.4.24/cgi-bin/cpicalc.pl?cost1=2.00&year1=1985&year2=2011) if the minimum bet would have kept up with inflation it would be $4.18. And that might have something to do with why there hasn't been inflation in the price of claiming horses in the same period of time.

[lamboguy]

Back when I started going to the track in 1985, the minimum bet was $2. Today it is $2, or $1, or $0.50 or $0.10. According to the CPI inflation Calculator (http://146.142.4.24/cgi-bin/cpicalc.pl?cost1=2.00&year1=1985&year2=2011) if the minimum bet would have kept up with inflation it would be $4.18. And that might have something to do with why there hasn't been inflation in the price of claiming horses in the same period of time.
oh yeah! how come day money has gone from $20 a day to $90 a day in NEW YORK?

[tbwinner]

Seems like everything in horse racing does not follow the norms of everyday life.

[woodtoo]

Supply and demand comes to mind.

[Brogan]

Those $1200 claimers back in the day were probably really $300 claimers, but $1200 was as low as anyone wrote. When horses are in for the bottom level, they quite possibly are not even close to worth that much.

[Pell Mell]

Those $1200 claimers back in the day were probably really $300 claimers, but $1200 was as low as anyone wrote. When horses are in for the bottom level, they quite possibly are not even close to worth that much.

That's funny and your probably right. I was at Lincoln Downs many years ago and went to place a bet...the teller said,'Why don't you go back to the barn, you can probably buy the horse for less than you bet on it". I laughed and thought he was probably right. :D

[davew]

Efficiencies in production agriculture and farmers getting squeezed by everyone further down the chain towards utilization.

[iceknight]

So how come there are still horses running for 2,500 and a ton of them for 5,000?

Depends on how many people are willing to buy horses now.

Not sure if cost of oats and everything truly went up ten fold..there is also higher production so demand is matched by supply.

More horses are being bred (way more at cheaper prizes).

These are some of my thoughts...

[macguy]

Those $1200 claimers back in the day were probably really $300 claimers, but $1200 was as low as anyone wrote. When horses are in for the bottom level, they quite possibly are not even close to worth that much.

That makes me wonder, anyone know what the lowest claiming tag was last year?

I know they routinely run for $2000 at Portland Meadows.

[forced89]

The value of claimers is a function of purses and day rates.

[JBmadera]

Supply and demand comes to mind.

yep, at the end of the day a horse is only worth what someone else is willing to pay for it.

[wisconsin]

That makes me wonder, anyone know what the lowest claiming tag was last year?

I know they routinely run for $2000 at Portland Meadows.


Los Al has $2k claimers.

Fair meets go as low as $500 in some areas.

I remeber when the big tracks never ran for leass than $10,000, and those were open claimers. $7,500 NW2L at New York? There was a time when that would never be allowed to happen. Arlington in the late '80's would not card a race for less than $5,000. With inflation, today it would be $8000, yet they were carding $4000 races a few years back.

[classhandicapper]

The value of horses is at least partly a function of the size of the purses and costs of owning a horse. If the purses haven't kept up with inflation or the costs have risen faster (or both), then the value of horses would probably not be in sync either.

[green80]

I have seen $5000 claiming races where the whole field was not worth $5000.

[Steve 'StatMan']

I have seen $5000 claiming races where the whole field was not worth $5000.

Which is why some horses improve a bit and win when dropped to the bottom level at a track. The 'Residents' at the at level are probably not worth the price except on a rare day or string.

By the way, those $1,200 claimers of old were running for much smaller purses. In fact, just about all the purses were smaller. Like the Santa Anita Handicap, what is that, $1 Million now, was big news years ago when IIRC it was the first Hundred Grander.

[macguy]

By the way, those $1,200 claimers of old were running for much smaller purses.


Not to mention they were also probably running twice a week.

[cj]

The value of horses is at least partly a function of the size of the purses and costs of owning a horse. If the purses haven't kept up with inflation or the costs have risen faster (or both), then the value of horses would probably not be in sync either.

It seems to me purses have kept up, but claiming prices have not.

[forced89]

Not to mention they were also probably running twice a week.

I don't remember twice a week. I do remember back in the late 60s running $1,500 claimers every 7-10 days. We would run them into shape (why not get paid for a workout). The horses would peak for 3 or 4 races then tail off at which time we would turn them out for 60 days or so R&R.

[Robert Goren]

Those $1200 claimers back in the day were probably really $300 claimers, but $1200 was as low as anyone wrote. When horses are in for the bottom level, they quite possibly are not even close to worth that much.Most horses today that are entered 5k claimers you couldn't get someone to take even if you paid them $300.

[johnhannibalsmith]

Most horses today that are entered 5k claimers you couldn't get someone to take even if you paid them $300.

This is what this whole discussion boils down to. There is no parallel between racehorses and other consumables that are tracked in studies or stories of inflation. If there is no value in the horses beyond the ability to compete now (ie, broodmare/stud) - most claimers are simple liabilities. The cost to purchase them doesn't increase at a fast rate because the cost to maintain them does. Their earning ability is described as "better than average" if they can break even from month to month. The ones that defy this and can make money usually are purchased (claimed) and often the seller is perfectly comfortable exchanging the potential for the guarantee.

[JBmadera]

This is what this whole discussion boils down to. There is no parallel between racehorses and other consumables that are tracked in studies or stories of inflation. If there is no value in the horses beyond the ability to compete now (ie, broodmare/stud) - most claimers are simple liabilities. The cost to purchase them doesn't increase at a fast rate because the cost to maintain them does. Their earning ability is described as "better than average" if they can break even from month to month. The ones that defy this and can make money usually are purchased (claimed) and often the seller is perfectly comfortable exchanging the potential for the guarantee.


agree - when I owned horses by far the least expensive part of the deal was the cost of the horse.

[macguy]

agree - when I owned horses by far the least expensive part of the deal was the cost of the horse.


Seems strange to say, but I couldn't agree more.

[classhandicapper]

It seems to me purses have kept up, but claiming prices have not.

How is that possible if the handle hasn't been growing rapidly (at least lately)?

An extension of my original comment would be if the claiming prices were inflated years ago (like home prices a few years back) and horse owners were getting killed on the combination of claiming prices and potential income, then even if incomes rise (handle/purses), the claiming prices would not rise as fast.

There should be some basic economic relationship between the values of the horses and the purses/expenses.

[cj]

How is that possible if the handle hasn't been growing rapidly (at least lately)?

An extension of my original comment would be if the claiming prices were inflated years ago (like home prices a few years back) and horse owners were getting killed on the combination of claiming prices and potential income, then even if incomes rise (handle/purses), the claiming prices would not rise as fast.

There should be some basic economic relationship between the values of the horses and the purses/expenses.

Subsidies, mostly slots.

20 years ago, it seems like a $5,000 claiming race would have a purse of $5,000 at most. A good claim had to win a few races to make the owner a profit. Now, the same race has a purse of 15k, or 20k. Clearly a horse winning those purses is worth more than 5k. I looked at a 25k claimer recently at Aqueduct and every horse had won over 50k in 2011.

In the long run, this can't be good for the game, especially the horses. As I stated in another thread recently, the game has turned claiming horses into an equine version of Flip Men. You don't need real horsemenship. Just patch them up for a race or two, drop them in class, win a purse and hope they get claimed.

[Tom]

The idea of a claiming race was to "bring them together." You would not risk a good $10,000 horse for $5,000. But if the purse for the 5K race is $25,000, who cares if you lose the horse?

Huge purses and small fields will kill the game.

[classhandicapper]

Subsidies, mostly slots.

20 years ago, it seems like a $5,000 claiming race would have a purse of $5,000 at most. A good claim had to win a few races to make the owner a profit. Now, the same race has a purse of 15k, or 20k. Clearly a horse winning those purses is worth more than 5k. I looked at a 25k claimer recently at Aqueduct and every horse had won over 50k in 2011.

In the long run, this can't be good for the game, especially the horses. As I stated in another thread recently, the game has turned claiming horses into an equine version of Flip Men. You don't need real horsemenship. Just patch them up for a race or two, drop them in class, win a purse and hope they get claimed.

In another thread I speculated that it was possible that all the new slot money in NY might eventually raise the claiming prices.

If most owners are getting totally buried, then IMO the prices of the horses are probably too high and owners are going to drop out.

If it's really easy to make money, then everyone is going to want to get in and eventually bid the prices up.

I've never understood the economics of the industry because such a high percentage of owners lose money. But most people explain it away as owners not thinking about racing as a business and being willing to accept moderate losses for the joys of ownership. That seems reasonable, but even if the threshold is different for racing than most businesses, there's still got to be some relationship.

[nearco]

If every owner approached racing strictly as a business, then the industry (hate that word, it's a sport) would shrivel up and dry over night. We should be glad that many owners do treat it as an expensive hobby.
Can you imagine it Sheikh Mo had to balance his books? that would put tens of thousands of people out of work.

[Pell Mell]

Subsidies, mostly slots.

20 years ago, it seems like a $5,000 claiming race would have a purse of $5,000 at most. A good claim had to win a few races to make the owner a profit. Now, the same race has a purse of 15k, or 20k. Clearly a horse winning those purses is worth more than 5k. I looked at a 25k claimer recently at Aqueduct and every horse had won over 50k in 2011.

In the long run, this can't be good for the game, especially the horses. As I stated in another thread recently, the game has turned claiming horses into an equine version of Flip Men. You don't need real horsemenship. Just patch them up for a race or two, drop them in class, win a purse and hope they get claimed.

This is sort of what I had in mind when I started the thread...say I had a trucking company 50 yrs ago....each truck cost me 10Gs and the truck would earn 5 Gs a month....today the truck earns 50 Gs a month but the truck now costs 100 Gs...seems like a horse can earn a lot more today than in days gone by but the horses still seem to have the same value. :confused:

[classhandicapper]

This is sort of what I had in mind when I started the thread...say I had a trucking company 50 yrs ago....each truck cost me 10Gs and the truck would earn 5 Gs a month....today the truck earns 50 Gs a month but the truck now costs 100 Gs...seems like a horse can earn a lot more today than in days gone by but the horses still seem to have the same value. :confused:

Perhaps horses were extremely overvalued in the past and way too many owners were getting buried financially. Then this would be an appropriate correction to a more balanced position between the costs of horses, the costs of training/care, and earnings power.

Say you bought a house a few years ago for 500k and 10 years from now it's still 500K but the rents have risen. That might be a reflection on the overvaluation a few years ago.

It could also mean that horses are starting to get cheap enough relative to their earnings power to make them worthy of consideration as a potentially profitable operation.

The thing that makes horses so tough to value is that many owners apparently don't mind losing money. It's kind of hard to place a value on an operation when there is a willingness to lose money. In most businesses there are usually minimum acceptable return on capital to justify the existence of the business.

[Capper Al]

Maybe supply and demand of the bottom tier horses. As we urbanized, the supply of cheap claimers increased.

[Robert Goren]

The idea of a claiming race was to "bring them together." You would not risk a good $10,000 horse for $5,000. But if the purse for the 5K race is $25,000, who cares if you lose the horse?

Huge purses and small fields will kill the game.I have saying that for years. I keep hearing that huge purses bring larger fields, but have yet to see that. The purse go up 60% and the average field goes up less than a horse a race. The way the pro slot people talk you think the average field would go up by 4 or 5 horses a race. All we get is the same bunch of 5k claimers plus one 12.5k claimer dropped in at 3/5 for 25K purse about 3 races sooner than would have been drop to that level anyway. I can't understand for the life of me how this is good for the bettors or the sport in general.

[Robert Goren]

Maybe supply and demand of the bottom tier horses. As we urbanized, the supply of cheap claimers increased.Pretty soon there will be for all practical purposes no claiming price levels. A horse will through its conditioned allowance levels, if it can, then it will run in stakes(either graded or ungraded) or it will dropped into what is now the bottom claiming price. I have ready seen claiming prices levels at a track shrink from 5 or 6 to 2 or 3 in my lifetime. It is rare to find a track which has 4 claiming prices levels for horses that have won at least 3 races life time. A lot don't even have 3 for that kind of horse.

[classhandicapper]

I don't think there are any rules about what a horse is worth based on what it has run for in the past or how fast it is.

That's the point I am making.

Assume I have a barn full of horses that have been running in 5K claiming races with purses of 5K and have been more or less breaking even as an owner.

Then suddenly all the purses are raised to 50k because of a casio. Those same horse would suddenly be worth a lot of more than 5K to me because they will continue to run the same, but now my operation would be wildly profitable. So people would (or should) be willing to pay a lot more than 5K for my horses even though the horses are not faster or better.

Of course, what could happen is that a bunch of 25k horses could start running for 5K, but then those really aren't 5K races and everyone is going to want those horses instead.

I'm not saying claiming prices will rise with all the casino money because claiming prices are not really a free market. The tracks more or less control what races are carded. But IMO the values of horses change with the value of the purses. So IMO, the claiming prices "should" change also.

It's just that at any given time horses could be undervalued or overvalued just like stocks, real estate etc... and it's hard to know what was fair to begin with.

[Tom]

Maybe the minimum claiming price should now be $50,000.
If a 5K claimer earns $20,00 in one race, is its real value 5K?

Is this what we want the slots windfall do to help racing, foster more cheap claimers? Maybe NO slots money should go to claimers. I am all for dropping all conditions in claimers, let the market determine where they run. Why should a nickle claimer run for $30,000 nw1 lifetime instead of a nickle, or less?

[VastinMT]

Perhaps horses were extremely overvalued in the past and way too many owners were getting buried financially. Then this would be an appropriate correction to a more balanced position between the costs of horses, the costs of training/care, and earnings power.

Say you bought a house a few years ago for 500k and 10 years from now it's still 500K but the rents have risen. That might be a reflection on the overvaluation a few years ago.

It could also mean that horses are starting to get cheap enough relative to their earnings power to make them worthy of consideration as a potentially profitable operation.

The thing that makes horses so tough to value is that many owners apparently don't mind losing money. It's kind of hard to place a value on an operation when there is a willingness to lose money. In most businesses there are usually minimum acceptable return on capital to justify the existence of the business.

Horses are status items. That's why most owners don't demand profits from their horse owning "investment." They're paying for social standing, ahead of profits. They have other means for making money.

Horses may have been overvalued in the past because they conferred greater status in the past. As the game dies, this makes sense to me.

Now it's not as prestigious to be in the game.

[Cholly]

What is a broodmare worth?

I’m asking looking at Aqueduct’s Race 4. Giant Sensation is out of Giant’s Causeway and a Dixie Union dam. With that breeding, wouldn’t she be worth at least $50,000 as a brood mare?

I was looking at the DRF (Hammersly) comment “Pletcher…it’s good to see he’s not giving up on her as he does not risk her for a tag.” Unless my, admittedly a guess, of a broodmare’s value is way off, of course the Owners (Overbrook FARM and Andrew FARM) aren’t going to risk her for a tag, and Pletcher’s assessment of her ability has nothing to do with it.

[cj]

What is a broodmare worth?

I’m asking looking at Aqueduct’s Race 4. Giant Sensation is out of Giant’s Causeway and a Dixie Union dam. With that breeding, wouldn’t she be worth at least $50,000 as a brood mare?

I was looking at the DRF (Hammersly) comment “Pletcher…it’s good to see he’s not giving up on her as he does not risk her for a tag.” Unless my, admittedly a guess, of a broodmare’s value is way off, of course the Owners (Overbrook FARM and Andrew FARM) aren’t going to risk her for a tag, and Pletcher’s assessment of her ability has nothing to do with it.

He should know this horse won't be entered for a tag.

[Cholly]

I didn't mean for my query to get lost in comments about Hammersly's comments. Seriously, what is a broodmare worth?

For a 2yo colt-in-training, I have read that their median sale price is somewhere in the neighborhood of 4X their sire's stud fee. That's certainly not a benchmark that can be relied upon, but it gives one an idea of an approximate value. And if their actual sale price was much greater or much less than the 4X multiplier, its an indication of how they were perceived at sale. Of course, recent gyrations in sales and breeding prices may have altered the reliability of the 4X number.

Is there a similar multiplier that approximates a broodmare's value in relation to her sire's stud fee?

[forced89]

Is there a similar multiplier that approximates a broodmare's value in relation to her sire's stud fee?

My gut tells me that there is a better correlation with the sire whose foal a broodmare is carrying than her own sire.

[Cholly]

My gut tells me that there is a better correlation with the sire whose foal a broodmare is carrying than her own sire.

No doubt that if there is a package deal involved, everything changes. I was more interested in evaluating a “still racing” filly/mare’s inherent value as a potential broodmare.

I found a note on Dapple Bloodstock’s website (http://dapple.net/words.aspx?t=17) where they state, “Each mare needs to be bred to a stallion with a stud fee of approximately one-third of her value.” By that guideline, a potential broodmare’s worth might be estimated at 3X the stud fee of her sire. A lot of things would run that number up or down, but maybe it’s a starting point.

In any case, I’m not going to be buying a broodmare—they don’t do well in loft apartments. I’m just interested as to into why a mare might be entered at a certain claiming level…or not.