08/16/2001 11:00PM

Market got you down? Buy a racehorse!

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LEXINGTON, Ky. - Before the Keeneland July select sale started the yearling auction season, consignors felt they had reason to be jittery. But even as the general economy slows, the market for selected Thoroughbred yearlings appears to be stronger than ever.

Last year's select auctions rang up substantial gains, but by the time sellers shipped to Keeneland July in 2001, the American economy had slowed significantly and Wall Street's dot-com bubble had burst. Consumer confidence generally was weaker this year, and there was little wonder why as headlines announcing layoffs replaced last year's stories about overnight Internet millionaires.

According to conventional wisdom, Wall Street nerves and negative financial reports have a similarly unhappy effect on racehorse buyers' confidence. But, so far, the 2001 select yearling season has been anything but conventional.

Keeneland's July sale would have had several excuses if it had a soft year in 2001. Despite the general economic slowdown, and a smaller catalog that was generally weaker in terms of pedigrees, the auction ended on a tremendous upswing. The average price jumped 14 percent to a record $710,247, and the median price increased 8 percent to $430,000.

The only negative - and it was significant - was an increase in buybacks, from 28 percent of July yearlings offered last year to 33 percent this year.

Three weeks later, Fasig-Tipton's Saratoga select auction also set a record average of $385,259, up 26 percent from last year's record, and median leaped 24 percent to $235,000. This time, buybacks actually dropped to 19 percent, an unexpected development in a market that has been polarized in recent years.

So what happened?

"The top, top guys are still very bullish, and they're having success at the racetrack," Fasig-Tipton chief operating officer Boyd Browning Jr., said of such major bidders as Englishman Michael Tabor, Canadian Eugene Melnyk, and Sheikh Mohammed al Maktoum's European-based Godolphin operation. "We've been buoyed by the success our major buyers have had."

"It's also indicative of the confidence people playing at that level have in the racing and breeding industry," said Keeneland spokesman Jim Williams.

Top buyers like English-based Sheikh Mohammed and Michael Tabor - relatively unaffected by short-term jolts in the American stock market than domestic or less established buyers - accounted for most of the 25 yearlings bought for $1 million or more at Keeneland July and Saratoga this year. But a host of domestic buyers - Roger King, Elizabeth Moran, John Oxley, Padua, and Live Oak Plantation - also made seven-figure purchases. Others were underbidders.

"We had a tremendous amount of domestic participation," said Browning. "They were just getting outbid."

That made for an unexpectedly deep select market where competition was fierce, even in the after-market. The after-market is comprised of the private offers made for horses who failed to reach their reserve prices moments earlier in the auction ring.

All of this bodes well for the last major yearling sale, Keeneland's 13-day September auction, which gets underway with a pair of select days on Sept. 10-11. If the boutique market's current trend holds, horsemen can expect titanic clashes over the top lots, resulting in seven-figure payoffs, as well as a strong middle market driven by competitive domestic buyers looking to fill their stables.

The question now is whether the strength at this most select portion of the auction world will trickle down to lesser stock.

"In the past, the strength has trickled down," Williams said, "but there probably is more concern at the lower levels that the economy will have a greater impact. Conversely, there are several racing venues, like West Virginia and Canada, that have had purses strengthened. So perhaps there will be enthusiasm from those areas to better their stock."

Browning is cautious, especially with regard to lower-middle and regional markets.

"There is another shoe to drop," he warned. "The strength at the very top of the market will probably not be continued through all levels. At Fasig-Tipton July, Keeneland July, and Saratoga, 25 percent of the horses are still propelling the rising prices. But it's really tough to sell a marginal horse, and we'll begin to find that marginal horses represent a higher percentage of the sale catalogs from here out. This is not a rising tide that will sweep up every horse, and consignors need to be realistic. If they have a very good horse, they'll have fun. If they don't, they won't have much fun at all."

Former Spendthrift chief pleads guilty to fraud

L. Brownell Combs II, former president of Spendthrift Farm in Lexington, has pleaded guilty to federal income tax fraud in a case related to Spendthrift's financial woes in the 1980's.

The Columbus, Ohio, Dispatch reported that Combs pleaded guilty to filing a false income tax report for 1994. He failed to disclose $1 million in assets hidden in an offshore bank account to avoid paying settlements from civil litigation over Spendthrift's failure as a public company.

Combs, whose May 2 pleading was recently unsealed, has not been sentenced but faces up to three years in prison and a $250,000 fine.

Combs was head of Spendthrift, which was founded by his late father Leslie Combs II, when the operation went public in 1983. The farm went bankrupt in 1988, prompting lawsuits by some of the 34 major investors who had purchased $32 million in farm stock in 1983.

Combs, 68, now lives in Bal Harbour, Fla. Spendthrift currently is owned by a partnership headed by Bruce Kline, which purchased the farm in 2000.