Archives for April 2020

Katy awoke on May 2, 2020, gloomy that something important was missing, the Kentucky Derby.  Ever since childhood, Katy, now 44, and her closest relatives had treated the first Saturday in May as though it were a national holiday, always something to look forward to during dreary winters.

To fight the blues, Katy decided to get her endorphins stirring by going on a long jog in a nearby park.  She entered a familiar covered bridge, long reputed to have magical charms, and came out the other side dressed to the nines and in the midst of a huge crowd at a racetrack, which she recognized immediately by its twin spires.

She was puzzled that the crowd was so differently attired.  Many of the women were in styles characteristic of the start of the Jazz age in the 1920s and lots of their male companions wore boaters and sported spats on their shoes.  This was in stark contrast to the other half of the crowd, men and women garishly bedecked in clothes popular in the early 1970s. 

Katy struck up a conversation with a fashionably outfitted woman who commented on being grateful that the “war to end all wars” was over and that the deadly flu pandemic of 1918 and 1919 was finally subsiding.  Katy could commiserate, coming from a world in which a virus was causing fear, suffering, and deaths.  No such concerns were evident in the devil-may-care behavior Katy saw in the circa 1973 fans.

Katy, who only hours earlier was sorry that Derby Day had been postponed, found herself about to witness an epic Kentucky Derby, at a Churchill Downs where time seemed to be irrelevant.  The Derby would be a match race for the ages, one perhaps designed by the horse god Poseidon himself, to settle once and for all who is the greatest American racehorse, Man o’ War or Secretariat. 

In the paddock, a stylish Penny Chenery Tweedy briefly politely chatted with a stern Samuel Riddle.  But the stress was palpable as Ron Turcotte got a leg up on Tweedy’s Secretariat and Clarence Kummer set atop Riddle’s Man o’ War.  Riddle now had a chance to rectify his mistake of not running Man o’ War in the 1920 Kentucky Derby, an omission that likely kept the colt from becoming the second Triple Crown winner.

The bright Kentucky sunlight made the two red chestnuts appear surreal as they radiated power and paraded to the post in front of two frenzied contingents of fans from over fifty years apart.

The colts broke together at the start and remained side-by-side, mirror images, throughout the 1 ¼ mile journey to fame and glory.  As they swept under the wire, the Derby had been decided by the slimmest of margins, and there was a deafening roar of approval for what had transpired. 

As Katy approached the mysterious covered bridge on her way back to May 2, 2020, she thought of what she had experienced, though no one would believe her, not even her family.  As she disappeared into the darkness of the bridge, she marveled at how “Big Red” had proved himself to be the greatest racehorse of all.

But Katy, WAIT, WAIT…wait…which Big Red?

Copyright © 2020 Horse Racing Business

When low-probability events of high magnitude occur, seemingly out of nowhere, things quickly go awry in society. The Covid-19 virus has disrupted the world of organized sports like never before, even during the Spanish flu pandemic of 1918-1920, the Great Depression, and World War II, or in the aftermath of other national tragedies.

The 2020 Triple Crown horse races have already been upended with the Kentucky Derby rescheduled for September 5 and Preakness and Belmont dates not yet determined.  The chain effect is that other major summer races for 3-year-olds are in limbo.  Most notably, the Travers is supposed to be run one week before the Kentucky Derby, which now seems unlikely. 

No one can predict, with any confidence, what the rest of 2020 will bring.  Will coronavirus infections begin to increase once social distancing is relaxed?  To what extent and how soon will antiviral drugs prove effective?  Will the virus mutate? How badly has consumer confidence been damaged…and how long will it take to recover?

What can be said with some certainty is that if by late August and early September conditions are not conducive for gatherings of large crowds, or if crowds are banned by government edict, events such as the Indianapolis 500, the Kentucky Derby, and college and NFL football will all be canceled or substantially altered. The people in charge of these spectacles will, of course, terminate as a last resort because of the huge amounts of money that will be forever lost, both to the sponsors and the cities hosting the events.

In addition to health concerns, there is the unknown of how long it will take to recover from the carnage in the world economy.  When daily life gets back to a semblance of normal, will people have the wherewithal and desire to spend, especially on entertainment and sporting events?  While Goldman Sachs is forecasting double digit GDP growth in the United States for the third and fourth quarters of 2020, other credible sources are not as sanguine and see a slower pace.  One promising fact is that the American economy was buoyant prior to the Covid-19 pandemic, which is a marked contrast to 2008, when there were serious structural issues

The future is unknowable. The only prudent way forward for individuals and organizations is to prepare for several likely scenarios, including a worst-case. This would apply to top executives at, say NYRA or Churchill Downs, or to horse trainers who must adapt to an uncertain Triple Crown racing calendar. Or to fans hoping to see the Kentucky Derby on the first Saturday in September.

As renowned investor Howard Marks aptly says in his most recent memo: “These days everyone has the same data regarding the present and the same ignorance regarding the future…if you’re experiencing something that has never been seen before, you simply can’t say you know how it’ll turn out.”

Copyright © 2020 Horse Racing Business

Next Wednesday, Horse Racing Business will publish “A Kentucky Derby from the Twilight Zone.” Maybe there was a Kentucky Derby on May 2, 2020 after all…a classic of classics.

Like most businesses, small to large, Tremont Goodie Shop in Upper Arlington, Ohio (a Columbus suburb) is struggling during the Covid-19 pandemic.  Recently, a longtime customer purchased a single doughnut from Tremont for $1,000—likely the most expensive doughnut ever sold.

The world of Thoroughbred horse racing and breeding has its own stories of empathy to tell.  To illustrate, prominent owner Charles Fipke, a renowned Canadian geologist and diamond prospector, has waived all fees for the rest of 2020 on his stallions standing in California, Indiana, Kentucky, and Ontario.  According to an article by Bill Finley in Thoroughbred Daily News, the generous offer has brought numerous calls of inquiry.  For instance, Darby Dan Farm in Kentucky, where Fipke has three stallions, says that at least 40 additional mares are to be bred for free.

Daily news reports, or warnings from government and companies, concern criminal activities intended to take advantage of people during the coronavirus pandemic.  Then too, we hear of price gouging and hoarding of essentials.  In the midst of such reprehensible behavior toward fellow human beings, it is uplifting to see how much a $1,000 doughnut or a free stud fee can mean to those who temporarily need a leg up. 

No matter whether Covid-19 emanated from a Chinese wet market or a Chinese laboratory, many innocent folks have suffered or died.  In times of great calamity, selfless actions by health-care professionals, first responders, and soldiers in the National Guard demonstrate compassion and courage.  Countless acts of kindness by individual citizens, like the ones described above, also contribute mightily to limiting the human and economic damage.

Copyright © 2020 Horse Racing Business