Tuesday, September 30, 2008

High Percentage Trainers

I realize I've left a few loose ends by not finishing my discussion of lousy horse names, and my attempts to calculate AEI/CI per crop. I'll get back to those shortly, but wanted to mention part of another study I'm working on. This is one that I'm doing for a client - we're swapping research for a small share in a 2YO filly that his partnership owns. The study is going to focus on which factors can be used to improve the percentage of claimed horses that go on to become stakes quality horses. I'll be looking at a number of factors, but the one I'm the most excited about at this point is the idea of restricting claims to trainers with high winning percentages. On the one hand, a low percentage trainer is generally going to be a worse trainer, and may make more mistakes...including not identifying a potential star. However, I think this would be more than outweighed by the fact that a high percentage trainer likely gets that high winning percentage by entering horses in spots where they can win...which means generally entering them at or below their 'true' class. They realize that its tough to be profitable at the claiming game, and accept the fact that in order to be profitable, they're going to have to lose a certain percentage of their horses.

Sunday, September 28, 2008

The Worst of the Worst

My post over at Thoroughbred Champtions generated just the kind of discussion I was looking for, with over 75 awful names being suggested. Some of the ones that I think are particularly bad (possibly bad enough to have impacted auction prices prior to their racing careers):

Dirty Dish Mitch
The Love Master
Viagra River
Stinky Twinkie
What a Gaylord
Bodacious Tatas
Stinke Pant's (yes, they put the apostraphe in the wrong place)
Kirby's Glue Foot
Uno Tess Tee
Annie Dirt Bag
A Colt Named Sue
Erotick Mountain
Judge Smells
King of Scat
Dead Rabbits
Pissed Apache

In case anyone is wondering whether I could just study how these horses performed relative to their auction fees, the answer is 'definitely not!'. Without even looking at the results, I can tell you what we'd find - they substantially outperformed expectations, and would appear to indicate that purchasing horses with lousy names is a great way to get a bargain. The problem is, that these were the horses that people were able to think of. In general, that means they probably had some success on the track...or at least made it to the track enough time that some people have heard of them. Using this kind of after the fact selection of horses for a study will ALWAYS show strong performance. You can see why by trying a more extreme example. Let's test whether giving a horse a name that starts with 'Z' makes them more likely to excel on the track. Offhand I can think of...Zenyatta, Zaftig, Zarkova, Z Fortune, Z Humor, Zanjero...WOW! Definitely name all your horses with 'Z' names! You can see what the problem is here.

It's possible that you could get reasonable results using the second study design (compare auction prices to sire's stud fees) I mentioned in my previous posts with the horses people thought of that had bad names, but even that might be impacted by the fact that people will tend to remember superior horses. Perhaps the horses on the list, in addition to generally being relatively fast, also tend to have good conformation (which presumably tends to go together with speed). If that's the case, then they likely would have sold for higher prices than their sire's stud fees would indicate...so the study would tend to show that horses with awful names are a bad deal.

In any case, I'll definitely get more reliable results if I select names in a more random fashion. I'll go through the full list of horses for sale at a two year old auction and select those with awful names. I'll then compare their auction prices to their sire's stud fees, and see if they tend to sell any worse than the average horse at the same sale. My selections will focus on those names that include explicit sexual references, punctuation and spelling mistakes, and anything else that would make a name really embarrassing...not just a little unappealling.

Friday, September 26, 2008

Useful Angle For Auctions?

A not too serious post on the dos and donts of claiming horses by Frank over at That's Amore Stable generated some discussion about awful horse names. That got me thinking...are there any names that are so awful that it would impact potential buyers' interest in purchasing the horses? Never one to avoid an interesting research topic, I'd like to try to answer this question. The study design shouldn't be that hard:

1. Go through a list of horses about to be sold, and select the worst of the worst names.
2. Collect the racing of an unbiased sample of horses sold at the same auction.
3. Compare the racing results of the oddly named horses with the rest.

This could be done retrospectively as long as I'm not familiar with ANY of the horses sold in the auction, since I wouldn't want that to bias which names I select.

Actually, an even simpler study might begin to answer the question:

1. Go through a list of horses about to be sold, and select the worst of the worst names.
2. Compare the auction prices (relative to sire's stud fee) of the poorly named horses with those of all horses in the auction.

In order to do either of these studies, I need a good understanding of what names people really hate. Which horses have such bad names that somebody would be embarrassed to tell their friends if they owned the horse? I polled the folks over at the Thoroughbred Champions Forum to get some ideas of the worst of the worst names. I'll share the list in my next post.

Thursday, September 25, 2008

Calculating AEI and CI By Crop

Things are rarely as easy as they should be when doing research on thoroughbred racing and breeding, and a lot of the blame for that has to fall on those who have the data. Rather than making it available (at a price) in its 'raw' form, so that we can do the research WE find interesting, they insist on spoon feeding it in the format that THEY find interesting, which often makes it nearly impossible get the information we want.

One example of this is that I'm interested in seeing how successful the most popular statistics for ranking sires (AEI and AEI/CI) are in predicting future success. What I'd like to do is get a list of sires along with their AEI and AEI/CI and see what kind of correlations the statistics show over time. The problem is that I need to look at the data BY CROP. If I go to Bloodhorse.com the data is presented by year (never mind that its in a PDF file and I need to spend time on 'data hygiene' to even get it into a usable format). The problem is, looking at the data by year, of course there will be high correlation...because we're comparing some of the same horses to themselves. Smart Strike's results in 2007 and 2008 will both include Curlin...that's obviously going to make the correlation between his AEI and AEI/CI higher, but what is it really telling us? Not much.

What we really need is the AEI and AEI/CI data separated out by crop, and I think I may have figured out a way to calculate this, and will share it in a few days, once I've had the chance to test it out.

Tuesday, September 23, 2008

Odds and Ends

Just another six more days of baseball season, and then my focus will shift entirely to horse racing!

In the meantime, I wanted to post on a few assorted items. At this stage there are only a handful of people reading this blog because I haven't gotten to promote it much yet (and wouldn't necessarily want to until I'm posting more regularly). In an odd coincidence though, one of those few readers is apparently Chuck Simon...the man who trained Comic Relief to her only career win. I made two posts about Comic Relief and why I think she'd be an underrated broodmare prospect (despite the lack of success of her first few children). Chuck provided some really detailed information on her. To me, the key points are:
1. The injury that forced her retirement is not something that would change my assessment of her promise for breeding.
2. She should probably be bred to sires whose offspring do well on turf.
3. Her connections believed she would have been a potential stakes winner.

I'm currently working on a study of claiming horses that go on to be stakes winners or stakes placed, and how to identify claimers who are more likely to do so. While I have a great capacity for completing length, boring tasks, if anyone can point me in the direction of a complete list of U.S. stakes winners for 2007 and 2008, I'd appreciate it. Otherwise, I'll be typing the complete list in by hand.

Tuesday, September 16, 2008

Breeders Cup Handicapping

In general I'm trying to focus on the inefficiencies in the thoroughbred industry that owners can take advantage of. Beggars can't be choosers though, and sometimes the inefficiencies aren't where we want them to be. On big days for international racing, such as the Dubai World Cup or the Breeders Cup, there can be some great opportunities. For example, in his race in Dubai earlier this year, Notional was the favorite for an extended period of time, and ended up going off as the 2nd choice. Keep in mind that this was a Grade 2 quality horse, who was completely out of form at the time, running on grass, against many of the best turf milers in the World. Obviously, his presence and odds should have made it pretty easy to find good value on other horses. With so many Europeans horses aiming for the Breeders Cup this year, its likely that similar values will exist...particularly if you have access to betting pools in both the UK and the US. There may even be races where you can bet on every horse in the race and be guaranteed a profit. Bet on the US horses in the UK, and the UK horses in the US, and proportion the bets so that they all return a similar amount.

Tuesday, September 9, 2008

Is The Bubble Bursting

According to The Bloodhorse, Sheik Mohammed's Bloodstock Manager, John Ferguson said, "If somebody is thinking of buying a racehorse, this is a good time to do it because I think there will be value to be had throughout the course of the year." It's unclear whether that was before or after yesterday's relatively weak Keeneland September Sales results.

He may be right. You can certainly buy horses for less money now than the same horse would have cost a year ago. However, I think the current environment for unraced horses has some of the signs of the early stages of a post-bubble bear market in financial markets.

First, some of the typical characteristics of a financial bubble:
1. Prices go higher than anyone thought was possible.
2. There is no fundamental basis for the level that prices reach.
3. Many people are buying purely as a speculation, because believe they can resell to someone for even more.
4. Some people believe that prices will never go down because 'this time things are different'.

How does the situation in the very recent past meet these criteria:
1. Prices are at all time highs (although in fairness, not so much different than in the 1980s at the top end of the market).
2. The 'fundamentals' (earnings from actually racing the horses) make it impossible for something like 90% of the horses sold at auction to ever earn a profit for whoever owns them during their racing careers.
3. The entire concept of 'commercial pedigrees' as opposed to 'breed to race' pedigrees is an open admission that many breeders subscribe to a version of the greater fool theory...they believe that there are buyers who don't care about winning, and will buy their horses at prices unjustified by the horse's potential to earn money on the racetrack.
4. I've heard plenty of people say "prices won't go down much as long as the Sheiks and Coolmore are around". This kind of misses the point of what happens if they choose to stay home one year.

If the current drop in prices is indeed the early stage of a bursting bubble, then the following may happen:
1. Prices will go down further than many thought possible.
2. Eventually fundamentals will drive the market...there will be no interest in 'commercial pedigrees', and much more of the market will be driven by the idea that the horse being purchased has a reasonable chance of eventually earning the money back.

I don't want to overstate the latter point though...people do buy racehorses for reasons other than making a profit (obviously), so the link to fundamentals won't be as strong as in other markets.

My overall point is that now may not be a good time to buy at all, despite the apparent bargains. It might be a good time to sit on the sidelines and wait for the bottom in prices. Just remember...when the true post-bubble bottom is reached, most people are usually screaming that its the end of the world and the market will never come back.

Friday, September 5, 2008

Exclusive Quality

In my last two posts I talked about a mare named Comic Relief. It appears that she lives in Florida, based on the stallions she been bred to so far. So who would be a good stallion to send her to? How about the fastest son of Elusive Quality? No, not Smarty Jones! Exclusive Quality. He won three out of four starts. Tied a track record at seven furlongs. In his three wins he defeated Diabolical, In Summation, Songster, and Bernardini!!! He's currently standing for $4,000 in Florida. Predicting a sire's success at stud is always a gamble, but I'd be happy to bet on that stud fee going up once his children have been racing for a few years (his first crop will be two year olds in 2010). Does Exclusive Quality match up well with Comic Relief? I have no idea. But until someone shows me convincing statistical evidence that concepts like 'nicks' have predictive value, I'll go with the approach of 'breeding the best to the best'. And given his brilliance on the track, I believe that Exclusive Quality is a lot closer to 'the best' than his stud fee would indicate.

Thursday, September 4, 2008

More Comic Relief

A little more detail on the offspring of Comic Relief:

2004 - Gelding by Notebook named Satire. I haven't found details on his racing career yet.
2005 - Colt by Montbrook named My Friend Tingui. Racing in Puerto Rico.
2006 - Unnamed colt by Montbrook.
2007 - Colt by Bernstein. Sold for $7,000 in February 2008 to W.P. Stiritz.

Comic Relief

I've read in a variety of places that those thinking of becoming thoroughbred owners should only do so if its something that you'll enjoy enough to make up for the money it will cost you. The assumption is that, barring extreme good fortune, it's not a "beatable" game. A close look at the economics of owning racehorses is certainly a sobering reminder that the odds are stacked HEAVILY against you. That said, there are clearly massive inefficiencies in the industry, and if I didn't believe that discovering and measuring those inefficiencies had at least the potential to provide enough of an edge to owners to have a profitable expectation, then I wouldn't have started Thoroughmetrics.

That said, it's often useful to write out the exact nature of our 'edge' in any game. In general, if you can't detail specifically where your edge comes from, then you likely don't have an edge. My edges in evaluating breeding, racing, buying, and selling opportunities right now:

1. The results of a single study I did on buying horses at Two Year Old Auctions vs. Yearling Auctions, and in what situations each of them provide better results.

2. My knowledge of correct statistical analysis techniques that allow us to test predictive theories for their ability to forecast the future, rather than just explaining the past.

3. I have shiny, white teeth*

In other words, I have lots of work left to do.

In the absence of a proven edge, sometimes you have to rely on old fashioned common sense. Just don't assume that it will lead to the kind of results you're looking for. My common sense says that most potential owners are overvaluing horses where they can put a check the box next to 'Black Type', and possibly undervaluing horses who might have been equally good, but never earned any black type. I've begun compiling a list (note: there's only one horse on the list so far) of mares who meet the following criteria:

1. Did NOT earn black type.
2. Very lightly raced.
3. Showed potential stakes ability.
4. Career cut short due to problems unlikely to be passed on to offspring.

The first mare on the list is named Comic Relief. Actually, I haven't even verified that point #4 above is true for her, but she meets the other criteria - she won her only start (at a mile and a sixteenth) with a Beyer of 83. She's well bred for whatever that's worth (by Kingmambo). She's being bred to stallions in Florida who stand for $10K-$20K (Bernstein for one), and her offspring haven't yet accomplished anything worth mentioning (the most accomplished was last seen racing in Puerto Rico as far as I can tell). I think she and her offspring are a great value, particularly if I can find out why she was retired, and confirm that it was something relatively unlikely to be passed on to her offspring.

* I'm taking some poetic license here. While shiny, my teeth are not particularly white.