HALCYON DAYS

President Jacob Zuma holds up South Africa’s new 50 rand note
bearing Nelson Mandela’s image…
(Photo : 2 Oceans Vibe)

“Be fearful when others are greedy,
and be greedy when others are fearfull.”
Warren Buffett

Mick Goss
Summerhill Stud CEOThe 2011 edition of the South African Racing Fact Book has just been published, a labour of love by former Gold Circle chairman, John Bescoby. You don’t have to be a racing aficionado to know that it’s an invaluable piece of work, especially if you’re interested in the economics of the game.

Among the many famous things the world’s greatest investor, Warren Buffett, has said in his 82 years on the best time to be involved in the market is : “Be fearful when others are greedy, and be greedy when others are fearfull,” or words to that effect. If you’re into breeding racehorses, pages 36 and 37 of the Fact Book are a revelation. The tide has gone out on the number of registered breeders, and especially on the number of mares returned (i.e. those reflected as having been bred in the records of the National Horse Racing Authority). Assuming these statistics are reliable, as we’ve been predicting, the broodmare population shrank by some 500 head in 2011 (not quite the 25% the pundits have been professing, but a sizeable number nonetheless). On the basis of a worldwide average of 60% live foals to mares in active service, the total number of foals we may anticipate from the 2012 crop will be of the order of 2800. We all know what happened last time there were less than 3000 foals on the ground.

Breeders had never had it quite so good before, and those who had stock cashed in with both hands, as the demand for racehorses outstripped supply. The number of colourholders has held its own despite the times we live in, unless you are a doomsday prophet, the signs for a bull market in 2014, are up there in technicolor. South African racing has traditionally demanded something approaching 3500 foals a year to sustain its fields, and if that is the fundamental number, the 2012 foal crop will leave us close to a 700 head (or 20%) short of the mark. Imports are becoming increasingly expensive to acquire, not only because the domestic markets in the countries favoured by South Africans (Australia in particular) have already begun their recovery, but also because of Rand weakness (though who knows, now that we have Nelson Mandela’s image on our banknotes, what kind of effect that could have on the Rand)?

All of this has to be seen in the context of our history as a racehorse-producing nation. In the boom years of the 80s and early 90s, there were more than 7000 broodmares in use in South Africa. The foal crop was up there in the vicinity of 5000, and breeders were still making money. The racing operators were enjoying a bit of a bull run, and the prize money to cost ratio was the third best in the world. A maiden victory would keep a horse for 9-10 months, and with a bit of place money, you could break even on livery.

Last week, we penned a piece on the new prosperity of our operators, and we included a speculative line on what that might do to prize money going forward. It seems as if there might be a serendipitous convergence between the shortage of horses in production, and the upward momentum in prize money. You don’t need a doctorate to understand the possibilities.

SUMMERHILL NEWSLETTER : DECEMBER 2011

Click above to watch Ready To Run Graduates, Igugu and Pierre Jourdan,
finish “one-two” in the 2011 Vodacom Durban July (Grade 1)
(Image : John Lewis - Footage : SABC 3)

“Let’s get our chins up for a big one.”

Mick Goss
Summerhill Stud CEOGood Morning,

Given the racing man’s hereditary obsession with the irretrievable past, and allowing for the fallibility of memory, it may prove too much for us to recreate it just as it was. We all know that the “good old days” were never quite as good as we’d have ourselves believe, but we cannot remember a more fulfilling breeding season, punctuated by a patronage of our stallions which exceeded all-comers among recent years, an outstanding crop of foals (which probably explains the stallion bookings) and an excellent conception rate. Top that with an extraordinary Emperors Palace Ready To Run Sale in November, and we’d have to be feeling bullish. Remember, this is 2011!

Let us explain why. We all know the world’s been in turmoil, but these numbers tell us that at Summerhill, we have a clientele whose enterprise, far-sightedness and guts exceeds everything we could wish for. People have put their heads down, knowing that when the market is frightened in one direction, you should be looking for opportunities in the other. They obviously read Warren Buffet. The broodmare demographics in the country, according to some stats I saw in the Cape a week ago, suggest that we have just over half the number of broodmares in circulation we had a decade ago, which means half the foal crop. We also know that racing needs a critical mass in the way of competitors to make the totes work, and it looks like we’re headed for a hefty shortfall in the way of available stock come 2014, when next year’s foals reach the market. We’ve not seen financial times as tough as these in most of our lifetimes, but South Africans are not unaccustomed to financial turbulence, and the art of knowing when to swim against the tide has worked for us just about every time we’ve pursued it.

Besides the numbers, there’s cause for further hope in the work being done at intergovernmental level in fixing our protocols for the facilitation of exports. Whatever prosperity the South African breeding and racing communities have enjoyed in the past decade, will pale in comparison with what we can achieve if we can get our horses to foreign destinations more expeditiously, with less fuss and less expense to our customers abroad. This could be a game-changer, but while we’re waiting for May next year when the IOC reviews the rules, we must turn our hopes to our expectations for next year’s sales.

Those who follow the industry closely will know that Bloodstock South Africa has for decades been the dominant agent for the sale of our horses. There’ve done us well in a laagered environment, with one shortcoming. Unlike the rest of the world, producers have had to carry the risk on their sales for as long as the buyer hasn’t settled, and the newly formed Cape Thoroughbred Sales brings some relief in this respect. While competition is a healthy aspect of any industry if BSA is to retain the loyalty of its vendors, it will have to find a solution to this problem to maintain its share of the turn, and we have to encourage its custodians to search long and hard, and quickly. Meanwhile though, CTS has embarked on an ambitious programme to showcase its sale at the end of January, and that, together with BSA’s National Sale (which has the benefit of an April date) should have the impact, with the cash that will flow back to breeders, of restoring the integrity and the value of our broodmare bands. Balance sheets will once again look like they should do, bankers will be more amenable and the breeding game will be back with a bang. There is a new energy in the marketing environment, and the pros are bringing their “A” game.

For some years now, Summerhill has been on many a travellers “to do” list at this time of year. Somehow though, despite the apparent constraints of the world economy, we’ve seen more people from more diverse places, than ever before. When Summerhill pumps, Hartford pumps, too, and vice versa. Judging by the number of Brits, Germans, French and Belgians among them, it’s obvious residents of the Eurozone have at last discovered the meaning of “value”, while the Aussies and the Mauritians have no such problems. Go to the blog (www.summerhill.co.za) for a peek.

Talking of Mauritians, Cheryl and I attended the International Jockeys Challenge earlier in the month, squeezed in between business in Jo’burg and Cape Town. There’s no free lunch here though, as we’re busy drumming up custom for the second Ready To Run (22^nd February). The response from Mauritius tells us they remember the outcome of this year’s Vodacom Durban July, and it wouldn’t be a surprise to see French the dominant lingo at Hartford the evening before. The old saying “If you snooze, you lose,” still applies. You won’t meet a more fervent bunch of racing aficionados anywhere, so book early if you want to join. Remember Imbongi, Bold Ellinore, Emperor Napoleon, Amphitheatre and Vangelis were all “left-overs” on the farm, and they all made millionaires of their owners, if they weren’t already.

Can you believe it, 2012 is upon us. Most of us would probably want to put a line through 2011, so why don’t we do that?

All the best for the festivities, and let’s get our chins up for a “big one”.

Mick & Cheryl Goss
SUMMERHILL STUD & HARTFORD HOUSE

www.summerhill.co.za

SIRS PATRICK AND TRISTRAM; MESSRS JOOSTE AND GOSS

Sir Patrick Hogan
(Photo : Racing Victoria)

“Proving it’s better to be lucky than brilliant”

Alec Hogg
Graceland FarmWe’re in the process of building an equine library at Jeanette’s Graceland Gallery. With the gallery now specialising in equine art, it makes sense to also stock horse books. Good books about thoroughbreds are hard to find in South Africa, especially since the TBA cancelled its annual pre-National Yearling Sale book sale. Although, in truth, the library is more of an excuse for me to indulge two passions - reading and racing - while investing in my own education.

The idea of an equine library came from my pal Mick Goss, whose leadership has given the country its seven-time Champion Breeders, Summerhill Stud. Always one who believes actions speak louder than words, Mick followed up the library suggestion with a donation - a book about New Zealand’s master breeder Sir Patrick Hogan. Called Give A Man A Horse and written in conversational style by Kiwi journalist and biographer Dianne Haworth, the book’s an inspiration for anyone, not just those in the breeding game.

Haworth’s writing reinforces how life’s lessons come from different places. Reading about Sir Patrick often reminded me of Nassim Taleb’s argument in Fooled by Randomness, a book that changed the way I look at just about everything. Taleb’s classic uses many examples to show how success needs dedication and a passion for what you’re doing - but with the important rider that getting to the very top is dependent not on these everyday attributes, but on a huge dollop of luck.

In my other life as a financial journalist, three decades of observation proves the accuracy of Taleb’s thesis. Every big success story I’ve come across owes a great deal more to luck than good judgment. Where beneficiaries of such providence go wrong is when they believe some super-human talents are the real reason for the success. Appreciating this reality helps keep perspective in a world where society wants heroes, often putting personalities onto pedestals they cannot possibly retain, tumbling after getting caught up in the hype. For me, the difference between a great man and a lucky poser often begins with their realization - or not - of life’s randomness.

Warren Buffett, for instance, had the good fortune as a young man to meet his teacher Benjamin Graham and then lifetime business partner Charlie Munger. Without the influence of these two, Buffett would surely have done well. But without them it’s hard to believe he could have become the best in the world. Buffett acknowledges he was in the right place at the right time, calling himself fortunate to have been born in the USA when he was; and to have a brain “hard-wired for capitalism”. His strongest message to young people is that they realize we’re all knowledgeable and perhaps even talented in some areas; success comes from knowing where these sweet spots are and sticking to them.

Well known personalities in local horseracing provide more examples. Table topping owner Markus Jooste, for instance, owes much to being fractionally the lower bidder for SA Breweries’ furniture manufacturing assets at the absolute peak of the market in the late 1980s. The winning bidder, Pat Cornick, offered a mere 25c more a share (R19.50 versus R19.25), and ended up going bust because of overpaying. Had Jooste’s Steinhoff won the auction, it would surely have suffered a similar fate. Instead, Steinhoff was around to pick up the same assets from a bankrupt Pat Cornick at a fraction of what it had been prepared to pay just a year or so earlier. That was the enterprise making deal which created the low cost asset base from which Steinhoff’s global empire was built. Jooste was blessed with good fortune once more when he dipped his toe into the racing world. His first investment: a share in a yearling called National Emblem who became the country’s Champion racehorse and then a leading stallion.

Mick Goss tells a similar story. The mighty Summerhill Stud, he readily explains, was the result of two pieces of great fortune - the first, flight cancelling bad weather that put him together for an extended period with the country’s greatest tax and legal minds (from which tax-incentive breeding partnerships were created); the second, a chance bumping into Northern Guest when he and brother Pat were visiting Ireland to see a different horse. Every barn, stable and pasture at Summerhill, Goss reckons, owes its existence to Northern Guest, the unraced marvel who became South Africa’s multiple Champion stallion.

The benefit of good luck seeps right through the Hogan book. Feted around the world as a genius in the Tesio tradition, Sir Patrick’s talent might never have been recognised had it not been for a nasty natured, poorly conformed (“terrible hind quarters… shocking hind leg”) Irish racehorse who he was strongly advised against buying. That stallion was Sir Tristam who became the greatest producer of Group One winners worldwide, putting Sir Patrick’s Cambridge Stud and, indeed, New Zealand breeding onto the global map.

Hogan’s real talent - something shared in breeding by Goss and in business by Jooste and many others - was an ability to use his random good fortune as a base. He kicked on. Strongly. Doubling up through buying back one of Sir Tristam’s best sons, Zabeel, from Sheikh Hamdan. The Dubai Prince had bought the Cambridge-bred Group One winner as a yearling for $650,000. For reasons best known to the Sheikh and his advisors at Shadwell, he decided not to stand Zabeel as a stallion (or to send him, like Kahal and Muhtafal, to Goss’s Summerhill Stud - what a difference that would have made to South African racing). Instead, Hogan was invited to submit a bid in a private auction and prevailed by a mere $50,000. Over three dozen Gr1 winners later, Zabeel has proved that in racing, sometimes lightning does strike twice. What makes New Zealand’s most famous horseman so extraordinary, though, is how he appreciates this, never losing his humility or his humanity. It’s that part of the man, even more than his amazing breeding achievements, which is most inspiring.

Extract from www.gracelandfarm.co.za

NOW FOR THE GOOD NEWS

TBA Sales Complex, Gosforth Park, Germiston, South Africa
(Photo : Leigh Willson)

EMPERORS PALACE READY TO RUN SALE
TBA Sales Complex, Gosforth Park, Germiston
6 November 2011

We’re not sure whether we’ve got this quote exactly as the sage of Omaha once said it, but Warren Buffett is famous for timing his investments to the tee. “Be fearful when the greedy are greedy, and be greedy when the greedy are fearful”. It seems that international thoroughbred investors had his advice in mind at the principal American and English sales last month, when a new tide of buyers from across the world ensured increases in average and median of 30 and 40% plus. That was before the recent EU deal on Greece, before US retail sales posted their increases, and before a spate of healthy reporting from Fortune 500 companies in the States.

In South African terms, it was before our president earned his brownie points with the announcement of an arms deal probe, the firing of 2 ministers, and the suspension of his Police Chief, and the conclusion of the evidence in the Malema disciplinary enquiry. The mood in the country has already moved into positive mode, and earlier this week Stats SA announced a net increase of almost 200,000 jobs in the formal sector. It’s remarkable how quickly things are developing, and here in the Golden City, we hear encouraging stories from retailers, casino and factory floor operators, that the “worm has turned”.

At the sales grounds, traffic is pumping, lending some credibility to a 17% uptick in visits to our website, and it seems Ready To Run fever is reaching a point where it will soon be notifiable. Credit applications at Bloodstock South Africa are well ahead of last year, and it seems the adage “the Ready To Run is all about fun” has taken deep root among racing fans. We’ve always known it, but it’s worth remembering the optimistic natures of racing people, who seem to bounce back before the rest of the economy. Toss in a bit of the farsightedness, the enterprise and the guts for which our countrymen are renowned, and the faith we’ve always held in South Africans, and you have all the ingredients for a good sale.

But this is a deep draft of quality thoroughbreds deserving of respect, and whilst you might accuse us of bias, no less a judge than Michael Azzie made a turn at Block A yesterday, and after inspecting the Summerhill draft, frustratedly announced he had 42 on his (long) shortlist, a phenomenon he’d never experienced at a sale before. He is among those that remember the early days at the Ready To Run, when he took home the top-priced colt of his year, Imperial Despatch (R65,000!), and turned him into the unbeaten champion juvenile of South Africa. He also recalls the fickle rapidity with which we tend to dismiss the progeny of certain sires, forgetting that fashion comes and fashion goes. Some years ago, when Desert Team was “dead and buried”, we consigned 4 of his youngsters, and all 4 of them told us on the gallops at home that they deserved some respect. Alan Greeff took home a Gold Cup Gr1 winner, Cereus, David Goss a Gr2 heroine, Dot Dot Dash, St John Gray a St Leger ace, Stud Master, and the late Roy Howe, Captive Audience, a 5-time winning filly who beat the colts under top weight in the B division.

The moral of the story : “watch the gallops”. These horses don’t know who their father is, and if the evidence is that they can run, it doesn’t matter who the hell their parents are. Good horses come from both patrician and plebeian backgrounds, with almost equal regularity, and there is no sale that exemplifies the successes of the rich and the not-so-rich quite as emphatically as this one. It’s also worth remembering that everything in our draft has had the benefits of a Summerhill upbringing, and if that can’t enhance your prospects, whatever your origins, nothing will. Simply put, it’s the best upbringing of a racehorse known to man.

Enquiries :
Tarryn Liebenberg +27 (0) 83 787 1982
or email tarryn@summerhill.co.za
www.summerhill.co.za

WINTER SCHOOL 2011 : A HARD ACT TO FOLLOW

Mike de Kock
(Photo : Heather Morkel)

WINTER SCHOOL OF EXCELLENCE
By Alec Hogg

Alec Hogg
Moneyweb FounderPythagoras, the ancient Greek polymath, is best remembered for our schoolroom introductions to the algebraic theorem involving squares and the hypotenuse. Apart from the maths class, his contribution to mankind was through philosophy. Including a belief that all men fall into one of three categories - they are lovers of either wisdom; money; or fame.

Those in racing who believe they fall into the first pigeonhole now have new dates for the annual calendar. Judging by this year’s debut, the first three weekdays after the Durban July now belongs to Summerhill’s Winter School. Before attending, the idea of blocking out three days for a seminar seemed indulgent. It was, instead, one of the better investments I’ve made in some years - different, but right up there with learnings from annual visits to the World Economic Forum in Davos.

So what of the take-homes? Was it inspiring?

Definitely. But that came with the territory. OK, he’s my good friend. But even those who envy rather than celebrate my neighbour Mick Goss’s achievements wouldn’t deny his ability to inspire. Whether it’s at the daily 6:45am staff meeting; a room of potential horse buyers; engaging with the world’s leading horsemen or just with pals around a dinner table, Mick’s always positive approach leaves you feeling better than when you arrived. His enthusiasm is infectious. So knowing he’s behind the Winter School created the expectation that it would be world class. It was, including his own (always) lengthy rendition of the Summerhill Story, a tale I’ve heard many times, but one that still inspires.

I’ve also got a soft spot for that rough of racing’s diamonds, Mike de Kock (who in SA racing hasn’t?). So to witness his story, in his words, was a privilege. Including the reminder of that secrets of success are universal. The world’s greatest investor, Warren Buffett, advises us just two things are at the root of a successful life - invest in yourself; and stick to your circle of competence. Mike’s story is living proof of Buffett’s thesis. A man who never studied the science of outsourcing, he practices business focus better than many corporations. Obsessed with his thoroughbreds, he stays in his sweet spot - with the more than occasional distraction of rounds of golf (where, he swears, the mind still thinks horses). If a couple of hours listening to MdK doesn’t inspire you, nothing will.

Educational? Absolutely.

If they’d taken a vote, outside of the two Ms, my highest rating would have been for the other of De Kock’s Musketeers, Dr John McVeigh and Jehan Malherbe; and the man many of us in SA honour as our own “Mr Racing”, Graeme Hawkins. Listening to real experts with the confidence to tell it straight is always a treat. Having them discuss your passion without a hint of egg dancing is to be treasured. McVeigh provided more than a few “aha” moments; Malherbe used facts to explain why it makes sense to invest all in quality - whether you’re buying or breeding. And hearing Hawkins’ insights ensures I’ll never participate in an auction the same way again.

Just a notch behind them were the trio of Onderstepoort Prof’s Alan Guthrie and Martin Schulman; and Summerhill’s broodmare manager Annet Becker. After a few hours of absorbing some of their knowledge, you’d fancy making a contribution at the next debate about African Horse Sickness; mare pregnancy and foal birth rates or the critical issue of nutrition. Bio-agric expert John Fair provided more “aha” moments - even for McVeigh - as he explained how years of working with Team Summerhill rebalancing pastures has produced the bigger, stronger, more densely boned animal that now leaves the Champion Breeders. Very different to the experience of many KZN breds in the 1990s. 

Life changing? For me, yes.

Mick is one of those rare people who, well, loves other human beings. Put him in an airport line and by the time you board he’s made a friend of the man behind; take him to a restaurant and he can’t leave without engaging with people at the next table. He’s what best selling author Malcolm Gladwell called a “Connector” in his classic book Tipping Point -one of those rare individuals who act as a hub for the rest of us: a common point for thousands of people. Some do it for profit. Mick interacts widely because he likes people. He can’t help himself.

This is which brought Australian family business professor Justin Craig to Summerhill’s School of Excellence. Typically, they were queuing ahead of this year’s Berkshire Hathaway AGM in Omaha. A chat in the Midwest led to dinner on the Gold Coast during the Aussie Yearling Sales. Sure enough, Justin soon found himself agreeing to present the keynote at the Winter School’s opening session.

It was a talk worth flying to Australia to hear. Everyone takes different things from a great teacher like Dr Craig. For me it provided a well-needed jolt; a reminder that entrepreneurs are made, not born; and for those of us thus afflicted, best we remember this fact. He also emphasised how each of us have resources we often leave fallow. Justin hit the spot. My own now-in-gestation bestseller was born from his guidance.

As a final point, enrolling two of racing’s elder statesmen, Judge Alan Magid and former NHRA chairman Ronnie Napier, to act as introducers and summarisers was a masterstroke. They provided the right blend of fun and decorum, critical factors if a long anticipated event surpassed its billing. They provided the platform for an atmosphere - for the most part anyway - of respectful interaction. Lecturers didn’t duck questions, supporting an open, sharing environment that’s most conducive to learning.

The inaugural event is a tough act for School Principal Heather Morkel and her team to follow. I’m betting they’ll manage. So have already blocked off the second week of July in my 2012 calendar. As, I imagine, all the other outsiders privileged to join the school’s first intake of full-time students at this special occasion.

• Alec Hogg founded Moneyweb and now breeds thoroughbreds. He lives on Summerhill’s northern border at Graceland Farm which he shares with sculptor wife Jeanette and her Graceland Gallery, which focuses on equine and other fine art.