by Doug French by Doug French
Hope is everywhere this spring despite the awful economic numbers. The corner of Washington DC & Wall Street and its cheerleaders on CNBC have their noses stuck in Norman Vincent Peale’s The Power of Positive Thinking. No matter how dreadful the smoothed and sanitized government statistics are when released, instead of bombshells, these stats become mustard seeds and green shoots in the hands of the alchemists in the financial press.
"You’ve got to accentuate the positive" Johnny Mercer famously wrote and sang back in the ’40s. But for the reported 539,000 who lost their jobs in April it will be hard to keep their chins up. Meantime, the Dow soared on the news because after all the number crunchers had guessed the payroll number to be down more like 600,000. Never mind that the government signed on 72,000 warm bodies last month to do the upcoming census. Oh and that birth/death ratio added a few "jobs," otherwise the payroll number that the Squawk Box crew waits so breathlessly for would have been close to down 700,000. "Eliminate the negative and latch on to the affirmative. Don’t mess with Mister In-Between."
"Celebration in recession" wrote The Economist of this year’s Run for the Roses. The Kentucky Derby is America’s race and signals the arrival of spring and renewal each year. The sport of horse racing rarely takes a day off, but it is only on the first Saturday in May that the average American watches a race — 14 million according to the CNBC special "Run For the Roses." For those of us who have spent way too many afternoons at the track or in Las Vegas racebooks "the greatest two minutes in sports" is simply: Churchill Downs, Race 11. Long lines at the betting windows filled with people who have never bet a race. As annoying as the tipsy one-night-a-year drinkers are to the hardened lush on New Year’s Eve.
After being one of America’s top three sports back in the 1950’s, horseracing as a spectator sport has dwindled to virtually nothing. Sure, 154,000 showed up in Louisville to watch 19 three-year-olds tromp through the mud in search of racing immortality. But as Melissa Francis pointed out during the CNBC special only two or three thousand show up in person for a typical race day at any given track around the country.
The crowds for Derby Day at Churchill Downs and opening day at southern California’s Del Mar look like country club beauty pageants, with mint julep-sipping society women showing off the work of their personal trainers clad in sun dresses and topped with ostentatious hats. At tracks like Turf Paradise in Phoenix, the tiny crowds are dominated by t-shirted would-be wise guys with cigarette packs rolled up in their sleeves.
But as a betting sport, horseracing is far from dead. While much more is bet on Wall Street, $15 billion a year is still wagered on the short-term futures of four-legged animals. The computer age and simulcast has made it easy. No trip to the track required. For those who have no idea what horse to bet on the horses are numbered for your convenience: you can make it a numerological exercise. Every horse has a clever name: you can handicap playing the name game. For those who like others to tell them how to lose their money there is no end to the opinions that are for sale.
But of course the hard-core horse players, the do it yourselfers, analyze the horses’ past performances in the Daily Racing Form, and make their educated selections based upon any number of strategies they’ve learned from reading any one of the hundreds of books on horserace handicapping or systems they’ve made up themselves. The fact is it all amounts to a wild-ass guess. In the case of the Derby, a person is wagering on the performance of three-year old horses — the equivalent of teenagers.
Breeding thoroughbreds is a huge gamble in itself, and a $4 billion business to boot. There are 40,000 thoroughbreds brought into the world each year and just over half will ever race. But breeding money follows bloodlines and past performance. So Derby winners command big stud fees. You won’t see many Derby winners racing into old age, at least not in the bubble economy when they could command $200,000 in stud fees. The owners of last year’s Derby winner Big Brown had their eyes on 100—120 mares a year at 200 grand a pop, until Big came up last in the Belmont Stakes and the economy sputtered. Now he commands a not-so-studly $65,000 per mare.
Thoroughbreds are made to run, weighing more than half a ton on long spindly legs. They can reach 40 mph and accidents happen. Barbaro won the Derby in 2006 and many thought he would be a Triple Crown winner. Instead he shattered a leg in his very next race and after many heroic attempts to save him, he was eventually put down. Last year, filly Eight Belles gamely took on the boys and finished second to Big Brown, only to snap both her front ankles just beyond the finish line and had to be euthanized in front of the stunned capacity Churchill Downs crowd.
But if horseracing means anything it is hope. And this year hope arrived in the form of a little $9,500 colt that was shipped in from New Mexico by the name of Mine That Bird. None of Mine That Bird’s connections thought he had much of a chance. Co-breeder Peter Lamantia even talked a friend out of betting $100 on the horse to win. "I cost her $5,000," Lamantia told the DRF, "Not for the life of me did I think he could win."
Indeed, when jockey Calvin Borel charged up the rail on Mine That Bird, blowing by the rest of the field, very few held winning tickets. The game colt went off at 50-1 and pulled off the second biggest upset in Derby history. For the first time in many years I had no financial interest in the Kentucky Derby. But reviewing the past performances, I can safely say I wouldn’t have had the winner. Many of the horses had better speed figures and there was just nothing for this handicapper to hang his hat on. I wouldn’t have bet him to win, place or show, or even included him in any exotic bets.
In hindsight, careful handicappers might have noticed that Mine That Bird’s sire is Birdstone, a horse famous for spoiling Smarty Jones’s Triple Crown bid in the Belmont Stakes in 2004. But his Dam, Mining My Own, was unraced calling into question his soundness.
Ironically, there will be no bidding war for Mine That Bird’s stud services — he’s a gelding. Canadian trainer Dave Cotey had the horse gelded, reportedly because the randy colt was showing too much interest in the neighborhood fillies, a distraction from training.
Mine That Bird’s next race will be the middle leg of the Triple Crown, the Preakness Stakes at Baltimore’s Pimlico racetrack this Saturday. Amazingly, the Derby champ may have a different rider in Baltimore. Calvin Borel has committed to ride super filly Rachel Alexandria for the rest of the year, including The Preakness if her owners enter her. But if rumors are correct, Mine That Bird will be in good hands Saturday. Hall of Fame Jockey Mike Smith has been approached to fill in for Borel.
No matter from where you watch the Kentucky Derby, the singing of "My Old Kentucky Home" before Race 11 at Churchill Downs brings a tear to the eye. That was especially the case this year, remembering that my horse-betting friend Burt Blumert would miss the race. Burt was a keen student of the sport and a good judge of horse flesh. He bet on plenty of long shots in his life, and more than a few came in. Mind That Bird would have probably caught his eye and Calvin Borel’s savvy ride would surely have made him smile.
Speaking of hope, 23 bettors hit the Derby superfecta, correctly picking the top four finishers in the correct order. A $2 winning superfecta ticket paid $557,006.40. Now that’s a green shoot.
Doug French [send him mail] is president of the Ludwig von Mises Institute and associate editor for Liberty Watch Magazine. He is the author of Early Speculative Bubbles & Increases in the Money Supply. He received the Murray N. Rothbard Award from the Center for Libertarian Studies. See his tribute to Murray Rothbard.