In early September of 1991, I was on vacation in France in the Cognac Region and in Wine Country around Bordeaux.  I was getting away from the thoroughbred horse industry or so I thought.  I found a great many situations that had occurred in Cognac and Wine Country Country, that paralleled what had occurred, and was still happening in the thoroughbred industry.

It is important to examine how events affect different industries.  The relatively recent events with Cognac and great Bordeaux Wines and the recent events in the thoroughbred industry in America were of great interest.  As we know and read about all the times, the effects of tax law changes have greatly hurt the thoroughbred horse industry in America.  We never did receive investment tax credit on horses anyway, but slower depreciation and changes in capital gains along with countless other changes have had a significant role in reducing the price of horses.

Cognac is considered a luxury product as are racehorses.  The majority of all Cognac produced, nearly eighty five percent, finds a home outside of France.  Whenever an importing country wants to raise revenues, luxury items such as Cognac, Perfume and Champagne are usually very hard hit.  Cognac sales were increasing at a rate of eight to ten percent in the late sixties.  Just when Cognac firms were set to unleash a great quantity of Cognac in the world, outside events created big problems.  Britain devalued their currency making French goods very expensive.  In retaliation against duties imposed on American chickens going to France, the United States Treasury placed higher duties on fine Cognacs.  In 1977 alone there were more than forty restrictive measures instituted against the importation of Cognac involving more that thirty countries around the world.  Brazil, Ghana and Peru banned Cognac entirely.

Meanwhile, in the world of great Bordeaux Wines, it can be said that folly was in the air in the early 1970s.  One Texas retailer paid $36,000.00 for a magnum of 1929 Mouton-Rothchild at a Chicago auction.  For whatever the reason, great Bordeaux vintages were recognized as investments, not for drinking but strictly for buying and selling.  In short, too many people--some of whom had only  the vaguest understanding of wine--began buying wines on speculation, certain that the market which was healthy then would continue to grow.  It grew only because everyone from French banks to English brewing companies, from Swiss chocolate firms to American multinationals, continued to buy wine without thinking where, or when they might sell it.  The prices rose to extraordinary levels just as yearling and stallion seasons and broodmares prices rose to extraordinary levels in the mid 1980s in the thoroughbred business.  A world wide economic slowdown aggravated by the so-called oil crisis, came hot on the heels of a local scandal in Bordeaux involving a shipping firm with dubious blending practices.  It all hit the customer at once..  Resentful to begin with a the grossly exaggerated price for the fair-to-medium 1972 vintage, wholesalers, retailers and consumers refused to go along.  Cases of wine piled up in the warehouses of Bordeaux and abroad, and no one was willing to pull the cork from French bottles..  The bottom fell out practically overnight and many foreign speculators were wiped out.

Our situation of the 1980s in the thoroughbred horse business included the problems associated with the Spendthrift Farm public offering, the Tom Gentry bankruptcy, the Nelson Bunker Hunt forced sale of horses along with countless dispersals of major owners and breeders and expensive syndications that proved to be unsuccessful as sires of quality racehorses.  Add this to the tax law changes and like Bordeaux Wine, it all seemed to hit at once and for us it is still going on.  Even today, the very cornerstone name of the thoroughbred industry, the great Calumet Farm is in bankruptcy just when they once again attained there industry leadership in 1990 by being awarded Eclipse Awards for Leading Breeder and for Horse of the Year Criminal Type.  They also stood the Leading Sire Alydar and the Leading Second Crop Sire in 1990, Wild Again.

Just as you might associate American Thoroughbred Racing with names like Calumet Farm, Greentree Stud, Sagamore Farm, Cain Hoy Stable and the familiar names of Phipps, Whitney, Vanderbilt and so on, we associate Great Bordeaux Wines with the great chateau names of Margaux, Mouton, Lafite, Latour, Haut-Brion, D'Yquem, Petrus, Ausone, Cheval-Blanc, Lascombes, Pichon Longueville, and others, and we associate Cognac with the names Hennessy, Martel, Otard, Remy-Martin, Courvoiser, Hine, Augier and others.

In the Cognac region ownership has changed until today, Seagrams of the United States and Canada own Martell and Augier; Hennessy is officially known as Moet-Hennessy, a publicly owned multinational company combining the interest of Moet and Chandon Champagne, Christian Dior perfume, Louis Vuitton, Domaine Chandon sparkling wines of Napa Valley and Hine Cognac: Bass-Charrington, the British brewers own Otard; Remy-Martin is still in the hands of descendants of Andre Renaud who bought the company in 1924.  Remy-Martin now owns the Champagne firm of Krug and and is now a conglomerate owning distributorships in Hong Kong and the Unted States.

The great Bordeaux chateaus are owned in a variety of new ways but mostly by corporations.  Large inheritance taxes in France require that individuals cannot afford to own the virtual wine institutions.  Chateau Margaux is owned by the Societe Civile du Chateau Margaux (Mentzelopoulos family) who also are part owners of Perrier, Chatreau Lafite-Rothchild is owned by Domaines Rothchild (descendants of Baron James de Rothchild who purchased Lafite on August 8, 1868 for 4,440,000 French Francs), Chateau Mouton-Rothchild is owned by the family of Baron Philippe de Rothchild, direct descendents of Nathaniel de Rothchild who purchased Mouton for 1,125,000 French Francs in 1853 in a corporate format, Chateau Latour is owned primarily by Allied Lyons, Château d'Yquem is owned by Comte Alexander de Lur-Saluces, a direct descendant of Marquis de Lur-Saluces who acquired the vineyard in 1785, and Chateau Haut-Brion, purchased in 1935 by an American banker named Clarence Dillon, in owned under the title of Domaine Clarence Dillon and operated by the Duchesse de Mouchy, the granddaughter of Dillon.

In America, Gainesway Farm is owned by South African Graham Beck whose property includes Greentree, the Hancock Family operate Claiborne Farm, Allen Paulson of Gulfstream Air owns Brookside Farm, the Arab Sheikhs have several farms as do the English.  It would seem that the great farms of Lexington, Kentucky are now owned in a format that one might not have thought possible, just a few short years ago.  The fate of the legendary Calumet Farm now hangs in the air as the industry waits to see who will step forward and save the name.

The great and noble Cognacs and Bordeaux Wines of France are legacies that have been preserved. Sometimes, families are able to pass down the legacy for centuries and sometimes corporations both foreign and domestic must move in to preserve the legacy.  If the American Thoroughbred Industry is to be preserved, and move on through history, it must learn from other industries.

So sit back, drink a glass of fine Cognac or lush Bordeaux Wine or both and give some thought to it all.

I wish to thank all the great people in France at the vineyards I visited and especially at Chateau Margaux, Chateau Haut-Brion, Chateau Latour and Chateau Mouton-Rothchild in the Bordeaux Region and Chateau Otard, Courvoiser in the Cognac Region, who were so kind to show me their facilities.  I also wish to credit my reference material, Alexis Lichine's Guide to the Wines and Vineyards of France and David Peppercorn's Bordeaux.

After Thoughts - April 30, 2002

Horse prices are high, the world is at war and the economy is once again having some problems.  Big companies have recently failed with a strong aftermath for investors such as the Enron case.  We all know that economically speaking, business cycles about every 15 years and we seem to be coming back into a cycle which could easily hit the horse business as it did in the late 1980s and early 1990s.

We entered the new millennium with prices once again beginning to soar in the business.  The breeders are holding out for high reserves and there is a substantial number of buy backs.  Just this year, stud fees in the middle price range took a solid hit.  Syndications of new stallion prospects might just have been a bit too high.  

Foreign participants, especially from the middle east are under strong political pressure.  We all understand that a big portion of the thoroughbred market is currently influenced by sportsman from the Arabian Peninsula.  Although it seems that there are more billionaires then ever in our industry, we still need to take notice of the situations in the world in which we reside.

I always do what I can to contribute to the health and well being of the horse business.  I love this business and most of the people in it.  Furthermore, I make my living from the horse business and I am noted for making deals that take into consideration that the business world and life in general is certainly not a static situation.  Frankly, the dynamics of life must be considered by everyone interested in the health and well being of the thoroughbred industry.  In this era of hundred mare books to stallions, those wishing to see a healthy industry must especially consider the smaller players that are the life blood of the business.  The stallion owners especially should keep in mind that money is like manure and must be spread around if they expect things to grow.

Second After Thought  - September 24, 2009

It has been greed and some corruption that has hit the world economies and caused an economic situation that is unequalled in my lifetime and may be unequalled in economic history long before it ends.  A commercial real estate crisis looms on the horizon and the leveling of salaries in a global work force market is also a strong factor.  America exported a lot of jobs because unions and workers priced themselves out of the global work force.  New jobs of quality require skills that many American workers will not be able to acquire in this age of Nano Technology, Robotics, High Bandwidth Utilization Products, Microbiology and Physiology, etc.

The American and Global Healthcare Crisis is actually a Disease Care Crisis. Fast Food and Restaurant Chains are crippling their customers with high sodium, high sugar and high calorie foods that are destroying world health.  The drug companies are actually killing and disabling people in the long term. The new technologies to cure the root causes of illness are not being offered by most medical practitioners.  Lobbyists and business as usual, disguised as new business practices, is going to run out of time and things will continue to journey down the wrong path for what might be another decade or so until the leaders wake up to what is actually going on.

Solutions to environmental situations are scheduled much too far into the future.  Disasters involving the ruination of earth only add to the problems.  The Time is Always Now so solutions to environmental issues need resolution and enforcement immediately. Each new disaster cost lives and alter the quality of life for the survivors.

The horse business needs to utilize the best minds available and do it quickly.  We are being passed by everyone, everywhere we turn.  Slot machines are not and never as the answer and synthetic racing surfaces only add to the problem.  We must realize that no one has a franchise on new ideas and we need to keep our minds open to new concepts from all sources. 

I am hopeful that my next update of this article in several years or more will demonstrate that my message got home and changes that were positive have augured in a new day.  Drugging horses and greedy business practices must go and a fair and level playing field needs to be the cornerstone on which the new thoroughbred racing and breeding business is built.  We need for the popularity of horse racing to return and that will only come when integrity and economic soundness return to the business.