Who'd spend pounds 2m on an untried horse?

The rarified world of international horse trading is not one that normally impinges on the consciousness of ordinary folk. But those interested in the state of the so-called feelgood factor might be interested to know that a baby racehorse now costs twice what it did two years ago.

Over the past few weeks the scenes at Tattersalls, the country's premier equine auction house based in Newmarket, Suffolk, have been little short of phenomenal as buyers from all over the world scrambled for possession of a selection of some 1,200 yearling thoroughbreds.

These unnamed, untried little horses, which will race for the first time next year, must be the ultimate in luxury spending. The cheapest cost 1,000 guineas, but the most expensive was a cool 880,000 guineas.

The bloodstock business is one where gambles start long before any horse sets foot on a course, and the reasons for this latest, extraordinary market surge defy logic when the returns for the buyer in terms of hard cash are considered. The overwhelming majority of the young animals sold this, or any, autumn will fail to win. But racing is an industry built on dreams, and when the rewards do come, they are sweet.

The willingness of half-a-dozen mega-rich men to take each other on in search of those dreams of glory had the effect of sending the market for their particular commodity - the best-bred and most beautiful yearling colts and fillies - straight through the roof of the elegant domed sale ring.

The sport of kings is now the sport of sheikhs and magnates, and when their egos collide, the stratosphere seems to be the limit.

The buying frenzy started three weeks ago at the Houghton Sale, the glossiest, swankiest yearling auction in Europe. There are two ways of acquiring a young racehorse: you either breed one yourself or go to market and buy one from a specialist producer, and it is at the Houghton that the cream of the commercial crop is offered, which carry the promise of being that Derby-winning colt or that filly to found a dynasty.

By the end of the three days' trading, which produced turnover of a shade more than 26 million guineas, six men - all high profile in the racing world but none dependent on it for their income or subject to the vagaries of inflation that worry mere mortals - had contributed more than half the week's takings.

The Dubaian brothers and ministers of state Maktoum Al Maktoum and Sheikh Mohammed; the Saudi Arabians Fahd Salman and his American-based cousin Ahmed Salman, both of their country's royal line; the Syrian-born businessman Wafic Said, who is a friend of Lady Thatcher, and entrepreneur Michael Tabor, once of Clerkenwell and now of Monaco - these men spent more than 14 million guineas between them. They are powerful and acquisitive men in their own fields, and nothing changes when they enter the realms of the business that is their pleasure.

It is the nature of horses that there will be more chumps than champs among their ranks, and the major players are all involved in a numbers game. They buy in bulk, because there is no guarantee that the highest- priced horse will be the best runner; the annals of bloodstock sales are littered with expensive failures. The most expensive horse ever sold in the Tattersalls ring was a 2.4 million yearling colt sold eight years ago. Named Classic Music, he never raced and died after only two years at stud.

Bosra Sham, who fetched the highest price at the Houghton Sale two years ago when she cost 530,000 guineas, became the first Newmarket "top lot" for 49 years to win a Classic race when she took the 1,000 Guineas back in May. But she represented half a million well spent, and is undoubtedly one reason why her owner, Wafic Said, has been back at the ringside reinvesting.

The filly may have bucked a costly trend, because the racecourse performances of last year's priciest youngsters, as two-year-olds this season, has also been encouraging.

Entrepreneur, who cost Tabor 600,000 guineas, has won two of his three races and is among the favourites for next year's Derby. King Sound (550,000 guineas) ran third in Sheikh Mohammed's colours in a top race in France last week and also has Epsom 1997 on his agenda. Said's Abou Zouz (350,000 guineas) will be bidding for sprint champion honours next year after winning the Gimcrack Stakes.

There is something vaguely hypnotic about watching rich men spend more in three minutes than most people fantasise about earning in a lifetime, especially on a product that comes straight off the factory floor with no guarantees of that business about merchantable quality. At the Houghton, Michael Tabor saw off all comers by paying 880,000 guineas for a neat chestnut, active colt whose parents were Kingmambo, an as yet unproven sire but a high-class runner in his day, and Puppet Dance, a full- sister to champion stallion Sadler's Wells.

At the October Sale, the second- division auction held over the past five days, the high rollers were only sporadically active, but a battle between Sheikh Mohammed and Fahd Salman over a son of the good young sire Polish Precedent produced a new record for the fixture of 310,000 guineas. The top men are often represented by agents, but on this occasion they did their own bidding in a head-to- head, their dark, bearded faces impassive.

They trawled the catalogue and competed for the choicest lots as they took the elite market onwards and upwards. And at the October Sales the knock-on effect of their antics was revealed. Those who could not get a bid in at the Houghton turned up to do their shopping last week and, as they competed with buyers from Europe, demand proved so strong that every single yearling offered on Thursday was sold as the secondary market, too, rose to unprecedented levels.

Last week's scenario can be read either as a massive vote of confidence in the bloodstock and racing industries or a demonstration of extraordinary foolhardiness and lack of judgement of value on the part of buyers. But for vendors - either commercial breeders, who nurture their potential gold mines from conception onwards, or pinhookers, those bold speculators whose commodity is foals bought specifically to trade on - it was bonanza time, even if only in the short term. The case of the Alzao colt, bought by a Wiltshire stud for 37,000 guineas last December and traded back at the Houghton for 300,000 guineas to Ahmed Salman's Thoroughbred Corporation, was not untypical.