Weekend Trivia: What Was The Tulip Bulb Mania?

Well Know Market Bubbles Of The Past Century
---The roaring twenties led to the stock market crash in 1929 and the resulting Great Depression.

---The "Nifty Fifty" stocks rose to very high levels in the 1960s, but was followed by very flat stock market prices for two decades.

---During the 1980s, the Japanese economy was booming. The Japanese Nikkei 225 index increased 4x in five years and they were buying trophy properties around the world, the most famous being Pebble Beach. Eventually the bubble broke and they ended up selling Pebble Beach for a loss. Nineteen years later, the index is only one-third of the all-time high of 38916 achieved on 12/29/89.

---The Dot-com mania resulted in the NASDAQ increasing 7x in 5 years to a high of 5048 on 03/10/00. Eight years later, the index is less than one-half this level.

---The Chinese stock market increased 5x in 2006-07, peaking at 6124 on 10/16/07. Less than four months later, the index is now down 25% from its peak. Time will tell if this is bull market correction or a true bubble that bursts.


Most Famous Bubble Of All Time
---Anonymous 17th-century watercolor of the Semper Augustus, the most famous bulb, which sold for a record price of 6000 florins. This is the equivalent of 40 years of income for the average person at the time.

---The Tulip Bulb Mania in the Netherlands in the early 1600s is considered by many historians to be the greatest market bubble of all times.

---Much of our knowledge of the Tulip Bulb Mania can be attributed to the British journalist Charles Mackay who devoted a full chapter titled "The Tulipomania" in his 1843 book "Extraordinary Popular Delusions and the Madness of Crowds."

---Much of Wikipedia's description of the Tulip Bulb Mania comes from Mackay's book. The picture above and the quotes below are from Wikipedia.


Brief History And Facts From The Tulip Bulb Mania
---Tulips were first introduced to Western Europe from Turkey in the middle of the sixteenth century.

---"The tulip experienced a strong growth in popularity in the United Provinces (now the Netherlands), boosted by competition between members of the upper classes for possession of the rarest tulips. Competition escalated until prices reached very high levels. Tulip cultivation in the United Provinces is thought to have started in 1593, when Charles de L'Ecluse first bred tulips able to tolerate the harsher conditions of the Low Countries from bulbs sent to him from Turkey by Ogier de Busbecq. The flower rapidly became a coveted luxury item and a status symbol. Special breeds were given exotic names or named after Dutch naval admirals. The most spectacular and highly sought-after tulips had vivid colors, lines, and flames on the petals as a result of being infected with a tulip-specific virus known as the 'Tulip Breaking potyvirus.'"

---"In 1623, a single bulb of a famous tulip variety could cost as much as a thousand Dutch florins (the average yearly income at the time was 150 florins). Tulips were also exchanged for land, valuable livestock, and houses. Allegedly, a good trader could earn six thousand florins a month."

---"By 1635, a sale of 40 bulbs for 100,000 florins was recorded. By way of comparison, a ton of butter cost around 100 florins and "eight fat swine" 240 florins. A record was the sale of the most famous bulb, the Semper Augustus, for 6,000 florins in Haarlem."

---"By 1636, tulips were traded on the stock exchanges of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society, with many people selling or trading their other possessions in order to speculate in the tulip market."

---"In February 1637 tulip traders could no longer get inflated prices for their bulbs, and they began to sell. The bubble burst. People began to suspect that the demand for tulips could not last, and as this spread a panic developed. Some were left holding contracts to purchase tulips at prices now ten times greater than those on the open market, while others found themselves in possession of bulbs now worth a fraction of the price they had paid. Allegedly, thousands of Dutch, including businessmen and dignitaries, were financially ruined."

---"Attempts were made to resolve the situation to the satisfaction of all parties, but these were unsuccessful. Ultimately, individuals were stuck with the bulbs they held at the end of the crash—no court would enforce payment of a contract, since judges regarded the debts as contracted through gambling, and thus not enforceable in law. The aftermath of the tulip price deflation led to a widespread economic chill throughout the Netherlands for a number of years afterwards, resulting in what we would describe today as a mild or moderate economic depression."


Today
---Almost 400 years later, the Netherlands are still famous for their tulips.

---The city of Holland, Michigan has a large Dutch American population and is famous for its windmills and annual Tulip Time Festival.