Tulip Mania? Don't Get us Started ... - MarketBeat - WSJ

Anonymous wrote: Oil – The Tulips of 2011 … Oil prices bubble is going to burst like every other bubble since 17th century. If you are institutional manager holding oil futures, time to get out is NOW. Stop rolling. You will lose BIG if you wait till oil falls back to $40 a barrel as it did two years ago.

Chris wrote: Oil may be overvalued right now, but Tulips? Surely you suggest that in jest! Tulips are nice to look at (and were back then) but you can’t burn them to power cars, commercial trucks, planes, power plants, and the economy in general. Also, the tulip bubble of centuries ago was largely localized while oil is a global commodity subject to geopolitical risk, emerging markets, and currency manipulation.

Yes, that’s right, these markets wonks are talking about the famed Tulipmania that peaked in Holland in the 1630s, when an obsession with tulips blossomed into one of the first financial frenzies in modern memory. Made famous by Charles Mackay in his 1841 investment classic “Extraordinary Popular Delusions and the Madness of Crowds,” the tulipmania was indeed an extraordinary period when investors briefly paid more for a tulip bulb than for a house. Demand for the flower, which first spread across Europe from Turkey in the late 1500s, spurred such lofty valuations that one bulb of the variety Tulipe Brasserie was exchanged for a successful brewery in France. Mackay wrote:

“A golden bait hung temptingly out before the people, and one after the other, they rushed to the tulip-marts, like flies around a honey-pot. . . .”

In 1988, Brown Economics Professor Peter Garber penned this in The Journal on the roots of Tulipmania:

Here are the few facts that Mackay tells us: The tulip entered Europe from Turkey in the mid-16th century and spread to the Netherlands, which became a center for the cultivation of new varieties. A market for rare varieties of bulbs generated high prices. For example, a prized Semper Augustus bulb fetched 2,000 guilders in 1625, an amount of gold worth about $18,000 today. At the peak of speculation in 1637, a single Semper Augustus bulb sold for 5,500 guilders. (By comparison, Rembrandt was commissioned in 1638 to paint “The Night Watch” for 1,200 guilders.) During the Tulipmania, prices for all bulbs — rare and common — escalated. In February 1637, speculation suddenly terminated.