If you’ve read enough investing books, you know about the “Dutch Tulip Mania” of the 1600s (Wikipedia) and how it was considered one of the first documented economic bubbles. At one point, 12 acres of land were exchanged for a single tulip bulb.
I was catching up on my Bloomberg magazines and saw this: Finance Geeks Will Love This New Movie About the Tulip Bubble. The official trailer would indicate it’s mostly a romantic drama, but the article suggests that it weaves in the tulip mania, the “nature of money”, and what “love and money have in common”:
The critic reviews weren’t that great, so perhaps it will end up on Amazon Prime Video or Netflix soon enough.
I believe I first read about tulip mania in the Burton Malkiel classic A Random Walk down Wall Street as an example of the Greater Fool Theory, where you buy something for a high price not due to its intrinsic value, but solely because you think someone else will buy it from you for an even higher price. (Does this apply to iPhone X pre-orders?)
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Definitely makes me think of the current “Bitcoin”-mania going on right now. Bitcoin has no inherent value to anyone besides speculators and money-launderers (for the most part). Yet everyone seems to think it will go up in value forever, hence the current $7000/1 USD/BTC exchange ratio. For something that was at $1000 at the beginning of the year, I think speculators are in for a wild ride in the near future.
What’s wrong with speculation? Either you intentionally speculate yourself, or you throw money at index funds to ride the coattails of those who make the entire market via speculation.
Mark your calendar – one year from now, after Bitcoin futures start trading on the CME, after Wall St money floods in, and after there are vehicles for retail investors to easily buy in their brokerage accounts; check the price of Bitcoin then and come back and read again what you’ve written here. I dare you.
I mostly agree with what you’re saying, but Bitcoin also makes a lot of sense in countries where the currency (or general level of lawfulness) are more volatile than (extremely volatile) Bitcoins. I think this might actually be the second largest (behind illicit activities) and most useful market for something like Bitcoin.
I haven’t seen the movie yet but would highly recommend the book. It’s a well-written, short book with a good story that also does a great job describing the tulip mania.
I didn’t realize this until recently, but what we think of as the tulip mania was largely a fiction propagated by religious pamphleteers centuries later. The fact is that there was a change in Dutch law at the beginning of the “mania” that allowed tulip buyers to break contracts with sellers for a nominal fee. To use modern terminology, the tulip futures market was turned into an options market. Though many extravagant contracts were written, because the market price of tulips did not significantly increase, most of these were not exercised.
Wikipedia has a good article about this as does The Economist:
https://www.economist.com/blogs/freeexchange/2013/10/economic-history