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Hope Springs Eternal, Part Two
March 29, 2010
It takes seven years to produce a flowering tulip from a tulip seed. The exoticness and scarcity of the flower created conditions ripe for irrational value and demand. One crazed Dutch investor traded his farmhouse in Hoorn for three rare bulbs. Another paid more for a single bulb than the asking price of the famous Dutch art masterpiece The Night Watch, by none other then Rembrandt himself. Tulip trading soon was no longer just for the wealthy, as farmers and tradespeople mortgaged themselves up to the hilt in an attempt to get a piece of the pie. Tulips nearly replaced the florin as hard currency. Simply amazing, isn’t it?
Of course, all bubbles must come to an end, and just like the real estate market of the 2000’s, the end of the tulip craze was pretty ugly. As tulip prices soared, traders signed future contracts ahead of time to purchase tulips at the end of the season—yes, future contracts in the 1600’s. Finally, the market collapsed in 1637 when buyers could no longer afford the inflated prices, and the future contracts were rendered useless. People were left with vastly depreciated bulbs and empty contracts. The Dutch government intervened, attempting to create a soft landing. However, many felt that the government had failed to control the tulip market in the first place, and it was blamed for the resulting economic depression. Which just goes to show that everything old is new again!
Recessions and depressions come and go. However, every spring nature dutifully brings us rain, flowers, and hope—reliably and on time. Interestingly, the only disharmony in nature resides in mankind. Will we ever learn the value of hard-work, consistency of purpose? Will we not submit to greed?
The U.S. economy is beginning to show modest improvements, and as we bid farewell to the winter of 2010 here in New England, there are signs of new possibilities. A word to the wise. however: the great tulip bust took approximately 7 years to run its course, and the bust was followed by a Dutch depression. Here in 2010 America, we could be in a double dip recession.
So our advice is to carefully assess your options, and don’t put all your eggs (or bulbs) in one basket. Diversify, don’t be greedy, work hard, and most of all, look forward…not behind.
Stop and smell the tulips!