Tulip Mania

I bought a bunch of tulips today to brighten a dull January.  I worked in Internal Audit and Risk Management and tulips always remind me of one of the first market bubbles in the 1600's and the lessons we still haven't learnt.  

Tulips were introduced from Turkey to Holland in 1593 and were a novelty which was highly sought after and therefore pricey. Then a virus causes 'flames' of colour on the petals, making them even more interesting and desirable, resulting in a twenty fold increase in price in one month on an already over-inflated price.  People started speculating as the price rose exponentially. The bulbs became more valuable than people's homes and it is said that they cost more than ten times what an average working class man earned in a year. Then some people tried to sell and realise their profits, plus the reality of the situation struck home and this caused panic selling and a collapse in the price. This episode was followed by a depression.

What amazes me is that this happens time and time again, just with different assets. Whilst there is mis-selling, the key factor is human behaviour and in particular greed. The fear of missing out on a quick buck causes people to lose their common sense. I'm looking forward to going to see The Big Short when it is out at the cinema soon, I've read the book already.