shipperx | Strange Tales... Tulip Mania

When the Tulip Bubble Burst

Around 1624, the Amsterdam man who owned the only dozen specimens was offered 3,000 guilders for one bulb. While there's no accurate way to render that in today's dollar, the sum was roughly equal to the annual income of a wealthy merchant. (A few years later, Rembrandt received about half that amount for painting The Night Watch.) Yet the bulb's owner, whose name is now lost to history, nixed the offer.

Who was crazier, the tulip lover who refused to sell for a small fortune or the one who was willing to splurge? That's a question that springs to mind after reading Tulipomania: The Story of the World's Most Coveted Flower and the Extraordinary Passions It Aroused by British journalist Mike Dash. In recent years, as investors have intentionally forgotten everything they learned in Investing 101, tulip mania has been invoked frequently. {...}

The Dutch were not the first to go gaga over the tulip. Long before the first tulip bloomed in Europe--in Bavaria, it turns out, in 1559--the flower had enchanted the Persians and bewitched the rulers of the Ottoman Empire. It was in Holland, however, that the passion for tulips found its most fertile ground, for reasons that had little to do with horticulture.

Holland in the early 17th century was embarking on its Golden Age. Resources that had just a few years earlier gone toward fighting for independence from Spain now flowed into commerce. Amsterdam merchants were at the center of the lucrative East Indies trade, where a single voyage could yield profits of 400%. They displayed their success by erecting grand estates surrounded by flower gardens. The Dutch population seemed torn by two contradictory impulses: a horror of living beyond one's means and the love of a long shot.

Enter the tulip. ''It is impossible to comprehend the tulip mania without understanding just how different tulips were from every other flower known to horticulturists in the 17th century,'' says Dash. ''The colors they exhibited were more intense and more concentrated than those of ordinary plants.''

Around 1630, however, a new type of tulip fancier appeared, lured by tales of fat profits. These ''florists,'' or professional tulip traders, sought out flower lovers and speculators alike. But if the supply of tulip buyers grew quickly, the supply of bulbs did not. The tulip was a conspirator in the supply squeeze: It takes seven years to grow one from seed. And while bulbs can produce two or three clones, or ''offsets,'' annually, the mother bulb only lasts a few years.

Bulb prices rose steadily throughout the 1630s, as ever more speculators wedged into the market. Weavers and farmers mortgaged whatever they could to raise cash to begin trading. In 1633, a farmhouse in Hoorn changed hands for three rare bulbs. By 1636 any tulip--even bulbs recently considered garbage--could be sold off, often for hundreds of guilders. A futures market for bulbs existed, and tulip traders could be found conducting their business in hundreds of Dutch taverns. Tulip mania reached its peak during the winter of 1636-37, when some bulbs were changing hands ten times in a day. The zenith came early that winter, at an auction to benefit seven orphans whose only asset was 70 fine tulips left by their father. One, a rare Violetten Admirael van Enkhuizen bulb that was about to split in two, sold for 5,200 guilders, the all-time record. All told, the flowers brought in nearly 53,000 guilders.

Soon after, the tulip market crashed utterly, spectacularly. It began in Haarlem, at a routine bulb auction when, for the first time, the greater fool refused to show up and pay. Within days, the panic had spread across the country. Despite the efforts of traders to prop up demand, the market for tulips evaporated. Flowers that had commanded 5,000 guilders a few weeks before now fetched one-hundredth that amount....

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The irony? (Other than we keep doing variations of this dance)...

horticultural article on tulips

Tulip Viruses

Shortly after being introduced tulips became a symbol of status and a way to showcase wealth publicly. Semper Augustus, with its red and white streaked petals, is famously remembered as being the most expensive tulip sold during the "Tulip mania." At the time it wasn't known that the spectacular colors in the petals of tulips were caused by a tulip virus. Tulip breaking virus was carried by the green peach aphid and while the virus caused beautiful flowers, it also caused weak bulbs that died...