Tip Toe Through The Tulips

Everybody wanted them, and spent millions to get them. Investors went crazy, scrambling to get their piece and sell it for 100 times the cost. Soon, people were no longer buying them for utility, or even intrinsic value… but instead, to resell them for huge profits.

Fortunes were doubled in the blink of an eye. Poor men became rich, and rich men became filthy rich – without doing a day’s work!

Desperate to cash in on this wildly speculative marketplace, investors traded or sold (often at ruinous discounts) land, produce, livestock, grocery budgets, jewels, livery, the family silver, small businesses – even their homes … to buy into the frenzy.

Are we talking about the technology boom? The stock market? Real Estate bubbles? SIV’s? Wii? Tickle Me Elmo? None of the above… it was Tulipmania!

This mass hysteria over nothing but a flower actually took place nearly 400 years ago, in 1630’s Holland, and it wasn't from high tech, securities, or real estate. It was a small flower bulb that seduced the Dutch – tulips!!

Coming from Turkey to Holland during the 16th century, by the early 17th century these exotic and expensive flowers became so sought after, the market exploded!

When the middle and lower classes began to realize how much money the upper classes spent on tulip bulbs, and how much money they made selling them, they sensed a “fool-proof” get-rich-quick opportunity. Thus Tulipmania was born.

After approx. two years of madness, more prudent investors began to understand that this folly could not last forever… prices could not continue rising forever, particularly in huge increments. As this conviction spread, prices fell, and never rose again. In 1637, when a gathering of bulb merchants could not get the usual inflated prices for their bulbs, the bottom dropped out of the tulip market over a 60-day period.

Word quickly spread, and the commodity market crashed. Confidence was destroyed, and a universal panic ensued. Thousands of businessmen, many of whom were among Europe’s leading economic powerbrokers, were ruined almost overnight. Millions of speculators from the full spectrum of society – lost everything.

Just like today's collapsing “Housing Bubble”, and the ripple effect from the closely related “liquidity crunch” – Tulipmania plunged Europe into an economic depression. The disaster was such an extraordinary event, that even now – centuries later – it helps explain the eerie similarities to our country’s current housing market, the “herd instinct” and the madness of crowds!!

To gain some more insight on how these issues are impacting investment decisions in today's real estate market, see the article Beware The Blue Sky at Creative Real Estate Online's How-To-Library" at: http://www.creonline.com/articles/index.html