Bubbles and Other Fools Gold
Sheriff’s post yesterday about the dot-com bubble started me thinking on other schemes that broke the investing bank. The oldest one I could remember was the Dutch tulip craze, when Dutch collectors were paying the equivalent of a half-million dollars for a single rare bulb – this in the early 1600s. The craze reached its peak in 1636, when flower prices crashed and speculators panicked, selling at a loss or reneging on contracts.
It’s possible that the tulip craze was not as far-reaching or catastrophic as later historians made it out to be. (Also, I never heard of a pirate raiding a ship for a bunch of flowers – not very piratey. Or smart. Gold keeps better, and wisely invested money grows pretty well.) But the Dutch also invented the stock market as it exists today; while the French traded government bonds, the Dutch started openly selling stocks and company shares in the Dutch East India Company right around the year 1600.
So not long after the first speculations from the first real bourgeois-heavy culture, you see the first stock market crash. Interesting.
And look throughout history – people overreach, get greedy, get too speculative, and boom! The market crashes. Today it may be the housing market, starting in the U.S. and spreading throughout the world. Yesterday it was the dot-com. Before that, oil. Before that, the worldwide crash of the 1920s followed by a worldwide depression.
Need I continue? I can, if you wish. Stock market crashes are as old as stock markets. People should realize that speculating on the stock market is gambling. It is dangerous. And you can lose your shirt.
Now what’s going on today is speculation on the very dubious value of domain names. A few people made a killing selling great web names they were smart enough to seize early. There’s been a terrible battle over the ownership of Sex.com. And a lot of Johnny-come-latelies think they might be able to duplicate the success through other slick Internet schemes.
Guess what? Won’t work. The first pirate to get to the galleon, gets the gold. The next ones usually get caught by the British navy – a fate not to be wished on a barnacle, mate.
Be smart. Work hard. Don’t buy into the get-rich-quick garbage, and don’t ever think you’re smarter than the next guy. You’re not. Neither am I.
Couldn’t agree more. No better example of this than the supposed “Japanese economic miracle”. They’re only now just beginning to come out of a 15 year recession. In the UK, everyone just assumes that their property will always gain value and 95% mortgages for the first time buyer are the norm. Ever heard a real estate agent mention the phrase “negative equity”?
Mosey said this on September 24, 2006 1:04 pm
There are a lot of people getting pretty sick right now over just that term. Boston property crashed last year; I’m betting San Francisco will follow. We have plenty of places where prices or normal, but Boston, San Fran, some parts of Chicago, most of Connecticut and the parts of New York near the city—common to see property that’s tripled or quadrupled in price over the last five to ten years. It’s soft now, but it’s going to crash hard when it does.
DreadPirateYarr said this on September 24, 2006 1:33 pm