March 6th, 2013

What was the tulip craze and why is it important to understand the history of different markets?

2 thoughts on “March 6th, 2013”

  1. Katherine Graham says:

    The Tulip Craze, “Was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed.” ( It is important to understand the history of different markets because if you don’t, you’re essentially throwing your money to the wind. No investment goes without some type of risk. Like you explained Monday night, you did lose a big chunk of money in one month last year, but when you look at last year as a whole, you ended up making more than double the biggest month’s loss. While most people would gasp when they see that dollar amount (and very possibly pull all of their money out when they saw that), you understood the market.

  2. Mike Finley says:

    Another very nice answer, Katherine. The Tulip Craze is one of many mania’s that have occurred in markets over time. In more recent times, the craze and the housing market demonstrated ridiculous returns until they reached their tipping point (everyone stopped buying) and then the bottom fell out of the market (prices plummeted). The speculator (make a buck fast) can easily get sucked into these type of markets. The investor (make money slowly without chasing one particular security or another) avoids this type of manic behavior because they do not follow the crowd over the cliff. Generally speaking, the crowd is dumb and usually broke when its all said and done.

    Currently, we are experiencing a gold and silver bubble (it already has a few holes poked in it, but it has not quite popped, YET). You can see this play out with the long litany of commercials you see pushing you to buy these speculative driven commodities. Once we open our eyes clearly to this concept of mania’s and how crowds work (understand reversion to the mean and recency bias), we can protect ourselves and our money from their harmful affects. Nice job, Katherine.

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