Stock Market Mania's: History Repeats Itself

[Soultrader 12]

This thread will focus on past mania's using excerpts from various books. Please feel free to join me.

 

Below is a few excerpts from Humphrey Neill in his book The Art of Contrary Thinking.

 

"Goethe, the great poet-philosopher, once wrote: "I find more and more that it is well to be on the side of the minority, since it is always the more intelligent."

 

The Dutch Tulip Mania

 

"For a moment we shall drop back three centuries. In 1634 one of the most extraordinary public manias in all recorded history took place in Holland. To this day it is referred to as the "Tulipmania." The rage to own tulips - particulary rare specimens - engulfed the entire nation. It is impossible for us to visualize this craze, but it happened. There is no doubt about that.

 

Prices for tulips reached fantastic heights. By 1636 the demands for tulip speculation caused rare species to be traded in on the stock exchanges of Amsterdam and other Dutch cities. Soon everybody was gambling in tulips. Like all manias, the author tells us, "everyone imagined that the passion for tulips would last forever, and the wealthy from every part of the world would send to Holland, and pay whatever prices were asked for the. The riches of Europe would then be concentrated on the shores of Zuyder Zee, and poverty banished from the favoured clime of Holland."

 

Tulip jobbers, like stockjibbers, speculated in the rise and fall of "tulip stocks." For a while everybody made money. Many inidividuals grew suddenly rich, the author tells us - and "Nobles, citizens, farmers, mechanics, seamen, footmen, and maid-servants, even chimney-sweeps and old-clothes-women, dabbled in tulips."

 

As the mania spread people did the most outrageous things to get in on the get-rich-quick tulip game. Homes and properties were sold at ridiculous prices to get cash for tulip speculation.

 

The mania spent itself, of course, as all such mass hysterias do, but left in its wake countless broken pocketbooks. When the collapse came prices fell far faster than they rose. Then, as so often happens, people turned to the government for some relief from their financial distress. The whole complicated aftermath was finally referred to the Provincial Council at The Hague and "it was confidently expected that the wisdom of this body would invent some measure by which credit would be restored." The mania had been so widespread that all business was affected and the general financial situation of the nation put in jeopardy. This august body, however, deliberated and stalled. They could think of no cure-all for the morning after, so they "allowed the matter to rest" and cure itself. We're told that the commerce of the country suffered a severe shock, "from which it was many years ere it recovered."

 

For more reading please refer to The Art of Contrary Thinking by Humphrey Neill.

 

To learn more about the Dutch Tulip Mania, refer to Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay.

 

For further reading on crowd psychology, refer to The Crowd by Gustave Le Bon.

[darthtrader2.0 10]

The South Sea bubble is kind of cool because there are some charts of it. Its a pretty boring story though compared to the Tulip mania. One interesting part is that Isaac Newton got caught up in it..I believe he sold early with a profit but then jumped back in and got killed.

"Isaac Newton lost over 20,000 pounds of his fortune. As a result of this crisis, he stated “I can calculate the motions of heavenly bodies, but not the madness of people”."

[Guest forsearch]

Isaac Newton stated “I can calculate the motions of heavenly bodies, but not the madness of people...”

 

Trading in a nutshell, eh?

 

-fs