Introduction to Investing Advice
One word is popping up over and over again in financial news: bubble, bubble, bubble. A bubble in economic terms refers to rapid growth in stock prices driven by market participants. Some are comparing the current trend we see in the securities market to the 2008 housing crisis. Others are comparing it to the 2000 dot-com bust. This may be too short-sighted. To take a look at the best bubble it won’t be from this decade, or even century. Instead, it’s time for a little history lesson from 1637—AKA investing advice from your 10x great grandfather.
The Dutch Golden Age
In the early 17th century, the Dutch were a powerhouse in every aspect from the military to trade to the arts. Early capitalist innovations such as the first formal stock market and the first publicly traded company, the Dutch East India Company, fueled their economic boom. However, with capitalist progress came capitalist outcomes.
One item in particular that grew in popularity was a small flower native to Central Asia: the tulip. It was highly prized by European aristocracy because of its saturated color and vivid patterns. The most coveted tulips were those with stripes on them. A virus within the tulip is, in fact, what caused their rare beauty while the virus also deteriorated their biology, making it hard for them to grow, which added to their allure.
Dutch traders imported tulips from Central Asia with 400% returns per trip. European growers were expanding their operations to accommodate growing demand, and the price of bulbs continued to climb. Eventually, traders introduced futures contracts as a new way of buying and trading bulbs. Essentially, these contracts give the holder the right to buy a commodity at a specific time at a predetermined price. The contract buyer isn’t buying the commodity itself, just the right to buy the commodity. However, the value of the contract can be different from the market value of the asset.
In the 1630s, the true value of the tulips and the value of the futures contracts traded on them were drastically different. The trading of futures contracts on tulips allowed prices to inflate far beyond what anyone would ever reasonably pay for a bulb. People who knew nothing about tulips began trading complex, new financial instruments with the hopes of getting in on the financial boom. This only led the prices to grow unsustainably. A single tulip bulb could now buy a home in the Netherlands. Some estimates claim prices for a tulip reached as high as ten times the average annual laborer’s wage. Starting to sound familiar?
In 1637, the gig was up. People wised up on the absurdity at which the little flowers were trading. Within a matter of weeks, prices of tulips fell more than 90%. The bubble had burst. Those who got in early and got out early made fortunes, while others who staked their future on the boom lost entire livelihoods.
“Tulip Mania,” as it is called, is widely pointed to as the first asset bubble in history. The events that transpired nearly 400 years ago have been repeated countless times since. The lessons from 1637 have countless times been ignored. It’s about time we learn from our mistakes and stop investing in speculative “investments” and start investing in tangible assets with value.
What do you think of this investing advice? Leave us a comment below.
THE ISSUE WITH BUYING RENTAL PROPERTIES
Over the past several years, rental properties have taken the real estate market by storm. Instead of booking hotels, people are now gravitating towards renting rooms, apartments, and even entire houses for days, weeks, or months at a time.
“WHO” QUESTIONS: GOOD QUESTIONS TO ASK
Whether you’re running a software company or a furniture company, we all tend to believe what or how dominates the decision-making process. But eventually, we always arrive at who made a choice or decision.
HOW TECHNOLOGY IS DISRUPTING HOME REAL ESTATE
What happens when you merge the oldest asset with the latest tech? Read to find out. Plus, see where it might go in the future.
BRAINS TO BITCOIN: AN EXAMPLE OF BIOMIMICRY
As cryptocurrencies have become more popular, they’ve brought blockchain into the spotlight along with them.
INVEST IN REAL ESTATE: 86 BILLION OPPORTUNITIES
The brain has approximately 86 billion neurons, each of them being an opportunity in which to invest in real estate. This is our take on how to do so.
AIRBNB RENTALS: OPPORTUNITIES OF THE TRAVEL BOOM
With the resurgence in travel and the lack of hosts, there has never been a better time to get involved with investing in short-term rental properties like Airbnb rentals.
10 MOST PROFITABLE BUSINESS INDUSTRIES
Across the globe, many industries were accelerating at a normal pace until early 2020. We take a look at ten industries with the potential to reach trillion-dollar valuations in the next decade.
ARTIFICIAL INTELLIGENCE INVESTMENT (INVESTING BACK INTO AI)
Since the advent of computers, capital markets have always been at the forefront of technology. You may be wondering what these old 100-plus-year-old banking and financial institutions are doing with cutting-edge technology—and the answer lies in artificial intelligence investment.