The bubble games with Tulips, Chameleons, Shares, Houses, or anything
by tonytran2015 (Melbourne, Australia).
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(Blog No.3xx).
#tulips, #chameleons, #Bitcoins, #cryptocurrency, #gold, #investment, #investment mania,
You have stored your earning surplus for rainy days and now are tempted to use that capital to make more wealth following EASY TRENDS. You may become an easy prey for the bubble games promoters who want to rip you off.
1. Dutch Tulips Mania of 1637
Figure: Tulips (currently at $2 a bulb).
Tulips are beautiful flowers which require skillful cultivation and are perishable.There was an (informal) club of Tulips owners in Holland. Anyone owning a beautiful tulip is automatically its member (You don’t need to grow the flowers yourself, you can buy them from anyone and they are good until they perish!). This informal club flourished then quickly dissolved itself in Holland. The phenomenon is named the Tulips Investment Mania of 1637. The Tulips Mania were mutually promoted by its own participants.
Obviously people have to grow tulip flowers to harvest them and the total number of tulips is limited as their total mass cannot exceed the mass of our plannet Earth!How much are you prepared to pay for a beautiful Dutch tulip now?
There were numerous analogue repeats of the tulips mania in the World and also in Vietnam. They did not use tulips but used instead chameleons, quails, specific types of fish in fish tanks. Those manias all ended up in the same way.
Figure: Any other flowers can also be used to start a mania.
2. A chameleon scam in Vietnam.
This story came from actual printed news reviews in Vietnam published prior to 1960. I have red it myself and quite enjoyed it.
A group of traveling Chinese merchants came downstream on a boat from Cambodia along the Mekong river toward Saigon area asking for available chameleons (Chinese traders have traveled along rivers on boats since ancient time). They bought all available chameleons at 5 cent per animal. The merchants also sold medicinal wine made of chameleons and herbs pickled in wine. This appeared like a genuine traditional oriental herbal medicinal wine. The merchants then returned to Cambodia saying that they would come back the following lunar month (River navigation relies on water level which depends on the phase of the Moon).
After one lunar month, the group of traveling Chinese merchants on boat came back, again asking for available chameleons.This time the group bought all available chameleons at even higher price of 10 cent per animal as there were then fewer animals. The merchants still sold the same medicinal wine of chameleons pickled in wine but at higher price. The merchants then returned to Cambodia again saying that they would return the following lunar month.
So it seemed that chameleons pickled in wine formed some sort of medicinal wine. People in Saigon then thought that chameleons would be bought for 10 cents per animal in Cambodia for making chameleons pickled in wine.
Two weeks later, some two boats carrying merchants came from the Eastern Sea towards Saigon along the Mekong river. The boats asked for the direction to go to Cambodia. The boats were full of chameleons. The local people of Saigon asked what the merchants buy and sell. They said they wanted to go to Cambodia to sell chameleons at 2 cents per animal. The smart local Vietmamese of Saigon confered among themselves then told the merchants they did not have to go far, they could instead sell all their chameleons at Saigon for the same price. The merchants were happy with the deal, sold all chameleons and return to Eastern Sea saying that they would come back the following year.
The smart local Vietnamese then waited for the arrival of the buyers from Cambodia to sell them the chameleons making a profit of 8 cents (=10 cents – 2 cents) per animal.
The boats from Cambodia never came back. The smart Vietnamese were not so smart after all.
Chameleons had little value and the smart Vietnamese had fallen for an elaborate scam. It was sad for them that all Chinese merchants from both directions were from the same group. This was a scam as there were organizers plotting the elaborate script.
3. Other manias and scams or “bubbles games”.
Beside chameleons, tulips, anything else can also be traded multiple times creating a bubble game that is either a trading mania or an outright scam. Examples are: Tulips bubble (1630), shares in the (British) South Sea Company (1720), Japanese Real Estate (1980), shares in dot.com companies (1999), American Real Estate (2006). Curently there is a “cryptocurrency” mania.
The main points of any bubble game are:
a/- The items must not be freely available like free air or tree leaves.
b/- There must seem to be a demand (essential or non-essential) for them.
c/- The trading relies on unsustainable activities, sometimes the trading must grow like in a Ponzi’s scheme.
d/- There seems to be no immediate plan by the authority to take their share of the quick profits via special taxes, special duties, registration fees,…
The players in scams and mania are herded by their own an inherent greed of making easy, quick profits at the expense of others. They think that they are quicker and smarter than others and can time the bursting of the bubble.
The steps for bubble games promoters (scammers) are:
a/- Obtain bubble trading objects at dirt cheap prices.
b/- Resell them all when most people have been involved or at some (coordinated?) price to change the possession of dirt cheap objects into assets of real value.
c/- Never sell real essential assets to acquire bubble trading objects.
d/- Have a plan of how to use the real asset when the bubble is about to burst (To avoid the temptation of making the last turn-around before the bubble bursts).
Currently, there are bubbles of shares, real estates. and cryptocurrencies. They are said to be in bubble state when their price far exceed any incomes they can produce. In practice almost anything can be sent into bubble state.
4. Gold can also be overpriced
Figures: 1 ounce gold slab.
Gold is a compact commodity. It can be swapped for any other commodity when there is a need.
There is always a demand for gold everywhere and the supply cost is almost constant in human history. So gold can be bought as a form of compact property and sold when required.
Gold can also be over priced as a bubble if its price far exceed the physical effort to mine it from nature. In 1975 gold price soared to USD 200/oz (after American were allowed to keep raw gold) and declined afterwards. For the last 50 years gold price has been reasonable.
5. Conclusion
Any type of assets can be sent into a bubble state. A buyer has to determine the income generated by an asset to determine its reasonable price and whether he is buying into a bubble which may burst right after his purchase.
References
[1]. https://en.m.wikipedia.org/wiki/Tulip_mania
[2]. https://survivaltricks.wordpress.com/2017/04/28/gold-for-storing-wealth/
[3]. https://www.brrcc.org/gold-price-1929/
[4]. https://en.m.wikipedia.org/wiki/Dot-com_bubble
[5]. https://en.m.wikipedia.org/wiki/Bitcoin
[6]. https://irishinfosecnews.wordpress.com/2018/02/05/the-new-gold-rush-a-look-inside-cryptocurrency-fraud/
[7]. http://riggedgame.blog/2018/02/06/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-us-economy/
[8]. https://wolfstreet.com/2018/02/05/largest-cryptocurrencies-plunge-50-80-372-bn-gone-in-1-month-will-it-hit-the-economy/
[9]. https://venitism.wordpress.com/2018/02/08/cryptocurrency-2018/
[10]. https://wolfstreet.com/2018/02/18/blockchain-stocks-completely-disintegrate/
[11]. https://www.cnbc.com/2018/02/23/secretive-chinese-bitcoin-mining-company-may-have-made-as-much-money-as-nvidia-last-year.html
[12]. https://centinel2012.com/2018/04/17/the-bubble-of-1825-was-also-a-contagion/
[13]. https://business.financialpost.com/investing/investing-pro/nothing-can-save-venezuela-from-its-economic-fate-not-even-a-cryptocurrency
[14]. http://lawrieongold.com/2018/11/30/how-the-bitcoin-bubble-burst-could-lead-to-a-new-golden-era/
[15]. https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2783212/The-20-biggest-trading-disasters.html
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