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How much is a nickel worth?  5 cents, as a rule.  But what is nickel the metal worth?  Now that can vary.  In the late 1960s, nickel was in high demand due to the Vietnam War, but there was a shortage of supply due to strikes at the major Canadian supplier Inco.  An Australian company, Poseidon announced they’d found a large deposit of nickel, the price of nickel went from about $2500/ton to nearly $10k in less than a year and their stock soared from $0.50 to peak at $280.  But shortly after Poseidon got the nickel out of the ground, they were in receivership and the company was removed from the stock exchange.  My name’s….


We’re talking today about financial bubbles.  Can’t imagine why I chose this topic, what with all the talk of crypto-this, blockchain-that, NFTs, FUDs, and coins with dog memes on them that don’t actually exist.  You’ve heard the term ‘bubble’ in a financial context before and you’ve probably lived through a few already, like the US housing bubble that brought on the 2008 recession or the dot-com bubble of the late 90’s.  But what exactly is a financial bubble?  While a bubble can be based on commodities, credit, or stock, they follow an observable and predictable pattern.  


Step 1 is, eureka, displacement – this occurs when investor attention gets captivated by some emerging thing or recent event.  2. the big Boom – prices rise and start rising faster.  This draws attention, which draws more investors, which draws more attention, etc.  3. Euphoria – everything’s coming up Milhouse, you’ve finally made it, and it’s all smooth sailing from here.  4. which could also be called act III, scene 1 Profit-Taking, investors who can smell disaster on the wind start selling and getting out with a profit.  This brings us to the part of the bubble that is best remembered each time, 5. Panic.  It doesn’t take much to pop the bubble, but once it’s done, it’s done, you can’t reinflate it.  Cue selling en masse and plummeting prices.


One does not simply write a podcast episode about financial bubbles without talking about one of the best known historical examples, so let’s dive right into it, the 17th century Dutch tulip mania.  The primary, pastel, or pin-stripey flower, as closely associated with Netherlands as windmills and clogs, come to us from the Persian Empire.  Tulips back then were red as a rule, but the occasional white or yellow popped up and, being rare, were prized.  Its botanical history is a bit vague –difficult for botanists to be sure what they were looking at — thanks to the quality that would elevate tulips to rockstar status in the Xth century, their ability mutate and change color rapidly.  One botanist wrote in 1597, “Nature seems to play more with this flower than with any

other that I know.”  You can grow a tulip from a bulb, the way most of us encounter them today, or from a seed, but that requires waiting 7-12 years for it to reach the flowering bulb stage.  Imagine a botanist’s surprise if they had spent a decade carefully tending a patch of red tulip plants, only to have them come up red and white striped; more on the stripey boys in a minute. Not everyone had that sort of patience.  


Being a bulb plant meant that they were relatively easy to sell and transport than a whole plant, which would require tending along the journey.  All you had to do was wait for the plant to be dormant in late summer/early fall and dig up the bulb.  As tulips migrated from the Middle East to new lands, thanks to a Hapsburg ambassador to the Ottoman empire in the 16th century, people were as likely to try eating them, as we would shallots, but that never really caught on.  They also showed up as ingredients in medicines treating intestinal complaints, but that didn’t stick either.  But this was a time when botany was the new hotness for the brainy set, like archeology and Egyptology for Victorians, though with rather less grave-robbing.  Wealthy nobles and royals planted vast gardens of the beautiful flower.  This was also the era of Calvinism, a stern subset of Christianity, that approved of tulips because, though they were brightly colored, they have little to no smell, which meant they could be considered modest or virtuous. 


Carolus Clusius, director of the Royal Medicinal Garden in Vienna, took tulip bulbs with him when he relocated to the University of Leiden in the Dutch Republic.  Clusius’s garden produced wondrous mutations, including “broken tulips,” where the base color of the flower is painted with stripes of white or yellow.  No one knew what caused broken tulips to be able to cultivate their own and Clusius was understandably possessive and protective of his flower.  Other tulip enthusiasts tried to manipulate the color of their flowers by using wall plaster or pigeon guano in the fertilizer or adding pigments to the soil, thinking the plants would draw the color up into their stems and then into the petals, which I can certainly see someone believing would work.  Those things did not, of course, so the tulip-heads started asking Clusius to sell them bulbs, offering exorbitant fees.  Clusius refused to sell, so some gardeners joined forces and pillaged his beloved garden under cover of darkness one night.  For the curious, which I assume is anyone who listens to this show, the broken colors are the result of a virus spread by the peach potato aphid, which afflicted peach trees, which were popular in gardens as well.  


As thieves of hot commodities will do, the hobby botanists sold their ill-gotten booty and tulips were soon popping up, npi, across the country and beyond and the obsession with broken and rare colors spread and grew along with them.  The creme de la creme, the must-have tulip, was the semper Augustus, an almost candy cane-like red and white striped flower, which this reporter finds to be nice.  Not thrilling, but nice.  These days, the endall and be all color for enthusiasts is black, a true black, a mall goth lipstick black, not the deep purple referred to as black.  Most collectors would never lay eyes on a semper Augustus in person, but one who did offered its owner 13000 florins, the cost of a respectable house, for a single bulb.  This wasn’t the start of people spending flatly ridiculous sums of money on a small plant that serves no purpose other than to look at it, it was merely one example of many.  Tulip mania was on.  Like online day-trading in the early Aughts, people from all social strata wanted to get rich quick.  People sold their homes and businesses to buy them.  A groom was said to have accepted a single tulip as a dowry from his bride’s family.  A burglar supposedly sold his toolkit to buy tulips, which is less going straight than hoping to be the Gordon Gecko of the gardeners.


By 1636, tulips were the fourth largest Dutch export, after gin, herring, and cheese, which sounds like date night to me.  Plants only grow and propagate so fast, so it didn’t take long before the enormous demand far out-stripped the supply.  Transactions went from being an exchange of money for bulbs to promissory notes for delivery of bulbs in the future.  This meant selling could happen whenever and was no longer dependent on the tulips’ growing cycle and dormant period.  As prices rose, people began buying on credit, taking on mountains of debt they were certain they could pay back with profit.  The same ‘exists somewhere but not here where we’re doing business’ bulb could be bought and sold a dozen times in a busy trading day.  This system was known as windhandel, because you didn’t have a physical tulip in your hand at the end, just a hand full of wind.  And what a system it was.  Growers and buyers would meet in back rooms of taverns along with an impartial intermediary.  Each party would write down the figure they wanted for their end of the deal and the intermediary would write down a figure somewhere in the middle that they deemed fair.  If the parties agreed to the intermediary’s price point, everyone went home happy.  If either party disagreed, the grower owed a fine to the intermediary, incentivizing them to close the deal instead.  When the payment was made, the intermediary took a fee, known as wine money, which was meant to be paid to the publican. 


That was 1636.  By February 1637, things had taken a decided turn.  A grower in Haarlem went to the tavern as usual to sell his bulbs for a stately sum, but there were no takers.  He lowered his price; still no interest.  Prices dropped and panicking speculators sold their inventory or futures as fast as they could, flooding the market with more supply and driving prices down further and faster.  It was as if everyone had suddenly realized, they’re just flowers.  Sure, they’re pretty, and some are rarer than others, but they’re flowers.  They’re not worth selling your home or risking winding up in crushing debt if you’re not savvy in your selling.  That is only one theory as to why the bubble burst.  Some historians point to a growers guild lobbying Parliament to regulate sles contracts to make contracts more favorable to the buyer, which buyers thought would make them even more money, spurring more buying…which ground to a crawl when they realized that wasn’t in fact the case.  There was also pushback against the whole thing from religious groups, who pointed to the mania as an example of the sin of greed, decrying that “one fool hatched another; the idle rich lost their wealth and the wise lost their sense.”   


We think of tulip mania as crippling the Dutch economy, but just as the “belief” that people throwing themselves from office windows when the stock market crashed in 1929 is wildly exaggerated, there were fewer people in the tulip game than we think.  Says [job title] Anne Goldgar, and you can add a zero to each figure for a rough approximation to modern US dollars,  “I only found 37 people who paid more than 300 guilders for a bulb. Some of the legends of bulbs that people talk about were 1,200 guilders. The highest price I ever saw was 5,500 guilders.  There are people who lose money, but we’re talking about a small group of people and most of them who have enough money that it doesn’t really make that much difference. They are not happy about it but they can afford it.”  While tulips had been popular, it’s not like the economy hinged on them.  The bubble burst, a few people lost their shirts, but the Netherlands continued on pretty much unchanged by it.




Name something that started as a children’s toy and ended in pain for adults.  No, not Monopoly, that ruins entire families.  This item should only have been an obsession for 8 year old girls was called an investment vehicle, with rare examples selling for 3000x the original price.  It led adults to spend huge amounts of money, fight tooth and nail, include it in their divorce, and even waste armloads of food.  Can you tell ol’ Moxie’s got an opinion about this one?  This one I lived through, but I’ll narrow the timeframe a little further.  This bubble took place in the grunge, Braveheart, OJ Simpson trial, pogs era; that optimistic time when we actually knew what to call the decade, the 1990’s.  That’s right, we’re talkin’ Beanie Babies.  Yes, I know you’ve been shouting it since I started, but I wrote the script so I’m jolly well going to read it.


Ty Warner, whose name would adorn the ear tags of millions of plush toys, was a top salesman for the Dakin Toy Company in the early 1970s.  His sales style was … memorable.  He’d arrive at client meetings in white Rolls-Royce, wearing a full-length fur coat and carrying a cane.  (Is that what I’m doing wrong in my voiceover business?  Not dressing like Huggy Bear?)  In 1986, Warner got the idea to set aside the classic approach of stuffing toys with fluffy stuff, like cotton wool, in favor of plastic pellets.  He started working on his new toy line on the side, which Dankin caught wind of and sacked him for.  That just gave him the time he needed to launch Ty Inc.


Initially, buyers were not keen on the floppy furry figures, but Warner, undeterred, made a series of calculated decisions that drove the market to madness.  Step 1, price Beanie Babies at $5 each, easily affordable for basically anyone.  Step 2, make them exclusive to small shops and keep the supplies in the shop limited.  Our lizard brain will stop at nothing to get something if it means we’re the only one who can have it.  Step 3, keep your cards close to your vest.  The corporate culture, the buzziest of buzzwords in the impending dot-com bubble, and the toy design process were kept mum.  They wouldn’t even let on which stores would carry which toys, so if you wanted that Patti the Platypus, you’d have to drive all over hell and creation looking for it, making you doubly determined.  We’re easily-led animals and it took no time at all for people to become obsessed.  Warner’s master stroke in buyer manipulation came in 1995, when he decided to “retire” certain characters, heightening the illusions of scarcity, even while factories across Asia churned out Beanie Babies by the millions.  Suddenly, a Splash the Whale, the first BB to be retired, was selling in stores for $20 instead of $5 and once those were exhausted, they began selling on the burgeoning internet for thousands.


Warner did his work a little too well.  He’d created a monster and, one imagines, swum around Scrooge McDuck style in a vault of plush toys and money while the rest of us read news stories of things like: adult collectors physically trampling children to get their hands on the retired tie-dye “Garcia” bear; people creating literal smuggling rings; a 77-year-old man stealing over 1k BBs; and, almost unthinkably, a a 63-year-old security guard being shot and killed during a robbery in which the bandit didn’t want the cash in the register, only the BBs.


At the height of the Beanie Baby boom, gurus emerged, offering financial insights and words of wisdom to hopeful collectors.  Don West, a former wrestling hype man, appeared on Beanie Baby infomercials admonishing viewers they shouldn’t “let the opportunity of a lifetime” slip through their fingers. Venerable publications like Mary Beth’s Beanie World sold 650k copies per month, and encouraged readers to use the toys as an “investment strategy,” with topics like “How To You Protect An Investment That Increases By 8,400%.”  “Simply putting away five or ten of each and every new Beanie Baby in super mint condition isn’t a bad idea,” suggested the Beanie Baby Handbook, in 1998. Unfortunately, it was — and some people lost a lot of money.


Then came the moment that disgusted me particularly, the 1997 McDonald’s happy meal promotion, in which 100m Teenie Beanies were sold in just 10 days.  Across the country, grown men wrestled over toys with names like “Pinky the Flamingo” and “Seamore the Seal.”  Among the fist fights and general chaos that fast food workers are *not paid enough to deal with, people would also buy as many happy meals as the location would allow, take the toys out, and immediately throw all the food away.  Mr. Warner, you’ve gone too far.  Wasting food is a real no-no with me.  By 1998, the company was raking in more than $1B per year in profit.  At a holiday party that same year, Warner, a billionaire in his own right, stood before a room of 250 of his employees and shouted, “I’ve never seen so many millionaires in my life!”


If you’ve picked up on the rhythm of these stories, you know the bubble-burst is coming and I won’t make you wait.  Little more than a year later, Ty Inc announced the retirement of several Beanie Babies… [sfx crickets] and nothing happened.  No panic buys, no market swell, no grossly-inflated secondary market, no nothing.  The company wasn’t the only one to notice.  Collectors noticed too, many wisely recognizing it as the beginning of the end, possibly the first wise moment in their hobby cum obsession.  Collectors panicked and tried to sell off their BBs before their value vanished, flooding eBay and sales forums, knocking the floor right out from under their own feet.  There was no scarcity of BBs.  There were tons of the things and now they had no value apart from the fleece they were made from and the transient joy they could give a small child.  In a desperate bid to pull something, anything from the burning wreckage of the once juggernaut company, Ty Inc announced that it would end production of all Beanie Babies at the end of 1999.  The world responded with yawns.  Angry yawns.  Bulk purchasing sites like sprang up, offering to buy your collection for $.20-.40 per toy, reselling them for carnival prizes and claw machine filler.  People who spent thousands of dollars, sometimes their entire life savings, found themselves broke with armloads of collectibles that no one wanted to collect.


Okay, you’re thinking, but that was more than 20 years ago, nearly a generation ago, or several with the way the media is hellbent on demarking and labeling generations lately.  If I were you, I wouldn’t go through the fuss and bother of pulling that tote of BBs down from the attic just yet.  Their average value has declined by more than 98% since the late ‘90s.  They’re literally worth less than dollar store knock-offs.  Yes, even the “rare” Princess Diana bear.  They’re not that rare, and while lots of people hope to sell them, no one’s looking to buy one.  


And Ty Warner, the mad genius who started it all?  If you’re holding out for comeuppance, I’ve got bad news.  Aside from some minor trouble getting caught secretly squirreling $100m in an offshore Swiss bank account, Warner has kept a low profile over the years.  Quiet does not equate to humble.  Warner is among the thousand richest people in the world, with a fleet of luxury cars, a $153m estate, $41m worth of rare art, and he owns the friggin’ Four Seasons Hotel in New York, where you can rent the “Ty Warner Penthouse” for a mere $50k per night, or the original price of 10k BBs.


Ever have someone tell you something far-fetched or incredulous, followed by “and if you believe that, I have some real estate in Florida to sell you.”  … Well, people used to say that, and now I know why!  You could say that real estate in Florida’s been important to the United States since before there were states or they were united.  The first settlement in North America was in Florida when the Spanish established St Augustine 42 years before the English founded Jamestown in Virginia.  The first European settlement, excuse me.  I disappoint myself with the Euorcentricity.  Let me open a new tab and bring up one of a number of websites that let you search your address to learn whose land you’re living on.  Let’s see [sfx typing]…Okay, I knew the Chickahominy, Powhatan, and Pamunkey, but I didn’t know the Paspaheg, Kiskiack, or Weyanock.


It’s almost hard to imagine as someone who has grown up with cities like Miami and Tampa, but Florida wasn’t settled at nearly the same rate as the rest of the country.  It didn’t really get going until the late 1800s and even then was concentrated on the coasts and river deltas.  The land seemed designed to keep people out.  Roads are hard to build in marshy swampland, especially when it’s full of alligators and malarial mosquitoes.  Also, based on my two trips to Orlando, covered in lizards.  The whole place, every outside wall, lizards all the way down.  


All that changed in the 1850’s — the urbanization stuff, not the lizards.  Florida’s leaders set out

to spur the construction of railroads.  There was land in it for you if you were willing to lay down track.  Before long, the isolated towns of Florida were connected to the large cities in the southern US.  Rail lines shuttled exotic goods like citrus fruit to New York and points beyond, and on the return trip, brought tourists and potential residents, drawn in by recently reduced taxes.  The rapid industrialization of the early 20th century put more money in those people’s pockets.


It was the ideal time to be a real estate investor or developer, a sort of cross between the wild west and an all you can eat buffet.  Thousands of developers, like Carl Fisher, who transformed the island of Miami Beach from a place where the occasional local would picnic to, well, Miami Beach, drove a full-fledged land boom.  From 1921-25, the populations of Florida’s biggest cities increased by around *150%, in just four year.  That is a lot of people to sell land to.  The whole of the state seemed to have been divvied into parcels as swamps were back-filled, shorelines reinforced, roads laid, they even drew islands out of the sea.  Florida subdivided enough land in the 1920s to re-house the entire population of the country at the time.  Investors were buying tracts sight unseen and selling them before the first deed change had even been recorded.  In 1924, a man named DP Davis sold 300 building lots in Tampa Bay in three hours, nearly all of them were under water.  And he probably still wasn’t salesman of the year.  There were so many real estate ads in the Miami Daily News that the July 26, 1925 edition ran to 504 pages and weighed a staggering 7.5lbs/3.4kg.  The newspaper.


Why the 20’s?  Why didn’t this boom come a decade soon or two decades later?  Americans had the time and money to travel to Florida to invest in real estate. For the educated and skilled working American, the 1920’s meant paid vacations, pensions, and fringe benefits unheard of during the Victorian Era. The United States also had the automobile: that indispensable family transportation that allowed you to travel to Florida. This “welfare capitalism” of time and money contributed to the arrival in Florida of a new kind of tourist – middle class families.


Success is never guaranteed in business, or in life, but if you got in on the boom early, the odds were in your favor.  Regular folks got in on the action, such as an elderly man whose sons had him committed to a sanitarium after he spent his life savings of $1,700 on a piece of Pinellas property.  When the value of the land reached $300,000 in 1925, the man’s lawyer got him released so he could sue his children.  


This economic prosperity taking place in the roaring 20’s, you’re probably thinking ahead to the stock market crash that stalked our land like…a great… stalking thing.  The FL real estate bubble didn’t even last that long.  With so many transactions happening so quickly, authorities struggled to police the real estate market.  False advertising was utterly pervasive, taking a 200pt smudge tool to the line between legit transaction and scam.  Prospective buyers were lured in by elegant drawings and even movie scenery facades of houses to trick them into buying often worthless land.  Stories like these coming to light really harshed the bubble’s buzz, but it was category-4 hurricane in 1926 that shut down the party.  In addition to hundreds dead and thousands injured, huge swaths of developed land and buildings were fubar.  People in other cities who might have considered moving to FL saw that in the paper and stayed away in droves.  


That kind of weather added an unacceptable level of risk, even for people who’d already put up with yellow fever vectors, confidence men, and, let’s be honest, the humidity.  The flow of cash into the state went from suck to blow.  That Spaceballs line didn’t work as well as I’d hoped, but like all my other mistakes, I’m committing to it.  Floridians got a sneak preview of the bank collapses the rest of the nation would see in a few years as the vaults were emptied and the banks shuttered.  Remember the newspaper with 504 pages of real estate ads?  Yeah, now it was just 41 pages, all tax delinquency notices.  




in 1845, with the UK in the grips of a frenzy which saw investors tripping over each other to pile into railway shares, bewitched by promises of a revolutionary mode of transport, a huge untapped market and spectacular profit growth. Even the likes of Charles Darwin and the Brontë sisters were swept up by the hype. Private firms hatched grandiose investment plans, submitted hundreds of bills to parliament for new railway lines, and saw their share prices roughly double in the space of a few years. Government was obliging; in 1845, it authorized around 3,000 miles of track, roughly as much as the previous 15 years combined. And at its peak, railway investment—which lagged a few years behind planning applications—surged to 7% of GDP, representing half of total investment in the economy at the time.


The seeds of the boom were sown a decade earlier, with the opening of the world’s first commercial passenger railway line between the recently industrialized and thriving cities of Liverpool and Manchester.  The UK was fast becoming a global manufacturing dynamo, and railways promised to catalyze the revolution underway, making it possible to move raw materials and finished goods more cheaply, quickly, and in greater volumes than ever before.  And that’s what trains were for, in many peoples’ minds, cargo, not passengers.  Investors assumed, no way people would want to be jangled about on a noisy train when they could just take a coach.  But the public at large was up for it, the Liverpool-Manchester line was a roaring, wildly profitable success.  Shovelfuls of coal for the engines turned into buckets of cash for investors and they were on-board, npi, with the idea if not the actual train.


But the mania was still a few years away, when the Bank of England inadvertently created fertile conditions for it by allowing stocks to be purchased with just a 10% deposit, massively expanding the investor base.  If this sounds familiar, it was the same buying on margin system that precipitated the 1929 U.S. stock market crash.  With railway stocks now tantalizingly within reach of Britain’s emerging middle class, companies pulled out all the stops to market themselves to investors. Railway firms aggressively pushed their own shares, particularly those newfangled newspapers everyone’s going on about.  In late 1845, railway ads covered over half the space in many papers, chock full of inflated claims, optimistic revenue projections, questionable accounting practices.  But they got the job done.


There was a wild west feel here too.  The paint was still wet on the industry of professional accounting, there were no set standards, from within or without, and no governing body.   Auditing?  Not a thing per se.  As such, information regarding company accounts and future business prospects was surrounded by a thick fog of uncertainty.  We do know with certainty though that some transactions were outright scams.  Take for instance George Hudson, the so-called railway king and one of the wealthiest industrialists of the day, who ran a Ponzi-like scheme, paying dividends out of company capital.  Private companies, however, were not the only ones responsible for the railway bubble; the finger of blame should also be pointed at the British government. The regulatory approach was lackadaisical to say the least, with parliament limiting itself to approving the construction of new lines and making no initial attempt to develop a coherent national rail strategy, or to put a brake on the huge proliferation of rail firms. Fragmented decision-making didn’t help either. At the height of the boom in 1845, there were 44 separate parliamentary committees analyzing potential network expansions, each focusing on a specific region of the country. Every single committee, without exception, approved at least one project.  Think about your last group project.  Now imagine your output is expected to jive with the output from 43 other groups.  It’s a committee of committees and I’m getting an ulcer just thinking about it.  But even the most streamlined, uniform thinking wouldn’t have stopped the railway bubble, for the simple reason that many Members of Parliament had a dog in the fight, including the aforementioned Hudson who would control ⅓ of the rail lines.  A government official with a financial interest, one is shocked.   


The mania reached its zenith in 1846, when 263 Acts of Parliament setting up new railway companies were passed, with the proposed routes totalling 9,500 miles (15,300 km). About a third of the railways authorised were never built—the companies either collapsed due to poor financial planning, were bought out by larger competitors before they could build their line, or turned out to be fraudulent enterprises to channel investors’ money into other businesses.  As the dozens of companies formed began to operate and the simple unviability of many of them became clear, investors began to realise that railways were not all as lucrative and as easy to build as they had been led to believe. Coupled to this, in late 1845 the Bank of England increased interest rates. As banks began to re-invest in bonds, the money began to flow out of railways.  By 1850 railway shares were worth less than half of their original value, and dividend rates had fallen from upwards of seven percent to two percent.


When the mania came to an end, it was revealed that Hudson had engaged in improper business practices, including bribery, embezzlement, and insider trading.  I am Jack’s complete lack of surprise.  In essence, Hudson operated his railways through a Ponzi scheme, in which outsized dividends were distributed to old investors from the capital contributed by new investors. Hudson resigned from his directorships, lost his seat in Parliament, and spent the remainder of his days living in obscurity, which I feel pretty okay about.


And that’s…

As Poseidon stock became too expensive for some investors, they began to snatch up shares in other mining companies, some of which listed themselves purely to cash in on the investment frenzy with no intention or realistic prospect of ever mining nickel.  While that happened, Poseidon found the ore they’d discovered wasn’t very good and it cost far more to mine and process than anticipated.  Once it became apparent in 1970 that a lot of this stock was worthless, the bubble burst.