China: Manufacturing activity accelerates in July
United States: Investors fear a bubble
United Kingdom: BOE minutes suggest no imminent change in tone
Asset price bubbles come in varying shapes and sizes. The Tulip Mania or Tulipomania was a speculative bubble in tulip bulbs that took place in the Netherlands from 1634 to 1637. Tulipomania occurred shortly after the tulip plant was introduced to Europe from the Ottoman Empire, in present-day Turkey. The tulip plant’s rarity and exotic beauty (as compared to plants that were common in Europe at the time) helped it to find immediate favour within Dutch high society, who cultivated and displayed tulips as a status symbol. As tulip prices rose to new heights, speculators began to buy tulip bulbs to “flip” later on for higher prices. Very soon, almost all classes of Dutch society were involved in tulip bulb speculation, with many trading all of their worldly possessions for a single tulip bulb. When tulip bulb prices became worth the equivalent of tens of thousands of dollars (in current values), many Dutch tulip speculators became fantastically wealthy. Alas, tulip bulb prices eventually peaked and soon imploded, bankrupting scores of speculators and throwing the Netherlands into a mild economic depression that lasted many years. When looking at current asset prices, while valuations seem somewhat stretched, it is hard to identify the broad based investor frenzy that would need to be present to say we are currently in a bubble. If anything, as the Bloomberg investor poll below shows, market participants are very cautious on the outlook for prices.
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