Tulip Fever

Author: David R. Kotok, Post Date: October 15, 2017

Three levels are apparent in the wonderfully crafted movie Tulip Fever, in which the impeccably cast Judi Dench is both abbess (mother superior) and tulip-speculating vault keeper. The film is a cinematic lesson about trading momentum and human emotions overtaking investment reasoning.

Market-Commentary Tulip-Fever

But there is also a lesson in Dutch history, with a marvelous depiction of early 17th-century Amsterdam and only by surmise and projections Amsterdam’s upstart cousin Nieuw Amsterdam, otherwise known as New York. Bottom line: NYC really was and still is a Dutch town.

The movie peeks at the roots of New York during its pre-English years. The attempt at historical accuracy is affirmed in this viewer’s eyes even though there are a couple of dates which conflict by a year or two with records.

Incidentally, Beverly Swerling’s compelling historical novels are a perfect companion to the film. We must give five stars to both Tulip Fever and to City of Dreams: A Novel of Early Manhattan, the first in Swerling’s series. (We subsequently read all the rest.)

A second level in the film concerns art. Please Realize that Tulip Fever is set in Rembrandt’s era, and please observe the paintings closely. So obviously metaphorical is the play on Vermeer and Girl with a Pearl Earring. The movie uses this metaphor brilliantly. (And I have seen that classic work when it was on exhibit.) The movie makes use of other classic artistic themes, too, including portraiture and the mixing of color. How lovely to see an art lesson woven among the story’s other threads.

The tulip craze and collapse is more than just a chapter in Charles Mackay’s famous classic Extraordinary Popular Delusions and the Madness of Crowds. BTW that book is a must read and a classic to be assigned to any and every serious investor.

In the movie, we see tulip prices rising and observe how the extension of credit influenced the path to a peak and then collapse. We see early auction pits in operation in taverns, with high and low intrigue. This all takes place three and a half centuries before Michael Lewis came along. Hmm – some things may never change. My speculation is that Jesse Livermore would love this movie and Ben Graham would want a refund of the ticket price. Warren B, Graham’s disciple, might have an opinion. Is there a view from the Oracle of Omaha?

This third level fascinates those of us who populate and puzzle over the markets. What does this tulip story say about Fama or Samuelson and about efficient markets and price discovery? Is Professor Andrew Lo correct as he leads us down the path of critical thinking with his new book Adaptive Markets? Doesn’t the movie affirm Daniel Kahneman’s lessons in his seminal work Thinking, Fast and Slow?

For us, the movie was entertaining and rewarding. We got our money’s worth. We disagree with the critics who gave it a pan. But what do they know? They’re only out of teenage hood in the last ten years and only know one direction of markets and economics.

If you want a lesson in trading certificates, see Tulip Fever. For a pleasant art history course, see Tulip Fever. And for suspenseful entertainment that ends with a smile, see Tulip Fever.

P.S. Was there a tulip named Bitcoin?

David R. Kotok
Chairman and Chief Investment Officer
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