Mad about tuplips● 和兴 By He Xing This is a story that happened in 17th century Europe. Tulips were introduced into Holland before the 17th century but it did not take long for the flowers to gain popularity among the upper classes. Flowers of such beauty and rarity soon became symbols of power and prestige and the rich triedtheir utmost to lay their hands on some to display in their gardens. When more people learned of the prices that the rich were willing to pay for tulips, they knew they just found a 'get-rich-quick' gold mine. By 1634, the whole country was so fascinated by tulips that all other activities almost came to a stop. People weretrading in tulips and even buying and selling un-sprouted flowers. It was similar to the futures market today, where traders are buying and selling crude oil or cotton which they will never see. It was documented that one rare bulb fetched a price equivalent to ten tons of cheese. As the tulip trades increased, regular marts were set up on the Stock Exchange of Amsterdam and other towns. That happened in the year 1636 when mania was reaching its peak. Like all speculative bubbles, many made a fortune in the beginning. As the prices moved in one direction, you only needed to buy low and sell high, buy high and sell higher. After the initial gains, confidence rose and many sold away their assets in order to invest more money in tulips, hopingto make more money. The temptation was so great that those who were watching from the sidelines also rushed to the tulip-marts. People often said in jest that one should sellstocks when housewives were talking about stocks in the market. Mass participation was a sign that the market had peaked. At that time, everyone thought that the high demandfor tulips would continue forever and prices could only go up because more and more people from all over the world would start to like tulips. This was similar to the early nineties when China opened up its economy. If a listed company announced its intention to enter the Chinese market,its stock price rose because the profit potential was limitless if every single Chinese bought its product. When the prices of tulips reached such an exorbitant level, few people bought them for planting in their gardens.The real demand for the flowers was exaggerated by people who were buying them for speculation, not appreciation. Thebubble finally burst in 1637. For some unknown reasons maybe a group of people suddenly realised the madness tulipsfailed to command the usual inflated prices in a gathering. Word spread and the market crashed. As in all asset bubbles, it took time to propel prices to such outlandish levels, but it only took a single pierce to burst the bubble. When confidence was destroyed, it could not be recovered and prices kept falling until they were one-tenth of those set during the peak. Soon the nobles became poor and the rich became paupers. Cries of distress resounded everywhere in Holland. Why do investment professionals like to bring up this story that happened centuries ago? This is because greed is part of human nature and short memory is an investor trait, we just never seem to learn from past mistakes. Recently, many have pointed to the American investors' craze over Internet stocks as another 'tulipmania'. Whether these are really 'Internet tulips' remain to be seen. However there are tell-tale signs that the buying is overdone. There is no denial that the Internet is an important development in this century, but it is madness when every Internet stock jumps in multiples and every company that announces conducting their business over the net witnesses their stock prices going up. Not to mention that some of these Internet stocks are trading at hundreds times PE and some will not report any profit for the next few years ! Inthe early eighties when personal computers just appeared, PC-related stocks were also the darlings of investors, just like Internet stocks. However, many of the top brands then did not survive and most of the leaders in the PC industry today were not set up then. A look at the table shows the extent of the high valuations enjoyed by Internet stocks, asevidenced by their high market capitalisation (think of it as the price in the PE ratio) relative to their low annual revenues.(The writer is Investment Manager of an asset management firm. ) 为郁金香疯狂 这里要讲一个发生在17世纪欧洲的故事。郁金香在17世纪传入荷兰，没多久的时间贵族就疯狂爱上了它。这美丽兼稀有的花朵顿时成了权力和威望的象征，只要是有钱人都千方百计找几朵种在自己的庭院供玩赏。当越来越多人知道贵族们愿意为一束郁金香付出高昂的价格时，他们晓得已经寻到梦寐以求的金矿。 1634年，荷兰百业荒废，全国上下都为
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