Submitted by Darren Smith, Weekend Contributor
The situation is perhaps a small echo from the Tulip Mania market speculative bubble that caused the crash of a segment of the tulip bulb industry in 1637 in the United Provinces (now The Netherlands).
The white truffle is one of the rarest and most coveted food ingredients in the world. They are gathered in forests of a few regions of Italy using dogs specially trained to locate them. Sabatino Truffles unearthed the largest White Truffle ever discovered, significantly larger than the previous record holder auction in 2010. The truffle weighed 4.6 pounds.
Previous auctions of record holders reached nearly extreme levels. In 2007 a 3.3 pound example achieved three hundred and thirty three thousand dollars; bid by casino owner Stanley Ho. In 2010 a similar auction netted over four hundred seventeen thousand dollars according to Sotheby’s. Speculators estimated based on reports of possible offers from Chinese individuals and the previous auctions the latest white tulip record holder could garner over one million dollars.
In the end, the truffle only netted just in excess of sixty one thousand dollars, which is closer to a sense of intrinsic value in that it could serve up to four hundred meals. Whether this is the path the truffle ultimately follows is not certain.
The economic plight of this fungus is, though on an individual sampling, reminiscent of the Tulip Mania bubble that hit the Dutch from 1636 to 1637.
In this case the price of the rarest tulip group, the Bizarden which was a red, purple, or brown base with white or yellow flame like streaks became largely the subject of this speculation. This particular tulip is difficult to cultivate and requires much attention to detail over the course of years. It could produce daughter varieties having similar characteristics through cloning, resulting in an intrinsic value as well as beauty which has an attractive value.
When prices for this variety began to increase at steep rates, the market for these tulips grew from the traditional markets based in cities and town trading houses to other members of society including the wealthy who bought the tulips on contract which is a form of futures investment.
Over the course of about six months a feedback-loop among speculative buyers gave rise to one of the first known large scale speculation bubbles. The price for an individual bulb began to take on almost extortionate prices; garnering upwards of levels equivalent to ten times the annual income of a skilled craftsman.
However this, like nearly all economic bubbles, came to a crash from February 1637 to May and the market for this variety collapsed. The effect sent some speculators having long positions in the tulip contracts into bankruptcy and depressed the entire market widely among individual and corporate type investors.
This latest auction of the White Truffle world record holders might have also collapsed, though it is difficult to ascertain this given the sample size. But, it could be a signal that wild speculation in achieving status related prizes through auction could have limits and cooler minds will prevail.
By Darren Smith
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