Thursday, January 30, 2020
Trading Strategies Essay Example for Free
Trading Strategies Essay The Dutch Tulip Boom (1636-1637) The tulips, a beautiful flower usually associated with the Netherlands are flowers that have a very notorious economic history in that country. The tulip is not a native Dutch flower. Like many other products in western Europe, such as the potato and tobacco, tulips came to the Netherlands from another part of the world. Tulip was introduced to the Dutch on the year 1593. It was said that the tulip was first seen by Europeans in Turkey. Scholars now believe that the Turks had been cultivating tulips as early as AD 1000(Sykes, T. (2003),‘Tulips from Amsterdam). Most of these tulips probably originated in areas around the Black Sea, in the Crimea, and in the steppes to the north of the Caucasus. Back then it used to command a very steep price which could be amounting to a small fortune, today the said flowers are available at modest prices. When the Tulip was first introduced to Holland, tulip ownership was primarily limited to wealthy nobles and scholars. Antwerp, Brussels, Augsburg, Paris, and Prague are among some of the cities where such tulips first began to circulate. The exorbitant price as well as the great demand for this commodity gave rise to an extraordinary event in Dutch history – The Tulip boom of 1636 – 1637. The Tulip Boom was an economic phenomenon which took place on the year 1636. This craze lasted for a year. (McGuigan, B. (2007), ‘What is a Tulip Craze?’, Conjecture Corporation) The cause of the said phenomena was the sudden surge of the demand for tulip flowers and bulbs. The Tulip was prized back then for its rarity, beauty and because of the fact that it takes around 7 years to grow a tulip seed into a bulb. It was said that a reasonable purchase price for an ordinary single tulip-bulb of the Viceroy variety consists of: â€Å"two [loads] of wheat and four of rye, four fat oxen, eight pigs, a dozen sheep, two ox heads of wine, four tons of butter, a thousand pounds of cheese, a bed, some clothing and a silver beaker. This price roughly estimated to be amounting to 2,500 guilders (Dutch Currency) is of course ridiculously exorbitant nowadays considering that it is only for a piece of bulb which does not even guarantee that it will produce a flower. The said price however during those days is deemed a Fair and reasonable†purchase price for an ordinary tulip bulb. Rarer species during the height of the Dutch ‘tulip mania’ in the seventeenth century would be double or triple that price, a Semper Augustus, considered to be even more precious than the Viceroy tulip, could bring in close to 6,000 guilders. (Schulman, B. (2007), ‘Tulip’, The Regents of Minnesota University) Eventually, some tulips were sold at the rate of a single bulb for the value of a house, and lots of bulbs were exchanged for large estates. Tulips became a commodity on the Dutch stock exchanges, allowing people who weren’t cultivators or traders to try to take advantage of this boom. It was noted that many people began putting enormous amounts of wealth into speculation on the tulip market  in extreme cases, even their entire savings or properties. The Tulip craze reached a fevered pitch in the year 1636, which witnessed a lot of money pouring into the market, as well as speculation on tulip futures offered by traders who had not yet planted bulbs. At around 1637, the market became saturated with the said product, and some traders began to sell, often in large amounts. This caused panic on the so called tulip merchants making them want to sell their tulips immediately even up to the point of selling cheap. Needless to say the said speculation caused an enormous downturn. As a result the tulip craze ruined many thousands of people financially, as tulip bulbs that had been purchased for the price of a great estate were nearly devalued overnight to the price of common onions. To stop the economy from plummeting and because of the fact that tulip prices and the practice of tulip speculation became so excessive and frenzied the States of Holland passed a statute curbing such extremes in the year 1637. (Jones, S. ((2005), ‘House Prices Tulip Mania A lesson from History !’) II.   The Current Global Mining Resources Boom As of the present, Mining companies are in the midst of an immense economic boom, accompanied with high levels of demand and an above average boost in revenue and profits. It is apparent that the Global  demand for metals is closely related to global GDP, although rapidly expanding economies tend to have a higher intensity of use of some metals, particularly steels, than advanced countries (Mandaro, L(2006). ‘Joy Global: No end to mining boom in sight’,). Many analysts believe that the current peaks may represent long-term strength in the market, driven largely by the economic engines of China and India. The rapid growth of Chinese and Indian economies seem to have been inversely affected by the growth of Western economies. The advancement being enjoyed by the two countries is showing no signs of imminent slump or stagnation. The said Phenomenal levels of this demand were not expected nor anticipated(Achieving High Performance in Mining: Winning Today, Succeeding Tomorrow (1996-2007). The mining industry may not have the same nature of cycles as typically perceived by investors, but the current level of high metals prices appears to be holding up and the predicted peak keeps on moving. Amidst the apparent boom which the mining sector is experiencing presently, some measures still need to be implemented by the  executives of the mining sectors to focus on the opportunities that todays high commodity prices present, it is apparent that the mining sector needs to keep an eye on significant challenges that lie beyond the current boom to achieve high performance. It is a known fact that although prices are not likely to drop to the lows which occurred a few years back, the said prices are likely to fluctuate and fall below todays levels. This assessment is considered accurate given the number of players globally, there is a high risk of investing in future excess capacity. Production costs are skyrocketing, especially energy and input material costs, these variables seem to have diminished the positive effects the benefits of the commodity boom has in store for the mining industry. In a global industry, commodity price and currency volatility have the potential to erode the benefits coming from the profits being enjoyed by the Mining industry (Ernst Young.(2006) ‘A Timely Opportunity for Private Equity?’). Todays strong market gives companies an opportunity to invest in preparing to meet those challenges. Mining companies need to plan for a potential downturn as well as for continued high demand. In short, they need to balance the ability to exploit todays boom times with well-founded strategies that will continue to deliver value to shareholders in the post-boom period. They also must pay close attention to a range of issues to drive the triple bottom line and focus not only on economic results, but also on the social and environmental impact of their operations. In an era of global competition, mining companies must constantly look for ways to improve those operations, mostly by applying modern technology on the mining equipments used from mines to concentrators to smelters (Ernst Young.(2006) ‘A Timely Opportunity for Private Equity?’). III. The New York Stocks Exchange Commission (NYSE) Stock exchange transactions are basically transactions that involve the day to day activities of brokers and dealers. These individuals facilitate the buying and selling of financial assets. Brokers execute trades on behalf of clients and receive commissions and fees in exchange for matching buyers and sellers. Dealers, on the other hand, buy and sell from their own portfolios (Stock Exchange(2007)) Microsoft MSN Encyclopedia Encarta) .They earn income by selling a financial instrument at a price that is greater than the price the dealer paid for the instrument. Some exchange participants perform both roles. The said transactions occur frequently nowadays and is governed primarily by Stock exchange commissions, the most noted of these organizations would probably be the New York Stocks Exchange Commission. The New York Stocks Exchange Commission is the worlds largest marketplace for securities. It was organized back in 1792 by a group of stockbrokers who wanted a more orderly way to sell and buy company stocks (The New York Stock Exchange) (2007), Encyclopedia Britannica Online). The New York Stock exchange was formerly located at number 40 Wall Street in New York City, But As the said establishment grew it was later moved into what is currently the New York Stock Exchange Building. Membership was limited to 1,366 since 1953, and is obtained by purchasing a seat from a current existing member. Major stock exchanges in the United States include the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), both in New York City. The NYSE is operated by a board of directors, whose primary role is to list down securities, to set policies and to supervise the stock exchange and its member activities. Another important function of the NYSE is to oversee the transfer of members seats on the Exchange, which would involve judging whether a potential applicant is qualified to be a specialist. Stock exchanges perform important roles in national economies (New York Stock Exchange – NYSE (2007), Investopedia). Most importantly, they encourage investment by providing places for buyers and sellers to trade securities. This investment, in turn, enables corporations to obtain funds to expand their businesses. The Stock market, is of course the mirror of the current economic situation of a country. The NYSE, being the largest of them all, would of course imply that any fluctuation occurring in the NYSE stock market would of course mirror the economic situation of the U.S. This would best be illustrated by the economic turmoil experienced by the said country on the year 1929. It was an event remembered by many because of a lot of unseemly things happened within a blink of an eye. In the 1920s, things were really rocking in the US and around the world. The rapid increase in industrialization was fueling growth in the economy, and technology improvements had the leading economists believing that the up rise would continue. The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. It was on the 24th of October 1929, when the stock prices began to fall and brokers began to sell. By noon of the same day, millions of shares had been sold. The selling frenzy continued all afternoon. Before the close of the day, 13 million shares had been traded and the market dropped an estimated amount of four billion dollars. Many investors, tried to even things up, and as a course of action they invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. After some time the realization of what had happened began to sink in, and a full-blown panic ensued. People who had invested their entire life savings during the boom became destitute. Many of the banks which had speculated heavily with their deposits were wiped out by the falling prices, and these bank failures sparked a run on the banking system. As a result many banks and businesses were forced to close. Each failed bank, factory, business, and investor contributed to the downward spiral that would drag the world into the Great Depression. Five days later, the worst possible scenario took place. On that day, over 16 million shares of stock were sold and the market fell over 14 billion dollars. By comparison, the entire budget of the U.S. Government that year was three billion dollars. In one day, the United States lost more capital than it had spent in all of World War I. And so it came to pass that thousands of investors many of them ordinary working people, were financially ruined. By the end of that year, stock values had dropped by fifteen billion dollars (The Crash, NYC Architecture. Retrieved August 29, 2007). Bibliography  The Dutch Tulip Boom Schulman, B. (2007), ‘Tulip’, The Regents of Minnesota University, Retrieved August 28, 2007             http://bell.lib.umn.edu/Products/tulips.html McGuigan, B. (2007), ‘What is a Tulip Craze?’, Conjecture Corporation,             Retrieved August 28, 2007             http://www.wisegeek.com/what-is-a-tulip-craze.htm Jones, S. ((2005), ‘House Prices Tulip Mania A lesson from History !’             Retrieved August 28, 2007  http://www.marketoracle.co.uk/Article18.html Sykes, T. (2003), ‘Tulips from Amsterdam’, Retrieved August 27, 2007 http://www.rba.gov.au/PublicationsAndResearch/Conferences/2003/Sykes.pdf The Current Global Mining Resources Boom Mandaro, L(2006). ‘Joy Global: No end to mining boom in sight’, Marketwatch Retrieved August 29, 2007 http://www.marketwatch.com/News/Story/5VZZZjDn3fVvlBkkp9z78Ht Achieving High Performance in Mining: Winning Today, Succeeding Tomorrow (1996-2007),  Accenture, Retrieved August 29, 2007. http://www.accenture.com/Global/Services/By_Industry/Mining/R_and_I/WinningTodaySucceedingTomorrow.htm Ernst Young.(2006) ‘A Timely Opportunity for Private Equity?’ Ernst Young Global.            Retrieved August 29, 2007. http://www.ey.com/global/content.nsf/International/Mining_Private_Equity The New York Stocks Exchange Commission The New York Stock Exchange (2007), Encyclopedia Britannica Online. Retrieved August 29, 2007.            http://www.britannica.com/eb/article-9055541/New-York-Stock-Exchange New York Stock Exchange – NYSE (2007), Investopedia            Retrieved August 29, 2007            http://www.investopedia.com/terms/n/nyse.asp The Crash, NYC Architecture. Retrieved August 29, 2007            http://www.nyc-architecture.com/LM/LM036-NEWYORKSTOCK EXCHANGE.htm Stock Exchange(2007), Microsoft MSN Encyclopedia Encarta. Retrieved August 29, 2007            http://encarta.msn.com/encyclopedia_761560145/Stock_Exchange.html Gongloff, M. ‘Attacks could hit economy’. CNN Money. Retrieved August 30, 2007            http://money.cnn.com/2001/09/11/economy/wtc_econ/
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