Forty-two chapters. Almost a year of posts. Stories spanning from 1637 to 2018, from Amsterdam flower auctions to cryptocurrency exchanges. And here I am, writing the last post in this series.
Forty-two chapters. Almost a year of posts. Stories spanning from 1637 to 2018, from Amsterdam flower auctions to cryptocurrency exchanges. And here I am, writing the last post in this series.
After 42 chapters of booms, busts, manias, and crashes, Torsten Dennin does something unexpected in the Outlook and Epilogue of “From Tulips to Bitcoins.” He looks forward. And what he sees is a setup for the next big commodity cycle. The numbers he puts on the table are brutal enough to explain why.
After 42 chapters of booms, busts, manias, and crashes, Torsten Dennin does something unexpected in the Outlook and Epilogue of “From Tulips to Bitcoins.” He looks forward. And what he sees is a setup for the next big commodity cycle. The numbers he puts on the table are brutal enough to explain why.
We started this whole series with a guy paying a house price for three flower bulbs in 1637. Forty-one chapters later, we end with a guy paying 10,000 bitcoins for two pizzas. Chapter 42 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of the biggest financial bubble in human history. Bigger than tulips. Bigger than gold. Bigger than anything we covered in this book. And it happened in our lifetime.
We started this whole series with a guy paying a house price for three flower bulbs in 1637. Forty-one chapters later, we end with a guy paying 10,000 bitcoins for two pizzas. Chapter 42 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of the biggest financial bubble in human history. Bigger than tulips. Bigger than gold. Bigger than anything we covered in this book. And it happened in our lifetime.
In 2017, cobalt went from $25,000 to $100,000 per ton. Quadrupled in a single year. Not because someone cornered the market or because a mine collapsed. It happened because the world suddenly realized that electric cars need batteries, and batteries need metals. Lots of metals. Chapter 41 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how Tesla, Elon Musk, and the EV boom turned obscure industrial metals into the hottest commodities on the planet.
In 2017, cobalt went from $25,000 to $100,000 per ton. Quadrupled in a single year. Not because someone cornered the market or because a mine collapsed. It happened because the world suddenly realized that electric cars need batteries, and batteries need metals. Lots of metals. Chapter 41 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how Tesla, Elon Musk, and the EV boom turned obscure industrial metals into the hottest commodities on the planet.
In February 2016, a barrel of WTI crude oil cost less than $26. That was the lowest price since 2003. Just 18 months earlier, the same barrel was selling for $110. A 76% drop. Chapter 40 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how the world literally ran out of places to store all the oil it was pumping, and what happened when OPEC and Russia finally decided to do something about it.
In February 2016, a barrel of WTI crude oil cost less than $26. That was the lowest price since 2003. Just 18 months earlier, the same barrel was selling for $110. A 76% drop. Chapter 40 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how the world literally ran out of places to store all the oil it was pumping, and what happened when OPEC and Russia finally decided to do something about it.
Your phone has rare earths in it. Your laptop has them. If you drive a hybrid or electric car, it is full of them. Wind turbines need them. Flat screens need them. Pretty much every piece of modern technology needs a tiny bit of these 17 metals that most people have never heard of. Chapter 39 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of what happened when one country controlled almost all of the supply and decided to squeeze.
Your phone has rare earths in it. Your laptop has them. If you drive a hybrid or electric car, it is full of them. Wind turbines need them. Flat screens need them. Pretty much every piece of modern technology needs a tiny bit of these 17 metals that most people have never heard of. Chapter 39 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of what happened when one country controlled almost all of the supply and decided to squeeze.
For decades, the world’s largest commodity trading company operated in near-total secrecy. No public filings. No shareholders to answer to. No journalists poking around. Then on May 19, 2011, Glencore listed on the London Stock Exchange and raised $12 billion in one of the biggest IPOs in history. Chapter 38 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how a fugitive’s private empire became a public company. And how the insiders who sold their shares at the top never saw that price again.
For decades, the world’s largest commodity trading company operated in near-total secrecy. No public filings. No shareholders to answer to. No journalists poking around. Then on May 19, 2011, Glencore listed on the London Stock Exchange and raised $12 billion in one of the biggest IPOs in history. Chapter 38 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how a fugitive’s private empire became a public company. And how the insiders who sold their shares at the top never saw that price again.
In March 2011, cotton hit $2.15 per pound. That was the highest price since cotton trading began on the New York Cotton Exchange in 1870. The last time cotton was anywhere near that expensive, the American Civil War was raging and the South’s plantations had stopped producing. It took 150 years for cotton to reach those levels again. Chapter 37 of Torsten Dennin’s “From Tulips to Bitcoins” explains how a combination of floods, export bans, hoarding, and panic buying made it happen.
In March 2011, cotton hit $2.15 per pound. That was the highest price since cotton trading began on the New York Cotton Exchange in 1870. The last time cotton was anywhere near that expensive, the American Civil War was raging and the South’s plantations had stopped producing. It took 150 years for cotton to reach those levels again. Chapter 37 of Torsten Dennin’s “From Tulips to Bitcoins” explains how a combination of floods, export bans, hoarding, and panic buying made it happen.
Some chapters in this book are about money. Some are about greed. This one is about what happens when you mix both with a deadline and a drill hole four kilometers under the ocean. Chapter 36 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of the Deepwater Horizon disaster. The biggest oil spill in American history. Eleven dead. 780 million liters of crude in the Gulf of Mexico. And a final bill of $65 billion.
Some chapters in this book are about money. Some are about greed. This one is about what happens when you mix both with a deadline and a drill hole four kilometers under the ocean. Chapter 36 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of the Deepwater Horizon disaster. The biggest oil spill in American history. Eleven dead. 780 million liters of crude in the Gulf of Mexico. And a final bill of $65 billion.
The Democratic Republic of Congo is the third largest country in Africa. It sits on top of enormous reserves of cobalt, diamonds, copper, gold, and rare minerals. By any logic, this should be one of the wealthiest nations on the continent. Instead, it is one of the poorest countries on Earth. Only Zimbabwe has a lower per capita GDP. Chapter 35 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how Kazakh oligarchs ended up controlling Congo’s copper riches through a chain of shady deals, corrupt middlemen, and a government that treated its country’s resources like personal property.
The Democratic Republic of Congo is the third largest country in Africa. It sits on top of enormous reserves of cobalt, diamonds, copper, gold, and rare minerals. By any logic, this should be one of the wealthiest nations on the continent. Instead, it is one of the poorest countries on Earth. Only Zimbabwe has a lower per capita GDP. Chapter 35 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how Kazakh oligarchs ended up controlling Congo’s copper riches through a chain of shady deals, corrupt middlemen, and a government that treated its country’s resources like personal property.
In July 2010, a 50-year-old hedge fund manager quietly bought 240,000 tons of cocoa beans. That was 7% of the entire world’s production. The majority of all available supply on the market. His bet was worth a billion dollars. The press called him “Chocolate Finger.” Chapter 34 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Anthony Ward and his massive cocoa gamble.
In July 2010, a 50-year-old hedge fund manager quietly bought 240,000 tons of cocoa beans. That was 7% of the entire world’s production. The majority of all available supply on the market. His bet was worth a billion dollars. The press called him “Chocolate Finger.” Chapter 34 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Anthony Ward and his massive cocoa gamble.
Sugar is one of those things you never think about. You put it in your coffee, you eat it in everything, it is just there. Then one summer in India the rain does not come, and suddenly sugar is front page news. Chapter 33 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of what happened in 2009 and 2010, when the world’s second-largest sugar producer ran out of sugar and had to start buying it from everyone else.
Sugar is one of those things you never think about. You put it in your coffee, you eat it in everything, it is just there. Then one summer in India the rain does not come, and suddenly sugar is front page news. Chapter 33 of Torsten Dennin’s “From Tulips to Bitcoins” (ISBN: 978-1-63299-227-7) tells the story of what happened in 2009 and 2010, when the world’s second-largest sugar producer ran out of sugar and had to start buying it from everyone else.
There is a tiny town in Oklahoma called Cushing. Fewer than 10,000 people. It has a Walmart. A few fast food places. And somehow, this place is the center of the global oil market. Chapter 32 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of what happened when oil prices collapsed and the biggest banks in the world started renting supertankers just to have somewhere to put the stuff.
There is a tiny town in Oklahoma called Cushing. Fewer than 10,000 people. It has a Walmart. A few fast food places. And somehow, this place is the center of the global oil market. Chapter 32 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of what happened when oil prices collapsed and the biggest banks in the world started renting supertankers just to have somewhere to put the stuff.
Less than a month after Jerome Kerviel blew a $5 billion hole in Societe Generale, another rogue trader popped up on the other side of the Atlantic. This one was not at a fancy French bank in Paris. He was sitting in Memphis, Tennessee, betting on wheat. Chapter 31 of Torsten Dennin’s “From Tulips to Bitcoins” tells how one guy at MF Global secretly built a $1 billion position against wheat, got absolutely crushed, and brought his entire firm to its knees.
Less than a month after Jerome Kerviel blew a $5 billion hole in Societe Generale, another rogue trader popped up on the other side of the Atlantic. This one was not at a fancy French bank in Paris. He was sitting in Memphis, Tennessee, betting on wheat. Chapter 31 of Torsten Dennin’s “From Tulips to Bitcoins” tells how one guy at MF Global secretly built a $1 billion position against wheat, got absolutely crushed, and brought his entire firm to its knees.
In 2007, a 65-year-old Thai rice exporter stood up and told everyone that rice prices would go from $300 per ton to $1,000. People laughed at him. Not politely. They actually laughed. Chapter 30 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened next. Spoiler: nobody was laughing by spring 2008.
In 2007, a 65-year-old Thai rice exporter stood up and told everyone that rice prices would go from $300 per ton to $1,000. People laughed at him. Not politely. They actually laughed. Chapter 30 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened next. Spoiler: nobody was laughing by spring 2008.
Imagine you control 80% of the world’s supply of a precious metal. And then one day your electricity just stops working. Chapter 29 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of South Africa’s platinum industry getting hit by the most basic problem imaginable: no power.
Imagine you control 80% of the world’s supply of a precious metal. And then one day your electricity just stops working. Chapter 29 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of South Africa’s platinum industry getting hit by the most basic problem imaginable: no power.
You would think that after Amaranth blew up and lost $6 billion on natural gas, every bank and fund on the planet would have gotten the message. Natural gas is dangerous. Do not bet the house on it. But no. Just six months later, one of Canada’s oldest and biggest banks walked straight into the same wall. Chapter 28 of Torsten Dennin’s “From Tulips to Bitcoins” tells how the Bank of Montreal lost $850 million on natural gas trades and tried to cover it up.
You would think that after Amaranth blew up and lost $6 billion on natural gas, every bank and fund on the planet would have gotten the message. Natural gas is dangerous. Do not bet the house on it. But no. Just six months later, one of Canada’s oldest and biggest banks walked straight into the same wall. Chapter 28 of Torsten Dennin’s “From Tulips to Bitcoins” tells how the Bank of Montreal lost $850 million on natural gas trades and tried to cover it up.
Wheat is boring. It just sits there in a field, grows, gets harvested, becomes bread. Nobody thinks about wheat until the price of bread doubles and suddenly everyone is an agricultural expert. Chapter 27 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened when Australia, one of the biggest wheat exporters on the planet, stopped producing wheat. Not by choice. Because the rain stopped coming.
Wheat is boring. It just sits there in a field, grows, gets harvested, becomes bread. Nobody thinks about wheat until the price of bread doubles and suddenly everyone is an agricultural expert. Chapter 27 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened when Australia, one of the biggest wheat exporters on the planet, stopped producing wheat. Not by choice. Because the rain stopped coming.
For most of the twentieth century, seven Western companies ran the global oil business like it was their private club. They decided how much oil was pumped, where it went, and what it cost. Then, country by country, the club got kicked out. Chapter 26 of Torsten Dennin’s “From Tulips to Bitcoins” tells how the old Seven Sisters lost their grip and a new set of state-owned giants took over.
For most of the twentieth century, seven Western companies ran the global oil business like it was their private club. They decided how much oil was pumped, where it went, and what it cost. Then, country by country, the club got kicked out. Chapter 26 of Torsten Dennin’s “From Tulips to Bitcoins” tells how the old Seven Sisters lost their grip and a new set of state-owned giants took over.
Some people trade commodities. Some people build entire industries. Chapter 25 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Lakshmi Mittal, a man who spent three decades buying steel plants that nobody wanted and turned them into the largest steel company the world has ever seen.
Some people trade commodities. Some people build entire industries. Chapter 25 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Lakshmi Mittal, a man who spent three decades buying steel plants that nobody wanted and turned them into the largest steel company the world has ever seen.
John Fredriksen did not drill for oil. He carried it. He did not fish in the ocean. He farmed it. Chapter 24 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of a Norwegian who built an eight-billion-dollar empire on tankers, oil rigs, and salmon.
John Fredriksen did not drill for oil. He carried it. He did not fish in the ocean. He farmed it. Chapter 24 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of a Norwegian who built an eight-billion-dollar empire on tankers, oil rigs, and salmon.
If you have seen the 1983 movie Trading Places with Eddie Murphy and Dan Aykroyd, you remember the final scene. The trading floor of the New York commodity exchange. Two old millionaires trying to corner the frozen orange juice market. Total chaos. People yelling, waving paper, sweat everywhere. That scene was fiction, but the commodity was real. Frozen concentrated orange juice is traded on NYMEX, and the price can move violently when nature decides to get involved. Chapter 23 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened when the most destructive hurricane seasons in recorded history hit the real orange juice market. The price quadrupled. And unlike the movie, nobody was laughing.
If you have seen the 1983 movie Trading Places with Eddie Murphy and Dan Aykroyd, you remember the final scene. The trading floor of the New York commodity exchange. Two old millionaires trying to corner the frozen orange juice market. Total chaos. People yelling, waving paper, sweat everywhere. That scene was fiction, but the commodity was real. Frozen concentrated orange juice is traded on NYMEX, and the price can move violently when nature decides to get involved. Chapter 23 of Torsten Dennin’s “From Tulips to Bitcoins” tells what happened when the most destructive hurricane seasons in recorded history hit the real orange juice market. The price quadrupled. And unlike the movie, nobody was laughing.
“Amaranth” is Greek for “imperishable.” The flower that never fades. Somebody at the hedge fund picked that name on purpose, imagining a fund that would last forever. Instead, Amaranth Advisors became the biggest hedge fund collapse since Long-Term Capital Management in 1998. Two-thirds of its capital gone in two weeks. Six billion dollars, vanished on natural gas bets. Chapter 22 of Torsten Dennin’s “From Tulips to Bitcoins” tells this story.
“Amaranth” is Greek for “imperishable.” The flower that never fades. Somebody at the hedge fund picked that name on purpose, imagining a fund that would last forever. Instead, Amaranth Advisors became the biggest hedge fund collapse since Long-Term Capital Management in 1998. Two-thirds of its capital gone in two weeks. Six billion dollars, vanished on natural gas bets. Chapter 22 of Torsten Dennin’s “From Tulips to Bitcoins” tells this story.
Most of the stories in this book are about people. Traders who got greedy. Governments that miscalculated. Speculators who cornered a market and then lost control. Chapter 21 of Torsten Dennin’s “From Tulips to Bitcoins” is different. The main character is a hurricane. And the commodity it moved is one that most people have never thought about: zinc.
Most of the stories in this book are about people. Traders who got greedy. Governments that miscalculated. Speculators who cornered a market and then lost control. Chapter 21 of Torsten Dennin’s “From Tulips to Bitcoins” is different. The main character is a hurricane. And the commodity it moved is one that most people have never thought about: zinc.
In November 2005, a 36-year-old copper trader for the Chinese government stopped answering his phone. His apartment door stayed shut. He did not show up at work. His employer, the State Reserve Bureau, first told the London Metal Exchange that the man did not exist. Then they said he acted alone. Then they stopped talking. Chapter 20 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Liu Qibing, who shorted up to 200,000 tons of copper on the LME and vanished when the bet went wrong.
In November 2005, a 36-year-old copper trader for the Chinese government stopped answering his phone. His apartment door stayed shut. He did not show up at work. His employer, the State Reserve Bureau, first told the London Metal Exchange that the man did not exist. Then they said he acted alone. Then they stopped talking. Chapter 20 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Liu Qibing, who shorted up to 200,000 tons of copper on the LME and vanished when the bet went wrong.
Most people have never heard of palladium. Ask someone on the street to name a precious metal and they will say gold. Maybe silver. Maybe platinum if they know jewelry. Almost nobody would say palladium. But in January 2001, palladium became the first precious metal in history to break $1,000 per ounce. More expensive than gold. Chapter 19 of Torsten Dennin’s “From Tulips to Bitcoins” tells how this obscure metal went from $120 to over $1,100 in four years. A 10x increase. And it all came down to one country: Russia.
Most people have never heard of palladium. Ask someone on the street to name a precious metal and they will say gold. Maybe silver. Maybe platinum if they know jewelry. Almost nobody would say palladium. But in January 2001, palladium became the first precious metal in history to break $1,000 per ounce. More expensive than gold. Chapter 19 of Torsten Dennin’s “From Tulips to Bitcoins” tells how this obscure metal went from $120 to over $1,100 in four years. A 10x increase. And it all came down to one country: Russia.
St. Paul, Alberta. A town of five thousand people in the Canadian prairies. The town’s only claim to fame is a UFO landing platform, built in 1967 for Canada’s centennial. A concrete pad with a sign inviting extraterrestrial visitors to land. Nothing ever landed. But in the mid-1990s, something stranger than aliens happened to this town. Chapter 18 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Bre-X Minerals, the biggest mining fraud in Canadian history.
St. Paul, Alberta. A town of five thousand people in the Canadian prairies. The town’s only claim to fame is a UFO landing platform, built in 1967 for Canada’s centennial. A concrete pad with a sign inviting extraterrestrial visitors to land. Nothing ever landed. But in the mid-1990s, something stranger than aliens happened to this town. Chapter 18 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Bre-X Minerals, the biggest mining fraud in Canadian history.
How do you hide $1.8 billion in losses for over a decade? You stay at the same desk, you forge your boss’s signature, and you pray that the market turns around. Chapter 17 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Yasuo Hamanaka, a copper trader at Sumitomo Trading in Tokyo who controlled 5% of the global copper market, lied about it for eleven years, and brought down the biggest single-company trading loss the world had ever seen.
How do you hide $1.8 billion in losses for over a decade? You stay at the same desk, you forge your boss’s signature, and you pray that the market turns around. Chapter 17 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Yasuo Hamanaka, a copper trader at Sumitomo Trading in Tokyo who controlled 5% of the global copper market, lied about it for eleven years, and brought down the biggest single-company trading loss the world had ever seen.
Three of the richest men on Earth all decided to put money into silver during the 1990s. Same metal. Same decade. Completely different strategies. And wildly different outcomes. Chapter 16 of Torsten Dennin’s “From Tulips to Bitcoins” tells this story, and it reads almost like a parable about what separates a good investment from a disaster.
Three of the richest men on Earth all decided to put money into silver during the 1990s. Same metal. Same decade. Completely different strategies. And wildly different outcomes. Chapter 16 of Torsten Dennin’s “From Tulips to Bitcoins” tells this story, and it reads almost like a parable about what separates a good investment from a disaster.
In 1991, German business magazine named Heinz Schimmelbusch “Manager of the Year.” Two years later, he was fired for nearly destroying one of Germany’s oldest industrial companies. Chapter 15 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Metallgesellschaft, and it is one of the most painful corporate implosions in the book.
In 1991, German business magazine named Heinz Schimmelbusch “Manager of the Year.” Two years later, he was fired for nearly destroying one of Germany’s oldest industrial companies. Chapter 15 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of Metallgesellschaft, and it is one of the most painful corporate implosions in the book.
August 2, 1990. One hundred thousand Iraqi soldiers cross the border into Kuwait. Within hours, the small oil-rich country is occupied. Within three months, oil prices double. Chapter 14 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how a debt dispute between neighbors turned into the biggest oil shock since the 1970s.
August 2, 1990. One hundred thousand Iraqi soldiers cross the border into Kuwait. Within hours, the small oil-rich country is occupied. Within three months, oil prices double. Chapter 14 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of how a debt dispute between neighbors turned into the biggest oil shock since the 1970s.
“Every moron could buy a printing press, everything might be better than paper money.” That is Nelson Bunker Hunt explaining why he bet the family fortune on silver. Chapter 13 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of the Hunt brothers, two Texas oil heirs who tried to corner the global silver market. They almost pulled it off. And then they lost everything in a single day.
“Every moron could buy a printing press, everything might be better than paper money.” That is Nelson Bunker Hunt explaining why he bet the family fortune on silver. Chapter 13 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of the Hunt brothers, two Texas oil heirs who tried to corner the global silver market. They almost pulled it off. And then they lost everything in a single day.
“A diamond is forever.” That is probably the most successful advertising slogan in history. De Beers spent decades convincing the world that diamonds are rare, precious, and eternal stores of value. But Chapter 12 of Torsten Dennin’s “From Tulips to Bitcoins” tells a different story. A story where investment-grade diamonds lost 90% of their value in twelve months.
“A diamond is forever.” That is probably the most successful advertising slogan in history. De Beers spent decades convincing the world that diamonds are rare, precious, and eternal stores of value. But Chapter 12 of Torsten Dennin’s “From Tulips to Bitcoins” tells a different story. A story where investment-grade diamonds lost 90% of their value in twelve months.
November 25, 1973. A Sunday morning in Germany. The autobahn is completely empty. No cars. No trucks. Nothing. The country that gave the world Mercedes, BMW, and Audi, the country that has no general speed limit on its highways because people love driving that much, just banned driving on Sundays.
November 25, 1973. A Sunday morning in Germany. The autobahn is completely empty. No cars. No trucks. Nothing. The country that gave the world Mercedes, BMW, and Audi, the country that has no general speed limit on its highways because people love driving that much, just banned driving on Sundays.
For most of human history, money meant metal. Gold coins. Silver coins. Paper notes that you could walk into a bank and trade for actual gold. Then in 1971, a US president went on television and changed everything. Money became just paper. Backed by nothing but trust.
For most of human history, money meant metal. Gold coins. Silver coins. Paper notes that you could walk into a bank and trade for actual gold. Then in 1971, a US president went on television and changed everything. Money became just paper. Backed by nothing but trust.
In the summer of 1972, the Soviet Union pulled off one of the most audacious trades in the history of commodity markets. They bought almost a third of America’s wheat supply. And almost nobody noticed until it was too late.
In the summer of 1972, the Soviet Union pulled off one of the most audacious trades in the history of commodity markets. They bought almost a third of America’s wheat supply. And almost nobody noticed until it was too late.
Imagine you are a bank. Someone comes to you and says, “I have millions of pounds of soybean oil stored in tanks in New Jersey. Give me a loan.” You send an inspector. The inspector dips a measuring rod into the tank. Oil floats on top. Looks fine. You approve the loan. What you do not know is that 95% of the tank is filled with water and there is just a thin layer of oil floating on the surface.
Imagine you are a bank. Someone comes to you and says, “I have millions of pounds of soybean oil stored in tanks in New Jersey. Give me a loan.” You send an inspector. The inspector dips a measuring rod into the tank. Oil floats on top. Looks fine. You approve the loan. What you do not know is that 95% of the tank is filled with water and there is just a thin layer of oil floating on the surface.
A 16-year-old kid who speaks four languages watches his family lose everything overnight. He flees to Argentina with nothing. No money. No connections. No plan. Thirty years later, he owns the largest private tanker fleet on the planet, throws parties with JFK and Churchill on his yacht, and marries the most famous widow in America.
A 16-year-old kid who speaks four languages watches his family lose everything overnight. He flees to Argentina with nothing. No money. No connections. No plan. Thirty years later, he owns the largest private tanker fleet on the planet, throws parties with JFK and Churchill on his yacht, and marries the most famous widow in America.
A city burns down. Warehouses full of wheat turn to ash. Storage capacity drops overnight. And a group of traders looks at this disaster and thinks: “We can make money off this.”
A city burns down. Warehouses full of wheat turn to ash. Storage capacity drops overnight. And a group of traders looks at this disaster and thinks: “We can make money off this.”
There is a famous Rockefeller quote: “Competition is a sin.” Most people hear that and think it is just a rich guy being arrogant. But when you read Chapter 5 of Torsten Dennin’s “From Tulips to Bitcoins,” you realize this was not just talk. This man actually eliminated competition. All of it. He controlled 90% of the oil refining in the United States. One person. Ninety percent.
There is a famous Rockefeller quote: “Competition is a sin.” Most people hear that and think it is just a rich guy being arrogant. But when you read Chapter 5 of Torsten Dennin’s “From Tulips to Bitcoins,” you realize this was not just talk. This man actually eliminated competition. All of it. He controlled 90% of the oil refining in the United States. One person. Ninety percent.
Picture this. A 30-year-old guy from Massachusetts moves to Chicago with no connections and no fortune. Within a few decades, he becomes the most feared trader on the floor of the Chicago Board of Trade. They called him “Old Hutch.” And he figured out how to squeeze money from wheat like nobody had done before.
Picture this. A 30-year-old guy from Massachusetts moves to Chicago with no connections and no fortune. Within a few decades, he becomes the most feared trader on the floor of the Chicago Board of Trade. They called him “Old Hutch.” And he figured out how to squeeze money from wheat like nobody had done before.
You know what is funny about the California Gold Rush? The guy who found the gold died broke. The guy who sold shovels became rich. If that does not tell you everything about how money works, I do not know what does.
You know what is funny about the California Gold Rush? The guy who found the gold died broke. The guy who sold shovels became rich. If that does not tell you everything about how money works, I do not know what does.
If you ever opened a stock trading app, you probably saw those red and green bars on the price chart. They are called candlestick charts. Every trader uses them today. Every finance app shows them. And they were invented by a Japanese rice trader in the 1700s.
If you ever opened a stock trading app, you probably saw those red and green bars on the price chart. They are called candlestick charts. Every trader uses them today. Every finance app shows them. And they were invented by a Japanese rice trader in the 1700s.
Imagine paying a million dollars for three flower bulbs. Not rare diamonds. Not a house. Flowers. That actually happened in the Netherlands in 1637. And then the whole thing collapsed in a single week.
Imagine paying a million dollars for three flower bulbs. Not rare diamonds. Not a house. Flowers. That actually happened in the Netherlands in 1637. And then the whole thing collapsed in a single week.
Here is a question that bothers me. We have thousands of years of recorded history. We have examples of every possible financial mistake. We have libraries full of books about market crashes. And yet people keep doing the same thing over and over.
Here is a question that bothers me. We have thousands of years of recorded history. We have examples of every possible financial mistake. We have libraries full of books about market crashes. And yet people keep doing the same thing over and over.
I just finished reading “From Tulips to Bitcoins” by Torsten Dennin, and I have to say - this book is a wild ride through 400 years of people losing (and making) fortunes on commodities and crypto.
I just finished reading “From Tulips to Bitcoins” by Torsten Dennin, and I have to say - this book is a wild ride through 400 years of people losing (and making) fortunes on commodities and crypto.
This is the final post in my series retelling Diary of a Very Bad Year. Here’s the epilogue and my closing thoughts.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter IX, Part 2 - the final interview.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter IX, Part 1. The chapter was too long for one post so I split it in two.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter VIII.
It’s July 2, 2009. The Dow sits at 8,280. Unemployment is at 9.5%. And HFM is doing something he hasn’t done in a decade. He’s going on vacation. A real one.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter VII.
It’s May 2009. The Dow is at 8,504. Unemployment is 9.4 percent. Over 342,000 homes got foreclosed that month. But the worst of the panic? That part seems to be over.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter VI - the start of Part 3: Aftermath.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter V.
It’s January 16, 2009. The Dow is at 8,281. Unemployment is 7.6 percent. Over 300,000 foreclosures this month. And HFM just spent his New Year’s Eve chasing bank traders on ski slopes to get year-end prices for his portfolio. Welcome to year-end closing on Wall Street.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter IV - the start of Part 2: The Collapse.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter III.
It’s September 4, 2008. The Dow is at 11,188. Unemployment just hit 6.2 percent. Over 300,000 foreclosures this month. And HFM is back in his midtown office, looking out the window at the same city. But things are worse now.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter II.
Six months have passed since the first interview. It’s March 26, 2008. The Dow is at 12,422. Unemployment is 5.1%. And Bear Stearns just got bought for pocket change.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Chapter I.
Before the interview starts, the book gives you context on how we got here. And it’s a story about cheap money and bad decisions stacking on top of each other.
This is part of my series retelling Diary of a Very Bad Year. Today we’re covering Keith Gessen’s introduction.
Keith Gessen got introduced to the anonymous hedge fund manager (HFM) in late 2006. Someone called HFM a “financial genius” who ran the emerging markets desk at a midtown hedge fund. Gessen was skeptical. He knew plenty of people from college who went into finance, but mostly for the lifestyle. Working hard, drinking beer, watching football.
I just finished reading one of the most interesting books about the 2008 financial crisis. And I want to walk you through it.