Winton on Lesser Known Speculative Manias

Form Winton Group, 21 January 2019:

Down on the Farm
A stable of lesser known speculative manias including Japan's rabbit mania, poultry fever and the ostrich feather boom.

Although big generalised manias in financial instruments tend to receive the most press coverage, history is rife with speculative frenzies in specific agricultural commodities which, despite their smaller scale, have been just as ruinous for those involved. This section rounds up several such examples, ranging from the Merino mania of 1809–10 to the ostrich feather bubble of the late 19th and early 20th centuries.

Sheep Thrills
From 1809 to mid-1810, American farmer-speculators descended upon imported Spanish Merino sheep with lupine ferocity. Spanish Merinos were renowned as the finest wool sheep in the world, certainly far superior to the rather scraggy colonial breed, and were much in demand when America began manufacturing its own cloth.
At the height of the mania, some farmers sold their entire annual harvest to buy a single Merino, and a lamb that had been worth $100 in 1807 might sell for $1,000. In one Delaware county, Merinos were prized so highly that a tax was levied on every dog, to compensate farmers for sheep which had been killed by dogs. Legislation also stipulated that ‘dogs shall not enter the sheep walks, nor shall sheep enter the dog kennels. In either case, the invader shall be repelled by force of arms. Let them bite the dust.'

The bubble eventually burst in autumn 1810 when the chaos accompanying the Peninsular War in Spain resulted in uncontrolled exports of Merinos. Prices came crashing down – one man who had repeatedly refused $1,000 for his buck ended up selling it for $12. ‘Entire flocks of the finest Merino sheep’, wrote an observer, ‘were devoted to the knife, for no other reason but that, contrary to the wish and expectation of the owner, they would persist in eating!’

One speculator expressed his reversal of fortunes in verse:

When first Merino’s bless’d our land
Thro’ Humphreys’ patriotic hand,
Methought I’d be a patriot too
And buy a ram Merino true;

One hundred eagles was the price,
I paid the shiners in a trice;
I’ll risque my fame and fortune too,
Quoth I, on what a ram can do.

Scarce did my hobby ’gin to thrive,
’Ere thousand Spanish rams arrive,
And what I dream’d not of before,
My ram turned out to be a bore.

Mulberry Madness

‘Nature has never produced a more convincing demonstration of the triumph of life over death than these shabby, down-at-the-heel, despised old trees’, somebody once wrote of the mulberry tree. Yet at one stage speculators could not keep their hands off its wart-ridden skin, and were willing to pay fortunes for a single stump.

Mulberry trees are the natural habitat of silkworms and when several US states began subsidising their silk producers in 1832, the tree came into high demand. Huge plantations containing hundreds of trees sprang up all over the country.

By 1838, however, it was clear that the massive premiums being paid for the trees could in no way be justified by the underlying demand and the mulberry mania came crashing down. One contemporary wrote that the mulberry speculation had ‘fallen suddenly like a tremendous Colossus, and it now lies sprawling with a good many under it who are crushed by its fall.’...

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