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3 Bubbles That Burst

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Like many young people, I'm gradually coming to terms with the sad fact that I won't be able to retire at 25 with the fabulous wealth I accumulated through shrewd sports card speculation in the late 80s and early 90s. While it's disappointing to learn that one can't trade his stack of Harold Miner rookie cards for a new car, there's some small solace in knowing that you weren't the only person to be caught in a bubble. (At least be thankful that you had baseball cards and not, say, Pets.com stock.) Let's have a look at three other popped bubbles:

Tulipmania

Although tulips are inextricably linked to the Netherlands in most peoples' brains, the flowers didn't actually start growing in the area until the late 16th century, when bulbs were imported from the Ottoman Empire. When the plants finally found soil, though, they quickly became immensely popular. Every Dutch aristocrat longed for a garden full of the beautiful, rare spring flowers, and tulip bulbs were suddenly the Netherlands' hottest commodity. Even better, the country's booming trade with the New World had given the potential buyers purses full of disposable income, so there was nothing to keep a boom from taking off.

By 1623, the market for tulip bulbs was starting to warm up, and by 1636, it was overheating. Although the surviving evidence is largely anecdotal, there are stories of collectors being offered the equivalent of year's pay for a single bulb"¦and turning down the offer. Speculators traded their houses and livestock for bulbs they thought they could flip for a large profit, and professional tulip traders peddled their wares throughout the country. Enterprising traders were even offering what amounted to futures contracts for bulbs they intended to plant at later date; this practice was decried as the "tulip wind trade" because the buyers rarely got any sort of tangible return.

The deathblow for the craze didn't come until February 1637 when a group of traders gathered in Haarlem to auction their bulbs. No one seemed interested in buying the bulbs, though, and the traders began dumping their bulbs at reduced prices. The public, though, had already begun to panic and wanted no part of the tulip trade. Certain varieties lost 99% of their value in a matter of days, and speculators faced financial ruin.

Some modern academics have questioned whether these tales of the tulipmania's scope are a bit exaggerated, but the tale is still recounted as a cautionary tale after a speculative bubble bursts. At the end of the day, wouldn't you rather have a garden full of tulips than a portfolio full of dot-com stocks?

The South Sea Company

The South Sea Company was established in 1711 as the exclusive English trading partner with Spain's holdings in South America. As the plan went, the treaty ending the War of Spanish Succession, which was being fought at the time, would grant the company extensive trading rights with these colonies. The South Sea Company could provide the colonies with slaves, and an even more rewarding racket could be built around trading English cloths and textiles to the natives for precious metals and jewels.

However, when the war finally wound up with the Treaty of Utrecht in 1713, the trading rights weren't as extensive as the South Sea Company's shareholders had hoped. The company could only send one general-commerce ship to South America each year, and contentious relations with Spain meant that these voyages were vulnerable to harassment by the Spanish navy. Although the South Sea Company was fairly efficient as a slave trader, it didn't seem to have the huge long-term potential that its directors claimed.

The company continued to hawks its potentially lucrative trade in the Americas as a great business opportunity, though. The South Sea Company began taking on England's war debts and converting them into equity in the company. For the holders of these debts, converting them into South Sea Company stock seemed like a great way to get in on an up-and-coming commercial enterprise, while the company itself gained a steady revenue stream as the country paid off war debts it now held. In 1720, Parliament agreed to let the company take over an even larger share of the country's debt, and the company's stock went through the roof. Stock prices rose from 128 pounds in January to over a 1,000 pounds in August, and investors were euphoric.

There was a slight hitch, though; this whole endeavor was something of a pyramid scheme. The company was trading its equity for the government debt, but the underlying trading business with South America was fundamentally weak. As investors gradually realized that the South Sea Company had very little in the way of actual products or services to offer, the stock price collapsed. In short, all of this government debt had been converted into stock in a company with comparatively meager prospects for future earnings. By September 1720, the price had dropped all the way back down to 150 pounds a share and continued falling.

This precipitous drop undercut the entire British stock market, and investors wanted answers. The ensuing investigation showed that the South Sea Company had been allowed to get away with such shaky business practices in part because it had bribed officials with cash and free stock. Not everyone lost out on the transaction, though; Robert Walpole, a longtime critic of the company and reformer following the collapse of the South Sea Bubble, parlayed his role in straightening this mess out into the role of the first de factor prime minister.

Beanie Babies

Nothing says "Destined to hold its value indefinitely" quite like a teddy bear stuffed with plastic pellets. Or so collectors thought in the late 1990s when Beanie Babies, the plush stuffed animal brainchild of Ty Inc. founder Ty Warner, were sweeping the national collecting market.

What made these little stuffed critters a billion-dollar industry that sucked in both children and scores of adults? A number of factors contributed to the beanbags' meteoric rise as collectibles. Ty's brass originally envisioned the product line as a set of inexpensive, high quality stuffed animals that kids could afford. Prices were generally around $5, low enough that kids could get the whole set of Beanies. Ty eschewed normal distribution chains for stuffed animals; the company avoided big chain discount retailers in favor of smaller gift-shop type outlets, a decision that made the product seem classier and rare.

Moreover, the Beanie Babies themselves received constant tweaks. Colors or names changed, their trademark ear tags would be subtly redesigned, and, most importantly, Ty retired certain models, further spiking collector demand.

As you may remember, the secondary market for the toys absolutely exploded. By 1996, Beanies had graduated from kids' fad to full-blown collecting craze. It seemed that almost any Beanie could conceivably become the next hot limited edition, so collectors snapped them up as soon as they hit store shelves. A royal blue Peanut the Elephant, which was only produced in limited quantities for a short time in 1995, could sell for over $3000. Other individual Beanies, like a wingless Quackers the Duck, fetched prices well over $1,000 apiece. The good times were never going to stop rolling, and Beanie Babies seemed poised to replace the less-adorable dollar as the nation's currency.

That is, until the good times promptly stopped rolling. By 1999, the craze had started to lose its steam. Most of the newer toys hadn't appreciated like their predecessors, possibly because the market was so flooded with bean-filled animals. (Ty's revenues had ballooned to over $1 billion, which represents an awful lot of stuffed bears flowing into collectors' hands.) In 1999, Ty announced it was completely retiring the entire Beanie line, and although a fan outcry convinced the company to revive the line in 2000, the hysteria was dead.

Certain rare Beanies still have significant value, but they're far below their heady late-90s peaks. Peanut the Elephant seems to be bravely soldiering on; two examples of his royal blue variant sold for $1100 and $2000 on eBay last week. These examples are exceptions, though; the great bulk of speculative Beanie purchases seem to be worth a few bucks at most.

Ethan Trex grew up idolizing Vince Coleman, and he kind of still does. Ethan co-writes Straight Cash, Homey, the Internet's undisputed top source for pictures of people in Ryan Leaf jerseys.

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The Average Age When People Become Millionaires
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If you start investing in a retirement plan early in your career, you don’t have to bring home an insanely high salary to become a millionaire—eventually. (Thank you, compound interest.) The average age when bank accounts reach the seven-figure mark is in a person’s late 50s, according to Business Insider and The New York Times.

The average age when women become millionaires is slightly lower than the average age for men, despite the persistent wage gap in the workforce. For women, the average age is 58.5 years old, while for men, the age is 59.3. Or at least that’s the case for people with Fidelity 401(k) retirement plans, according to the investment firm’s research. That means that millionaires are reaching that milestone several years before the usual retirement age of 66 to 67 years old.

Nevertheless, how much money you need to retire comfortably varies based on your current salary, your expenses, and the number of years you’ll be living off your nest egg. Many financial advisers say you should aim for $1 million or more, which will hopefully last you through a 30-year retirement.

Reaching that million-dollar mark may seem like a long shot, but Fidelity has found that more and more of its savings plan customers have become millionaires in recent years. One of the firm’s recent analyses found that 133,000 of its customers had $1 million or more in their accounts in 2017, compared to 89,000 in 2016. (The company oversees 401(k) accounts for around 15 million people, so that’s not exactly a huge portion of its customers, though.) Between 2005 and 2017, the number of women who had $1 million in their retirement accounts doubled.

Fidelity attributes this increase to people putting more money away for retirement than in past decades. On average, the firm’s customers making less than $150,000 a year become millionaires by saving around 22 to 25 percent of their salaries in retirement funds, including employer matches. That may seem like a lot if you aren’t making a six-figure salary, but keep in mind that the earlier you start saving, the more your money grows. Investing just a little money in your 20s is a more effective way to save for retirement than investing a lot of money in your 30s and 40s. So if you want to become a millionaire (and who doesn’t?), now would be a good time to start investing in that 401(k).

[h/t Time]

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How Rich the U.S. Is Compared to the Rest of the World, Visualized
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The U.S. is often called the richest country in the world. But how rich is it, really? A new infographic from How Much, spotted by Digg, explores the average household income across the 36 countries in the Organization for Economic Co-operation and Development (OECD). As you can see in the graphic below, the U.S. is, on average, quite rich compared to most other countries.

The infographic explores finances on two different levels. The size of each bubble corresponds to household wealth: in other words, assets minus debts. That means it takes into account savings, stocks, and other financial assets as well as loans. (It doesn't include property holdings due to a lack of data, so it doesn't encompass the big boost of wealth that comes from say, owning a penthouse overlooking Central Park in New York City.) As you can see, the U.S.'s bubble is a pretty big outlier. On average, U.S. families have a net worth of $176,100, compared to just $128,400 in the second-wealthiest country on the map, Switzerland.

Colored bubbles represent household income and wealth across the OCED
How Much

The colors of the bubbles correspond to "household net adjusted disposable income," as the OECD refers to it, which has to do with the money you bring in each year rather than what you own. That takes into account salary, income from things like stock dividends and rental properties, and government benefits (like Social Security, unemployment, food stamps, or housing subsidies). It also takes into account what each household pays in taxes, providing a snapshot of the take-home pay people actually have available to spend, rather than their pre-tax salary.

The U.S. has relatively high salaries, at $44,000 a year (the top of the scale) in disposable income. Only Switzerland, Luxembourg, and Norway have disposable income levels greater than $35,000. Mexico falls at the bottom of the scale, with average adjusted disposable incomes of less than $15,000. Most of Western Europe falls within the $25,100 to $30,000 range, while income in Eastern Europe, Israel, South Korea, and New Zealand is a little lower.

There could be a lot going on behind this data, though. The U.S. has an increasingly stratified economic system, so while the averages seem fairly high, that's probably because the few billionaires among us are skewing the numbers. The U.S. also doesn't have the social safety net offered by governments in much of the rest of the world, meaning that while we have relatively high salaries and pay lower taxes in some cases, we have to pay for things like healthcare and retirement on our own.

Read more about the OECD numbers here.

[h/t Digg]

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