The Alpaca Bubble Has Burst

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The alpaca bubble has burst

Alpaca (click for larger image)

A news item on NPR’s Morning Edition caught my attention. Apparently the alpaca bubble has burst. Alpacas are, of course, one of the two animals most often mistaken for llamas. (The other is the ostrich.)

According to NPR, at one point alpacas were selling for “tens of thousands of dollars” per animal. A recent ad on craigslist offered 30 of them for $3,000. Now that’s a bubble! Puts the housing bubble to shame.

This, of course, brings to mind the first documented bubble: the Dutch tulip bubble in 1630.  Wikipedia notes dryly that, “The lack of consistently recorded price data from the 1630s makes the extent of the tulip mania difficult to estimate.”  Wikipedia is also the source for this graph showing tulip prices during the bubble.

A standardized price index for tulip bulb contracts, created by Earl Thompson. [1] Thompson had no price data between February 9 and May 1, thus the shape of the decline is unknown. The tulip market is known, however, to have collapsed abruptly in February.

Tulip Prices

Tulip Prices (click for larger image)

Comparing the two bubbles, alpaca prices declined to 0.01 of the peak price.  Tulips declined to 0.05 of the peak price (approximately).  If any of these numbers can be believed, the alpaca bubbles was the real thing.

[1] Thompson, Earl (2007), “The tulipmania: Fact or artifact?” (PDF), Public Choice 130 (1–2): 99–114, doi:10.1007/s11127-006-9074-4

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.