BOOK REVIEW BY JAMES P. PROUT
From Tulips to Bitcoins:
A History of Fortunes Made
and Lost in Commodity Markets
By Torsten Dennin
River Grove Books, 2019
317 pages with glossary,
notes and references
$19.95
There is a long path between the farm
field and the grocery, between the iron
mine and the auto showroom, between the
oil rig and the gas tank. Are consumers
turning off to orange juice? Does the world
have enough lithium to meet the rapid
growth in battery production? What will
e-mobility do to markets for fossil fuels?
How will the growing Chinese appetite for
meat affect animal feedstock demand? And
so on. Welcome to the multi-trillion dollar
global commodities markets.
For centuries, commodity market play-
ers have sought to make money by spot-
ting imbalances or inefficiencies on the
path between production and consump-
tion. Not enough wheat, too much cot-
ton, new discoveries of gold, shortages in
rare earth materials. Most times the bets
on commodity pricing play a positive
role. They act to “correct” over- or under-
supply. Like any market, however, there
are times when things get out of hand. A
certain madness takes over. Or someone
tries to manipulate the prices. Or lie about
new supply. And the commodities mar-
kets are particularly fascinating because
they deal in actual goods—not inventions
like stocks or bonds—but stuff like rice,
wheat, cotton, pork bellies and soy beans.
Into this mix comes From Tulips to Bit-
coins: A History of Fortunes Made and Lost
in Commodity Markets, by Dr. Torsten
Dennin, a business professor and com-
modities fund executive. It is a very broad
treatment of the commodities markets, with
each chapter dealing in a how a particular
commodity market moved at a point in
time, and who was responsible for it. There
are stops and sidebars in each chapter, giv-
ing additional background on the commod-
ity or the personalities.
While there were commodity markets
in ancient times, Dennin begins his com-
modities tour in 1637. Holland was rich,
stable and sophisticated. Tulips became a
measure of a person’s wealth and status.
But there weren’t enough tulips to meet
demand, and thus was born a mania. Mid-
dlemen, seeking to grab the future market,
began valuing bulbs, and investors raced
to get into the market as prices skyrock-
eted. At one point, three bulbs would get
you a decent townhouse in Amsterdam.
In the end, someone was left with a large
supply of bulbs nobody wanted.
We then move to Japan in 1750, where
Homma Munehisa, a rice trader using his-
torical pricing data, essentially becomes the
market for rice. Over several trading days,
he buys all he can. When news hits of a poor
rice harvest, prices skyrocket and Munehisa
makes a fortune. His knowledge of market
data would be his edge. But as we learn later,
superior data alone is not always enough.
In the 19th century, consumer markets
open up and industrialization speeds. Com-
modity demand broadens. The markets for
wheat, oil, gold, etc. all go national, and
34 FINANCIAL HISTORY | Fall 2019 | www.MoAF.org
then global. And where money changes
hands, financial markets are not far away.
Exchanges—The Chicago Board of Trade,
The New York Mercantile Exchange, The
Baltic Exchange, etc.—are established deal-
ing in futures for crops, metals, oil and
distillates, and maritime freight.
As these exchanges grow, the commod-
ities trading business opens up. One need
not own a pound or gallon or warehouse of
anything in order to bet big. We meet the
Hunt Brothers (silver), Yasuo Hamanaka
(copper), Brian Hunter (natural gas) and
a host of other characters who placed
market moving wagers on commodity
pricing. Sometimes they get it right, other
times they don’t, causing huge losses for
their financial backers. We are reminded
that natural disasters—droughts, floods,
hurricanes, tornados, etc.—can upend the
best pricing data.
Dr. Dennin’s book is a good introduc-
tion to the history of commodities. The
writing is conversational, with plenty of
colorful factoids. (Rare earth minerals
aren’t that rare! Contango is not a Latin
dance step!) The organization and presen-
tation could have been improved. There
is a precis at the open of every chapter,
then highlights and then key takeaways.
No need, when the chapters are just pages
long. Also, some of the stories could have
used more depth.
Commodities markets are always look-
ing for the next big thing or swing. The
book’s last and longest chapter is on
crypto-currencies. The value of bitcoins
and other “new” cyber-currencies have
seesawed since their introduction. Billions
have already been made and lost. Are they
a real thing, with real value? Or will some-
one be left with a big supply of 21st century
tulip bulbs? Read Dr. Dennin’s book to
find out more.
James P. Prout is a lawyer with over 30
years of capital market experience. He
now is a consultant to some of the world’s
biggest corporations. He can be reached
at [email protected].