Wednesday, January 19, 2022

Optional: Financial Trivia In "Trading Places"

Trading Places is a comedy film from the 80's. Funny, sometimes offensive even back then, and in parts very politically incorrect for 2022.

It's also a movie that professors talk about from time to time because there's a nugget of actual finance/macro at the core of the script. This is the story arc that two greedy old men are going to make a killing on orange juice by stealing the annual report from the Department of Agriculture and using it to set up a financial position that will improve when the news becomes public. The good guys feed them a false report indicating that the orange harvest will be bad, and the brothers buy lots of futures contracts for the delivery of orange juice at the current price (which is low because the news hasn't hit yet). When the true news hits, the brothers are in the totally wrong position, the price of orange juice falls instead of rising, and they lose their fortunes.

As far as buddy comedy movies go ... this is certainly the most financially complex plot ever attempted by Hollywood.

That report is actually a real thing! And it was in the news last week, because it predicted the worst orange harvest in about 75 years, and higher orange juice prices for the rest of the year.

P.S. Here's one more bit of trivia. Somehow, in Italy, a dubbed version of Trading Places has become a fixture of the season as the goofy rerun that families watch together every year on Christmas Eve.

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