92 upvotes, 5 direct replies (showing 5)
If someone could relate all this to the movie Trading Places for me, that would be great. Also, then could you explain the ending to Trading Places.
Comment by Leskanic at 27/01/2021 at 06:50 UTC
112 upvotes, 5 direct replies
Frozen Orange Juice is Gamestop.
The hedge fund managers are the Duke brothers.
WSB is Louis & Billy Ray.
Clarence Beaks is experts analyzing retail trends.
The original/real crop report is the inevitable decline in physical game sales combined with a company that over-expanded its brick-and-mortar locations while commerce massively shifted online.
The fake crop report is memes.
The seat on the stock exchange is, uh, a mod?
I don't really know what happens at the end of Trading Places either. I mostly just wanted to say: "Looking good, WSB!"
Comment by StasRutt at 27/01/2021 at 05:40 UTC
24 upvotes, 2 direct replies
Sorry can only do the TLC interior design show Trading Spaces
Comment by [deleted] at 27/01/2021 at 19:26 UTC
3 upvotes, 0 direct replies
In Trading Places:
The Duke brothers (the bad guys) believe that the price of frozen OJ is going to go way up because the upcoming orange crop will be bad, so they instruct their buyer to purchase as much OJ stock as possible. The other buyers see this and also assume that OJ is going to go up, so they start buying as well, which pushes the price higher and higher.
However, the Dukes were given false information- the orange crop is actually fine. Winthorpe and Valentine (the good guys) know the correct information, so they take advantage of the high prices to short sell OJ, meaning that they are selling borrowed stock they will have to buy back later. They make a buttload of money selling.
Then, the official crop report is announced, alerting everyone on the floor that OJ is not going to be in short supply this year, causing them to realize that the price is not going to go higher. They all start selling in a panic to cut their losses, which drops the price way low. Winthorpe and Valentine buy back their shares at the new low price, and in the end they net millions of dollars. The Dukes, who bought high and then sold low, lose millions of dollars instead.
For the current Gamestop situation:
The basic idea is the same, but the roles are reversed. The "bad guys" are the big companies who expected GME's prices to fall, so they were short-selling at what they thought would be the high price. WSB is the "good guys" who expected the opposite, so they bought instead. WSB ended up being correct- GME's prices rose massively, so the big companies are scrambling to buy back their shorted shares to cut their losses, which drives the price even higher. They sold low and bought high, so they lost massive amounts of money, while WSB gained money by buying low.
Comment by DrSpacecasePhD at 27/01/2021 at 20:17 UTC
2 upvotes, 0 direct replies
I made a write-up on Medium[1] that tries to explain ELI5. Let me know if the paywall blocks you or something or if you have any comments or questions.
1: https://ryanwalraven.medium.com/the-gamestop-investing-saga-explained-c2c956bc725f
Comment by [deleted] at 27/01/2021 at 21:39 UTC
2 upvotes, 0 direct replies
In case you're serious this[1] Planet Money episode does a good job explaining the ending of Trading Places, which is basically all about an Orange Juice futures market.