Hollywood screenwriters often look to real-life trends for inspiration. But Money writer George Mannes says that when it comes to stories about the financial world, Hollywood is particularly slow to react. So slow, that seeing a financial trend on a screen near you is a sure sign that it’s totally over.
BOB GARFIELD: This is On the Media. I'm Bob Garfield.
MIKE PESCA: And I'm Mike Pesca. In 1958, Business Week assured its readers that, quote, "with over 50 foreign cars already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the U.S. market." Whoops!
There's some joy in recognizing when the supposed business experts get it so wrong. The point is that opinion-making business writers are reactive, not predictive. Turns out pop culture is even more reactive than the business rags. As a result, movies and TV shows wind up being an excellent contrary indicator to where the market is going.
George Mannes noticed this trend in the January issue of Money magazine. George, welcome to On the Media.
GEORGE MANNES: Thanks for having me.
MIKE PESCA: So what are your data points, as I think they say on Wall Street?
GEORGE MANNES: The classic data point is the movie Wall Street, which they started production on in early 1987, just in time for the market to crash in October, 1987.
MIKE PESCA: So after the movie came out following the stock market crash, did anyone at that point put two and two together, or did it take a couple more things for a guy like you to notice, wait a minute, there might be a trend here?
GEORGE MANNES: Well, I have to say I didn't really think too much of it myself until 2000, when all of a sudden you had two TV shows going on the air – one called The Street, the other called Bull - which were all about young and sexy people working on Wall Street. And that struck me as a contrary indicator.
MIKE PESCA: And there are a couple of famous things, I think, that people on Wall Street say. By the time it gets to X, we know the trend has crested.
GEORGE MANNES: Well, you mentioned Business Week. A classic cover that they had was in August, 1979 – The Death of Equities. And it basically speculated that the era of Wall Street was over, and that was exactly the worst time to agree with the cover of Business Week and get all your money out of stocks and put it into something else.
MIKE PESCA: And after 1979 was something that's come to be known as the go-go '80s, the exact period that Oliver Stone looked at and said, oh, my God, we got to do a Wall Street movie.
GEORGE MANNES: Right. I looked up the statistics. The S&P for the decade prior to that story rose about .5 percent annually. Ten years after that article came out, annual price appreciation, 12 percent.
MIKE PESCA: And so you not only have to wonder why Business Week was predicting the future would be bleak, but what took them nine years to say – I mean, if they had written the story in 1974 saying get out of equities, at least for five years they would have been right.
GEORGE MANNES: I think it's the fear of every reporter that you're calling the top or you're calling the bottom in the wrong way; that at the moment you say it's over, it's actually just begun.
MIKE PESCA: Another famous stock market-type movie – I think it was actually a commodities movie – was Trading Places, with Eddie Murphy and Dan Akroyd. Does that fit into the trend?
GEORGE MANNES: I think it does. Two characters in that movie are the Duke brothers, and they're loosely based on the Hunt brothers, who in real life, around 1980, tried to corner the silver market. And the price of silver went up huge amounts, and then it collapsed and they went bankrupt.
But the interesting thing, when Trading Places came out in 1983, if you looked at that and you thought, hmm, maybe I could, you know, try and make some money in commodities – well, I tried researching this. I can't get you prices for the commodity that they traded in that movie, which was frozen concentrated orange juice. But I did look at silver prices, and if you had invested in silver in 1983, you would have had a very unhappy 20 years.
MIKE PESCA: So, so far we've been talking about Wall Street, but when pop culture takes on other parts of American money society, how does it do?
GEORGE MANNES: Well, not so well. One thing I noticed also was that in the summer of 2005, within almost days of each other you had two shows going onto cable TV, two reality shows. One was called Flip This House. The other one was called Flip That House. And the summer of 2005 was a very dangerous time to start flipping houses.
MIKE PESCA: Do you think I should try to investigate what business-related movies Paramount has in the pipeline and short that sector?
GEORGE MANNES: I think people at hedge funds should be sweating, because the guy who created the TV series Entourage, about a Hollywood star and his buddies, announced that he was going to be making another series, which was about a guy who runs a hedge fund and his buddies.
MIKE PESCA: Now, sometimes the phrase "smart money," the people who invest the smart money in Wall Street, see something – maybe it's someone who would represent dumb money - being interested in investing, and the smart money says, uh-oh, if this guy's into it, I've got something to worry about.
In your case, you're saying if Hollywood's into it, maybe the rest of us have something to worry about. But there's, I think, a famous anecdote with Joe Kennedy concerning this phenomenon.
GEORGE MANNES: Yeah. The famous anecdote, semi-apocryphal, is that he got out of the market in 1929 before the crash. And what prompted him to get out of the market was that his shoeshine boy was trying to give him stock tips. And he thought to himself, if everybody in the whole world thinks that it's no problem to make money out of the stock market, something terrible is going to happen.
MIKE PESCA: And so maybe the shoeshine boy of the '20s is the TV producer of the '00s.
GEORGE MANNES: Sounds like a reasonable conclusion.
MIKE PESCA: Reasonable enough. George Mannes is senior writer for Money magazine. Thanks very much, George.