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In 1955, an onion farmer from New York made a fortune cornering the market for onions in the United States.
By the time he was done, there were literally onions flowing through the streets.
Who's up for a story?
By the time he was done, there were literally onions flowing through the streets.
Who's up for a story?
1/ Vince Kosuga fancied himself as more than just your average onion farmer.
He had a productive 5,000-acre onion farm in Pine Island, NY.
But it was his side hustle, trading in futures markets, that would make him (in)famous.
He had a productive 5,000-acre onion farm in Pine Island, NY.
But it was his side hustle, trading in futures markets, that would make him (in)famous.
2/ Futures markets offered a way for farmers to hedge their risk. They could execute a contract to sell their crop at a fixed price at a later date, removing the risk of price fluctuations.
But Vince was more interested in using futures for speculation.
He wanted to get rich!
But Vince was more interested in using futures for speculation.
He wanted to get rich!
3/ After some unsuccessful episodes trading in wheat futures, Vince Kosuga had a (seemingly obvious) revelation.
He knew all there was to know about onions, so he should be trading in onions!
He would pull off the greatest onion trade of all time.
He knew all there was to know about onions, so he should be trading in onions!
He would pull off the greatest onion trade of all time.
4/ The idea was simple. He would corner the entire US market for onions.
Executing against it was not. To pull it off, he would need to own the vast majority of all harvested or in-ground onions in the country.
But Vince thought big.
He and his partners began buying onions.
Executing against it was not. To pull it off, he would need to own the vast majority of all harvested or in-ground onions in the country.
But Vince thought big.
He and his partners began buying onions.
5/ They built secret warehouses across the country, buying and storing millions of onions.
But this only covered harvested onions, which was just one piece of the market.
So they began buying up futures contracts, essentially taking ownership of all future US onion harvests.
But this only covered harvested onions, which was just one piece of the market.
So they began buying up futures contracts, essentially taking ownership of all future US onion harvests.
6/ By the fall of 1955, Vince Kosuga had a stranglehold on the entire market for onions in the United States.
Most importantly, no one knew it.
With this control, Vince Kosuga could move onion prices as he pleased.
Now, it was time to get rich.
Most importantly, no one knew it.
With this control, Vince Kosuga could move onion prices as he pleased.
Now, it was time to get rich.
7/ He called a meeting with the VIPs of the onion market, essentially telling them, "I own you."
He could spike or collapse the market on a whim. They had to comply. They agreed to purchase 9 million lbs of onions at a price he liked.
But Vince had one more trick up his sleeve.
He could spike or collapse the market on a whim. They had to comply. They agreed to purchase 9 million lbs of onions at a price he liked.
But Vince had one more trick up his sleeve.
8/ He flipped and began making secret bets against the price of onions, shorting futures.
By spring 1956, he had built a massive short position against onion prices.
The trap was set. He emptied the onion warehouses, loaded up trucks, and flooded the entire market with onions.
By spring 1956, he had built a massive short position against onion prices.
The trap was set. He emptied the onion warehouses, loaded up trucks, and flooded the entire market with onions.
9/ With massive truckloads of onions arriving at the futures exchange all at once, the price of onions began to plummet.
No one wanted to get stuck with all of those onions.
The trucks dumped their loads. There were literally onions flowing through the streets.
No one wanted to get stuck with all of those onions.
The trucks dumped their loads. There were literally onions flowing through the streets.
10/ The price of onions collapsed, falling to 10 cents per 50lb bag, less than the price of the plastic bag they were in!
Vince Kosuga cleaned up.
His big short on the onion market had netted him $8.5 million, the equivalent of $82 million today!
Not bad for an onion farmer.
Vince Kosuga cleaned up.
His big short on the onion market had netted him $8.5 million, the equivalent of $82 million today!
Not bad for an onion farmer.
11/ The outcry against Vince Kosuga was massive.
A lot of people had been hurt by his market manipulation, but it was unclear that he had done anything illegal.
He had his trading license suspended for 10 months and was forced to pay a small fine.
But his legacy would live on.
A lot of people had been hurt by his market manipulation, but it was unclear that he had done anything illegal.
He had his trading license suspended for 10 months and was forced to pay a small fine.
But his legacy would live on.
12/ In 1958, President Eisenhower would sign the Onion Futures Act, which banned the trading of futures in the onion market.
To this day, onions are the only agricultural product specifically outlawed in this manner.
And so, the legend of Vince Kosuga's onion coup lives on!
To this day, onions are the only agricultural product specifically outlawed in this manner.
And so, the legend of Vince Kosuga's onion coup lives on!
13/ For more on this amazing story, I'd encourage you to check out the @planetmoney episode that covered it below. https://www.npr.org/sections/money/2015/10/14/448718171/episode-657-the-tale-of-the-onion-king
14/ And for more educational threads on money, finance, and economics, check out my meta-thread below. Stay tuned for more! https://twitter.com/SahilBloom/status/1284583099775324161
