At the Movies: An Investor's Take on "Dumb Money"
From “Wall Street” to “The Big Short,” there’s been no shortage of Hollywood movies documenting the often fast-paced world of finance and investing. The latest film to join this list, “Dumb Money,” features an A-list cast and a fascinating premise—but does it stack up to scrutiny from a real-world investment professional? We wanted to find out! One member of the Wespath team – senior investment analyst Fred Huang – took to the theater to see if the film offered any valuable insights.
Q: First things first: Did you like the movie? Would you recommend that others check it out?
Fred: I very much enjoyed the movie! It captured the cultural zeitgeist of a time during the height of the COVID pandemic with everyone stuck at home. However, the movie is rated R and contains vulgar/offensive language, so I wouldn’t recommend it to everyone.
Q: What do you remember from the GameStop mania back in 2021, and how well did you feel the movie depicted the drama and intrigue?
Fred: As someone who closely follows the market, I vividly remember the GameStop trading frenzy. It was a byproduct of a larger trend in 2020, where everyone was receiving stimulus checks and many immediately deposited them into their investment accounts. This helped drive markets to record highs, causing huge dislocations between the share price and the fundamental value of the underlying companies.
With GameStop, the effect of the stimulus was magnified by the Reddit channel: “WallStreetBets.” Individual investors and followers of the channel bought the stock en masse, driving the stock price higher. Big hedge funds that bet on the stock to decline lost lots of money. Ultimately, brokers had to step in and restrict the purchase of GameStop stock. This led many individual traders to believe that the system was “rigged” against them.
While much of the dialogue in the film was fictionalized for dramatic effect, the drama and intrigue portrayed in the movie was accurate to what was happening in market at the time.
Q: The best finance movies usually offer some sort of lesson or teaching moment. Did you feel that was the case with “Dumb Money?”
Fred: A common theme in these movies is the plight of the “little guy.” For a moment it seems like the little guy will win, but in the end, nothing really changes. In this case, though, some real-world lessons were learned. Individual investors now feel they can impact markets, despite most market activity coming from large institutional investors . Hedge funds have also begun closely monitoring online trading forums to avoid being the next target. In some ways, there is more uncertainty in the markets today, and the movie depicts one of the reasons why that is. “Dumb Money” also did an excellent job explaining certain market concepts like “short selling” and “options contracts” in ways the average person can understand.
Q: Our own Joe Halwax, Managing Director—Institutional Investment Services, reflected on the GameStop mania shortly after it all played out, noting some underlying market dynamics which added to the frenzy and drawing some connections (or juxtapositions!) to the work we do at Wespath. Did the film add any new perspectives on those themes or our work, in your view?
Fred: The film further reinforces what we already know at Wespath: a long-term disciplined approach to investing can weather short-term dislocations and uncertain markets. Like Joe said, these events tend to have little impact on our approach. If you’re investing for a long-term goal like retirement, you’ll probably see a lot of remarkable events, but you don’t always need to react to them.