Monday, September 18, 2023
Dumb Money
Allow me to demystify the jargon. The financial media classifies investments into two categories—"smart money" and "dumb money." "Smart money" refers to the investments from professional institutional investors such as mutual fund managers, and the "dumb money" refers to investments from average individual investors. Therefore, this film is telling a true story about the individual investors.
The true story in the film is about the "GameStop short squeeze" in 2021, and the film is based on Ben Mezrich's book "The Antisocial Network." GameStop is a store chain that sells video-gaming products. To understand "short squeeze" you need to know the term "short sell" first. A "short sell" means an investor borrows a certain amount of shares of a stock and sells them right the way, betting on that stock's devaluation in the near future, so that when the borrower returns the same amount of shares, he is able to purchase them at a lower price. As a consequence of these transactions, he can make a profit. However, if the bet is off and that stock price goes up instead of down, the borrower loses money on the short sell, which is called a "short squeeze."
The center figure of the "GameStop short squeeze" story is Keith Gill (Paul Dano), an investor from Brockton, Massachusetts and an online streamer on Reddit operating from his basement. He lives with his wife Caroline (Shailene Woodley) and their infant daughter, occasionally visited by his brother Kevin (Pete Davidson) who works for DoorDash.
Like many stores during the pandemic, GameStop is losing millions of dollars. Hedge-fund managers, like Gabe Plotkin (Seth Rogen), Steve Cohen (Vincent D'Onofrio), and Ken Griffin (Nick Offerman), are all betting on GameStop's stock value going down, so they can short sell it to make money.
Against the conventional wisdom, Keith Hill puts all of his savings of $53,000 on GameStop's stock. Then he tells all of his viewers on Reddit about his belief that the GameShop stock is undervalued, and he claims "I like this stock." Well, investors whose investments in the dumb money category follow him and begin to buy GameStop stock. Its price goes higher and higher, and causes the short-selling Wall Street hedge funds to lose billions. The online brokerage Robinhood halts its buying to stop the bleeding, which angers individual investors and triggers a congressional hearing.
In the end, dumb money outranks smart money, at least for Keith, whose $53K investment and his rebellion toward Wall Street make him millions in profits, with the help from a large number of amateur investors.
The film chronicles the event mostly in Keith's domain, in addition to a few other amateur traders such as college students, a store clerk, and a nurse. The storytelling is fairly straightforward once you figure out the few key concepts about investing in the stock market. But the film's pleasant surprise is Pete Davidson who steals the scene as Keith's amusing brother.
Paul Dano's calm, low-key manner as Keith is quite mesmerizing. You wonder how his eccentric online persona as a cat lover draws such a big group of followers. Interestingly, you don't even see any cats in his house. Even though some of these amateur investors made some money by bonding together against Wall Street, you have to wonder if they are dumb for doing that, giving a new meaning to the "dumb money" labeling on their investments.
"Dumb Money" opens on Friday, September 29, 2023.
