A scene midway through Dumb Money, the new movie about the 2020 GameStop stock saga, features Keith Gill, more infamously known as Roaring Kitty, lamenting, “The whole idea of the stock market was if you were smart, and maybe with a little luck, you could make your fortune.” This is but one of the many misguided views on investing and markets that permeate the narrative of the film.
Directed by Craig Gillespie, best known for 2017’s I, Tonya, Dumb Money is framed as a David vs. Goliath clash between middle-class retail investors and moneyed financial institutions.
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Paul Dano (from There Will Be Blood) plays Roaring Kitty. By day, he’s a lowly financial analyst for a Massachusetts insurance firm; in the evening, the downtrodden CFA is a social media streamer, sharing his market insights and musings on Reddit. When he comes across shares of GameStop, a brick-and-mortar retailer specializing in video games, his interest is piqued by the degree to which the stock is being shorted.
Among Dumb Money’s various shortcomings is its reluctance to explain any of the financial jargon it employs liberally throughout the script. Shorting (or short selling) is the act of borrowing a stock to sell it, hoping its price drops so you can buy it back cheaper. However, if the price rises, losses can be limitless, as you must repurchase the stock at the current market rate to return it.
Despite not owning a house and having a family to support, Gill, for reasons only explained by his blithe remark, “I like the stock,” goes against traditional investing dogma and invests most of his net worth into GameStop, encouraging his Reddit audience to do the same. His plan is to orchestrate a short squeeze: rallying enough retail investors to buy GameStop shares, pushing the price higher. This rise would force hedge funds, which had bet against (shorted) the stock, to buy it back to mitigate their losses, further driving up the stock's price.
Weaving together news snippets, TikTok reels, and internet memes, the film recounts the GameStop surge as it transpired through 2020 and 2021. It frames the narrative of the stock and the investors behind its mounting demand as a broader disruption and rebellion against Wall Street and hedge fund managers, accusing them of “rigging the game.”
Though this perspective makes for a more compelling story, it is a myopic and distorted view of investing. Positively portraying young and in-debt college students’ decisions to dump their entire savings solely into GameStop shares, the film ultimately leans further into promoting reckless gambling than informed, responsible investing.
In one scene, a low-income nurse, inspired by Gill’s streams, starts buying GameStop shares and finds herself up half a million dollars. Rather than selling her shares, she buys a business-class flight and books a resort on her credit card. Despite preening about wanting to stick it to Wall Street, most people just wanted to emulate Wall Street and the lavish lifestyle it affords. The film cleverly conveys this disparity, cutting between shots of the fund managers (Seth Rogen and Nick Offerman) in their vast waterfront estates playing tennis on their private courts and middle-class analysts driving dilapidated cars to crummy houses.
The film's pivotal moment centers on Robinhood, a trading platform that faced significant backlash during the GameStop surge when it restricted its users from buying more shares of the stock. While Dumb Money attributes this to underhanded tactics and pressure from hedge funds incurring losses, in reality, it was far less theatrical. Trading platforms such as Robinhood operate in conjunction with clearinghouses, which are financial intermediaries that ensure trades between buyers and sellers are securely executed. Every stock purchase necessitates a corresponding seller. These clearinghouses act as a safety net, ensuring buyers fulfill their payment obligations.
However, the GameStop frenzy amplified the inherent risks of trading due to the stock's extreme volatility. To mitigate potential defaults, clearinghouses increased their collateral requirements. Caught off guard, Robinhood grappled with a liquidity crisis, needing to deposit substantially more funds to cover its trades but lacking the immediate liquidity to do so. This financial bind compelled Robinhood to limit GameStop trading. It was a failing of the trading platform, but a malicious manipulation of the market, it was not.
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Dumb Money taps into a populist sentiment, painting a vivid picture of individual aspirations and acrimonies. It portrays hedge fund managers as antagonists and market manipulators. But it's crucial to consider the overarching financial landscape. It is broadly accepted that at any given time, stock prices fully reflect all available information.
In an efficient market, no investor, not even the deftest hedge fund manager, possesses an inherent advantage or special insight that guarantees consistent above-average returns. While hedge funds and their managers do have access to myriad resources, sophisticated tools, and extensive research, there is no guarantee to outperform the market. In fact, according to the S&P Indices Versus Active (SPIVA) Scorecard, a significant majority of actively managed funds often struggle to beat market returns over extended periods. Beating the market, apparently, often really is just dumb money.
Harry Khachatrian (@Harry1T6) is a film critic for the Washington Examiner's Beltway Confidential blog and a computer engineer in Toronto, pursuing his MBA.