Opinion | ‘Dumb Money’ and the Meme Stock Phenomenon

The new film “Dumb Money” dramatizes the legitimate story of an unlikely messiah named Roaring Kitty who decides to sink his daily life financial savings into shares of the movie-sport seller GameStop and then praise the inventory to his lovers. So several people invest in GameStop shares that the company’s valuation soars, crushing the positions of specialist hedge funds that had bet versus it. Thus, a band of lovable misfits triumphs around the Wall Avenue body fat cats.

A lot as we loved the movie, we are economists, not film critics. And as practitioners of the dismal science, we be concerned that some viewers will carry on to be influenced to duplicate the heroes’ investment decision tactics, which is about as wise as driving house at 100 miles for each hour after viewing “The Quickly and the Furious.”

You can see our worry in the movie’s title: “Dumb Funds.” That’s Wall Road parlance for unsophisticated particular person traders who make errors that can be exploited. Is it nice to call the actions of daily Joe investors dumb? No. Is it good? Effectively … sure.

We aren’t practically contacting retail traders dumb. What we are declaring is that retail buyers are wise people who sadly behave in dumb, self-harmful techniques. Their actions mirror overconfidence, financial ignorance and a prosperity-reducing love of gambling. Even intelligent individuals like Sir Isaac Newton can make dumb expense conclusions (he dropped revenue in the South Sea bubble).

And in celebrating an unintelligent financial commitment system in a moment when the inventory market was achieving historic heights of stupidity, “Dumb Money” raises an essential concern: Are American financial markets having dumber more than time? Or was this just a momentary lapse?

We did see a prior peak of stock market place dumbness in the 1999-2000 tech

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