Dumb Money exposes the baffling allure of bad investment advice

THE new movie Dumb Money dramatises the true story of an unlikely messiah named Roaring Kitty, who decides to sink his life savings into shares of the video-game seller GameStop and then praise the stock to his fans. So many people buy GameStop shares that the company’s valuation soars, crushing the positions of professional hedge funds that had bet against it. Thus, a band of lovable misfits triumphs over the Wall Street fat cats.

Much as we enjoyed the movie, we are economists, not movie critics. And as practitioners of the dismal science, we worry that some viewers will continue to be inspired to copy the heroes’ investment strategies, which is about as smart as driving home at 100 miles per hour after seeing The Fast and the Furious.

You can see our worry in the movie’s title: Dumb Money. That’s Wall Street parlance for unsophisticated individual investors who make mistakes that can be exploited. Is it nice to call the actions of everyday Joe investors dumb? No. Is it fair? Well… yes.