dumb money /dum muh-nee/
Saturday August 8, 2026
Someone asked me what I thought about a podcast this morning. So I looked it up and got as far as teaser and shook my head. Which led to me explaining quite a lot of market history to much somnolence.
Prior to May 1, 1975, retail investors, for all intents and purposes, didn’t exist. “Trading” didn’t exist as we know it today. Before “May Day” brokers followed the same rules they had followed since the Buttonwood Agreement in 1772 (typo). On top of each trade a 1-2% commission was applied. And, if a broker did not buy a round lot of 100 shares rulers came out and knuckles were whacked. Today, you pay no commission. Imagine if you had to pay $6/share to buy and sell Tesla (NASDAQ:$TSLA.)
If you were not a professional and wanted exposure to the market most likely you either bought into a Mutual Fund or had a payroll deduction plan.
Though the latter were not formalized until 1974 they existed since the 1920s. Now, stock is given away to offset decreased compensation as stock options. Back then (prior to 2000 or so) you were paid well and could chose to buy company stock at a discount.
Basically, if you worked for Sears Roebuck you could buy company stock out of every pay period. These plans and Mutual Funds would gather together the new capital and make purchases at a regular time. Usually, Wednesday on market close.
Always on market close.
The first modern Mutual Fund was created in 1924 but they have been around for hundreds of years in some form.
A professional at this point (1920-1970) either sat behind a desk with numerous hardline phones on it or ran around a “pit” yelling at other people and making bizarre hand gestures. The guy behind the desk would stare all day at either a piece of paper or a wall of glass where prices were marked. People look for patterns. Hallucinate them sometimes.
A sudden, reoccurring spike in volume and price will eventually get noticed eventually. Even without computers. And there weren’t computers back then. Professional traders figured out which securities moved because of Mutual Funds and payroll plans and would front-run this “dumb money.”
That is where the phrase comes from. It has nothing to do Wall Street’s disrespect for your intelligence. It was first written down in the Winter 1964 issue of the Columbia Journalism Review but it had been around before then.
“Smart money” is money that tries to find efficient entries and exits. “Dumb money” just buys at 3:55pm on Wednesday. Really, lazy money is a better moniker.
There is this prevailing idea that Wall Street wants to take your money.
It doesn’t. Well it does. But, not in the way anti-establishment podcasters advertise.
Wall Street makes money by charging you fees - not from liquidating you. For example, Morgan Stanley wants you to run 4x leverage because it collects a premium to lend you money. The bank wants you to have as much money as possible so that you borrow more and those fees go up. The bank will give you perks too if you use all that margin. They will ignore you if you don’t.
The capital market system from the Federal Reserve to Robinhood exists to multiply capital efficiently so that Wall Street can skim a little off the top. Rentech wants there to be as much money flowing in markets too. So that it can skim just a little of each trade.
No professional is rooting against you.
POD shops aren’t fighting against you. They are fighting against each other.
—AJ