1. There will always be some "dumb money" in the market. Bag-holders can change over time. Are the folks jumping into factor investing, passive ETFs and AI strategies "smart money" closing off arbitrages and exploiting/eroding known edges, or "dumb money" herding into fads, chasing performance, and ceasing to compete for some edges (e.g. old fashioned stockpicking) in favor of lower-effort strategies?
2. There will always be some smart money that's willing to lose. Producers and consumers of ags and metals trade in futures to offset price risk, not to bet on direction. Likewise, equity investors use options and futures to hedge various risks. These activities may cost them money in the end but it's no different than buying insurance.
3. As long as some players are trading with much more capital (hundreds or thousands of times what you or I have) and need to move this capital in and out of positions, I don't see how they can avoid creating trends and the typical price action footprints and patterns, which small fry can observe and follow. They can use algos to break up and randomize their orders, or use dark pools etc. but there's a limit to how effective these measures can be, and how much effort it makes sense to invest in them. At the end of the day and in principle, you or I can always "trade inside" someone moving hundreds of millions or billions. For whales, it's a cost that must be paid just as you or I have to pay the spread. The flows involved are immense and you only need to extract a few hundred K per year.
