U.S. Congress looking into Reddit frenzy
Charlie Munger, the long-time business partner of Warren Buffett, said Robinhood Markets and other brokerages that attract inexperienced retail investors are essentially offering “gambling services” and have found a “dirty way” to make money.
“I think you should try and make your money in this world by selling other people things that are good for them, and if you’re selling them gambling services -- where you make profits off the top, like many of these new brokers who specialize in luring the gamblers in -- I think it’s a dirty way to make money, and I think that we’re crazy to allow it,” Munger, 97, said Wednesday at the annual meeting of Daily Journal Corp., where he is chairman.
A Robinhood spokeswoman didn’t immediately respond to an email seeking comment. The broker has faced criticism by lawmakers and the public since last month’s surge in trading of certain stocks, driven by retail investors. Its stated mission is to “democratize finance for all” by giving users an easy way to invest in public markets and helping to eradicate trading fees. Millions of people, many of them young, have flocked to the company’s platform in recent years.
Munger took aim at trends including the Reddit-induced boom in stocks such as GameStop Corp. and the growth in SPACs, or special purpose acquisition companies, which he called a sign of an “irritating bubble.” He warned that this must end badly, but he’s not sure when.
“It’s most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood,” Munger said. “I think all of this activity is regrettable. I think civilization would do better without it.”
Munger, a Berkshire Hathaway Inc. vice chairman, has been at Buffett’s side for decades as they used corporate acquisitions and stock purchases to build the conglomerate into a behemoth valued at more than US$580 billion.