Warren Buffett at the Berkshire Hathaway Annual Meeting in Los Angeles, California. May 1, 2021.
Legendary investor Warren Buffett believes that millennial beloved Robinhood app is contributing to and benefiting from speculative, casino-like trading activity in the stock market.
Robinhood has “become a very important part of the casino aspect, the casino group, which has entered the stock market in the last year or a year and a half,” Buffett said at the Berkshire Hathaway annual meeting on Saturday.
The “Oracle of Omaha” also said it is looking forward to Robinhood’s pre-initial public offering SEC S-1 filing as the company nears its public debut, expected in the first half of 2021. The company, which pioneered zero commission trading, is seen as the main gateway for young investors to access the markets.
“American companies have proven to be a great place for people to put their money in and save, but they also make great betting chips,” Buffett said. “If you take into account those betting chips when people first have money in their pockets and you tell them they can make 30, 40 or 50 trades a day and you don’t charge them commission, but you sell their order flow or whatever … I hope we don’t have more of it. “
Robinhood – whose mission is to “democratize investment” – is often criticized for its gamification of investing. The Silicon Valley startup found itself in the midst of a firestorm in January amid GameStop tightness, fueled in part by Reddit-driven retail investors. The app has taken steps to break this reputation and eliminate the confetti animation when investors make their first trade.
Buffett said he was unhappy to learn that short-term stock options activity in Apple’s stock was on the rise. He said he expected much of that activity to come through Robinhood.
Robinhood’s user growth has been explosive in 2020 and 2021. Millions of new investors have burst onto the market during the pandemic and millions have joined in 2021. Stock trading app Robinhood added nearly 6 million clients in the first two months of the year. according to JMP Securities estimates.
“There’s nothing illegal about it, nothing immoral, but I don’t think you would build a society around people who do it,” Buffett said.
“The extent to which a very wealthy society can reward people who now know how to essentially take advantage of the gambling instincts of not only the American public, but the global public, is not the most admirable part of the achievement,” Buffett said.
Berkshire Hathaway Deputy Chairman Charlie Munger was less gentle with his description of Robinhood.
“I just think it’s awful that something like that generated investments from civilized men and decent citizens,” said Munger. “It’s all wrong. We don’t want to make our money selling things that are bad for people,” added Buffett’s right-hand man.
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