Warren Buffett says Robinhood responds to investors’ gaming instincts

Warren Buffett says Robinhood responds to investors’ gaming instincts

Warren Buffett

Gerard Miller | CNBC

Legendary investor Warren Buffett believes that millennials’ favorite stock trading app, Robinhood, contributes to and benefits from speculative and casino-like trading activity in the stock market.

Robinhood has “become a very important part of the casino aspect, the casino group, which has joined the stock market in the last year or a half,” Buffett said at Berkshire Hathaway’s annual meeting on Saturday. .

The “Oracle of Omaha” also said it was eager to read Robinhood’s prior public filing in SEC S-1 as the company nears its IPO, scheduled for the first half of 2021. The company , a pioneer in commission-free trading, is considered the main gateway for young investors to access the markets.

“American companies have proven to be a wonderful place for people to put their money and save, but they also make great gaming chips,” said Buffett. “If you fund these gambling chips when people first have money in their pocket and tell them they can do 30, 40, or 50 trades a day and you don’t charge them any commission, but you sell their order flow or whatever … I hope we don’t have more. “

Robinhood – whose mission is to “democratize investing” – is often criticized for its gamification of investing. The Silicon Valley startup found itself in the middle of a firestorm in January amid GameStop’s short squeeze, which was fueled in part by Reddit-focused retail investors. The app has taken steps to dissolve this reputation, eliminate confetti animation when investors make their first transaction.

Buffett said he was unhappy to learn that short-term stock options activity in Apple stocks was on the rise. He said he expected a lot of that activity to go through Robinhood.

The growth of Robinhood users has been explosive in 2020 and 2021. Millions of new investors have jumped into the market during the pandemic, and millions more have joined in 2021. The Robinhood stock trading app added nearly 6 million clients in the first two months of the year, according to estimates by JMP Securities.

“There is nothing illegal about it, there is 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 profit from the gaming instincts of not just the American public but the global public is not the most admirable part of the accomplishment,” said Buffett.

Berkshire Hathaway vice president Charlie Munger was less kind to his description of Robinhood.

“I think God is horrible that something like this has brought investments of civilized men and decent citizens,” Munger said. “This is deeply 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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