Charlie Munger calls Robinhood, other brokers for ‘dirty’ money
Charlie Munger, Warren Buffett’s longtime business partner, said Robinhood Markets and other brokerage firms that attract inexperienced retail investors are basically offering “gambling services” and have found a “dirty way” to earn money.
“I think you should try to make money in this world by selling other things that are good for them, and if you sell them gambling services – where you make a profit on top, like a lot of these new brokers who specialize in luring players – I think it’s a nasty way to make money, and I think we’re crazy to allow it, “said Munger, 97, Wednesday at the annual meeting of the Daily Journal Corp., where he is chairman.
A Robinhood spokesperson did not immediately respond to emails seeking comment. The broker has faced criticism from lawmakers and the public since last month’s surge in trading in some stocks, pushed by retail investors. Its stated mission is to “democratize finance for all” by providing an easy way for users 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 has targeted trends like the Reddit-induced boom in stocks like GameStop Corp. He warned it must end badly, but he doesn’t know when.
“This is most evident in the business dynamics of novice investors drawn to new types of brokerage operations like Robinhood,” said Munger. “I think all this activity is regrettable. I think civilization would do better without it.
Munger called “commission-free” trading one of the most “disgusting” lies perpetuated by the investment world.
“The Robinhood trades are not free,” Munger said. “When you pay for the order flow, you’re probably charging your customers more and claiming to be free. It is a very dishonorable and insignificant way of speaking. And no one should believe that Robinhood trades are free.
Munger, vice chairman of Berkshire Hathaway Inc., has been with Buffett for decades as they used company acquisitions and stock purchases to turn the conglomerate into a giant valued at over $ 580 billion. .
He also helped build the Daily Journal’s stock portfolio, which currently holds bets on companies such as Bank of America Corp. reducing its stake in the lender. When asked about this contrast, Munger cited different tax considerations and said the Daily Journal and Berkshire need not be aligned on everything.
“There is no doubt that Wells Fargo has disappointed long-term investors like Berkshire,” Munger said. “You can understand why Buffett was disappointed with Wells Fargo. I think I’m a little more forgiving. I expect less from bankers than he does.