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Broker Robinhood upbraids Buffett over casino comparison

Stock MarketsMay 03, 2021 03:50PM ET
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2/2 © Reuters. FILE PHOTO: The welcome screen for the Robinhood App is displayed on a screen 2/2

By John McCrank and Shubham Kalia

(Reuters) -Robinhood Financial on Monday struck back against comments by Warren Buffett that likened the retail brokerage to a casino that encourages millions of inexperienced day traders to place short-term stock market bets.

At Berkshire Hathaway (NYSE:BRKa) Inc's annual meeting on Saturday, Buffett said Robinhood has attracted, "maybe set out to attract," large numbers of people who just gamble on short-term price movements. Buffett's long-time business partner, Charlie Munger, was harsher, saying it was "god-awful that something like that would draw investment from civilized man and decent citizens."

"If the last year has taught us anything, it is that people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing," Robinhood's Head of Public Policy Communications, Jacqueline Ortiz Ramsay, said in a blog post https://robinhood.engineering/the-old-guard-of-investing-is-at-it-again-a8b870fbfd49.

"And at Robinhood, we're not going to sit back while they disparage everyday people for taking control of their financial lives."

Buffett and Munger made their comments after Berkshire shareholder Robert Miles asked them what they thought of Robinhood and other retail brokers enabling people of all ages and experience to participate in the market.

Miles said he did not think their responses were meant to disparage Robinhood users.

"They're trying to dissuade people from making money through trading, which Charlie (Munger) said is not how they made their money. They made their money by investing," he said in an interview.

Buffett specifically pointed to the high volume of short-term options bets on Apple Inc (NASDAQ:AAPL)'s stock, and compared the practice to playing the state lottery, which he said was "taxing hope."

"He said it wasn't immoral, it's just in his opinion not very wise," said Miles, who teaches a class on Buffett at the University of Nebraska, Omaha.

Robinhood also traded barbs with Munger in February, calling him elitist, after the 97-year-old investor said the brokerage encouraged gambling in stocks.

Brokers like Robinhood have attracted controversy this year as retail traders drove huge rallies in shares of companies like GameStop Corp (NYSE:GME) and AMC Entertainment (NYSE:AMC) despite no fundamental financial reason for the frenzy.

During a Feb. 18 congressional hearing on the matter, lawmakers slammed Robinhood's "gamification" of stock trading on mobile phones through things like a virtual confetti celebration following a big trade. Robinhood later removed the confetti animation from its app.

Massachusetts regulators in April sought to revoke Robinhood's broker-dealer license, saying it encourages inexperienced investors to place risky trades without limits, while the brokerage sued to invalidate underlying the case.

While some people do gamble on stocks, it is far more socially beneficial than going to the racetrack, because when they do so, they add capital, liquidity and risk-bearing capacity to the market, said James Angel, a finance professor at Georgetown University.

But they should never bet more than they can afford to lose, he added. "I warn my students, if you're looking for entertainment, you're going to pay for it."

Broker Robinhood upbraids Buffett over casino comparison
 

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Comments (14)
Javier Escamilla
Javier Escamilla May 03, 2021 7:09PM ET
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I do not think the gamestop example suits well.. if anything that was a smart move from retail that curshed several big ones... so theoreticaly there are some that beated the big ones at their own game which by the way the gamble all the time.. just look at the valuations and the market lol
Zach Lohman
Zach Lohman May 03, 2021 5:41PM ET
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I’m not sure if Robinhood’s anybody’s friend. There is a lot of gambling going on in the market, but that’s always been the case. Still, Berkshire shareholder for years and I intend to keep it that way for years longer.
Roger Miller
Roger Miller May 03, 2021 12:39PM ET
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It's still not as bad as what was going on during the tech bubble, and Buffet and Munger should know this.  At the end of the day Robinhood traders at times add to the accuracy of price discovery, and other times create mispricing which experienced investors can take advantage of.  Buffet and Munger are obviously growing old and would like calmer markets towards the end of their careers, like most wealthy investors.
stonks value
stonks value May 03, 2021 12:33PM ET
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Since robinhood owns the order flow its easy for them to show their partners which stocks retail are into. And then next day/week those get shorted. Not by retail, but by institutions with enough volume to counter retail interest. Buffett mentioned unusual options volumes on apple which has a lot of retail interest for a SPY company.
kristijan pavuna
kristijan pavuna May 03, 2021 12:02PM ET
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robinhood pretending to be all high and mighty, but we all saw how they treat retail traders
Void Void
Void Void May 03, 2021 11:26AM ET
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robinhood **** don't care what they say, never using em ever
Clinton Powell
Clinton Powell May 03, 2021 11:05AM ET
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Robinhood has turned investing in the stockmarket, into that of a game.Many millenials that I know own shares of stock that they have NO idea what those companies do. Trafing stocks isnt something that should looked upon in gamefication terms. You could lose nig loney and easily. Look at how RH gives our options level abilities.
Rodolfo Barraco
Rodolfo Barraco May 03, 2021 10:59AM ET
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Shame on robin hood profiting on FOMO and making normal people go broke. Allowing yo buy in FOMO but blocking from selling tops or buying dips. Most meme stonk investors lost it all. Few big investors mase billons with that.
danny Levine
danny Levine May 03, 2021 10:01AM ET
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typical establishment and elitist way of thinking! shame on buffett
danny Levine
danny Levine May 03, 2021 9:55AM ET
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Reddit crowd need to launch an attack on Berkshire stocks!
giwrgos aligias
giwrgos aligias May 03, 2021 9:55AM ET
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??????
Madi Azibayev
Madi Azibayev May 03, 2021 9:55AM ET
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After we finish with GME we will borrow some berkshire stocks and naked short it to oblivion
Kaveh Sun
Kaveh Sun May 03, 2021 9:50AM ET
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I have to side with RB. They save investors billions. Without them u still have to pay at least 9.99 a trade. Buffet act like he is moral but he ‘built’ a backup generator in texas to ‘solve’ their grid problem at 9.9% interest rate and guarantee money back. What kind of a ‘moral’ guy does that loan shark?
In Sight
Insight May 03, 2021 9:39AM ET
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Yeah, but hey let them hedgies play pump and dump, and manipulate the market with puts n calls. duuuhhooh
Mase Gumbo
Mase Gumbo May 03, 2021 9:36AM ET
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i dont know there is something to be said for more investing education...some people just throw their money away...i think thats what he meant...theyre still entitled to of course..but hence the gambling metaphor
Kaveh Sun
Kaveh Sun May 03, 2021 9:36AM ET
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When u young, u think u know all. U get into the market n loose, then u know u dont know. That is when education start if u still want to be around.
Pilot TwoFive
Pilot TwoFive May 03, 2021 9:10AM ET
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I'm not a big RobinHood fan for what they did during the GME run but Buffet and Munger need to shut their traps.  They have been living off the carcasses of people for decades.  Their time has past.
 
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