Broker Robinhood upbraids Buffett over casino comparison
(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 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 here.
“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’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 and AMC Entertainment 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.”
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