Broker Robinhood upbraids Buffett over casino comparison

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 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

Reuters May 04, 2021 03:05:26 IST
Broker Robinhood upbraids Buffett over casino comparison

Broker Robinhood upbraids Buffett over casino comparison

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 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'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."

(Reporting by John McCrank in New York and Shubham Kalia in Bengaluru; Editing by David Evans and Aurora Ellis)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

China's Ximalaya, Qiniu file for U.S. IPOs
News & Analysis

China's Ximalaya, Qiniu file for U.S. IPOs

(Reuters) -Ximalaya, backed by China's Tencent Holdings, filed for an initial public offering (IPO) in the United States on Friday, cashing in on growing demand as more people tune in to podcasts while staying at home during the pandemic. China's Qiniu Ltd, a cloud-based platform-as-a-service provider backed by Alibaba Group Holding Ltd, also filed paperwork for a U.S. IPO

Donerail pushes gaming headset maker Turtle Beach to explore a sale - sources
News & Analysis

Donerail pushes gaming headset maker Turtle Beach to explore a sale - sources

By Greg Roumeliotis (Reuters) - Donerail Group, an investment firm led by former activist hedge fund Starboard Value LP executive Will Wyatt, has amassed a stake in Turtle Beach Corp and is pushing the maker of gaming headsets to explore a sale, people familiar with the matter said on Friday. The move represents a bet that Turtle Beach could attract acquisition interest from peers such as Corsair Gaming Inc and GN Store Nord A/S, as the video game market continues to benefit from people looking for entertainment options at home during the COVID-19 pandemic

Analysis: New meme stocks swing as shorts and retail investors face off again
Business

Analysis: New meme stocks swing as shorts and retail investors face off again

By John McCrank, Saqib Iqbal Ahmed and Lawrence Delevingne NEW YORK (Reuters) - Recent volatility in a handful of so-called meme stocks is putting the spotlight back on the tussle between individual investors and short sellers, months after a wild ride in GameStop captivated Wall Street’s attention. Stocks that have notched big swings this month include laser-manufacturer MicroVision Inc, a favorite on Reddit’s popular WallStreetBets forum, whose shares have risen as much as 170% since April 20 before tumbling in recent days