FinTech: “Speculative, Casino-Like” (Buffett On Robinhood); “Insulting Old Guard” (Robinhood On Buffett)
Scathing remarks against Robinhood by Buffett and Munger drew a swift riposte from the millennial-favored brokerage.
At the Berkshire Hathaway (NYSE: BRK.A) annual meeting on Saturday Warren Buffett and Charlie Munger criticized commission-free brokerage Robinhood for fanning gambling behavior by people “who have money in their pockets for the first time.” Their charges drew an equally acidic response from Robinhood, which is likely to go public this year. (CNBC)
The Oracle of Omaha on American corporations as “gambling chips”
“American corporations have turned out to be a wonderful place for people to put their money and save but they also make terrific gambling chips,” said Buffett. “If you cater to those gambling chips when people have money in their pocket for the first time and you tell them they can make 30 or 40 or 50 trades a day and you’re not charging them any commission but your selling their order flow or whatever…I hope we don’t have more of it.”
Buffett also took a swipe at the rising stock options activity, most of it short term, in the stock of Apple (NASDAQ: AAPL) – implying that most of the speculation originated at Robinhood.
Last year, Alexander E. Kearns, a 20-year-old student at the University of Nebraska, committed suicide after seeing a negative balance of $730,000 on his Robinhood account from trading options.
“We are committed to continuously improving our platform and are reviewing our options offering to determine if any changes may be appropriate,” Robinhood had said at the time.
“The degree to which a very rich society can reward people who now know how to take advantage essentially of the gambling instincts of not only the American public but the worldwide public, it’s not the most admirable part of the accomplishment,” Buffett said on Saturday.
Robinhood fires back
Robinhood said to CNBC: “There is an old guard that doesn’t want average Americans to have a seat at the Wall Street table so they will resort to insults.”
“The new generation of investors aren’t a ‘casino group.’ They are tearing down old barriers to investing and taking control of their financial futures, the brokerage added.
“Robinhood is on the right side of history.”
Related Story: Robinhood Rides Gamestop Tumult To $3.4B Debt Financing
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