Charlie Munger, vice chairman of Warren Buffett’s Berkshire Hathaway (BRK.B) - Get Report insurance and investment group, on Wednesday criticized Robinhood Markets and its competitors for taking advantage of uneducated investors.
He spoke at the annual meeting of Daily Journal Corp., a newspaper company that he chairs.
Robinhood and other brokerages catering to novice individual investors are really supplying “gambling services” and make money in a “dirty way,” Munger said, according to Bloomberg.
He was referring to Robinhood’s sale of its trade orders to other firms, which then execute the trades. That’s how it can afford to offer commission-free trading.
“I think you should try and make your money in this world by selling other people things that are good for them, and if you’re selling them gambling services -- where you make profits off the top, like many of these new brokers who specialize in luring the gamblers in -- I think it’s a dirty way to make money, and I think that we’re crazy to allow it,” Munger said.
He’s not too impressed with the Reddit-fueled surge in stocks such as GameStop, (GME) - Get Report and the explosion in special purpose acquisition company offerings, warning of an “irritating bubble,” which will burst at some point.
“It’s most egregious in the momentum trading by novice investors lured in by new types of brokerage operations like Robinhood,” Munger said. “I think all of this activity is regrettable. I think civilization would do better without it.”
Berkshire Class B stock closed Wednesday trading at $248.45, up 1.2%. Its return has lagged the Morningstar U.S. Market index over the past one, three, five, 10 and 15-year periods.