Berkshire Hathaway’s (BRK-B, BRK-A) CEO Warren Buffett says he’s “looking forward” to reading Robinhood’s S-1 as he proceeded to subtly criticize the no-fee brokerage app, while his long-time partner, Charlie Munger, outright lambasted it.
Speaking at the conglomerate’s annual shareholder meeting, streamed exclusively on Yahoo Finance, Buffett said Robinhood has “become a very significant part of the casino aspect of the casino group that has joined into the stock market in the last year or year and a half.”
A wave of new investors has flooded the stock market, with lockdowns, no-fee trading, and stimulus checks making it easier to open up a brokerage account and start trading.
With free trading, Buffett said it “would be interesting to watch” how Robinhood describes its source of income in the S-1. He pointed out that Robinhood’s commission-free trading has resulted in a surge in put and call options trading that’s “gambling on the price of Apple.”
“There’s nothing illegal about it. There’s nothing immoral, but I don’t think you’d build a society around people doing it,” Buffett added.
He continued: “If a group of us landed on a desert island knew we would never be rescued and I was one of the group and said, ‘I’ll set up an exchange over here and I’ll trade our corn futures and everything around it,’ I think the degree to which a very rich society can reward people who know how to take advantage, essentially, of the gambling instincts of not only the American public, the worldwide public, it’s not the most admirable part of the accomplishment.”
While reiterating his thesis that American corporations are a “wonderful place for people to put their money and save,” he added that “they also make terrific gambling chips.”
“And if you cater to those gambling chips when people have money in their pocket for the first time and you tell them make 30 or 40 or 50 trades a day and you’re not charging commission but you’re selling their order flow or whatever — I hope we don’t have more of it. And I will be interested in reading the prospectus.”
Meanwhile, Munger, took a much stronger stance against Robinhood, calling it “God awful that something like that would draw investment from civilized men and decent citizens.”
“It’s deeply wrong. We don’t want to make our money selling things that are bad for people,” Munger continued.
Buffett chimed in, bringing up the lotteries put on by states.
“I know, but that’s bad, too,” Munger said. “That’s very bad. That’s one of the things that’s wrong with it — it’s getting respectable people to do these things. The states are just as bad as Robinhood.”
Buffett added that the states “in a sense are worse” because they’re “taxing hope.”
Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.
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