Charlie Munger renews Robinhood criticism, compares app to racetrack betting

Legendary investor Charlie Munger continued a war of words Thursday with popular online brokerage Robinhood Markets Inc. about how he and others have enabled and benefited from the recent boom in individual investing.

“I hate this temptation of people to participate in speculative orgies,” Munger told The Wall Street Journal from his home in Los Angeles. Robinhood “may call it an investment, but that’s bullshit.”

He added: “It’s really wild speculation, like gambling in casinos or gambling at racetracks. There is a long history of destructive capitalism, these commercial orgies animated by the people who profit from them. ”

Munger, 97, is a vice president of Berkshire Hathaway Inc. and a longtime Warren Buffett business partner. His comments Thursday echoed criticism he leveled at Robinhood the day before.

Those initial picks from Mr. Munger triggered a strong retort from the brokerage. Robinhood spokeswoman Jacqueline Ortiz Ramsay said Munger’s comment Wednesday about people who have the racing gambler mentality was “disappointing and elitist.” Munger made the comment after saying, “It’s really stupid to have a culture that encourages action play so much.”

“A whole new generation of investors has been criticized in one go and this comment overlooks the cultural shift that is taking place in our nation today,” he said. “Robinhood was created to allow people who do not have access to generational wealth or the resources that accompany it to begin investing in the US stock market.”

After hearing Robinhood’s statement in its entirety later Thursday, Mr. Munger said: “Everybody wants to protect their way of making a living. That is just human nature. That’s all I want to say about this. “

Robinhood has recently found himself at the center of the storm around GameStop Corp.

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Stocks, which soared, collapsed and rose again amid a frenzy of individual investors. Its CEO faced harsh questioning during a congressional hearing this month.

The brokerage has also faced scrutiny from Massachusetts securities regulators, who in December criticized the trading platform for exposing clients to “unnecessary business risks.” Clients have long been drawn to the app due to its free stock trading and simple and attractive mobile platform. Massachusetts regulators, by contrast, have said that many of those same characteristics have “gamified” the investment experience.

Robinhood has disputed the allegations and previously said it has made “significant improvements” to its options trading offering and added safeguards and improved educational materials. Last month, the brokerage responded to Massachusetts regulators, saying its complaint misrepresented “the Robinhood experience.”

The back and forth with Mr. Munger began when the remarkably outspoken investor was at the annual meeting of the Daily Journal. Corp.

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, of which he is president.

During Wednesday’s meeting, Mr. Munger, who has previously touted the virtues of patience in investing, was asked about the recent Reddit-fueled frenzy surrounding GameStop. In a broad response, Munger said he believes “you should try to make money in this world by selling other people things that are good for them.”

“If you sell them gambling services, where you make a top profit like a lot of these new brokers who specialize in attracting players, I think it’s a dirty way to make money, and I think we’re crazy about allow, “continued Mr. Munger.

When asked later Wednesday where he saw a glut in the financial system, Munger said it is most egregious “in the commercial momentum of rookie investors attracted to new types of brokerage operations like Robinhood.”

“I think all this activity is regrettable,” he said. “I think civilization would do better without him.”

The GameStop frenzy put the spotlight on a growing group of investors seeking and sharing business information on social media platforms like YouTube and TikTok. Three investors explain how these online communities are helping them chase the market. Photo Illustration: Adam Falk / The Wall Street Journal

Write to Caitlin McCabe at [email protected] and Jason Zweig at [email protected]

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