NgospelMedia.net is The No. 1 International Urban Gospel Media Website, The Largest Repository of Your Favorite Gospel Entertainment Website, Worldwide, Nigeria. We Published Latest Nigerian and Foreign Gospel Music Downloads, Videos; Lyrics, Artiste Biography, Daily Devotionals. NgospelMedia is mainly a Christian Website, as the Domain Name Speaks; Gospel; Which is also tagged as a Gospel On-line Ministry for Souls Winning...
Legendary investor and Berkshire Hathaway CEO Warren Buffett slammed stock-trading app Robinhood — saying it’s turning the market into a casino.
Robinhood has “become a very significant part of the casino aspect, the casino group, that has joined into the stock market in the last year or year and a half,” Buffett said at Berkshire Hathaway’s annual meeting on Saturday.
He added that there’s “nothing illegal to it, there’s nothing immoral, but I don’t think you build a society around people doing it.”
Robinhood, which pioneered “free trading,” bills itself as a democratizer of the stock market. The app has made trading more accessible to younger people and those with less cash on hand by eliminating commission fees.
Instead, the app relies on a practice called payment for order flow as its profit engine. The practice, while common, has often been criticized for its lack of transparency.
Market makers, such as Citadel Securities, pay Robinhood and other online brokers for the right to execute customer trades. The broker is then paid a small fee for the shares that are routed, which can add up to millions when customers trade actively.
“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,” Buffett said Saturday.
“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 you’re selling their order flow or whatever…I hope we don’t have more of it.”
Robinhood, which is eyeing an IPO later this year, landed in regulators’ crosshairs earlier this year when the app helped fuel a GameStop stock frenzy that saw the stock run up nearly 400% at one point.
At a Congressional hearing in February, lawmakers pressed Robinhood CEO Vlad Tenev on the company’s relationship with market makers and its use of payment for order flow. A handful of lawmakers also alleged that Robinhood gamifies the stock market.
In a December lawsuit, Massachusetts Secretary of State Bill Galvin said Robinhood used aggressive tactics to attract inexperienced investors. He accused the app of using strategies that treated trading like a game to lure young, inexperienced customers, including having confetti rain down for each trade made on its app, a practice the app ditched in March.
Buffett’s long-time lieutenant Charlie Munger also took Robinhood to task.
“I think it’s just God awful that something like that brought investments from civilized men and decent citizens,” Munger said. “It’s deeply wrong. We don’t want to make our money selling things that are bad for people.”
In a statement to CNBC, Robinhood defended its users and said it’s breaking down obstacles to trading that have existed for generations.
“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,” a Robinhood spokesperson told CNBC.
“The future is diverse, more educated and propelled by engaging technologies that have the power to equalize. Adversaries of this future and of change are usually those who’ve enjoyed plentiful privileges in the past and who don’t want these privileges disrupted. Their criticisms are unfortunate but they prove why Robinhood’s mission is in fact critical.”
“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. Robinhood is on the right side of history,” the spokesperson added.
A spokesperson also said to Axios that “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.”