Charlie Munger says novice buyers are getting lured right into a bubble in ‘soiled method’ by Robinhood

Charlie Munger

Lacy O’Toole | CNBC

Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s longtime enterprise accomplice, issued a dire warning on the manic momentum-driven buying and selling exercise by newbie buyers and mentioned commission-free buying and selling apps like Robinhood have been partly accountable for the bubble.

“It is most egregious within the momentum buying and selling by novice buyers lured in by new kinds of brokerage operation like Robinhood and I believe all of this exercise is regrettable,” Munger mentioned Wednesday on the Los Angeles-based Every day Journal annual shareholders assembly, which was stay streamed by Yahoo Finance.

The 97-year-old investor mentioned retail merchants are being enticed by brokerage apps touting free buying and selling. Robinhood has been accused by critics of gamifying investing by way of its app. It and different on-line brokerage companies depend on a controversial follow referred to as fee for order move as their revenue engine in lieu of commissions. These brokers obtain funds from market makers like Virtu and Citadel Securities for routing trades to them.

“Nobody ought to consider Robinhood trades are free,” Munger mentioned. “The frenzy is fed by people who find themselves getting commissions and different revenues out of this new bunch of gamblers.”

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