Robinhood affords a blistering reply to “elitist” criticism from Munger
Robinhood fired back on Berkshire Hathaway vice chairman Charlie Munger, who earlier this week said the free trading app was having “unfortunate” effects on investors.
Warren Buffett’s longtime business partner on Wednesday addressed the ongoing controversy surrounding Robinhood and related applications, identifying the dangers of simple, free trade.
“Nobody should believe that Robinhood trades are free,” said 97-year-old Munger. “The frenzy is fueled by people who take commissions and other income from this new group of players.”
He added that the app “created a culture that encourages gambling in stocks of people who have racetrack bettor hiring. … It’s a dirty way of making money.”
A statement by Robinhood spokeswoman Jacqueline Ortiz-Ramsay on Thursday made a sharp exception to the remarks.
“In one fell swoop, a whole new generation of investors was being criticized, and that comment overlooks the cultural shift that is taking place in our nation today,” said Ortiz-Ramsay. “Robinhood was created to empower people who do not have access to generational wealth or related resources to invest in the US stock market. It is disappointing and elitist to suggest that new investors have a ‘racetrack bettor’ mindset “to have. “”
Both comments referred to a recent surge in retail investors who are combining the convenience and free trading of Robinhood with viral platforms provided by social media, particularly the Reddit message boards.
In the most glaring example, investors have taken up residence in GameStop, a sharply shortened stock that has skyrocketed in recent weeks on a surge in Robinhood-based trades that led to a massive short squeeze.
Although speculation has resulted in high market volatility, Robinhood claimed that its product offers opportunities.
“It should be celebrated that market investors are gradually diversifying and that education and awareness of the values of investing continues into untapped generations,” said Ortiz-Ramsay.
Munger isn’t the only Robinhood critic – others have accused him of turning stock trading into a dangerous game that he profits from by paying for the flow of orders or the money market makers give the company for the volume of trading.
“Nobody should believe that Robinhood trades are free,” Munger said. “The frenzy is fueled by people who take commissions and other income from this new group of players.”