Robinhood hits back at Warren Buffet for linking his platform to the game

0

Posted on: May 3, 2021 at 1:20 am.

Last update on: May 3, 2021 2:42 am.

Robinhood, the commission-free trading platform involved in the GameStop 2021 short squeeze, has responded to criticism from billionaire Warren Buffett.

Robinhood Warren Buffett Casino Games
Warren Buffett addresses Berkshire Hathaway investors at the company’s annual meeting on May 1, 2021. The famous investor is facing backlash for his comments on the Robinhood trading platform. (Image: Getty)

At Berkshire Hathaway’s annual meeting this weekend, the 90-year-old ‘Oracle of Omaha’ linked Robinhood users with casino players.

[Robinhood] has become a very important part of the casino aspect that has joined the stock market in the last year or a half, ”said Buffett, adding that he doesn’t think ordinary Americans are particularly good at choosing stocks to invest.

Unlike other financial institutions of the time, Robinhood (established in 2013) was one of the first to offer its clients commission-free transactions. Buffett believes this allows investors to essentially gamble with their money by becoming inexperienced day traders.

“If you use these gambling chips when people first have money in their pocket, and you tell them they can do 30, 40, or 50 trades a day and you don’t charge a commission. … I hope we don’t have more, ”said the man worth more than $ 100 billion.

Robinhood counters

The founders of Robinhood realized early on in their Wall Street careers that brokers only cost fractions of a cent to execute trades, but typically charge clients $ 5-10 per trade. Robinhood was started with the business model of allowing customers to trade for free with no limits.

The company primarily generates its income by accumulating interest on clients’ cash balances, selling trade volume information to high-frequency traders, and lending on margin. In a blog post today, Jacqueline Ortiz Ramsay, Robinhood’s public policy communications manager, lambasted Buffett’s comments.

“If the last year has taught us anything, it’s that people are tired of the Warren Buffetts of the world acting like they’re the only oracles to invest,” Ramsay said. She cited the GameStop Squeeze short that implicated thousands of ordinary investors in the Redditt consortium to jack up the video game company’s stock price in order to hurt hedge funds.

“It is clear that the elites have benefited from a stock market that has prevented many families from participating while amassing enormous wealth through decades of investment – driving a deep wedge between the haves and have-nots. Suddenly Robinhood and other online trading platforms have opened the doors to the financial markets for ordinary people, deeply disrupting the old guard, who will fight to keep things the same, ”Ramsay added.

Investors reject gambling link

The GameStop saga has generated many comments that day trading is no different from spinning a slot machine or dropping $ 20 on red.

Investors big and small treat the stock market like a casino, ”said Senator Elizabeth Warren (D-Ma.). Representative Alexandria Ocasio-Cortez (D-NY) said Wall Street has “a long history of treating our economy like a casino.”

But senior Wall Street officials disagree.

“The markets are not a casino. We run a market that provides opportunities for investors to come in, invest in the companies they believe in, they think will grow, and then share that wealth creation, ”said Stacey Cunningham, chairman of the Stock Exchange. New York. .

Share.

About Author

Comments are closed.