Posted: May 3, 2021 01:20 AM
Last updated: May 3, 2021 01:20 AM.
Robinhood, a commission-free trading platform that was short-circuited by GameStop in 2021, responds to criticism from billionaire Warren Buffett.
During Berkshire Hathaway’s annual meeting over the weekend, the 90-year-old Oracle of Omaha connected Robinhood users with casino players.
[Robinhood] has become a very important part of the casino aspect that has hit the stock market in the last year or eighteen months, ”Buffett said, adding that he doesn’t believe ordinary Americans are particularly good at picking stocks to invest.
Unlike other financial institutions of the time, in 2013 Robinhood was one of the first to offer its clients commission-free deals. Buffett believes this allows investors to play with their money by becoming inexperienced day traders.
“If you serve 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 that anymore.” – said a man worth more than $ 100 billion.
The Robinhood founders realized early on in their Wall Street careers that it only cost brokers a fraction of a penny to execute trades, but typically charge clients between $ 5 and $ 10 per trade. Robinhood was launched with a business model that allows clients to trade without restrictions and for free.
The company mainly generates income through the accrual of interest on the balances of clients’ funds, the sale of information about the trading volume to private traders and margin lending. In today’s blog post, Robinhood’s head of public relations Jacqueline Ortiz Ramsay criticized Buffett’s comments.
“If the last year taught us anything, it’s that people are tired of Warren Buffett acting like they’re the only oracles of investing,” Ramsay said. She cited a short-lived GameStop squeeze, in which thousands of ordinary investors from the Redditt group raised a video game company’s stock to wreak havoc on hedge funds.
Knock Knock. Who’s here? It was not so easy with the old guard of investing who preferred this when investing. #OutOfTouch
– Robinhood (@RobinhoodApp) May 3, 2021
“It is clear that the elites benefited from the stock market, which prevented many families from participating, while they accumulated enormous wealth over decades of investing, driving a deep wedge between the haves and have-nots. Suddenly, Robinhood and other online trading platforms have opened the doors of financial markets to ordinary people, deeply alarming the old guard who will fight to keep things the same, ”added Ramsay.
Investors reject link to gambling
The GameStop saga has generated a lot of comments that day trading is no different than a slot machine spin or a $ 20 drop on red.
“Investors, large and small, treat the stock market like a casino,” said Senator Elizabeth Warren (Democracy). Representative Alexandria Ocasio-Cortez, NY, said Wall Street “has long treated our economy like a casino.”
But Wall Street’s top officials disagree.
“Markets are not casinos. We operate a market that provides opportunities for investors to come in, invest in companies they believe in, which they believe will grow, and then participate in creating that wealth, ”said Stacy Cunningham, president of the New York Stock Exchange. …