Don’t be a casino-type investor, including cryptocurrency gambling

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The stock markets, the US ones in particular, at this late stage in a bull market, seem to be increasingly influenced by speculators. Warren Buffett and Charlie Munger have long argued against speculation in shares, saying that share buyers should thoroughly understand what they buy (understand the underlying business, the managers and finances). So the following question about the latest manifestation of the ancient human tendency toward speculation posed little intellectual challenge to Buffett and Munger (speaking 1st May 2021).

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Q: What do you think about Robinhood and other trading apps or fintech companies enabling all ages and experience to participate in the stock market.

BUFFETT: “It [Robinhood, the “free” brokers] has become a very significant part of the casino group that has joined into the stock market in the last year, year-and-half. They have attracted 12% or 13% of casino participants.

“You know, I looked up on Apple the number of seven day calls [options], 14 day calls outstanding. And I’m sure a lot of that is coming through Robinhood. They’re gambling on the price of Apple over the next seven days.

“There’s nothing illegal about it; there is nothing immoral. But I don’t think you build a society around people doing it.

“I mean, if a group of us landed on a desert island and we knew that we’d never be rescued, and I said, ‘well, I’ll set up an exchange over here, and I’ll trade our corn futures and everything!’ [Laughing].

“I think the degree to which a very rich society can reward people who know how to take advantage of essentially the gambling instincts of not only the America public, but the worldwide public…it’s not the most admirable part of the accomplishment.

“But I think what Americans have accomplished is pr…………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

 

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