Sources told Charlie Gasparino of FOX Business that James Chanos of Kynikos Associates contacted the White House to lobby why short selling is necessary.
Berkshire Hathaway Vice President Charlie Munger issued a warning on Wednesday that nothing is really free – at least when it comes to Robinhood and other brokerage apps that are trying to attract amateur investors with commission-free trading promises on their platforms.
“Robinhood’s negotiations are not free. When you pay for order flow, you are probably charging more to your customers and pretending to be free,” said the 97-year-old investor during the Daily Journal’s annual shareholder meeting, broadcast live by Yahoo Fiannce. “It is a very dishonorable and petty way of speaking. And no one should believe that Robinhood’s business is free.”
FIASCO GAMESTOP HAS CHANOS DEFENDER SHORT-SELLERS IN WASHINGTON
Munger blamed brokerage apps for allowing the recent stock trading frenzy, including GameStop, bringing together “a lot of people who are using liquid stock markets to play the way they would when betting on racehorses”.
“The frenzy is fueled by people who are receiving commissions and other revenue from this new group of players,” said Munger. “And, of course, when things get extreme, you have things like that short squeeze.”
He also compared commercial activity to the historic 1720 South Sea bubble.
“You will remember when the first bubble came, which was the South Sea bubble in England, in the 1700s. It created a lot of damage when it burst,” said Munger. “England barely allowed public securities trading and any company for decades to come. This just created the most profane mess.”
“Therefore, human greed and aggression from the broker community create these bubbles from time to time. I think wise people just stay out of them, ”he added.
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Robinhood was accused by critics of “gamifying” investments through his app after the platform started to restrict titles, including GameStop. The move was prompted by Reddit’s WallStreetBets, a speculative investment discussion forum that began buying the distressed retailer’s call options, causing the company’s stock to rise and hurt short sellers.
Following the reaction of Main Street and Wall Street, Robinhood reversed its trade restrictions. However, it opened the company for an audience with the Chamber’s Financial Services Committee and an investigation by the Department of Justice now investigating possible market manipulation.
| Ticker | Safety | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP | 91.71 | +46.74 | + 103.94% |
“It is really stupid to have a culture that encourages maximum stock betting by people who have the racetrack mentality,” said Munger. “And of course it will create problems, as it did.”
“And I have a very simple idea about it. I think you should try to earn your money in this world by selling other people things that are good for them,” continued Munger. “And if you’re selling them gambling services, where you make profits from the top, like many of these new brokers who specialize in attracting players. I think it’s a dirty way to make money. And I think we’re crazy for allowing it.”
A spokesman for Robinhood did not immediately return FOX Business’s request for comment.