Berkshire Hathaway CEO Warren Buffett Wall Street criticized it for encouraging speculative behavior in the stock market, turning it into a “gambling room”.
Buffett, 91, spoke at length at his annual shareholder meeting on Saturday about one of his favorite targets of criticism: investment banks and brokerage firms.
“Wall Street makes money, one way or another, catching the crumbs that fall off the table of capitalism,” says Buffett. “They don’t make money unless people do everything, and they make a fraction of that. They make more money when people gamble than when they invest.”
Buffett laments that large American companies have “become poker chips” to speculate on the market. He cited the skyrocketing use of call options, saying that brokers make more money on these bets than on simple investments.
However, the situation could lead to market fragmentation, creating opportunities for Berkshire Hathaway. Buffett says that Berkshire spent a staggering $41 billion on stocks in the first quarter, freeing up his company’s cash hoard after an extended lull. Some $7 billion of that went to capture the share of Randomraised his stake to more than 14% of the oil producer.
“That’s why the market does crazy things, and every now and then Berkshire has a chance to do something,” Buffett said.
“It’s almost a speculative madness,” Charlie MungerThe 98-year-old, longtime Buffett partner and Berkshire Hathaway Vice Chairman, joined.
“We have people who know nothing about stocks who are advised by stockbrokers who know even less,” Munger said. “It’s an unbelievable, crazy situation. I don’t think any wise country would want this outcome. Why would you want your country’s shares to trade on a casino?”
Retail traders flooded the stock market during the pandemic, pushing stock prices to record levels. Last year, the frenzy was fueled further by meme-inspired trading from the Reddit message board. But the stock market has turned upside down this year, leaving many new domestic traders in the red. The Nasdaq Composite, much loved by small traders, is in a bear market, down more than 23% from its post-recession high in April.
Warren Buffett has a long history of attracting investment bankers and their institutions – claiming that they encourage mergers and spin-offs to collect fees rather than improve the company.
He often distances himself from investment bankers about his acquisitions, calling them “money shufflers.” According to the report, Buffett gives $848.02 per share to insurance company Alleghany to exclude, to expel Goldman consulting fees.
Early in the session, he noted that Berkshire will always have plenty of cash and, in times of need, will be “better than banks” at extending credit lines to companies. One audience member commented that he was inaudible while he was speaking.
“Is that a screaming banker?” Buffett joked.
(Follow for live updates and live feed of the annual meeting this.)
