Charlie Munger Once Said 'God Is Getting Just' While Criticizing Robinhood's Role In Stock Market 'Mania Of Speculation'

An influx of retail investors and the rise of retail investing platforms didn’t sit well with the late Berkshire Hathaway Inc BRK BRK Chairman Charlie Munger when discussing the state of the stock markets in 2022.

What Happened: Munger, who passed away in 2023, was known for speaking his mind and his sometimes too honest opinions on the stock market and investors.

At the 2022 Berkshire Hathaway shareholder meeting, Munger and Berkshire CEO Warren Buffett spoke critically of the state of the stock market and a rise of investors who could be investing in a manner similar to gambling.

Munger singled out Robinhood Markets HOOD as a company that was a good idea that was “grossly overdone.”

Munger said Robinhood had a “disgusting” business model that includes kickbacks from companies in the process of selling order flow.

“It’s unraveling. God is getting just,” Munger said.

The comment from Munger came as Robinhood shares had fallen and were below the 2021 IPO price of $38.

"Look what happened to Robinhood, from its peak to its trough, wasn't it pretty obvious something like that was going to happen?" Munger said.

Buffett told shareholders he recalled Robinhood management selling shares after the IPO.

"They've gotten a lot of money from it, they were big sellers," Buffett said.

Munger also criticized the role commission free trading and new brokers like Robinhood have played in creating "a mania of speculation" and gambling of sorts on the stock market.

"We have computers and algorithms trading against other computers," Munger said.

Munger compared Robinhood to a casino where people play craps and roulette, something Buffett agreed with.

"People and traders' poker chips are pulling the handle. They've got the system set up so that if you want to buy a three-day call on the stock you can do it, and they make more money selling you calls than if you buy stock, so they teach you calls," Buffett said.

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Why It's Important: While Munger and Buffett took a victory lap on Robinhood back in 2022, the company has grown in size and improved its share price since the 2022 Berkshire Hathaway shareholder meeting.

The company has added new products like retirement accounts and seen a large influx of new users and investors moving assets or accounts from other stock brokerages.

Robinhood ended the most recently reported second-quarter with 24.2 million funded customers. The company set records for revenue and earnings per share in the quarter.

The company also reported record net deposits in the quarter.

While Robinhood shares still trade below their July 2021 IPO price of $38, the company’s demise predicted by Munger may have been premature or incorrect.

Robinhood shares trade at $17.73 at the time of writing and are up 59% over the last year.

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This article was previously published by Benzinga and has been updated.

Image created using artificial intelligence via Midjourney.