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Warren Buffett and Charlie Munger's Bitcoin and Robinhood Comments Sound Like Sour Grapes

Warren Buffett
Credit: Scott Morgan - Reuters / stock.adobe.com

I have enormous respect for Charlie Munger and Warren Buffett. They are multi-billionaires who have achieved investing success the right way, by doing painstaking, detailed research, buying stock in companies they believe in, and getting long-term predictions correct. Far be it for me to criticize them, but there are times when they look and sound like angry old men shouting, “Get off our lawn!” than the quiet, contemplative, good people that their actions show them to be.

The annual shareholder meeting of Berkshire Hathaway (BRK.ABRK.B) this weekend provided a couple of examples of that. The first was when Munger said that he “hates” bitcoin’s (BTC) rise and called the whole thing "disgusting." I guess if you are somebody who has a long history of predicting the total collapse of an asset that has appreciated a few thousand percent over the last few years, you would see its success as disgusting. Obviously, it is incomprehensible to somebody who called bitcoin "worthless" in the past but doubling down on the hatred at this point just smells like sour grapes.

That point was obviously taken by Buffett himself, who moved things swiftly along after Munger’s rant, saying that "We've probably got hundreds of thousands of people watching this that own bitcoin, and we've got two people short. Angering the former group to make a couple of people happy wouldn't be worth it."

The Oracle of Omaha, however, had his own moment when his biases came through and drowned logic, when he said that the popular trading app Robinhood was "part of the casino aspect, the casino group, that has joined the stock market in the last year and a half."

Let’s make one thing clear right away. If you think that the "casino aspect" in the market has only been around for a year and a half, you are deluding yourself. It is the oldest criticism of trading in existence, probably going back as far as 1611, when the Dutch East India Company created the world’s first stock exchange in Amsterdam. And if you think that it an unfounded criticism, let me tell you as someone who spent decades in dealing rooms that it is not. I witnessed people literally flipping a coin before deciding which position to take, then throwing millions of dollars at the resulting trade.

For long-term investors, however, that casino aspect of markets is not a bug, it is a feature. Without it, Buffett wouldn’t have the billions that he has now. His investing style is to take advantage of uninformed trading, greed, panic, and irrational exuberance of others, and raking in the results.

As with Munger’s bitcoin-related spleen-venting, while this is an understandable example of an old man with a lot of money who doesn’t care what people, there is a potential problem with the perception of this. Because, really, at the end of the day, it sounds a lot like a wealthy and privileged old white guys taking umbrage at the fact that ordinary people like you and I have access to their once-private playground, the place that also happens to be the source of their massive wealth.

That isn’t a good look, and the further Buffett went into his reasons, the worse it got. He said he was unhappy to learn about the level of short-term options activity in Apple (AAPL) stock, for example, and assumed it was coming through Robinhood. If you have a problem with options and options traders having an outsized, massively leveraged influence on a stock, fine, but maybe you should have been concerned before, when desk traders were jumping in and out of huge options positions and distorting markets in the short-term, rather than waiting until the little guy came in for his slice of the pie.

Of course, all that being said, he isn't wrong in saying that there potentially are problems coming for some people involved with both bitcoin and app-based, leveraged trading. At some point, the markets will correct. It always does, and when it does, there will be enough people hurt for Munger and Buffett to say "we told you so" in no uncertain terms.

In the meantime, though, these two market phenomena are creating massive wealth for people who previously had no access to it, and no matter how much you may believe that it will end badly, attacking them sounds more like privileged petulance than relevant commentary.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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