‘The frenzy is fed by people getting commissions and other revenues out of this new bunch of gamblers, and, of course, when things get extreme, you have things like that short squeeze … and it’s really stupid to have a culture which encourages [so] much gambling in stocks by people who have the mindset of racetrack bettors and, of course, it will create trouble, as it did.’
So says Charlie Munger, Warren Buffett’s longtime business partner and vice chairman of Berkshire Hathaway, in a Wednesday interview. And in case you’ve been living under a rock for the past 70 years, Munger is a billionaire investor, businessman, former real estate attorney, architectural designer, philanthropist, World War II veteran, chairman of the Daily Journal Corporation, and a director of Costco.
The famously plain-spoken Munger made his comments in reference to the GameStop short selling chaos that gripped Wall Street a month ago, as an army of individual investors congregating on social-media platforms like Reddit and Discord, rattled the broader market by upending the short bets of professional investors.
The episode resulted in a hearing last week before the House Financial Services Committee, where the head of the popular trading platform Robinhood defended a decision in late January to temporarily restrict trading in so-called “meme stocks,” including GameStop and AMC. GameStop exploded back into the news Wednesday as trading in the stock, which doubled in value on the day, was repeatedly halted.