Robinhood gave fire to Warren Buffett and the old guard for attacking him for allegedly allowing millions of "ordinary people" to take "control of their financial lives."
Tit for Tat
It seems that the war of words began on Saturday with Fr. Berkshire Hathaway when Warren Buffett openly attacked Robinhood for approaching allegedly inexperienced young people for whom trading is more like an adrenaline rush, much like gambling rather than a long-term strategy-driven business. And now Robinhood replied.
"If the last year has taught us anything, it's that people are tired of Warren Buffetts and Charlie Mungers from the world acting like they're the only oracles in investing."
Jacqueline Ortiz Ramsay, Director, Public Policy Communications, Robinhood
Jacqueline Ortiz drew the dividing line between the elite and the common people because the former "benefited from the stock market that kept many families aloof by participating while amassing enormous wealth from decades of investing - driving a deep wedge between holders and non-owners," positioning Robinhood as a defender poor, as well as the heroic outlaw from the English folklore behind the name of the brokerage house.
She ended her attack by claiming that Robinhood had been honored by the elite for deeply disturbing her, opening the door to a new breed of young merchants. Indeed, it is astonishing why a long-term investor like Buffett would even bother with day trading tactics operated through a brokerage house that seemed to provide adrenaline-like experiences for young people in addition to short-term profits.
The genie is gone
Besides, had it not been for Robinhood, which banned trading and saved some hedge funds caught in a merciless bear squeeze by a group of united people via a trading forum, thus risking their license, the result could have been even worse for big sharks and more enticing for beginners in the trade looking for quick profits and huge doses of adrenaline.
One of the first lessons a trader learns is that the markets are driven by raw emotions like fear and greed, and while some of the big players have found a way to get around the emotional component by developing high frequency trading algorithms (HFT) in order to use the emotions of other participants, dden elimination of fear threatens the status quo.
Rally spikes are usually driven by triggered stop losses from traders caught on the wrong side of the market, but what happened to GameStop was that stock buyers weren't afraid to lose (and probably didn't use stop losses), recognizing transaction for rubicon. The elimination of fear didn't stop the game, but it fundamentally changed the game's rules by introducing an uncontrolled variable.
The threat from an unknown factor was later addressed by Securities and Exchange Commission (SEC) suspended some stocks, claiming they were driven by the social media craze. But the genie is out of the bottle already, and even people like Buffett and his righteous Munger would have to take that into account.