Billionaire investor Charlie Munger says stock market ‘gambling’ is as addictive...
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Billionaire investor Charlie Munger says stock market ‘gambling’ is as addictive as ‘heroin’—but he sees no way to fix it
Speculative trading boosted “meme stocks” and shares in many other risky companies during the COVID-19 lockdowns and helped retail investors profit tremendously before the market tanked.
Charlie Munger, Warren Buffett’s lieutenant at Berkshire Hathaway and a veteran long-term investor, thinks this kind of speculative trading is akin to an addiction—one that it should be done away with.
"They [people] love gambling, and the trouble is, it's like taking heroin,” Munger said in an interview with Berkshire Hathaway investment officer Todd Combs taped in April 2022 and published earlier this year. “A certain percentage of people when they start just overdo it. It's that addictive. It's absolutely crazy, it's gone berserk. Civilization would have been a lot better without it."
Munger said during the interview that the stock market attracts two types of traders: long-term investors and people wanting to “to do casino gambling.” The trouble comes when these two categories are allowed to trade together, according to the billionaire.
“Now, what earthly good is it for our country to make the casino part of capitalism more and more efficient, and more and more attractive, and more and more seductive? It's an insane public policy,” Munger said, adding that it causes harm to the country. “On the other hand, I think the chances of changing it are practically zero.”
Munger believes the effects of speculative trading caused the Great Depression, which started with the worst stock market crash in history in 1929. And while there are obvious perils of this form of “gambling,” he says nothing can be done about it.
At the time that Munger gave the interview, meme stocks like GameStop and AMC had surged almost 100-fold. Before the speculation-driven bump to its shares, AMC was at risk of bankruptcy, and GameStop’s was worth only a tiny fraction of what it had ballooned up to. And while market conditions have changed dramatically since then, meme stocks have seen good days even in 2023, especially when stocks seem to be climbing, adding to the frenzy.
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