Did you ever notice the tone of stories about how new investors are coming to the markets and stocks are becoming a bigger part of the wealth of families? These articles almost always have a bias; the theme is that these new investors will be lambs to the slaughter. They are flocking in droves and don't know what they are doing.
I find these articles abhorrent. They presume that almost everyone is a doofus. It's actually the opposite. Anyone who has their money in savings accounts or CDs are doofuses. They can make nothing. In stocks they are getting a good return. In fact, most of these articles are really about stocks being a bigger part of a person's portfolio because they have advanced so much. You can't be an idiot and be richer than the geniuses in cash, can you?
It gets worse. What if people educate themselves to the values of being in stocks? Is that not possible?
Nobody has more harsh comments about younger investors, especially of the Robinhood types, than Warren Buffett and Charlie Munger. I love their folksy attitude and I don't believe they are averse to people joining the stock market. But the notion of people picking stocks, particularly options, was totally frowned upon by these two deacons of Berkshire Hathaway (BRK.A) , (BRK.B) at their annual meeting over the weekend. They talked endlessly about the casino attitude of younger people, that they truly are gunslingers.
There is no doubt that, if we cut through the folksy talk, Buffett and Munger are saying that these new millions are a bunch of fools. They both say it without an ounce of irony considering that a preponderance of these investors came in when the market was much, much lower, something that Berkshire Hathaway sure didn't do. They were sellers of $12 billion of stock and found no elephants to buy.
Why not even a momentary doff of the cap to people, especially younger people, who believed in stocks when these two did nothing? Why not an ounce of humility? Why the endless drumbeat that Robinhood has encouraged a casino environment?
I think that Robinhood has gotten many involved who would otherwise have no interest in the stock market. Will they all be fools who blow themselves up? I am sure many will, especially if they get their information from Reddit's WallStreetBets, which seems to stand for recommending three or four stocks, the same three or four stocks, none of which is that good but were at some point. That, indeed, is a ridiculous place to so-called learn, yet we hear over and over again this is where they get their information about stocks. But a lot of these young people bought shares in slivers of bitcoin and, for better or worse, they crushed it.
I also tire of the rich telling the less well-off not to try to beat the market. In my lifetime I have seen so many people beat the market that it's astounding. I know, you could argue I only see wealthy investors. But that's just hokum. You could argue that my sample is anecdotal. That's nonsense, too.
After 16 years of interacting with investors of all kinds, from young people to newbies to middle-aged and even elderly investors, I have seen an overwhelming number of people trump the market, many simply by buying FAANG. Many people were buying Apple (AAPL) when Munger and Buffett were selling it. Again, why not some praise for those who beat the market by buying what they know and use?
Regardless of whether they beat the market or bought index funds that equaled the market, I welcome these people to the fray. Do I believe Robinhood when they say "there is an old guard that doesn't want average Americans to have a seat at the Wall Street table, so they will resort to insults"? Yes, kind of, but certainly not by elitism, more like those who simply look down on all but those who own shares in their own stocks, whom they welcome when they have their annual fest post-COVID.
I agree with Robinhood when they say, "The future is diverse, more educated, and propelled by engaging technologies that have the power to equalize. Adversaries of this future and of change are usually those who've enjoyed plentiful privileges in the past and who don't want these privileges disrupted." I also agree with this: "The new generation of investors aren't a casino group. They are tearing down the old barriers to investing and taking control of their financial futures."
No matter, you aren't allowed to criticize these two. They are hallowed. Pantheon. But I do believe they do not favor change.
I remember when these two hated technology. They got crushed in IBM (IBM) . But they bought Apple because Buffett saw young kids wedded to their iPhones. They researched it. They liked it. That's exactly what millions of the new folks did, too. They should be saluted, not denigrated. But these two put the nails in the coffin of the younger and the newer. It's a crying shame.