JULIA LA ROCHE 00:00
What are Mr. Munger’s thoughts on the recent GameStop short squeeze by social media and the resulting implications on short selling in the future? And another shareholder named 'Lee' asked: Dear Mr. Munger, please share your thoughts on the recent /r/WallStreetBets GameStop short squeeze. It seems to involve a lot of your standard causes of human misjudgment.
CHARLIE MUNGER 00:25
Well, it certainly does and that’s the kind of thing that can happen when you get a whole lot of people who are using liquid stock markets to gamble the way they would betting on race horses.
And that’s what we have going in the stock market in a frenzy that’s fed by people who are 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. It’s not generally noticed by the public but clearinghouses clear all these trades. And when things get as crazy as they were in the event you’re talking about, there are threats of clearinghouse failure. So it gets very dangerous. And it’s really stupid to have a culture that encourages as much gambling in stocks by people who have the mindset of race track betters. And, of course, it’s going to create trouble as it did.
I have a very simple idea on the subject. I think you should try and make your money in this world by selling other people things that are good for them. And if you’re selling them gambling services where you make profits off of the top, like many of these new brokers who specialize in luring the amateurs in, I think it’s a dirty way to make money. And I think that we’re crazy to allow it.