Wall Street has transformed the stock market into a “gambling parlour.”
Buffett, 91, spoke at length about one of his favourite targets for criticism, investment banks and brokerages, at his annual shareholder meeting on Saturday.
Berkshire Hathaway CEO Warren Buffett has chastised Wall Street for encouraging speculative behaviour in the stock market, effectively turning it into a “gambling parlour.”
“Wall Street makes money in some way, catching the crumbs that fall off the table of capitalism,” Buffett explained. “They don’t bring in cash except if individuals get things done and they get a slice of the pie.” People who bet get undeniably more cash-flow than the individuals who contribute.”
Buffett lamented the fact that large American corporations had “become poker chips” for market speculation.
He cited the increased use of call options, claiming that brokers make more money from these bets than from traditional investing.
Buffett stated that Berkshire spent an incredible $41 billion on stocks in the first quarter, releasing his company’s cash hoard after a long period of dormancy. Some $7 billion of that was spent on Occidental stock, bringing his stake in the oil company to more than 14 percent.
“That’s why markets do crazy things, and Berkshire occasionally gets a chance to do something,” Buffett explained.
“People who know nothing about stocks are getting advice from stock brokers who know even less,” Munger explained.
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