Wall Street’s encouragement of investors taking speculative and high-risk steps in their investments has made it more of a “gambling room,” Berkshire Hathaway CEO Warren Buffett said at their annual shareholder meeting on Saturday.

Buffett, 91, blasted investment banks and brokerage houses on Wall Street and criticized the way they generate revenue.

“Wall Street makes money, one way or another, by picking up the crumbs that fall off the table of capitalism,” he said. “They don’t make money unless people do things, and they get a piece of it. They make a lot more money when people play than when they invest.

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A longtime advocate of corporate America, Buffett said they have become “poker chips” for market speculation. The growing use of call options has been one of the reasons Wall Street brokers have made more money compared to standard investing.

Berkshire Vice Chairman Charlie Munger blasted the algorithms that make the trades and said brokerage firm Robinhood’s ( (HOOD) – Get the Class A report from Robinhood Markets, Inc.) practices were “gross” and “unraveling” for this purpose. The company’s stock has fallen more than 40% in 2022.

Market volatility has been good for Berkshire. Buffett said the conglomerate paid out $41 billion in stock in the first quarter and paid for it through its treasury. Berkshire allocated $7 billion to oil producer Occidental ( (OXY) – Get the Occidental Petroleum Corporation report), bringing its stake to more than 14%. The conglomerate also added to its Chevron ( (CLC) – Get the Chevron Corporation report) stake that propelled the investment in Berkshire’s top four common stocks. Chevron is now its fourth main position.

“That’s why the markets do crazy things, and sometimes Berkshire gets the chance to do something,” Buffett said.

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“It’s almost a mania for speculation,” added Charlie Munger, vice president of Berkshire Hathaway.

Too many retail investors are buying stocks and unfamiliar with corporate finances, he said. Some of them receive advice from brokers who are also not very familiar with these stocks.

“We have people who know nothing about stocks advised by stock brokers who know even less,” Munger said. It’s an incredible, crazy situation. I don’t think any wise country would want that outcome. Why would you want your country’s stocks to trade in a casino? »

Buffett has never been a fan of investment bankers and generally doesn’t use them when he buys companies and sees them as “money mixers”.

It bought insurer Alleghany for $848.02 per share for $11.6 billion in March, the biggest buy since 2016. It was reported to not include Goldman advisory fees.

Maintaining a large amount of free cash has always been a strategy for Berkshire. Buffett reiterated that stockpiled cash position and said the conglomerate could work “better than banks” to provide lines of credit to businesses.

Berkshire focuses on retail banking

Buffett sold shares of Wells Fargo ( (WFC) – Get the Wells Fargo & Company report), JPMorgan Chase ( (JPM) – Get the JPMorgan Chase & Co. report.) and Goldman Sachs ( (GS) – Get the report from Goldman Sachs Group, Inc.) over the past two years and has instead prioritized retail bank ownership, keeping its stakes in Bank of America ( (BAC) – Get the Bank of America Corp report), its second position after Apple ( (AAPL) – Get the Apple Inc. report.) and USBancorp ( (USB) – Get the US Bancorp report).

This could signal the belief that the United States is heading for a longer period of inflation and that retail banks are a safer and more stable investment. The billionaire is no longer exposed to Wall Street banks that generate revenue from global investment banking and trading markets.

JPMorgan Chase’s stake was sold in 2020 after amassing an $8 billion stake.

In 2021, he sold shares of Wells Fargo, a share he has held since 1989 and which he has built up to 10% of the capital. Consumer fraud at Wells Fargo began with employees opening millions of accounts for people without their permission. Wells Fargo also charged unnecessary mortgage fees and also required drivers to carry auto insurance that was not legally required.

The giant also sold 84% of its stake in Goldman Sachs in 2020 which which he acquired after giving the investment bank $5 billion emergency loan in September 2008 during the financial crisis.

Berkshire’s Class A shares rose more than 7%, beating the benchmark S&P 500 index which fell 13.3% in 2022.