"The stock market is raising gamblers"... Why Warren Buffett's warning hits harder in Korea

[Financial News] Warren Buffett, chairman of Berkshire Hathaway and a leading figure in value investing, recently warned the U.S. stock market that "it is hard to find value when everyone prefers gambling." Against that backdrop, some are voicing concern that the Korean stock market is not immune either.

Speaking through CNBC on the 15th, Buffett said, "It is hard to find value when everyone prefers gambling," adding that recent market sentiment has shifted toward short-term speculation rather than long-term investing.
He added, "There are times when opportunities are so abundant they are hard to believe, but there are also times when you are lucky to find even one good investment opportunity every few years. A normal market is the latter." He went on to note, "Human beings like gambling so much that it is more profitable to raise gamblers than to raise investors."
In May, Buffett also compared the stock market to "a church with a casino attached." He criticized the surge in trading of 0DTE options, a product popularized by Robinhood and others, calling it "gambling, not investing," and warned about the market's speculative tendencies.
In fact, indicators supporting that warning have continued to emerge in the United States. According to Crypto Briefing on the 5th, 0DTE options accounted for as much as 48% of retail options trading. Investing.com also reported that margin debt reached a record $1.42 trillion in May.
CNBC also expressed concern that retail investors are flocking to AI chip stocks, the recently listed SpaceX, various options and leveraged ETFs. It added that prediction markets such as Kalshi and Polymarket are also growing rapidly, driving a fast increase in bets on sports outcomes, political events and even stock price direction.

Leveraged investing is also rising sharply in the domestic market. As for margin loan balances, a key indicator of debt-fueled investing, the Korea Financial Investment Association said they reached a record 37.1998 trillion won as of the 8th. That was up by more than 18 trillion won from 20.1393 trillion won on the same day last year.
The figure then fell for six straight trading days, dropping to 34.7886 trillion won on the 13th, its lowest level in about three months. Since margin balances usually rise when the stock market climbs, the recent pullback in the KOSPI appears to have led to the decline.
A single-stock leveraged ETF tied to Samsung Electronics and SK hynix, launched on May 27, also highlights the concentration trend. The product, which amplifies the returns of individual stocks by a multiple, drew strong demand after its launch and absorbed a large amount of retail money, deepening the flow of funds toward the KOSPI and KOSDAQ, analysts said.
Just as U.S. 0DTE options are high-risk products that can become worthless depending on price swings just before expiration, single-stock leveraged ETFs are structurally similar in that they magnify a stock's daily volatility.

Financial authorities have also moved to respond to the surge in debt-fueled investing. At the third Consumer Risk Response Council meeting held on the 6th, the Financial Supervisory Service said it would strengthen oversight of sales practices that encourage excessive debt-fueled investing and of overly aggressive marketing by leveraged ETF managers.
A Financial Supervisory Service official said, "We asked for stronger investor protection oversight of excessive margin loan solicitations, insufficient risk disclosures, and especially cases in which margin trading is executed without the investor even knowing." The official added that, since the risk management system is operated under best-practice guidelines, it should be run flexibly to protect investors rather than in a formalistic or mechanical way.
Securities companies are also rushing to introduce measures such as restrictions on margin purchases and higher margin requirements. That is why Buffett's warning is not just someone else's story across the Pacific. As leverage has repeatedly hit record highs whenever the index sets a new all-time high, his remark that "it is hard to find value when everyone prefers gambling" is being seen as a message Korean investors should take to heart.
bng@fnnews.com Kim Hee-sun Reporter