Biden’s Potential SEC Head Wrote Book Calling Stock Picking a ‘Hoax’
President Joe Biden has nominated Gary Gensler to run the Securities and Exchange Commission. Gensler worked at Goldman Sachs before working for the federal government in the Treasury Department and Commodity Futures Trading Commission. More recently, he has taught economics and management at MIT. He has a solid resume, according to reporting by Quartz.
Gensler shared his perspective on stock picking in a book that he wrote with Gregory Baer called “The Great Mutual Fund Trap,” released in 2002. While it may seem outlandish, his advice to avoid stock picking and active management in favor of indexing and other passive strategies is conventional wisdom on Wall Street. Reams of academic research shows that after adjusting for expenses and risk, most money managers and individual investors underperform when trying to beat the market.
The few money managers who do manage to beat the market are able to charge fees that are high enough to eliminate their advantage. It’s hard for the average person to believe that all these people with fancy degrees and IT systems worthy of NASA haven’t uncovered a secret that they refuse to share, and yet, it’s true.
Gensler’s position also signals how he would deal with Robinhood and other trading apps. He has long expressed skepticism with day trading and app trading, and so he is likely to have an aggressive approach to regulating them. This may be a disappointment to people who have jumped into the meme stock game, but it may also save them in the long run.
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