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This is Master's in Business with Barry Ridholds on Bloomberg Radio. This week on the podcast what Can I Say, I have the delightful liz Anne Saunders on She is the chief investment strategist and member of the firm's investment committee at Schwab. The firm has eight and a half trillion dollars on its platform. We've been working with Schwab for a long time. Liz Anne was one of the earliest guests on the show, and we reminisce a little bit about that first appearance. I don't know what else to
say about her. She's so insightful and so knowledgeable and has such a wonderful perch overseeing eight and a half trillion dollars of both individual mom and pop investors advisors. They're the biggest platform as a estonian for advisors. My disclosure, my firm also uses them, and she just sees the world from a place that not a lot of people in the industry get to do. Not only do they have a giant research team, but she gets to see
fun flows. She gets to see a huge amount of activity from the inside, and she on a regular basis, speaks to investors, speaks to advisors, speaks to institutions. She is as much in the mix and the thick of what's going on in the world of investing as anybody, and that combination of her unique Perchin perspective and her deep experience as either a fund manager or a strategist for the past thirty eight years unparalleled in the world
of investing. I found this conversation to simply be delightful, and I think you will also, with no further ado. Charles Schwabs Liz Ann Saunders. I listened to the first conversation we had. It's like the second year I was doing this. It was twenty fifteen. You were great, I was awful.
That was not the first time we met. I remember that conversation nine years ago, but that was not the first time we met.
The first time we met was my first time doing television. I remember that in a tiny little room around a round table with Larry Kudlow, and I'll never forget banging down two die cokes, walking out the door to go to the men's room, and the producer grabs me, let's go, We're live, and that was it. I sat there for an hour with my back teeth floating. And that I remember a friend said, your fidgety, don't move around, don't
just pick a spot to look. And the spot was your front teeth, which are perfect and white and still perfect and white. Well, and I know why, well, I know why.
In between that time that we first sat down and did this and then this is a couple of years ago. Now we live in Naples, Florida, and it was the night before Thanksgiving. We walked out of a restaurant and I just walked off the curb the wrong way. Oh, and the first thing to hit the pavement, your teeth was my teeth.
So those are not now.
Parts of it chipped, the part of the right front tooth and the tooth next to it. And fortunately my sister's next door neighbor was a dentist, and he went in Thanksgiving morning and really and fixed it.
You know, I t boned a car. I was the t boney right in front of my dentist's office. And when I called the next morning, say hey, I chipped my front tooth I needed fixed, they said, oh, you too. There was a bad accident in front of that was me. Yeah, that was me. My wife was really upset. I totaled her car at like five miles an hour. An suv plowed into.
Us totaled five miles an hour.
So I was making a left. The person behind me thought I was going straight and tried to pass me on the left. So literally I meant a left right into them. And it's funny because that was a pandemic purchase, a very inexpensive twenty seventeen Panamera fors which everybody walked away. I mean, we were a little banged up, but you know, a giant suv just crunched us. And what's terrible is when you see the car afterwards and you see the driver's door, like, holy cow, how did I just how
did it walk go in there? That was like geez. Whenever people say you don't need to buy a new car, it's like, I want the latest, greatest.
With airbags with one hundred and seventy seven arabs.
By the way airbags come down, you can't sit. It was so disorienting because I'm trying to turn the wheel and.
I can't imagine driving in a car without a seatbelt on. Before we started this ferry, we were talking about our age and baby boomers. When I was brought home from the hospital in nineteen sixty four, it was in my mom's lap.
Okay, I'll tell you. I'll take that a step further. My dad had this giant I'm trying to it was an Impala, and we used to lie on the rear deck under the back window, like if there's an accident, you're a projectile right out.
We had a station wagon. We'd go from northern New Jersey to Brooklyn to visit grandparents, and sleeping bags would be laid out in the back.
And now you can't take a kid home from the hospital without the right not just a car seat. It has to be the right car.
I'm not saying what was going on back in the sixties was the right thing.
It toughened you up. You go through a few windshields, you know, you learn.
To dust your specially. I haven't had that.
All right, let's get serious. So everybody knows you as the chief investment strategist at SCHWAB, But let's roll back to the early part of your career. You get a BA in economics and polysi from the University of Delaware. What was the original career plan?
I didn't have one, none, well, not in college.
No.
In fact, what started as that double major ultimately morphed into the official degree being in international relations. But to be perfectly honest, I just decided to study a couple different areas that were very broadbrush because I didn't know what I wanted to do when I graduated international relations.
So you go to the Kennedy School and then become a diplomat.
Well, you know, I thought about going to graduate school right away for political science. I looked into American University, and then I thought to myself, I don't know what I want to do yet. So all I knew throughout the latter part of my undergraduate years is that I wanted to live and work in New York City. That was the dream without a latch. Grow born in bay Ridge, Brooklyn, then early part of childhood in Marstown, New Jersey, then
outside of Philadelphia and Westchester, Pennsylvania. Then of course went to Delaware and then New York City for twelve years, and then Connecticut. Raised our kids in Darien, Connecticut. And now I'm based in Naples, Florida.
Right, do you have a little golf cart and your.
Put no golf cart now, but of Vespa.
Okay, oh that's fun. So you come out of college, how did you end up at Avatar Associates working with Marty's wide.
So I interviewed across the spectrum of industries, and they were all interviews for grunt positions, entry level positions. But I had interviews at a few Wall Street firms, both large and small. I think I interviewed at a marketing firm and ad agency because I didn't know what I
wanted to do. But I had some familiarity with Marty because in college, one of the courses that I took a requirement was, in addition to reading the Wall Street Journal every day, was understanding what had happened in the world of financial markets throughout the week. And I had a professor give me a little sort of hint. He said, Hey, just watch Wall Street Week on PBS on Friday nights Closer Kaiser at eight thirty to nine o'clock. Then you know,
you go out and you start your weekend. And I did. And Marty was on that show really from its inception in the early nineteen seventies. And for those that remember the show, you also remember that that predated anything that exists Now.
That was the Orisontal for that show. Before there was three or four different financial news networks.
And it was millions of viewers every week. It was that eras version of Must see TV on the subject of the market. So I had some familiarity, but in advance of the interview, I also did more research on Marty on his side of the organization, which was the mutual fund, hedge fund, investment newsletter side, and then the avatar side that I ultimately joined, which was the institutional money management firm that Barry is a reminder in nineteen eighty six, the process of doing research on a person
or a firm, there is just Google them. No, there was no Google. There were no computers, there was no Internet. So I was in the library with the microfiche machine and literally turning the crank and reading newspaper articles. So I had some background and had two interviews, and honestly, just the voice inside my head said, this feels right.
You're there for thirteen years, nineteen eighty six to ninety nine. That was the Great bullmarket. Tell us a little bit what it was like during that period, and then we'll talk about what it was like working with Marty's Y for the late Great Marty's wife.
So again I was on the avatar side of this Wyg Avatar broader organization, which was institutional money management, managing money for a lot of large corporate plans and foundations and endowments. And I was a portfolio manager, so I was doing bottom up rec search and picking stocks. But it was with the context of the top down analysis that Marty brought to the picture I learned throughout that
thirteen years. And part of the reason why I took advantage of an opportunity that presented itself to move over to US Trust was I was much more interested in and fascinated by the top down and not the bottom up. I did love picking stocks, it just wasn't where my
passion was. So my observations were more keen on what Marty and his models were doing in the context of the big picture and monetary policy analysis and investor sentiment and behavior, and that was where I really found my passion was in that top down analysis.
So let's talk a little bit about Marty's Wig, one of that era's most famous investors and traders. The technical crew know him for the ZWYG thrust Indicationlater he created the coal ratio. But he's also the guy who coined the phrase don't fight the fed. Tell us a little bit what it was like to work with Marty's why.
I adored Marty, you know, rest in peace. He was quirky. He could have a temper, but never about the big stuff. It was more about the little stuff. If he couldn't find his pencil, and you know, he would toss a phone. But he was really sort of warm and fuzzy, but had that. He was always sort of anxious and nervous, and a lot of people who just observed him from afar took it as well, He's just bearish all the time. It wasn't the case. I mean, he was essentially a
market timer, for lack of a better word. He was an tactical acid allocator.
And one of the more rare successful market.
Times, unbelievably successful, and had to do with the discipline of the models that he used and how he segmented economical equids, investor liquidity, and then technicals and breath conditions and understood how they melded together. And you know, it wasn't The history of working for him wasn't without some periods that he didn't quite nail, but the big ones he really nailed.
When I was early in my career, I read the book Winning on Wall Street, which I think came out in like ninety five or ninety six.
Well, the original one came out earlier than that, but there were there were additions that followed that, but it's still a mustreet.
And my takeaway from that is market timing is one part science where you're crunching numbers and looking at history, but you can't get away from one part art where after you're watching the markets for decades like him, there's an intuitive feel where just something starts to smell wrong and when the data lines up and your spidey sense
starts to tangle. And he never quite said it that way, but I very much got the sense that all the data was there to buttress the fact that, hey, I've been watching markets for fifty years and something wicked this way comes.
The gut instinct was extraordinary. It was always again in the context of the models that he was very disciplined about, but there was that just added little piece, and it certainly came into play with regard to what essentially was his crash call.
So let's talk about that. So he's a regular on Wall Street Week with Lewis Rukeiser. I could still see the dollar sign in the street, the s for the street in the in the logo the Friday before Black Monday, he goes on Rukeiser, what does he say.
For those that don't remember the show? And it's you know what every other goes by? I still hear all the time. Oh my gosh, I miss Wall Street Week. I miss Lou? What was he like? What was Marty like? And younger people just never heard of the show. They have no idea who who short Kaiser is, and that's kind of sad for somebody that's been around for as long as I have. But the structure of the show
with Lou would come out. He would do ten minutes or so of a monologue and it was really brilliant writing. He wrote them all himself. There was humor, there was great intelligence on what had happened in the market. There was really important reminders around what matters and what doesn't. And he was just sort of a calming force and influence,
especially during tumultuous times. But then he would walk over to the table where at the table was Lou and the three regular panelists that were on that evening, and there was twenty one two three panelists on an ongoing basis, and he would have a conversation with each panelist and then all four would go over to the sofa area
and interview the special guest for that night. So this was the middle part of the show show where he was talking to the panelists, and Marty was his typical and I think Lou asked him, and you can find it on YouTube.
It's a.
Bunch of them, a bunch of them, are that's the one to watch?
Yeah? Absolutely, And I.
Think Lou said, boy, you sound a little trouble. Do you think we have a bear market? And Marty basically said, no, I think the market's going to crash, And then he went further to talk about the nature of what it would look like, the probability that it would happen, but then there would be a retest, but then once you had the retest, the decent chance that you'd be off to the races again.
Pretty much exactly exactly what happened. Like, It's not just oh, the market's going to lose some points on Monday. He laid out like the next six months and it's exactly what happened.
And it had to do with the interest right backdrop at the time and tighter monetary conditions, but also the spidey sense to your point, around the the innovation of the time of portfolio insurance and felt that that was sort of unwinding and wasn't going to represent the insurance that a lot of people thought. And he was on that the hedge fund side of the dual organization so could be could swing for the fences a bit more
than we could on the institutional side. And I don't remember the exact percentages, but was very aggressively long heading into what the pre crash peak was in August, and then started aggressively both selling and moving to the short side of things, heading right into the weekend before the crash. And we did something similar on the institutional side, not the same extreme, but close to fully invested to a very very low equity exposure.
And people may not remember nineteen eighty seven was at least up and through September was a robust year in the market. We were up like thirty or forty percent, like a really substantial gain, and despite the twenty two point seven percent crash, I think we finished the year like up one percent.
I think it was one point eight percent. And you know what, Barry, I'm glad you mentioned that, So indulge me if you would, on a tangent here. One of the things that I have never done, and no one at Schwab has ever asked me to do, is what I think is the silly exercise of things like yourine
price targets. Now, in part that's a way for institutional strategists to be measured against one another, and the sort of narrative embedded in that I suppose might matter to institutions, but our eight plus trillion dollars of client assets are for the most part, individual investors. Nineteen eighty seven is
a perfect example of that. If I, at the beginning of the year had said the market is going to be up less than two percent, that might have sent the impression that it was going to be kind of a boring year and patted myself on the back at the end of the year. But the path that the market took to start at the year and then ended up one point eight percent was nothing resembling what one might infer if you had just heard the year end price target of essentially a flat market.
So I love the mental exercise that Wes Gray of Alpha Architect does. Hey, if you knew with perfect clarity, if that bird landed on your shoulder and told you here's where equity prices are going to be in ten years, position your portfolio for that. He says, even God would get fired as a portfolio manager because the drawdowns can be so vicious. And what do you mean you're fully invested. The market is down, you know, thirty forty percent? You didn't see this.
When markets are going up, the benchmark is either an index like the S and P five hundred, or you know someone you know that's making even more money than you are. But it's amazing how quickly the benchmark turns into cash or a positive return when markets are going down.
So let's talk a little bit about a day in the life of a chief investment strategist at an eight trillion dollar firm. I have to assume every day is a little different.
I was going to say, it depends on the day.
So take us through a typical day. What's it like.
Well, there is probably nothing typical about a day, but on the rare occasion where I have a decent block of time where I am not on camera or traveling, I do a lot of research. I remember when my daughter was in middle school and she's twenty four years old analysis, and she's the youngest. It was a long time ago. The school had a career day and I was asked to come in as one of the representatives
to have kids rotate through the classroom. They assigned you to and talk about what you do, particularly for a job like mine. The directive from the principle was try to get the seventh graders to understand what you do. So I started by saying, well, basically, I read, write, and talk. So that's what I spend my typical day
doing is some form of reading, writing and talking. And the reading part is the digestion of just a fire hose of information, proprietary research, internal Schwab research, all the research that I get from the variety of research sources that we have, analyzing data, analyzing every economic report that comes in, everything happening in the market on a day to day basis. Even though I don't take a trading approach, just looking at technicals and breath statistics and leadership and
factor analysis, et cetera, et cetera. And then I spent a lot of time both literally and figuratively, on the road talking to our clients, both the retail clients as well as advisor services. Now, in this post COVID environment, it's not quite as much as used to be the case in terms of travel to do in person events. It's maybe sixty percent back in that direction, but we've all adopted to the.
Use of Isn't that a better balance?
Doesn't it's a better balance, and it's efficient. I used to I used to go over to Asia once or twice a year to see many of our clients that are based over there, and the trips would involve some combination of Hong Kong, Shanghai, Beijing, maybe Singapore, and I would do a breakfast event, a lunch event, a dinner event. The dinner events might have up to one hundred and fifty two hundred people, smaller other events, but at the end of a trip it was a brutal travel trip.
I might have interacted in some form with several hundred clients. I now do a quarterly webcast for those same clients, and there have been webcasts on which we've had more than five thousand. Wow, clients, So there is an efficiency to continue to weave that in.
There's no substitute for the face to face. But sometimes it's like, do I really need to go here to meet with thirty people? It just seems so some of the takeaway from a little bit of zoom, a little bit of webcasts have become hey, we can be more efficient and more productive. Absolutely, all these tools existed ten years ago. The pandemic seems.
Fair for us to right. Absolutely. And then as you and I sit here having this conversation, a relatively new component of my day to day activity is I know, co host a podcast.
I know that. How are you enjoying that?
Love it? Absolutely? Love it? So we launched it. I think it was November of last year. I co hosted with my colleague Kathy Jones, who was our chief fixed income strategist, So she's my counterpart on the fixed income side of things, where my bias is on the equity side of things. And we have just very open, honest conversation, sort of you're a fly on the wall hearing what
we would talk about. It's very unscripted about what's going on in the markets, and we talk about the FED and economic data and what's a head for the week. And we typically also have guests both in weekly. You're doing weekly, We're doing it weekly. It drops on Fridays. It's audio only, so we can have external guests, internal guests. Any people can be wherever they are, and a wide range of guests that we have had. We had Claudia som we had al Rabel talking about commercial real estate.
We had Dolly Lenz of real estate fame talking about residential real estate. We've had internal guests like our own Mike Townshend talking about what's going on in Washington. So that's been an absolute blast.
Isn't this not to toot my own horn, but isn't this just such a pleasant formatte not three minutes? There's no camera in your face. You know, the world is not black and white, and investing, especially has so many shades of gray, and to develop really have a decent explanation as to what's going on five minutes really is tight. Write it really is so to go into that sounds great and I love that description of what you do
is reading, writing and talking is really is great. I wanted to ask you something you mentioned all of the internal schwab clients, you have advisors, you have individual clients like I would love to be let loose on that data to see what they do in response to markets. How do you look at the behavior of whether it's professional or institutional or just mom and pop traders. Do you guys monitor that and say, here's the sentiment. It looks like people are starting to get really panic.
We do, and there are a variety of forms that we disseminate that type of information out into the public sphere, which is not something I do formally. There are groups that put that together, but I have access to the information, and you're right, particularly as it relates to the sentiment in side of things. I have been a sentiment watcher for my thirty eight years in this business, learning a
lot about the power of sentiment from Marty's wig. But I think it's important to look at both attitudinal measures of sentiment and behavioral measures of sentiment. And behavioral measures. With eight plus trillion dollars of client.
Assets, someone's going to be acting in it's.
Probably a pretty good eye into the sort of psyche and behavior of individual investors. So it is absolutely something that I incorporate in the analysis. It's in addition to broader metrics that go beyond just schwab things like fundflows and obviously the put call ratio and other ways to measure the behavior of investors. But it's in conjunction with those more attitudinal measures, and that comes from sources like
AAII American Association of Individual Investors. But frankly, a lot of the attitudinal measures of sentiment I pick up just from talking to our clients on the road. That's where the spidey sense that the gut feel comes in. And now being very active on social media too, particularly Twitter slash x. By the way, I am not active on either Instagram or Facebook. However, a very troubling, huge rash of impostors on those platforms of me not just trying to get followers.
Yeah, I was kind of surprised you.
Were kitching pitching things like.
Your big bitcoin advocate.
Apparently that is not me, by the way.
Not on Facebook, I'm not on.
I'm not active on Facebook. I'm not And I've had a rash of impostors on Twitter.
I was about to say, you know, Elon Musk is touting groc as their AI and I would never subscribe to that until they were able to demonstrate, Hey, groc has gotten rid of all the spam bots, and it's gotten rid of all the like I'm constantly reporting fake backes. I'm sure, and how c not. It's so easy to identify. Well, if a I can't do that, then it is worthless.
It is, and it drives me crazy.
That it's gone away anyway.
Twitter, somebody will think it's me, right, and it's somebody. It's an account with you know, seven followers and nine not not that, not that I'm on you know, Taylor Swift, but to.
Be fair, your call on doge coin using the handle lizen Sunder's nine seven three one four six nine it was pretty well.
Time good for her, for her, for him or it or whatever. It's a North Korean Yeah, no, so for for people who might not have been following the actual me, it's at Las Anne Sanders. There's there's no e at the end of a hand. There's Saunders is not spelled with a Z. There's no numbers added to it, there's It drives me crazy, and.
It's it should be one of those things that are just so easy to fix, and he is otherwise distracted, So it is something that yeah, that's pretty good. And I remember when you first when we when we spoke last time twenty fifteen, I.
Think I had just joined Twitter. Yeah.
And for people who don't follow liz Ane Saunders, but you should, and I retweet you on a regular basis. You put up some really nice charts, some good tables. Everything is databased, everything is fact oriented. It's none of the stuff that I see from you. And this is why I appreciate your feed. Is you know, I really think the market has another leg up here about ten to fifteen percent. Then we get a pull up.
There's none of that, there's no bit just because I you know why, I don't know. I can't do that. That's right, and by the way, nobody knows. Nobody can do that. It's not what we know that matters, meaning about the future, what the market's going to do. It's what we do along the way. It's as simple as that.
It's a little bit of a stoic philosophy. You can't control the world. All you can control is your reibator, what happened, your behavior, And that's very challenging for people to accept.
Fear and greed are really really powerful emotions, especially as it relates to our money, because we care a lot about our money.
So let's talk about fear and greed. Let's talk about twenty twenty two and twenty twenty three. Twenty two was a tough year. We had double digit declines in fixed income and equities. I think the SMP was down about almost twenty percent. Then NAZAK was down about thirty percent. What was twenty twenty two like for you? Dealing with a lot of clients and investors concerned about what was going on?
You know, one of the most interesting things about twenty twenty two was to tie this into the sentiment conversation that we just had and the differential times between behavioral measures of sentiment and additudinal measures of sentiment. I'm sure you remember the first big wush down into June of twenty twenty two that at the time was the hope for Okay, maybe this is the wash out point, in
part because some sentiment measures were at extremes AAII. I don't remember whether it was exactly around the low of June, but sometime in that spring early summer period, the percentage of bears in the weekly AAII survey went to a record high and commensurately, the percentage of bulls went to a record low, but it wasn't matched by the behavioral measures. In fact, AAII, in addition to their weekly or you
bullish or you bearish? Are your Neutral survey, they also track the equity exposure of their same.
Time My favorite data point of that.
And at the time where you had record high bearishness record low bullishness, the equity exposure was only slightly often all time high. So that was a classic example of what they what they're saying, and what they're doing are sort of diametrically opposed. Fast forward to the October twenty twenty two period, there was a little more of that across the spectrum, wash out the puke phase as I
like to call it, using a very technical term. That was also a period where because the Magnificent seven or the Grade eight, you know that the small handful of ten now right now it's getting shrunk, that those stocks were dragging performance down. But what was interesting about the October low was what was going on under the surface. So the indexes at the October low had taken out their June low, but under the surface you were seeing
much improved breadth. You know, positive divergence, to use that technical term, and that was a more compelling point in the market. Again, the message from us wasn't the bottom is in, but the message was this looks more compelling than what was happening in June because you had that sort of double wash out in sentiment and you had that under the surface improvement in breadth where even though you know the generals were retreating, there were more soldiers kind of approaching the front line.
And the October twenty twenty two lows were slightly below the June lows. And so the technicians will say that's a double bottom, but I recall seeing some people say, uh, oh, we're going to start a whole new leg down over here, and it's hard to see that with sentiment that negatively.
Not only that, but again the fact that breadth under the surface was truth.
Yeah, And you know, same thing at my firm. We're not market timers, we're not traders. In my personal account, I went out and bought a bunch of QQQ calls and Spider calls just to play around, and Russell two thousand calls. Spiders did well, Russell's did nothing, and the cues crushed it. Over the next year. But that has to be a challenging period. What sort of halls and do you get panicky conversations with investors?
You know, one of the differentiations that I've observed over my many years at Schwab is during some of the really tumultuous eras twenty twenty two, maybe not as significant as the COVID decline or certainly the global financial crisis, is there is a pretty direct correlation between the ability with the withstand volatility and tough market environments with whether you sort of have a discipline strategic acid allocation plan versus more of the day traders, the wing it kind.
That's where you see the bigger emotional swings versus our clients that have taken that what we sometimes call an advised approach, where they've got that long term plan, they have a financial plan, they've got a strategic acid allocation structure that is tied to everything personally about them, that they have the disciplines around diversification, periodic rebalancing, and they tend to ride through the tougher times much better than the kind of wing it type investors.
So let's flip it on its head. Twenty twenty three S and P five hundred up almost twenty five percent, and nas deck up more than double that. What do you do with people who suddenly become uber bullish and hey, this is this is a new something. We have to be in it to win it. How do you call it that?
You're like, last year was so dominant by such a small handful of names. It got less extreme as the as the year concluded. But at around the midpoint of last year, you not only had the Magnificent seven accounting for more than all the performance, but you had a record low percentage of the index outperforming the index itself, and.
Forty five stocks did better than twenty five percent one hundred and forty four STO and the S and P five hundred if I'm remembering correctly, right, output.
Wells way, which is low to look at that. So at the low point of last year, even today, if you look at the percentage of the SMP that has outperformed the index over the past twelve months, it's only twelve percent. That's close to an all time low.
If give me those numbers again, twelve to.
Twelve percent of the overall S and P five hundred.
So you're talking sixty stocks.
Right have outperformed the S and P over the prior twelve months. Now, if you start to shorten that twelve months, it gets better. So right now it's around forty percent of the index has outperformed the index over the past month.
Really, that's much broader. All we hear is people saying the market is narrowing. This is how bulls end.
It's just it's broadening.
It's going the other way.
So even justice, yes, it is even just among the magnificent seven. Now last year, so that Moniker came because those were the seven largest stocks right in the SMPN and the Nasdaq. They're not the seventh largest anymore. Six of them are still the sixth largest, but Tesla has dropped down. It's kind of bouncing between the ninth and the ten spot. So leap frogging Tesla has been. Berkshire, Hathaway, Eli, Lilly and Broadcom has been, you know, kind of breathing
down Tesla's neck. Last year, they were the seven largest stocks consistently throughout the year. They weren't the seven best performers, but they were all strong performers double and triple digit. You only had to go down to the sixty third ranking within the S and P five hundred to capture all seven of those names year to date. As you and I are recording this, three of the seven stocks are ranked year to date performance in the bottom quintile, so they four of them have three of them have
a four handle in terms of the ranking. So that's Tesla, Apple, and Alphabet. Now Nvidia is still the best proing stock. But you've got this massive spread in terms of performance among just that group of names, and you have the sort of stealthy breakouts happening in areas like industrials, even to some degree in financials.
And which have been a giant laggered for right forever.
But you know, sectors and groups and categories, there's rotation. I think all l sqel's that's a healthy thing. I think still a bit more work needs to be done. But in terms of back to the original part of your question, you know, how do you navigate this? First of all, understand what's actually going on in the market, and understand that indexes can often paint a very different
picture versus if you look under the surface. And that's why in my latest report I said that this may be more of a duck market than a bull market.
That's that's a quite literally a question I have explained. I love the metaphor of a duck explained.
So it was I guess is the quote originally is attributed to Michael Kaine, who's talked about a duck being very calm on the surface but paddling like the dickens underneath. And to put some numbers behind what I mean in this context, that both the S and P and the Nasdaq are still trading around all time highs with in the case of the S and P, no more than a two percent draw down from a year to date
high maximum draw down. It's a little bit worse is three percent for the Nasdaq, but that's at the index level. Let me just use the Nasdaq as an example of this, and as you and I are doing this first week in March, we're not very far into the year, but the average member Nasdaq member maximum draw down from year to date highs is negative twenty two percent.
That's big, it's big.
That's bear market level decline. So there's a lot more churn going on under the surface. And I think, especially in this environment, you want to understand what's going on under the surface, not just make assumptions about the market at the index level because of what has been that bias in terms of performance to just a relatively small handful of names.
So those data points that you bring up are really quite interesting because there has been an increasing chorus of people talking about passive flows and indexing are destroying price discovery. David Ihorn a few weeks ago said passive is destroying value and it's damaging market structure. You're essentially making the case that there's plenty of price discovery, that it's not uniform,
that money isn't just flowing into names blindly. If Apple, Alphabet and Tesla are in the bottom quintile of performers when they are amongst the top ten biggest stocks, that really contradicts Oh no, means there's.
Just there's other stuff going on.
It's not just fun now houses.
Passive did just surpass active in terms of the amount of money in passive ETFs and funds versus active. That just happened at the end of twenty twenty three. But dispersion is up and correlations are way down, and I think that that's supportive of activity, and that is not me saying sell all your passive vehicles and back up the truck and load up on active. We have always for years thought there's a home for both active and
power and settle in portfolios. The point is more that active in general and broadly has just not been playing on a level playing field with passive. I think that's improving, and it's your right. There is price discovery again. A lot of that has to do with the return of the risk free rate and an environment in the zerp.
Era competition with bonds, you mean, and just.
You know, the zerp Era zero percent interest rate. That was the support for zombie companies and companies that really had no business you know, existing. And I think with that return of the risk free rate, it is it has brought about more price discovery. It is represented a reconnection of fundamentals to prices. Not every day, not every week. You still get these you know, captriven concentration problems in the market like last year, but that's starting to ease
a bit. And if you're only looking at the index level and you see certain ugly days, I think the real story, which is arguably a more optimistic story, can often be found under the surface, not on the surface.
That's some really fascinating stuff. And I love that perspective of here's what the chatter is saying, but when we look at the data, it's telling you something else. All Right, last question on Schwab.
You've been there, I think later twenty four years.
So your next year is twenty five years. Yes, that longevity, first of all, is unusual.
Well two for all intents and purposes. Two jobs and thirty eight years not too bad. So that's not common on Wall Street.
I think it's definitely increasingly rare. The question is, tell us what's kept you at one place for a quarter of a century.
A lot of it has to do with the culture. And I give tremendous amount of credit to the man behind the firmly Chuck Schwab, and who is still with us, and he's still a pretty active chairman, and I know him personally as well as professionally, and his vision of what Schwab should be and has turned into is it really I think separates us from maybe the typical Wall Street firm, because you know, our sort of marketing tagline
of sorts of through clients' eyes is actually legitimate. And I think the perspective of the individual investor, what they maybe not want, but what we know they probably needs. Just very different than the institutional world, and I think approaching investing through the eyes of individual investors is just a different ballgame. And there was nobody that preceded me
in this role. So when Schwab acquired US Trust in two thousand, it was only ten months after I had joined US Trust, Chuck and and our CEO at the time, Dave Patrick, came to New York to meet all the US Trust executives and they sat down with me and said, we want to create this role of chief investment strategist any interest I'm making a longer conversation very short. I said, yep, hell count me in. And the rest is sort of history.
But they gave me a lot of free rain to sort of create this role, but with my full knowledge based on what I know was their mission around the organization of this is through individual client size, and that's a reason why we don't try to do things like market timing or year end price target. It's about long term planning and strategic acid allocation and just understanding how markets work and how behavior comes into the mix. So it's just been a great platform for me and I
love it. I hope I'm there for a.
Lot another twenty five years.
Well, boy, that would be interesting. So let me she my mom's age.
Then you mentioned the culture at Schwab. Let me share a perspective. I don't know if I ever shared this with you. So my firm launched in twenty thirteen with very little money. TD was our custodian.
I think i've heard of TD right now, part.
Of Schwab and the first couple, and we just the reason we did that is our prior firm. The clients were custody to TD, and it made it just a single letter, you know, LA, in order to transfer the accounts over. And it took us about a year or two. After you hear it for the hundredth time, where we
would go on a road trip. So we were a small shop, but you know, between our media exposure and everything else, had a national footprint and we would go to Seattle or San Francisco or Chicago or Austin, Texas And do you hear it like the nineteenth time, Hey, we love you guys. I would love to have you manage our portfolio. But we've been with Schwab and we're not leaving them as our custodian. Let us know as
soon as Schwab is one of your platforms. You know, you can only only have to hit me over the head with a hammer fourteen times before I'm like, hey, maybe I may. And now we have I think we have. I'm doing this off the top of my head. You know, four billion plus on the Schwab platform from essentially nothing years ago. Well, you guys have won a great part.
You know. I don't again, I always like to disclose things, but it was it was dumbfounding in the beginning, where it's like I don't understand they're a custodian.
Why now it's a partnership. I'm glad you use that.
That's what we ended up learning is oh, the culture at Schwab and the way they do things. This isn't just hey, leave your money with us. We'll send you a statement every quarter and that was it. It's a very different relationship. And to Chuck's credit, you guys created something that did not exist amongst most custodians beforehand. Am I over now?
No, no, not at all. And we are you know, by far the largest in terms of not just custodying assets for the RAA community, but representing that partnership in everything from research and trading and succession planning. It is. It's an important part of our business for sure.
Let's talk a little bit about the markets and the economy today, starting with all right, we're at all time highs and the Nasdaq where at all time highs in the s and P five hundred. I've heard a bunch of people on TV come out and say, oh, you know, this makes me nervous. What does the data say about what all time highs in broad indexes mean for the next couple of quarters.
Well, it starts to years that have a lot of momentum do tend to carry through. But there's with any data point like that, if you're looking at aggregate data or averages, there are always exceptions to those roles. And as we already talked about, there's been a lot more churn under the surface and when you pick up if you're only looking at index level. But to say that this has been a unique cycle, both on the market side of things and the economy side of things, is
the ultimate understatement. And I think that to be an analyst of the market and one of the nice things for me as strategists at SCHWAB is that I get to wear the two hats of both market strategists but also economist. We don't have a separate chief economist, and I like that because I get to marry the views. I'm not beholden to somebody else's view on the economy.
And on that front, the nature of this economic cycle helps to explain why we've had so many funky things happen in terms of the market cycle, and it's we've been using the rolling recessions terminology because that's actually what has happened in the early part of the pandemic during this stimulus fueled piece of that cycle, that all of that stimulus was essentially funneled into the goods side of
the economy because we had no access to services. That was the breeding ground of the inflation problem with which we're still dealing. But we subsequently went into recession like conditions for many of those goods oriented categories like manufacturing and housing. Housing related a lot of consumer oriented products and goods that were big beneficiaries of the lockdown phase. And we've gone from hyperinflation to disinflation to some deflation
based on certain categories of goods. But of course we've had the later pickup and off setting strength on the services side, and you've seen that roll through in terms of market behavior too, And it just makes this backdrop kind of an apple compared to history's oranges, and I think we have to be mindful of that when trying to gage where we are in the market cycle, where we are in the economic cycle. It's just a very unique period.
Any other historical parallels that come up, I personally hate the nineteen seventies parallel, because you certainly know the employment picture, the inflation picture, the geopolitics, everything was just so much worse than what we're dealing with.
It a very very different backdrop relative to the nineteen seventies. I guess the only comparison that we're witnessing right now is the desire on the part of the Fed and maybe Powell in particular, to not repeat the mistakes of the nineteen seventies in terms of monetary policy premature, you know, hanging of the victory banner, easing policy, only to see inflation sort of its head again. So I think that is maybe one similarity in terms of what the playbook
is for the FED. But I totally agree with you that the nature of what was driving inflation, the backdrop in terms of geopolitics and demographics and labor versus capital is not a mirror of what we're experiencing right now. But I think the FED took some lessons from the mistakes back in that.
Era if you're looking for parallels, and I think you're right, this is totally unique, but the immediate period after war war is kind of similar. You have all these gis returning and all this pent up. Hey, we couldn't do all these things, and a spike in inflation that came down, unemployment collapse because you had all these people coming back to work.
It's not perfect, no, but I think you're right. It was a military war, not a health war, which was the case this time, but had some of those same characteristics in terms of supply demand imbalances and the drivers of inflation. Obviously, there are plenty of differences, not least being what happened on the other side of it, with which you know, massive amount of military personnel coming back into the private sector and into the civilian workforce, and
the rebuilding of the global infrastructure. That is one era that I have used often as a reference point, with that differential being military war versus health war.
So let's talk about some of the other differentials because I think they're informative. Not only did we bring a lot of technological usage forward or things that existed. Look, we've had FaceTime for fifteen years. It's not like it's new, and screen shares and other things like that, but they just became more widely adopted.
It was forced adoption because we have no choice. We had no choice.
But today we have office buildings that are not running full documency. Return to office has been you know, we're sixty percent seventy percent back. You have a lot of hybrid work, you have a lot of people working from home. How does this affect how you perceive the economy? What does this mean for things like hey, commercial or residential real estate investment?
Yes, so commercial real estate tends to get thought of too monolithically. Commercial real estate is a very broad category, obviously, and it's inclusive of not just the world of offices, but you know, multi family residential and warehousing and retail
and healthcare facilities, et cetera. So we can't paint commercial real estate with one broad brush or segments within SIRI that are quite healthy versus say office, and even withinn office, of course, big differentials in terms of urban versus suburban. Certain regions in the country are doing much better. There's the different parts of the country have larger percent that
have gone back into that more typical office structure. And then of course the exposure to commercial real estate, which is yes down into the smaller regional banks, many of the same banks that suffered the most from last year's mini banking crisis. But even there there's you know, a vast array in terms of maturity schedules and what type
of commercial real estates exposure. On our podcast, one of the recent guests that we had on that I interviewed as actually a friend of mine, Al Rabel, who is the founder and CEO of kan Anderson, a big, huge private equity private real estate company, and although they're specifically more involved in student housing and senior housing, he's an expert more broadly, and I asked him at the outset of the interview, I said, let me ask you an expert, and I'm not an expert, a question about how I've
been terming it, how I've been describing it and feel free to tell me you're dead wrong, Lezanne. I think it's this is not a Lemanesque kind of problem. It's more of a slow moving trade wreck or a simmering problem over time. And fortunately for me, he said, yes, that's I think an app to descriptive. That doesn't mean the problems aren't still ahead of us, but it's over a more graduated period of time, and with some of
the carnage will come opportunities. And that was maybe a more interesting part of the conversation is some of the sort of distressed firms looking at this as an eventual opportunity to come in and acquire some of these properties, you know, significant discounts. So with carnage comes opportunity.
I'm glad you brought up private equity because during the era of zero interest rates, when you couldn't really find any sort of yield in the public markets, private equity, private debt venture right, pretty good numbers. Seven eight nine percent yield versus two three percent. Now that the risk free rate is in the threes or fours, and muni bonds are giving you the tax equivalent of, depending on the state, six seven eight percent yield, how do you think about private equity.
Yeah, it's not my area. So I'm going to answer the question by tying it back to something that is
I spend more time thinking about. To the point you made in the early part of asking that question was what was a shift in the zero interest rate environment by many investors that were looking for anything resembling a decent yield, and it forced them just out the risk spectrum, whether it was two riskier segments of the fixed income market, or into the publicly traded equity markets, or to your point, into the private markets, be a private equity or venture.
And for many of investors, they weren't really comfortable with that kind of risk. And it's not just the risk, but for many investors it's the transparency and liquidity that they had to give up. Now we have an environment wherein essentially hold to maturity risk free treasuries and things like you know, money market funds, A lot of money has has gone back in that direction. On that note, and this is somewhat tangential, but I think it's important.
Too many people view the six trillion dollars that's sitting in money markets as some maybe not imminent, but some huge source of funding for the equity.
Market ysh on the sideline.
On the sidelines, I think a lot of that money is actually probably fairly sticky. It's money that represents the cash needs or the liquidity side of acid allocation and isn't sitting there just waiting to go into riskier assets, be it public equity markets or a private I think a lot of that is probably fairly sticky.
And it migrated to money market funds because of the five whatever five point three percent yields after a drought of decades of not getting any sort of fields. Hey, I could earn a real rate of return, relatively risk free. Great, I'm gonna reduce my risk profile and capture some of this.
That's a great thing.
I've never really understood that cash on the sideline. The other thing that's related, and you might see it from your perch at Schwab. Whenever we people talk about fun flows, look at all this money flowing into equity funds or flowing out. It seems like it's a year behind what the market's doing. The market crashes and then there are fun flows out Look at twenty one or twenty three. Even as the market is rallying, the funds are flowing in the.
Opposite, performance chasing up and down. That's you know, as old as the day is long.
It's just that simple. It's just performance chasing.
You know. The other thing about the six trillion dollars that's in money market funds is yes, that's an all time record in level terms, but relative to total stock market capitalization, it's nowhere near a record. So you have to be careful. First of all. Number one, I think it's a mistake to our point that we just made that this is not sort of short term cash on the sidelines, that it's just itching to jump over under
the equity side of things. But even if you make that assumption, the firepower has to be put in the context of share of market capitalization, and there it's nowhere near a record high.
That's really interesting. So we've talked a little bit about the FED. We haven't really delved into too much about inflation. You hinted at it before, and CPI peaked in June twenty twenty two. How do you look at where we are today in the first quarter of twenty four and what does that mean for people's ports.
So we think the disinflation trend is still largely intact, but it doesn't mean it is linear and we'll quickly get down to the FEDS two percent target. Obviously, there's a lot of components within inflation metrics, not to mention
lots of ways of measuring inflation. And we can talk about the FED Preferred measure of PCE, and then there's core PCE or supercore supercore, you know, X shelter, and there's the differentials in terms of how things like the shelter components are measured and calculated and what share they
represent of metrics like CPI versus PCE. I'd say one of the more important things that has happened this year is number one, Powell and other members of the FED have emphasized more the rates of change, the three month rate of change, the six month rate of change, and then specifically in the sixty minute interview that Powell did following the January FOMC meeting, he started talking more about
the twelve month right change. I think that that was a way to almost quantify the notion that they want to make sure that if in one inflation comes down to or near the target, that there's sustainability to that that it's not just sort of a quick shot down and they fear the risk of it moving back up again.
In terms of what's happened very recently is that not only did we have the hotter than expected January CPI report, for both CPI and PCE, the three month rate of change has turned back up, the six month rate of change has turned backed up. The twelve month hasn't yet. But based on how these things work, if three month is moving up, six month is moving up, twelve month is probably going to start moving up. And that's part and parcel of why the shift has occurred from a
March start to then it was a May start. Maybe it's not until June, and you've really condensed the expectation around the number of rate HIGs. Not to mention that there are a few strategists out there more recently that are saying maybe they don't cut it all this year. I think the market definitely was way over at SKIS earlier in the year when it expected not just a
March start, but six rate cuts. There was just nothing in the data that the Fed is supposed to be monitoring on either side of their dual mandate that suggested such an aggressive pivot and I would also say to a lot of investors. I was saying at the time,
be careful what you wish for. If you think after the most aggressive tightening cycle in forty years that in short order they're going to pivot to an aggressive rate cutting cycle, the background conditions supporting that are probably not what you would want to see, either as an economic participant or as a market participant.
So you wear an economics hat. I have this discussion all the time with people. Someone said, imagine how great the economy would be if oil was thirty dollars a barrel, And I said, hey, if you want thirty dollars barrel oil, you need a really deep recession. Yeah, global, it doesn't happen out of context the idea of careful what you wish for, you want six rate cuts. That means the
economy is recession, is having a hard time. So since since we have you wearing the economists hat, where's my recession? I was promised.
Recesses, so we had the rolling recessions, but I.
Was promised a full recession in twenty two and then twenty three, and not only did we not have recession, unemployment fell to the mid threes. GDP is robust. When you look around the world, this isn't all right. Everybody is with the cleanest shirt in the hamper. It's not that we have a robust growth economy and the rest of the world that doesn't seem to be.
So here's what happened. It's in the context of this whole notion of the roll through when we had the individual sectoral recessions in manufacturing and housing and housing related and a lot of consumer and products, and it did end up with negative GDP for the first six months of twenty twenty two. The reason why.
Negative not a real basis On a nominal basis, it was.
It wasn't but you had and not that back to back negative GDP quarters is the definition of a recession. It's not. It never has been the definition of a recession.
Thank you for saying that.
When people say, well, the traditional or the typical, it's not. The NBER has been the official arbiters of recession since the mid nineteen seventies, and two quarters in a row of negative GDP has never been the definition. The key line perhaps within that much more comprehensive definition that the NBER uses, that helps to explain why six months of negative GDP ultimately wasn't declarative recession. Again, not because it was two quarters in a row. But the key part
of the NBER's definition is spread across the economy. The weakness that led to the first half of twenty twenty two having no real growth in the economy was concentrated. It was concentrated on the good side of the economy. Manufacturing we had the offsetting strength, and services service is a larger employer by far, helping to explain the resilience in the labor market. The services components of inflation are stickier by nature, including the shelter components, helping to explain
the roll through in inflation. And again it's just another example of a unique nature of this cycle. So I think when I look forward, I think, okay, So if and when services has their day in the clouds and we start to see more than just some cracks that we've started to see, like an ism services employment component. Going back into contraction territory, what you may get is you have a roll through of recoveries in areas or
at least stabilization that have already taken their hits. A lot of people have you no landing as best case scenario, there's going to be a landing, you know, at some point the plane lands. But I do think a near term no landing scenario might also mean a no cutting scenario. And then the question, which I don't know that I have an answer to, is what exactly has been propelling the stock market? Is it the prospect of easier monetary policy?
Or is it that growth has more than hung in there and that translates to better top line growth that are bottom line growth. Maybe a little bit of both, but it's hard to sort of isolate one or the other is the key driver.
I'm so glad you brought that up, because anytime I'm at a dinner party, i'm out a barbecue, I'm somewhere, and the dominant narrative is thrown at me. So what happens to the markets if the FED doesn't cut sooner or later? And my answer is always, why do you think that whatever that news headline is is what's driving the markets? First of all, it is one hundred factors.
Or a million a million factors, right?
And second, just because it's on TV or online or in the newspapers, doesn't I love that?
And I, you know, I know it's the job of journalists.
If I if I'm doing an interview on the phone with a print reporter, if I'm going on a TV program, and especially if questions are concentrated around what the market is doing you know that particular day, right, and the question is always some form of you know, what drove the market today or what turned the market at you know, midday, as if the market is sort of this inanimate thing that just sits around waiting for one particular news headline, And on any given day, any given week, if you
just change the sign on what the market was doing, I could come up with plenty of things to point to to say, this is why the market boomed today, or this is why the market went down.
It is kind of silly, but no one likes the answer. How do I know?
Right?
People are not satisfied.
I try more often than not to answer questions, especially that are about sort of what's the market going to do with I have no idea? And then sometimes I pause for a fact that, well, that's the truth. I assume you're going to have follow up questions for me, and that's not what the listeners of the viewers want to hear. I don't know, But anyone answering that question, that's the honest answer.
Undred percent, And people don't realize that makes the matters worse. The journalist writes up the story, someone else writes the headline, and they're looking for the clickiest, most slations thing to pull out. How many times have you read a story where you read the headline.
And the story is, what's we're going to do with it?
Right? It's really true. I don't know is probably the most underused phrase on Wall Street, and it really should be because you know, first of all, it's great when you're doing on live TV you get a question, so where's the marketing to be in a year? How am I supposed to know? Nobody knows?
It's and again, like nineteen eighty seven's example, even if you nailed nineteen eighty seven and said flat, the market's not going to do anything, No one's going to be, Oh, yes it is. The market is going to do a lot. It's right, it's not going to end the year with much to show for it.
That's really funny. So, given everything we've said about the markets, the duck paddling underneath, what's going on below the surface, how should investors think about forward expectations, what should they think about, Hey, you know we've been seeing the twenty tens the market. What do we averaged thirteen fourteen percent a year, even with some bad quarters in that the rest of twenty twenty was amazing, twenty one was huge, twenty three was huge. Here we are starting out twenty
four strong. At what point should investors begin to moderate return expectations.
The discipline of rebalancing keeps you in gear in perpetuity without having to figure out, Okay, is this the moment I want to lessen risk on my portfolio or take more risk in my portfolio? But I think the two key risks right now have more to do with called the internals of the market than anything out there that we're observing as risk. Obviously, you know, geopolitics and the
election and black Swan risks are always the potential. But I think sentiment and valuation now the one important caveat around saying sentiment and valuation are a risk in this case, meaning sentiment's scotten pretty frothy both attitudinal measures and behavioral measures, and valuation is fairly stretched. Is the important caveat is neither even at extremes represents anything resembling market timing tool.
As we all learned in the nineteen nineties, valuation can get stress and sentiment can get stretched, and that can last for years. What it does is set up maybe a risk factor to the extent there's a negative catalyst when you sort of have everyone on one side of the boat and your priced for perfection. But again, that environment can last. But I would certainly put both of
those in the risk column. In terms of what could the potential negative catalyst be that could cause a contrarian move relative to optimistic sentiment, well, we've already talked about a lot of them. It could be something outsized in terms of inflation or the Fed policy. You know, reaction function, geopolitics is ever present. Given that twenty twenty three was a very low volatility year, you've got the likelihood of mean reversion, and you throw the election into the mix
as a potential volatility driver. I don't think that's a stretch. Otherwise, I think you stay up in quality within the equity
portion of the portfolio. I think factor based investing makes a lot more sense than monolithic groups of stocks or even maybe at the sector level investing based on characteristics and looking for quality companies with strong balance sheets and ample interest coverage and strong free cash flow and positive earnings trends and revisions, and apply that analysis across the spectrum of sectors and even cap ranges.
Really informative and insightful. Let's jump to our speed round our favorite questions that we ask all of our guests, starting with tell us what's entertaining you? What are you watching or listening or streaming these days?
So I don't read a lot of books. Every once in a while i'll listen to them, but I'm a big podcast listener. Aside from our own and yours, I've always been a fan of mass.
I always tell people you don't have to mention.
No, no, I've been a regular listener of Masters in Business in podcast form and listening to you on the on the radio. So even in the beginning, I'm a longtime fan. Now well, because I was a guest sort of in the beginning, you.
Weren't sort of. You were one of the early guests. When I couldn't get anyone on, I worked my way through my personal phone book.
And then when you couldn't get anybody on, you got me on.
Yeah, no, no, seriously, the general response to requests was no. When I asked somebody I knew personally, I don't mean you weren't anybody when I asked someone I knew. All Right, I'll do you a favor, because really, nobody's paying attention to this. That was then now it's ten millions.
But I am, but I am. I am a fan. Grant Williams has a few podcasts and he always has really fascinating guests.
On very eclectic Mix, very eclectic mix.
But I like that it's often macro focused. And there's a number of other podcasts sporadically that I'll listen to outside of the world of finance. I'm a big SmartLess fan.
Oh sure.
I mean they're just so funny and so lovely and brilliant and.
I think they just saw yourself for an ungodly amount of money to them. Yeah.
Yeah's and then streaming. I guess the one that I'm in the midst of now is Feud Capodi versus the Swans. Really, yes, so it's it's not a documentary, but it's you know, based on true stories, but with great actors playing parts, and it's multi episode and so that's that's a good one that I'm into right now.
So I kind of know the answer to this question, but I want to ask in any way for anyone listening this deep into the podcast, tell us about your early mentors who shaped your career.
So Marty's why clearly obviously LUCIERU Kaiser in terms of my entree into the world of television and learning what matters and what doesn't matter. And I got it, Chuck Schwab.
I know you said you're you're too busy reading research reports to read a lot of books in addition to Winning on Wall Street by Marty's why, any other books you would recommend to someone?
And yes, So one of the best books I ever got about investing was given to be my Marty when I started the business in nineteen eighty six. And it's a little book. It's paperback. A lot of people have probably heard of it, but Reminiscences of a stock Court. It's just so fabulous and I also like and it's similar in its sort of size and structure with paperback. Where are the customer's yachts?
Uh huh?
So those are my two. And then you know Winning on Wall Street. You know I gotta plug Marty's book and that still resonates even today right now at times I'm listening to a book and I'll listen to, you know, fifteen minutes at a time, and then not listen to it for months and months. Is by Nathaniel Philbrick, and it's just the history of Nantucket, where OHI is my place. I spent parts of the summer and about the era from the sixteen hundreds into the seventeen hundreds when it
was the whaling capital of the world. And so that's it.
I'm going to share a book with you only because you are now in Naples. I just finished reading Bubble in the Sun, the History of Florida real Estate Booms and Busts, and the theory is the Florida real estate boom in the twenties is the biggest migration in US history, and it's collapse was one of the factors that led to the Great Depression. It's an deeply researched, absolutely fascinating All right, good, I think you get add it to
my list. Two questions. What sort of advice would you give to a recent college grad interested in going into finance or investment?
I would say, and This is advice I would give to a college grad going really into just about any industry, but I think maybe finance a little bit more. Too many college grads then coming into finance, it's about, well, what did I learn in college? What courses did I take? To be early? Honest, it doesn't matter. You're not bringing something into the mix that the company doesn't already know.
So the more broad advice I always give to people who are starting out and they're going through the interview processes, there always seems to be this strong desire to come across as interesting, be interested, focus more on being interested than being interesting.
Huh. Good advice. And our final question, what do you know about the world of investing today? You wish you knew thirty six years ago when you were first getting started.
To start early and young.
Start early and young. The magic of compounding, the.
Magic of compounding. And even if it means sacrificing a little of the pleasures when you're much younger and you're trying to divide a very small amount of money into you know, fun versus savings versus work, is starting early is just so powerful, even if it's just putting it in some version of Savings.
Liz Anne, this has been just absolutely delightful. Thank you so much for being so generous with your time and allowing me to really improve on our first conversation, which in preparation for this I listened to and was just utterly mortified.
Oh I disagree with you, diose to you because I didn't listen to the whole thing at your suggestion. I listened to the first five or ten minutes, and I still remember it like it was yesterday.
I remember sitting in that darkened room around that round table, you, me and Larry literally my first television appearance. I want to say that was like three something crazy. So anyway, we have been speaking with the delightful Liz and no E Saunders, chief investment strategist at Schwab, helping to oversee over eight trillion dollars on their platform. If you enjoy this conversation well, be sure to check out any of our previous five hundred discussions we've had over the past
ten years. You can find those at iTunes, Spotify, YouTube, wherever you find your favorite podcasts. Be sure to check out my new podcast at the Money, short ten minute Questions and Answers with experts about your money. I'm really enjoying doing this podcast to just get to the meet of an issue ten minutes. You can find those in your master's and business speed. I would be remiss if I did not thank the craft team that helps us
put these conversations together each week. Robert Bragg is my audio engineer at tik of Albron is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I'm Barry Radolts. You've been listening to Masters in Business on Bloomberg Radio.