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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is Master's in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 2: This week on the podcast what Can I Say, I

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Speaker 2: have the delightful liz Anne Saunders on She is the

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Speaker 2: chief investment strategist and member of the firm's investment committee

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Speaker 2: at Schwab. The firm has eight and a half trillion

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Speaker 2: dollars on its platform. We've been working with Schwab for

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Speaker 2: a long time. Liz Anne was one of the earliest

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Speaker 2: guests on the show, and we reminisce a little bit

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Speaker 2: about that first appearance. I don't know what else to

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Speaker 2: say about her. She's so insightful and so knowledgeable and

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Speaker 2: has such a wonderful perch overseeing eight and a half

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Speaker 2: trillion dollars of both individual mom and pop investors advisors.

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Speaker 2: They're the biggest platform as a estonian for advisors. My disclosure,

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Speaker 2: my firm also uses them, and she just sees the

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Speaker 2: world from a place that not a lot of people

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Speaker 2: in the industry get to do. Not only do they

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Speaker 2: have a giant research team, but she gets to see

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Speaker 2: fun flows. She gets to see a huge amount of

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Speaker 2: activity from the inside, and she on a regular basis,

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Speaker 2: speaks to investors, speaks to advisors, speaks to institutions. She

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Speaker 2: is as much in the mix and the thick of

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Speaker 2: what's going on in the world of investing as anybody,

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Speaker 2: and that combination of her unique Perchin perspective and her

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Speaker 2: deep experience as either a fund manager or a strategist

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Speaker 2: for the past thirty eight years unparalleled in the world

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Speaker 2: of investing. I found this conversation to simply be delightful,

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Speaker 2: and I think you will also, with no further ado.

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Speaker 2: Charles Schwabs Liz Ann Saunders. I listened to the first

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Speaker 2: conversation we had. It's like the second year I was

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Speaker 2: doing this. It was twenty fifteen. You were great, I

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Speaker 2: was awful.

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Speaker 1: That was not the first time we met. I remember

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Speaker 1: that conversation nine years ago, but that was not the

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Speaker 1: first time we met.

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Speaker 2: The first time we met was my first time doing television.

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Speaker 2: I remember that in a tiny little room around a

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Speaker 2: round table with Larry Kudlow, and I'll never forget banging

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Speaker 2: down two die cokes, walking out the door to go

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Speaker 2: to the men's room, and the producer grabs me, let's go,

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Speaker 2: We're live, and that was it. I sat there for

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Speaker 2: an hour with my back teeth floating. And that I

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Speaker 2: remember a friend said, your fidgety, don't move around, don't

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Speaker 2: just pick a spot to look. And the spot was

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Speaker 2: your front teeth, which are perfect and white and still

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Speaker 2: perfect and white. Well, and I know why, well, I

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Speaker 2: know why.

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Speaker 1: In between that time that we first sat down and

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Speaker 1: did this and then this is a couple of years ago.

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Speaker 1: Now we live in Naples, Florida, and it was the

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Speaker 1: night before Thanksgiving. We walked out of a restaurant and

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Speaker 1: I just walked off the curb the wrong way. Oh,

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Speaker 1: and the first thing to hit the pavement, your teeth

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Speaker 1: was my teeth.

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Speaker 2: So those are not now.

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Speaker 1: Parts of it chipped, the part of the right front

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Speaker 1: tooth and the tooth next to it. And fortunately my

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Speaker 1: sister's next door neighbor was a dentist, and he went

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Speaker 1: in Thanksgiving morning and really and fixed it.

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Speaker 2: You know, I t boned a car. I was the

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Speaker 2: t boney right in front of my dentist's office. And

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Speaker 2: when I called the next morning, say hey, I chipped

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Speaker 2: my front tooth I needed fixed, they said, oh, you too.

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Speaker 2: There was a bad accident in front of that was me. Yeah,

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Speaker 2: that was me. My wife was really upset. I totaled

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Speaker 2: her car at like five miles an hour. An suv

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Speaker 2: plowed into.

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Speaker 1: Us totaled five miles an hour.

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Speaker 2: So I was making a left. The person behind me

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Speaker 2: thought I was going straight and tried to pass me

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Speaker 2: on the left. So literally I meant a left right

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Speaker 2: into them. And it's funny because that was a pandemic purchase,

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Speaker 2: a very inexpensive twenty seventeen Panamera fors which everybody walked away.

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Speaker 2: I mean, we were a little banged up, but you know,

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Speaker 2: a giant suv just crunched us. And what's terrible is

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Speaker 2: when you see the car afterwards and you see the

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Speaker 2: driver's door, like, holy cow, how did I just how

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Speaker 2: did it walk go in there? That was like geez.

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Speaker 2: Whenever people say you don't need to buy a new car,

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Speaker 2: it's like, I want the latest, greatest.

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Speaker 1: With airbags with one hundred and seventy seven arabs.

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Speaker 2: By the way airbags come down, you can't sit. It

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Speaker 2: was so disorienting because I'm trying to turn the wheel and.

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Speaker 1: I can't imagine driving in a car without a seatbelt on.

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Speaker 1: Before we started this ferry, we were talking about our

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Speaker 1: age and baby boomers. When I was brought home from

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Speaker 1: the hospital in nineteen sixty four, it was in my

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Speaker 1: mom's lap.

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Speaker 2: Okay, I'll tell you. I'll take that a step further.

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Speaker 2: My dad had this giant I'm trying to it was

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Speaker 2: an Impala, and we used to lie on the rear

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Speaker 2: deck under the back window, like if there's an accident,

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Speaker 2: you're a projectile right out.

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Speaker 1: We had a station wagon. We'd go from northern New

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Speaker 1: Jersey to Brooklyn to visit grandparents, and sleeping bags would

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Speaker 1: be laid out in the back.

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Speaker 2: And now you can't take a kid home from the

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Speaker 2: hospital without the right not just a car seat. It

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Speaker 2: has to be the right car.

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Speaker 1: I'm not saying what was going on back in the

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Speaker 1: sixties was the right thing.

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Speaker 2: It toughened you up. You go through a few windshields,

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Speaker 2: you know, you learn.

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Speaker 1: To dust your specially. I haven't had that.

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Speaker 2: All right, let's get serious. So everybody knows you as

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Speaker 2: the chief investment strategist at SCHWAB, But let's roll back

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Speaker 2: to the early part of your career. You get a

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Speaker 2: BA in economics and polysi from the University of Delaware.

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Speaker 2: What was the original career plan?

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Speaker 1: I didn't have one, none, well, not in college.

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Speaker 2: No.

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Speaker 1: In fact, what started as that double major ultimately morphed

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Speaker 1: into the official degree being in international relations. But to

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Speaker 1: be perfectly honest, I just decided to study a couple

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Speaker 1: different areas that were very broadbrush because I didn't know

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Speaker 1: what I wanted to do when I graduated international relations.

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Speaker 2: So you go to the Kennedy School and then become

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Speaker 2: a diplomat.

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Speaker 1: Well, you know, I thought about going to graduate school

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Speaker 1: right away for political science. I looked into American University,

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Speaker 1: and then I thought to myself, I don't know what

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Speaker 1: I want to do yet. So all I knew throughout

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Speaker 1: the latter part of my undergraduate years is that I

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Speaker 1: wanted to live and work in New York City. That

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Speaker 1: was the dream without a latch. Grow born in bay Ridge, Brooklyn,

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Speaker 1: then early part of childhood in Marstown, New Jersey, then

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Speaker 1: outside of Philadelphia and Westchester, Pennsylvania. Then of course went

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Speaker 1: to Delaware and then New York City for twelve years,

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Speaker 1: and then Connecticut. Raised our kids in Darien, Connecticut. And

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Speaker 1: now I'm based in Naples, Florida.

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Speaker 2: Right, do you have a little golf cart and your.

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Speaker 1: Put no golf cart now, but of Vespa.

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Speaker 2: Okay, oh that's fun. So you come out of college,

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Speaker 2: how did you end up at Avatar Associates working with

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Speaker 2: Marty's wide.

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Speaker 1: So I interviewed across the spectrum of industries, and they

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Speaker 1: were all interviews for grunt positions, entry level positions. But

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Speaker 1: I had interviews at a few Wall Street firms, both

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Speaker 1: large and small. I think I interviewed at a marketing

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Speaker 1: firm and ad agency because I didn't know what I

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Speaker 1: wanted to do. But I had some familiarity with Marty

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Speaker 1: because in college, one of the courses that I took

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Speaker 1: a requirement was, in addition to reading the Wall Street

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Speaker 1: Journal every day, was understanding what had happened in the

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Speaker 1: world of financial markets throughout the week. And I had

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Speaker 1: a professor give me a little sort of hint. He said, Hey,

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Speaker 1: just watch Wall Street Week on PBS on Friday nights

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Speaker 1: Closer Kaiser at eight thirty to nine o'clock. Then you know,

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Speaker 1: you go out and you start your weekend. And I did.

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Speaker 1: And Marty was on that show really from its inception

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Speaker 1: in the early nineteen seventies. And for those that remember

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Speaker 1: the show, you also remember that that predated anything that

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Speaker 1: exists Now.

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Speaker 2: That was the Orisontal for that show. Before there was

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Speaker 2: three or four different financial news networks.

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Speaker 1: And it was millions of viewers every week. It was

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Speaker 1: that eras version of Must see TV on the subject

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Speaker 1: of the market. So I had some familiarity, but in

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Speaker 1: advance of the interview, I also did more research on

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Speaker 1: Marty on his side of the organization, which was the

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Speaker 1: mutual fund, hedge fund, investment newsletter side, and then the

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Speaker 1: avatar side that I ultimately joined, which was the institutional

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Speaker 1: money management firm that Barry is a reminder in nineteen

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Speaker 1: eighty six, the process of doing research on a person

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Speaker 1: or a firm, there is just Google them. No, there

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Speaker 1: was no Google. There were no computers, there was no Internet.

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Speaker 1: So I was in the library with the microfiche machine

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Speaker 1: and literally turning the crank and reading newspaper articles. So

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Speaker 1: I had some background and had two interviews, and honestly,

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Speaker 1: just the voice inside my head said, this feels right.

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Speaker 2: You're there for thirteen years, nineteen eighty six to ninety nine.

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Speaker 2: That was the Great bullmarket. Tell us a little bit

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Speaker 2: what it was like during that period, and then we'll

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Speaker 2: talk about what it was like working with Marty's Y

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Speaker 2: for the late Great Marty's wife.

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Speaker 1: So again I was on the avatar side of this

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Speaker 1: Wyg Avatar broader organization, which was institutional money management, managing

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Speaker 1: money for a lot of large corporate plans and foundations

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Speaker 1: and endowments. And I was a portfolio manager, so I

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Speaker 1: was doing bottom up rec search and picking stocks. But

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Speaker 1: it was with the context of the top down analysis

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Speaker 1: that Marty brought to the picture I learned throughout that

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Speaker 1: thirteen years. And part of the reason why I took

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Speaker 1: advantage of an opportunity that presented itself to move over

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Speaker 1: to US Trust was I was much more interested in

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Speaker 1: and fascinated by the top down and not the bottom up.

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Speaker 1: I did love picking stocks, it just wasn't where my

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Speaker 1: passion was. So my observations were more keen on what

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Speaker 1: Marty and his models were doing in the context of

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Speaker 1: the big picture and monetary policy analysis and investor sentiment

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Speaker 1: and behavior, and that was where I really found my

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Speaker 1: passion was in that top down analysis.

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Speaker 2: So let's talk a little bit about Marty's Wig, one

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Speaker 2: of that era's most famous investors and traders. The technical

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Speaker 2: crew know him for the ZWYG thrust Indicationlater he created

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Speaker 2: the coal ratio. But he's also the guy who coined

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Speaker 2: the phrase don't fight the fed. Tell us a little

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Speaker 2: bit what it was like to work with Marty's why.

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Speaker 1: I adored Marty, you know, rest in peace. He was quirky.

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Speaker 1: He could have a temper, but never about the big stuff.

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Speaker 1: It was more about the little stuff. If he couldn't

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Speaker 1: find his pencil, and you know, he would toss a phone.

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Speaker 1: But he was really sort of warm and fuzzy, but

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Speaker 1: had that. He was always sort of anxious and nervous,

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Speaker 1: and a lot of people who just observed him from

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Speaker 1: afar took it as well, He's just bearish all the time.

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Speaker 1: It wasn't the case. I mean, he was essentially a

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Speaker 1: market timer, for lack of a better word. He was

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Speaker 1: an tactical acid allocator.

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Speaker 2: And one of the more rare successful market.

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Speaker 1: Times, unbelievably successful, and had to do with the discipline

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Speaker 1: of the models that he used and how he segmented

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Speaker 1: economical equids, investor liquidity, and then technicals and breath conditions

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Speaker 1: and understood how they melded together. And you know, it

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Speaker 1: wasn't The history of working for him wasn't without some

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Speaker 1: periods that he didn't quite nail, but the big ones

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Speaker 1: he really nailed.

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Speaker 2: When I was early in my career, I read the

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Speaker 2: book Winning on Wall Street, which I think came out

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Speaker 2: in like ninety five or ninety six.

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Speaker 1: Well, the original one came out earlier than that, but

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Speaker 1: there were there were additions that followed that, but it's

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Speaker 1: still a mustreet.

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Speaker 2: And my takeaway from that is market timing is one

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Speaker 2: part science where you're crunching numbers and looking at history,

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Speaker 2: but you can't get away from one part art where

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Speaker 2: after you're watching the markets for decades like him, there's

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Speaker 2: an intuitive feel where just something starts to smell wrong

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Speaker 2: and when the data lines up and your spidey sense

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Speaker 2: starts to tangle. And he never quite said it that way,

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Speaker 2: but I very much got the sense that all the

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Speaker 2: data was there to buttress the fact that, hey, I've

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Speaker 2: been watching markets for fifty years and something wicked this

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Speaker 2: way comes.

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Speaker 1: The gut instinct was extraordinary. It was always again in

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Speaker 1: the context of the models that he was very disciplined about,

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Speaker 1: but there was that just added little piece, and it

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Speaker 1: certainly came into play with regard to what essentially was

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Speaker 1: his crash call.

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Speaker 2: So let's talk about that. So he's a regular on

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Speaker 2: Wall Street Week with Lewis Rukeiser. I could still see

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Speaker 2: the dollar sign in the street, the s for the

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Speaker 2: street in the in the logo the Friday before Black Monday,

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Speaker 2: he goes on Rukeiser, what does he say.

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Speaker 1: For those that don't remember the show? And it's you

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Speaker 1: know what every other goes by? I still hear all

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Speaker 1: the time. Oh my gosh, I miss Wall Street Week.

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Speaker 1: I miss Lou? What was he like? What was Marty like?

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Speaker 1: And younger people just never heard of the show. They

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Speaker 1: have no idea who who short Kaiser is, and that's

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Speaker 1: kind of sad for somebody that's been around for as

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Speaker 1: long as I have. But the structure of the show

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Speaker 1: with Lou would come out. He would do ten minutes

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Speaker 1: or so of a monologue and it was really brilliant writing.

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Speaker 1: He wrote them all himself. There was humor, there was

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Speaker 1: great intelligence on what had happened in the market. There

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Speaker 1: was really important reminders around what matters and what doesn't.

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Speaker 1: And he was just sort of a calming force and influence,

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Speaker 1: especially during tumultuous times. But then he would walk over

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Speaker 1: to the table where at the table was Lou and

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Speaker 1: the three regular panelists that were on that evening, and

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Speaker 1: there was twenty one two three panelists on an ongoing basis,

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Speaker 1: and he would have a conversation with each panelist and

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Speaker 1: then all four would go over to the sofa area

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Speaker 1: and interview the special guest for that night. So this

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Speaker 1: was the middle part of the show show where he

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Speaker 1: was talking to the panelists, and Marty was his typical

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Speaker 1: and I think Lou asked him, and you can find

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Speaker 1: it on YouTube.

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Speaker 2: It's a.

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Speaker 1: Bunch of them, a bunch of them, are that's the

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Speaker 1: one to watch?

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Speaker 2: Yeah? Absolutely, And I.

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Speaker 1: Think Lou said, boy, you sound a little trouble. Do

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Speaker 1: you think we have a bear market? And Marty basically said, no,

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Speaker 1: I think the market's going to crash, And then he

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Speaker 1: went further to talk about the nature of what it

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Speaker 1: would look like, the probability that it would happen, but

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Speaker 1: then there would be a retest, but then once you

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Speaker 1: had the retest, the decent chance that you'd be off

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Speaker 1: to the races again.

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Speaker 2: Pretty much exactly exactly what happened. Like, It's not just oh,

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Speaker 2: the market's going to lose some points on Monday. He

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Speaker 2: laid out like the next six months and it's exactly

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Speaker 2: what happened.

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Speaker 1: And it had to do with the interest right backdrop

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Speaker 1: at the time and tighter monetary conditions, but also the

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Speaker 1: spidey sense to your point, around the the innovation of

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Speaker 1: the time of portfolio insurance and felt that that was

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Speaker 1: sort of unwinding and wasn't going to represent the insurance

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Speaker 1: that a lot of people thought. And he was on

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Speaker 1: that the hedge fund side of the dual organization so

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Speaker 1: could be could swing for the fences a bit more

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Speaker 1: than we could on the institutional side. And I don't

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Speaker 1: remember the exact percentages, but was very aggressively long heading

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Speaker 1: into what the pre crash peak was in August, and

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Speaker 1: then started aggressively both selling and moving to the short

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Speaker 1: side of things, heading right into the weekend before the crash.

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Speaker 1: And we did something similar on the institutional side, not

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Speaker 1: the same extreme, but close to fully invested to a

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Speaker 1: very very low equity exposure.

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Speaker 2: And people may not remember nineteen eighty seven was at

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Speaker 2: least up and through September was a robust year in

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Speaker 2: the market. We were up like thirty or forty percent,

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Speaker 2: like a really substantial gain, and despite the twenty two

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Speaker 2: point seven percent crash, I think we finished the year

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Speaker 2: like up one percent.

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Speaker 1: I think it was one point eight percent. And you

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Speaker 1: know what, Barry, I'm glad you mentioned that, So indulge

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Speaker 1: me if you would, on a tangent here. One of

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Speaker 1: the things that I have never done, and no one

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Speaker 1: at Schwab has ever asked me to do, is what

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Speaker 1: I think is the silly exercise of things like yourine

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Speaker 1: price targets. Now, in part that's a way for institutional

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Speaker 1: strategists to be measured against one another, and the sort

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Speaker 1: of narrative embedded in that I suppose might matter to institutions,

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Speaker 1: but our eight plus trillion dollars of client assets are

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Speaker 1: for the most part, individual investors. Nineteen eighty seven is

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Speaker 1: a perfect example of that. If I, at the beginning

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Speaker 1: of the year had said the market is going to

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Speaker 1: be up less than two percent, that might have sent

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Speaker 1: the impression that it was going to be kind of

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Speaker 1: a boring year and patted myself on the back at

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Speaker 1: the end of the year. But the path that the

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Speaker 1: market took to start at the year and then ended

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Speaker 1: up one point eight percent was nothing resembling what one

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Speaker 1: might infer if you had just heard the year end

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Speaker 1: price target of essentially a flat market.

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Speaker 2: So I love the mental exercise that Wes Gray of

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Speaker 2: Alpha Architect does. Hey, if you knew with perfect clarity,

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Speaker 2: if that bird landed on your shoulder and told you

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Speaker 2: here's where equity prices are going to be in ten years,

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Speaker 2: position your portfolio for that. He says, even God would

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Speaker 2: get fired as a portfolio manager because the drawdowns can

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Speaker 2: be so vicious. And what do you mean you're fully invested.

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Speaker 2: The market is down, you know, thirty forty percent? You

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Speaker 2: didn't see this.

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Speaker 1: When markets are going up, the benchmark is either an

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Speaker 1: index like the S and P five hundred, or you

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Speaker 1: know someone you know that's making even more money than

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Speaker 1: you are. But it's amazing how quickly the benchmark turns

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Speaker 1: into cash or a positive return when markets are going down.

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Speaker 2: So let's talk a little bit about a day in

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Speaker 2: the life of a chief investment strategist at an eight

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Speaker 2: trillion dollar firm. I have to assume every day is

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Speaker 2: a little different.

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Speaker 1: I was going to say, it depends on the day.

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Speaker 2: So take us through a typical day. What's it like.

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Speaker 1: Well, there is probably nothing typical about a day, but

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Speaker 1: on the rare occasion where I have a decent block

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Speaker 1: of time where I am not on camera or traveling,

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Speaker 1: I do a lot of research. I remember when my

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Speaker 1: daughter was in middle school and she's twenty four years

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Speaker 1: old analysis, and she's the youngest. It was a long

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Speaker 1: time ago. The school had a career day and I

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Speaker 1: was asked to come in as one of the representatives

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Speaker 1: to have kids rotate through the classroom. They assigned you

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Speaker 1: to and talk about what you do, particularly for a

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Speaker 1: job like mine. The directive from the principle was try

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Speaker 1: to get the seventh graders to understand what you do.

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Speaker 1: So I started by saying, well, basically, I read, write,

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Speaker 1: and talk. So that's what I spend my typical day

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Speaker 1: doing is some form of reading, writing and talking. And

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Speaker 1: the reading part is the digestion of just a fire

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Speaker 1: hose of information, proprietary research, internal Schwab research, all the

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Speaker 1: research that I get from the variety of research sources

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Speaker 1: that we have, analyzing data, analyzing every economic report that

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Speaker 1: comes in, everything happening in the market on a day

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Speaker 1: to day basis. Even though I don't take a trading approach,

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Speaker 1: just looking at technicals and breath statistics and leadership and

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Speaker 1: factor analysis, et cetera, et cetera. And then I spent

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Speaker 1: a lot of time both literally and figuratively, on the

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Speaker 1: road talking to our clients, both the retail clients as

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Speaker 1: well as advisor services. Now, in this post COVID environment,

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Speaker 1: it's not quite as much as used to be the

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Speaker 1: case in terms of travel to do in person events.

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Speaker 1: It's maybe sixty percent back in that direction, but we've

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Speaker 1: all adopted to the.

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Speaker 2: Use of Isn't that a better balance?

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Speaker 1: Doesn't it's a better balance, and it's efficient. I used

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Speaker 1: to I used to go over to Asia once or

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Speaker 1: twice a year to see many of our clients that

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Speaker 1: are based over there, and the trips would involve some

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Speaker 1: combination of Hong Kong, Shanghai, Beijing, maybe Singapore, and I

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Speaker 1: would do a breakfast event, a lunch event, a dinner event.

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Speaker 1: The dinner events might have up to one hundred and

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Speaker 1: fifty two hundred people, smaller other events, but at the

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Speaker 1: end of a trip it was a brutal travel trip.

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Speaker 1: I might have interacted in some form with several hundred clients.

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Speaker 1: I now do a quarterly webcast for those same clients,

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Speaker 1: and there have been webcasts on which we've had more

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Speaker 1: than five thousand. Wow, clients, So there is an efficiency

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Speaker 1: to continue to weave that in.

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Speaker 2: There's no substitute for the face to face. But sometimes

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Speaker 2: it's like, do I really need to go here to

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Speaker 2: meet with thirty people? It just seems so some of

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Speaker 2: the takeaway from a little bit of zoom, a little

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Speaker 2: bit of webcasts have become hey, we can be more

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Speaker 2: efficient and more productive. Absolutely, all these tools existed ten

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Speaker 2: years ago. The pandemic seems.

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Speaker 1: Fair for us to right. Absolutely. And then as you

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Speaker 1: and I sit here having this conversation, a relatively new

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Speaker 1: component of my day to day activity is I know,

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Speaker 1: co host a podcast.

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Speaker 2: I know that. How are you enjoying that?

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Speaker 1: Love it? Absolutely? Love it? So we launched it. I

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Speaker 1: think it was November of last year. I co hosted

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Speaker 1: with my colleague Kathy Jones, who was our chief fixed

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Speaker 1: income strategist, So she's my counterpart on the fixed income

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Speaker 1: side of things, where my bias is on the equity

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Speaker 1: side of things. And we have just very open, honest conversation,

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Speaker 1: sort of you're a fly on the wall hearing what

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Speaker 1: we would talk about. It's very unscripted about what's going

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Speaker 1: on in the markets, and we talk about the FED

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Speaker 1: and economic data and what's a head for the week.

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Speaker 1: And we typically also have guests both in weekly. You're

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Speaker 1: doing weekly, We're doing it weekly. It drops on Fridays.

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Speaker 1: It's audio only, so we can have external guests, internal guests.

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Speaker 1: Any people can be wherever they are, and a wide

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Speaker 1: range of guests that we have had. We had Claudia

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Speaker 1: som we had al Rabel talking about commercial real estate.

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Speaker 1: We had Dolly Lenz of real estate fame talking about

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Speaker 1: residential real estate. We've had internal guests like our own

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Speaker 1: Mike Townshend talking about what's going on in Washington. So

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Speaker 1: that's been an absolute blast.

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Speaker 2: Isn't this not to toot my own horn, but isn't

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Speaker 2: this just such a pleasant formatte not three minutes? There's

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Speaker 2: no camera in your face. You know, the world is

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Speaker 2: not black and white, and investing, especially has so many

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Speaker 2: shades of gray, and to develop really have a decent

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Speaker 2: explanation as to what's going on five minutes really is tight.

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Speaker 2: Write it really is so to go into that sounds

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Speaker 2: great and I love that description of what you do

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Speaker 2: is reading, writing and talking is really is great. I

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Speaker 2: wanted to ask you something you mentioned all of the

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Speaker 2: internal schwab clients, you have advisors, you have individual clients

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Speaker 2: like I would love to be let loose on that

438
00:24:27,760 --> 00:24:32,920
Speaker 2: data to see what they do in response to markets.

439
00:24:32,920 --> 00:24:36,080
Speaker 2: How do you look at the behavior of whether it's

440
00:24:36,119 --> 00:24:39,960
Speaker 2: professional or institutional or just mom and pop traders. Do

441
00:24:40,040 --> 00:24:44,080
Speaker 2: you guys monitor that and say, here's the sentiment. It

442
00:24:44,160 --> 00:24:46,119
Speaker 2: looks like people are starting to get really panic.

443
00:24:46,240 --> 00:24:48,959
Speaker 1: We do, and there are a variety of forms that

444
00:24:49,000 --> 00:24:53,160
Speaker 1: we disseminate that type of information out into the public sphere,

445
00:24:53,200 --> 00:24:57,680
Speaker 1: which is not something I do formally. There are groups

446
00:24:57,720 --> 00:25:00,960
Speaker 1: that put that together, but I have access to the information,

447
00:25:01,200 --> 00:25:03,520
Speaker 1: and you're right, particularly as it relates to the sentiment

448
00:25:03,520 --> 00:25:05,679
Speaker 1: in side of things. I have been a sentiment watcher

449
00:25:05,760 --> 00:25:08,080
Speaker 1: for my thirty eight years in this business, learning a

450
00:25:08,119 --> 00:25:11,560
Speaker 1: lot about the power of sentiment from Marty's wig. But

451
00:25:11,640 --> 00:25:15,200
Speaker 1: I think it's important to look at both attitudinal measures

452
00:25:15,200 --> 00:25:19,240
Speaker 1: of sentiment and behavioral measures of sentiment. And behavioral measures.

453
00:25:19,280 --> 00:25:21,520
Speaker 1: With eight plus trillion dollars of client.

454
00:25:21,280 --> 00:25:24,480
Speaker 2: Assets, someone's going to be acting in it's.

455
00:25:23,920 --> 00:25:28,080
Speaker 1: Probably a pretty good eye into the sort of psyche

456
00:25:28,280 --> 00:25:32,480
Speaker 1: and behavior of individual investors. So it is absolutely something

457
00:25:32,520 --> 00:25:35,080
Speaker 1: that I incorporate in the analysis. It's in addition to

458
00:25:35,680 --> 00:25:39,520
Speaker 1: broader metrics that go beyond just schwab things like fundflows

459
00:25:39,520 --> 00:25:42,600
Speaker 1: and obviously the put call ratio and other ways to

460
00:25:42,720 --> 00:25:45,679
Speaker 1: measure the behavior of investors. But it's in conjunction with

461
00:25:45,760 --> 00:25:50,000
Speaker 1: those more attitudinal measures, and that comes from sources like

462
00:25:50,080 --> 00:25:54,040
Speaker 1: AAII American Association of Individual Investors. But frankly, a lot

463
00:25:54,080 --> 00:25:57,879
Speaker 1: of the attitudinal measures of sentiment I pick up just

464
00:25:58,000 --> 00:26:01,800
Speaker 1: from talking to our clients on the road. That's where

465
00:26:01,840 --> 00:26:05,239
Speaker 1: the spidey sense that the gut feel comes in. And

466
00:26:05,240 --> 00:26:09,320
Speaker 1: now being very active on social media too, particularly Twitter

467
00:26:09,520 --> 00:26:12,879
Speaker 1: slash x. By the way, I am not active on

468
00:26:12,960 --> 00:26:19,080
Speaker 1: either Instagram or Facebook. However, a very troubling, huge rash

469
00:26:19,240 --> 00:26:24,200
Speaker 1: of impostors on those platforms of me not just trying

470
00:26:24,240 --> 00:26:25,240
Speaker 1: to get followers.

471
00:26:25,320 --> 00:26:26,760
Speaker 2: Yeah, I was kind of surprised you.

472
00:26:26,640 --> 00:26:28,760
Speaker 1: Were kitching pitching things like.

473
00:26:28,760 --> 00:26:30,320
Speaker 2: Your big bitcoin advocate.

474
00:26:30,720 --> 00:26:33,440
Speaker 1: Apparently that is not me, by the way.

475
00:26:33,880 --> 00:26:36,240
Speaker 2: Not on Facebook, I'm not on.

476
00:26:36,320 --> 00:26:38,680
Speaker 1: I'm not active on Facebook. I'm not And I've had

477
00:26:38,680 --> 00:26:40,439
Speaker 1: a rash of impostors on Twitter.

478
00:26:40,560 --> 00:26:44,080
Speaker 2: I was about to say, you know, Elon Musk is

479
00:26:44,200 --> 00:26:48,560
Speaker 2: touting groc as their AI and I would never subscribe

480
00:26:48,600 --> 00:26:52,600
Speaker 2: to that until they were able to demonstrate, Hey, groc

481
00:26:52,680 --> 00:26:55,320
Speaker 2: has gotten rid of all the spam bots, and it's

482
00:26:55,320 --> 00:27:00,440
Speaker 2: gotten rid of all the like I'm constantly reporting fake backes.

483
00:27:00,520 --> 00:27:07,000
Speaker 2: I'm sure, and how c not. It's so easy to identify. Well,

484
00:27:07,040 --> 00:27:09,840
Speaker 2: if a I can't do that, then it is worthless.

485
00:27:10,119 --> 00:27:13,160
Speaker 1: It is, and it drives me crazy.

486
00:27:13,000 --> 00:27:14,679
Speaker 2: That it's gone away anyway.

487
00:27:14,680 --> 00:27:20,320
Speaker 1: Twitter, somebody will think it's me, right, and it's somebody.

488
00:27:20,440 --> 00:27:24,040
Speaker 1: It's an account with you know, seven followers and nine

489
00:27:24,520 --> 00:27:27,680
Speaker 1: not not that, not that I'm on you know, Taylor Swift,

490
00:27:27,840 --> 00:27:28,680
Speaker 1: but to.

491
00:27:28,800 --> 00:27:33,959
Speaker 2: Be fair, your call on doge coin using the handle

492
00:27:34,160 --> 00:27:38,639
Speaker 2: lizen Sunder's nine seven three one four six nine it

493
00:27:38,680 --> 00:27:39,440
Speaker 2: was pretty well.

494
00:27:39,280 --> 00:27:41,760
Speaker 1: Time good for her, for her, for him or it

495
00:27:42,040 --> 00:27:46,360
Speaker 1: or whatever. It's a North Korean Yeah, no, so for

496
00:27:46,359 --> 00:27:49,480
Speaker 1: for people who might not have been following the actual me,

497
00:27:49,640 --> 00:27:53,440
Speaker 1: it's at Las Anne Sanders. There's there's no e at

498
00:27:53,440 --> 00:27:55,800
Speaker 1: the end of a hand. There's Saunders is not spelled

499
00:27:55,800 --> 00:27:59,639
Speaker 1: with a Z. There's no numbers added to it, there's

500
00:28:00,400 --> 00:28:02,359
Speaker 1: It drives me crazy, and.

501
00:28:02,320 --> 00:28:05,440
Speaker 2: It's it should be one of those things that are

502
00:28:05,560 --> 00:28:10,600
Speaker 2: just so easy to fix, and he is otherwise distracted,

503
00:28:11,160 --> 00:28:14,520
Speaker 2: So it is something that yeah, that's pretty good. And

504
00:28:14,600 --> 00:28:17,719
Speaker 2: I remember when you first when we when we spoke

505
00:28:17,840 --> 00:28:18,919
Speaker 2: last time twenty fifteen, I.

506
00:28:18,920 --> 00:28:22,600
Speaker 1: Think I had just joined Twitter. Yeah.

507
00:28:22,640 --> 00:28:25,760
Speaker 2: And for people who don't follow liz Ane Saunders, but

508
00:28:25,840 --> 00:28:28,760
Speaker 2: you should, and I retweet you on a regular basis.

509
00:28:29,000 --> 00:28:32,440
Speaker 2: You put up some really nice charts, some good tables.

510
00:28:32,840 --> 00:28:37,159
Speaker 2: Everything is databased, everything is fact oriented. It's none of

511
00:28:37,200 --> 00:28:39,040
Speaker 2: the stuff that I see from you. And this is

512
00:28:39,040 --> 00:28:42,400
Speaker 2: why I appreciate your feed. Is you know, I really

513
00:28:42,400 --> 00:28:44,720
Speaker 2: think the market has another leg up here about ten

514
00:28:44,720 --> 00:28:46,760
Speaker 2: to fifteen percent. Then we get a pull up.

515
00:28:46,800 --> 00:28:48,800
Speaker 1: There's none of that, there's no bit just because I

516
00:28:48,840 --> 00:28:51,560
Speaker 1: you know why, I don't know. I can't do that.

517
00:28:51,480 --> 00:28:54,760
Speaker 1: That's right, and by the way, nobody knows. Nobody can

518
00:28:54,800 --> 00:28:57,240
Speaker 1: do that. It's not what we know that matters, meaning

519
00:28:57,240 --> 00:28:59,080
Speaker 1: about the future, what the market's going to do. It's

520
00:28:59,120 --> 00:29:02,240
Speaker 1: what we do along the way. It's as simple as that.

521
00:29:02,560 --> 00:29:05,400
Speaker 2: It's a little bit of a stoic philosophy. You can't

522
00:29:05,400 --> 00:29:08,840
Speaker 2: control the world. All you can control is your reibator,

523
00:29:08,960 --> 00:29:12,640
Speaker 2: what happened, your behavior, And that's very challenging for people

524
00:29:12,680 --> 00:29:13,360
Speaker 2: to accept.

525
00:29:14,200 --> 00:29:18,920
Speaker 1: Fear and greed are really really powerful emotions, especially as

526
00:29:18,920 --> 00:29:22,160
Speaker 1: it relates to our money, because we care a lot

527
00:29:22,160 --> 00:29:22,800
Speaker 1: about our money.

528
00:29:22,920 --> 00:29:25,320
Speaker 2: So let's talk about fear and greed. Let's talk about

529
00:29:25,360 --> 00:29:29,600
Speaker 2: twenty twenty two and twenty twenty three. Twenty two was

530
00:29:29,640 --> 00:29:34,440
Speaker 2: a tough year. We had double digit declines in fixed

531
00:29:34,480 --> 00:29:38,920
Speaker 2: income and equities. I think the SMP was down about

532
00:29:39,120 --> 00:29:42,080
Speaker 2: almost twenty percent. Then NAZAK was down about thirty percent.

533
00:29:42,800 --> 00:29:46,840
Speaker 2: What was twenty twenty two like for you? Dealing with

534
00:29:46,880 --> 00:29:49,600
Speaker 2: a lot of clients and investors concerned about what was

535
00:29:49,640 --> 00:29:49,960
Speaker 2: going on?

536
00:29:50,000 --> 00:29:52,200
Speaker 1: You know, one of the most interesting things about twenty

537
00:29:52,280 --> 00:29:56,880
Speaker 1: twenty two was to tie this into the sentiment conversation

538
00:29:56,960 --> 00:30:00,600
Speaker 1: that we just had and the differential times between behavioral

539
00:30:00,680 --> 00:30:04,200
Speaker 1: measures of sentiment and additudinal measures of sentiment. I'm sure

540
00:30:04,240 --> 00:30:07,320
Speaker 1: you remember the first big wush down into June of

541
00:30:07,360 --> 00:30:11,200
Speaker 1: twenty twenty two that at the time was the hope

542
00:30:11,240 --> 00:30:14,200
Speaker 1: for Okay, maybe this is the wash out point, in

543
00:30:14,240 --> 00:30:18,760
Speaker 1: part because some sentiment measures were at extremes AAII. I

544
00:30:18,760 --> 00:30:22,280
Speaker 1: don't remember whether it was exactly around the low of June,

545
00:30:22,280 --> 00:30:26,280
Speaker 1: but sometime in that spring early summer period, the percentage

546
00:30:26,320 --> 00:30:31,080
Speaker 1: of bears in the weekly AAII survey went to a

547
00:30:31,160 --> 00:30:34,480
Speaker 1: record high and commensurately, the percentage of bulls went to

548
00:30:34,560 --> 00:30:38,960
Speaker 1: a record low, but it wasn't matched by the behavioral measures.

549
00:30:39,200 --> 00:30:42,240
Speaker 1: In fact, AAII, in addition to their weekly or you

550
00:30:42,280 --> 00:30:44,600
Speaker 1: bullish or you bearish? Are your Neutral survey, they also

551
00:30:44,720 --> 00:30:46,680
Speaker 1: track the equity exposure of their same.

552
00:30:46,600 --> 00:30:48,360
Speaker 2: Time My favorite data point of that.

553
00:30:48,720 --> 00:30:51,720
Speaker 1: And at the time where you had record high bearishness

554
00:30:51,760 --> 00:30:55,360
Speaker 1: record low bullishness, the equity exposure was only slightly often

555
00:30:55,440 --> 00:30:58,600
Speaker 1: all time high. So that was a classic example of

556
00:30:58,760 --> 00:31:01,280
Speaker 1: what they what they're saying, and what they're doing are

557
00:31:01,480 --> 00:31:05,400
Speaker 1: sort of diametrically opposed. Fast forward to the October twenty

558
00:31:05,480 --> 00:31:08,479
Speaker 1: twenty two period, there was a little more of that

559
00:31:09,040 --> 00:31:11,840
Speaker 1: across the spectrum, wash out the puke phase as I

560
00:31:12,000 --> 00:31:15,920
Speaker 1: like to call it, using a very technical term. That

561
00:31:16,240 --> 00:31:21,080
Speaker 1: was also a period where because the Magnificent seven or

562
00:31:21,120 --> 00:31:23,600
Speaker 1: the Grade eight, you know that the small handful of

563
00:31:23,640 --> 00:31:27,959
Speaker 1: ten now right now it's getting shrunk, that those stocks

564
00:31:27,960 --> 00:31:31,400
Speaker 1: were dragging performance down. But what was interesting about the

565
00:31:31,440 --> 00:31:34,080
Speaker 1: October low was what was going on under the surface.

566
00:31:34,800 --> 00:31:38,160
Speaker 1: So the indexes at the October low had taken out

567
00:31:38,160 --> 00:31:40,560
Speaker 1: their June low, but under the surface you were seeing

568
00:31:40,640 --> 00:31:44,239
Speaker 1: much improved breadth. You know, positive divergence, to use that

569
00:31:44,360 --> 00:31:49,080
Speaker 1: technical term, and that was a more compelling point in

570
00:31:49,120 --> 00:31:52,880
Speaker 1: the market. Again, the message from us wasn't the bottom

571
00:31:52,960 --> 00:31:57,080
Speaker 1: is in, but the message was this looks more compelling

572
00:31:57,480 --> 00:32:00,760
Speaker 1: than what was happening in June because you had that

573
00:32:00,960 --> 00:32:04,040
Speaker 1: sort of double wash out in sentiment and you had

574
00:32:04,080 --> 00:32:08,560
Speaker 1: that under the surface improvement in breadth where even though

575
00:32:09,040 --> 00:32:12,200
Speaker 1: you know the generals were retreating, there were more soldiers

576
00:32:12,640 --> 00:32:13,960
Speaker 1: kind of approaching the front line.

577
00:32:14,120 --> 00:32:19,160
Speaker 2: And the October twenty twenty two lows were slightly below

578
00:32:19,320 --> 00:32:23,720
Speaker 2: the June lows. And so the technicians will say that's

579
00:32:24,480 --> 00:32:28,760
Speaker 2: a double bottom, but I recall seeing some people say, uh, oh,

580
00:32:29,240 --> 00:32:31,480
Speaker 2: we're going to start a whole new leg down over here,

581
00:32:31,520 --> 00:32:34,400
Speaker 2: and it's hard to see that with sentiment that negatively.

582
00:32:34,560 --> 00:32:36,920
Speaker 1: Not only that, but again the fact that breadth under

583
00:32:36,920 --> 00:32:38,080
Speaker 1: the surface was truth.

584
00:32:38,320 --> 00:32:41,600
Speaker 2: Yeah, And you know, same thing at my firm. We're

585
00:32:41,640 --> 00:32:45,080
Speaker 2: not market timers, we're not traders. In my personal account,

586
00:32:45,160 --> 00:32:48,000
Speaker 2: I went out and bought a bunch of QQQ calls

587
00:32:48,080 --> 00:32:51,240
Speaker 2: and Spider calls just to play around, and Russell two

588
00:32:51,240 --> 00:32:55,800
Speaker 2: thousand calls. Spiders did well, Russell's did nothing, and the

589
00:32:55,920 --> 00:32:59,520
Speaker 2: cues crushed it. Over the next year. But that has

590
00:32:59,600 --> 00:33:03,200
Speaker 2: to be a challenging period. What sort of halls and

591
00:33:03,960 --> 00:33:07,120
Speaker 2: do you get panicky conversations with investors?

592
00:33:07,240 --> 00:33:12,400
Speaker 1: You know, one of the differentiations that I've observed over

593
00:33:12,440 --> 00:33:16,120
Speaker 1: my many years at Schwab is during some of the

594
00:33:16,200 --> 00:33:21,160
Speaker 1: really tumultuous eras twenty twenty two, maybe not as significant

595
00:33:21,240 --> 00:33:24,840
Speaker 1: as the COVID decline or certainly the global financial crisis,

596
00:33:25,000 --> 00:33:30,000
Speaker 1: is there is a pretty direct correlation between the ability

597
00:33:30,080 --> 00:33:34,320
Speaker 1: with the withstand volatility and tough market environments with whether

598
00:33:34,440 --> 00:33:38,160
Speaker 1: you sort of have a discipline strategic acid allocation plan

599
00:33:38,480 --> 00:33:41,760
Speaker 1: versus more of the day traders, the wing it kind.

600
00:33:41,840 --> 00:33:47,239
Speaker 1: That's where you see the bigger emotional swings versus our

601
00:33:47,400 --> 00:33:49,800
Speaker 1: clients that have taken that what we sometimes call an

602
00:33:49,840 --> 00:33:54,320
Speaker 1: advised approach, where they've got that long term plan, they

603
00:33:54,360 --> 00:33:58,080
Speaker 1: have a financial plan, they've got a strategic acid allocation

604
00:33:58,240 --> 00:34:02,600
Speaker 1: structure that is tied to everything personally about them, that

605
00:34:02,640 --> 00:34:07,720
Speaker 1: they have the disciplines around diversification, periodic rebalancing, and they

606
00:34:07,760 --> 00:34:10,560
Speaker 1: tend to ride through the tougher times much better than

607
00:34:10,600 --> 00:34:12,799
Speaker 1: the kind of wing it type investors.

608
00:34:12,840 --> 00:34:15,359
Speaker 2: So let's flip it on its head. Twenty twenty three

609
00:34:15,800 --> 00:34:18,360
Speaker 2: S and P five hundred up almost twenty five percent,

610
00:34:18,440 --> 00:34:21,520
Speaker 2: and nas deck up more than double that. What do

611
00:34:21,560 --> 00:34:26,839
Speaker 2: you do with people who suddenly become uber bullish and hey,

612
00:34:26,960 --> 00:34:30,040
Speaker 2: this is this is a new something. We have to

613
00:34:30,040 --> 00:34:31,480
Speaker 2: be in it to win it. How do you call

614
00:34:31,520 --> 00:34:31,920
Speaker 2: it that?

615
00:34:32,120 --> 00:34:36,440
Speaker 1: You're like, last year was so dominant by such a

616
00:34:36,480 --> 00:34:39,400
Speaker 1: small handful of names. It got less extreme as the

617
00:34:39,640 --> 00:34:43,960
Speaker 1: as the year concluded. But at around the midpoint of

618
00:34:44,120 --> 00:34:47,520
Speaker 1: last year, you not only had the Magnificent seven accounting

619
00:34:47,560 --> 00:34:50,680
Speaker 1: for more than all the performance, but you had a

620
00:34:50,719 --> 00:34:55,000
Speaker 1: record low percentage of the index outperforming the index itself, and.

621
00:34:55,000 --> 00:34:59,160
Speaker 2: Forty five stocks did better than twenty five percent one

622
00:34:59,200 --> 00:35:00,640
Speaker 2: hundred and forty four STO and the S and P

623
00:35:00,719 --> 00:35:04,600
Speaker 2: five hundred if I'm remembering correctly, right, output.

624
00:35:04,360 --> 00:35:07,520
Speaker 1: Wells way, which is low to look at that. So

625
00:35:08,200 --> 00:35:13,120
Speaker 1: at the low point of last year, even today, if

626
00:35:13,120 --> 00:35:15,799
Speaker 1: you look at the percentage of the SMP that has

627
00:35:15,840 --> 00:35:19,000
Speaker 1: outperformed the index over the past twelve months, it's only

628
00:35:19,040 --> 00:35:22,120
Speaker 1: twelve percent. That's close to an all time low.

629
00:35:22,480 --> 00:35:24,239
Speaker 2: If give me those numbers again, twelve to.

630
00:35:24,239 --> 00:35:27,040
Speaker 1: Twelve percent of the overall S and P five hundred.

631
00:35:27,280 --> 00:35:29,880
Speaker 2: So you're talking sixty stocks.

632
00:35:29,480 --> 00:35:31,919
Speaker 1: Right have outperformed the S and P over the prior

633
00:35:31,960 --> 00:35:35,040
Speaker 1: twelve months. Now, if you start to shorten that twelve months,

634
00:35:35,320 --> 00:35:39,720
Speaker 1: it gets better. So right now it's around forty percent

635
00:35:40,200 --> 00:35:43,080
Speaker 1: of the index has outperformed the index over the past month.

636
00:35:43,880 --> 00:35:47,600
Speaker 2: Really, that's much broader. All we hear is people saying

637
00:35:48,120 --> 00:35:50,400
Speaker 2: the market is narrowing. This is how bulls end.

638
00:35:50,560 --> 00:35:51,760
Speaker 1: It's just it's broadening.

639
00:35:51,880 --> 00:35:52,799
Speaker 2: It's going the other way.

640
00:35:52,920 --> 00:35:56,960
Speaker 1: So even justice, yes, it is even just among the

641
00:35:57,000 --> 00:36:00,359
Speaker 1: magnificent seven. Now last year, so that Moniker came because

642
00:36:00,400 --> 00:36:02,640
Speaker 1: those were the seven largest stocks right in the SMPN

643
00:36:02,680 --> 00:36:05,319
Speaker 1: and the Nasdaq. They're not the seventh largest anymore. Six

644
00:36:05,400 --> 00:36:07,440
Speaker 1: of them are still the sixth largest, but Tesla has

645
00:36:07,520 --> 00:36:09,560
Speaker 1: dropped down. It's kind of bouncing between the ninth and

646
00:36:09,600 --> 00:36:13,000
Speaker 1: the ten spot. So leap frogging Tesla has been. Berkshire, Hathaway, Eli,

647
00:36:13,040 --> 00:36:16,080
Speaker 1: Lilly and Broadcom has been, you know, kind of breathing

648
00:36:16,160 --> 00:36:20,120
Speaker 1: down Tesla's neck. Last year, they were the seven largest

649
00:36:20,160 --> 00:36:23,080
Speaker 1: stocks consistently throughout the year. They weren't the seven best performers,

650
00:36:23,080 --> 00:36:25,920
Speaker 1: but they were all strong performers double and triple digit.

651
00:36:25,960 --> 00:36:28,200
Speaker 1: You only had to go down to the sixty third

652
00:36:28,280 --> 00:36:31,160
Speaker 1: ranking within the S and P five hundred to capture

653
00:36:31,200 --> 00:36:33,640
Speaker 1: all seven of those names year to date. As you

654
00:36:33,719 --> 00:36:37,719
Speaker 1: and I are recording this, three of the seven stocks

655
00:36:38,160 --> 00:36:42,080
Speaker 1: are ranked year to date performance in the bottom quintile,

656
00:36:42,320 --> 00:36:44,880
Speaker 1: so they four of them have three of them have

657
00:36:44,920 --> 00:36:49,960
Speaker 1: a four handle in terms of the ranking. So that's Tesla, Apple,

658
00:36:50,239 --> 00:36:53,160
Speaker 1: and Alphabet. Now Nvidia is still the best proing stock.

659
00:36:53,200 --> 00:36:57,000
Speaker 1: But you've got this massive spread in terms of performance

660
00:36:57,719 --> 00:37:00,080
Speaker 1: among just that group of names, and you have the

661
00:37:00,200 --> 00:37:04,439
Speaker 1: sort of stealthy breakouts happening in areas like industrials, even

662
00:37:04,480 --> 00:37:07,680
Speaker 1: to some degree in financials.

663
00:37:07,200 --> 00:37:10,720
Speaker 2: And which have been a giant laggered for right forever.

664
00:37:10,800 --> 00:37:15,120
Speaker 1: But you know, sectors and groups and categories, there's rotation.

665
00:37:15,280 --> 00:37:18,160
Speaker 1: I think all l sqel's that's a healthy thing. I

666
00:37:18,160 --> 00:37:20,399
Speaker 1: think still a bit more work needs to be done.

667
00:37:20,440 --> 00:37:22,360
Speaker 1: But in terms of back to the original part of

668
00:37:22,400 --> 00:37:24,480
Speaker 1: your question, you know, how do you navigate this? First

669
00:37:24,480 --> 00:37:27,600
Speaker 1: of all, understand what's actually going on in the market,

670
00:37:27,600 --> 00:37:31,200
Speaker 1: and understand that indexes can often paint a very different

671
00:37:31,239 --> 00:37:34,279
Speaker 1: picture versus if you look under the surface. And that's

672
00:37:34,280 --> 00:37:37,359
Speaker 1: why in my latest report I said that this may

673
00:37:37,400 --> 00:37:39,239
Speaker 1: be more of a duck market than a bull market.

674
00:37:39,440 --> 00:37:42,760
Speaker 2: That's that's a quite literally a question I have explained.

675
00:37:42,800 --> 00:37:45,680
Speaker 2: I love the metaphor of a duck explained.

676
00:37:45,280 --> 00:37:48,040
Speaker 1: So it was I guess is the quote originally is

677
00:37:48,080 --> 00:37:51,120
Speaker 1: attributed to Michael Kaine, who's talked about a duck being

678
00:37:51,280 --> 00:37:54,440
Speaker 1: very calm on the surface but paddling like the dickens underneath.

679
00:37:54,480 --> 00:37:57,239
Speaker 1: And to put some numbers behind what I mean in

680
00:37:57,280 --> 00:37:59,360
Speaker 1: this context, that both the S and P and the

681
00:37:59,440 --> 00:38:02,920
Speaker 1: Nasdaq are still trading around all time highs with in

682
00:38:02,960 --> 00:38:05,239
Speaker 1: the case of the S and P, no more than

683
00:38:05,280 --> 00:38:07,799
Speaker 1: a two percent draw down from a year to date

684
00:38:07,880 --> 00:38:10,160
Speaker 1: high maximum draw down. It's a little bit worse is

685
00:38:10,200 --> 00:38:12,719
Speaker 1: three percent for the Nasdaq, but that's at the index level.

686
00:38:12,800 --> 00:38:15,040
Speaker 1: Let me just use the Nasdaq as an example of this,

687
00:38:15,560 --> 00:38:17,200
Speaker 1: and as you and I are doing this first week

688
00:38:17,480 --> 00:38:19,719
Speaker 1: in March, we're not very far into the year, but

689
00:38:19,840 --> 00:38:25,239
Speaker 1: the average member Nasdaq member maximum draw down from year

690
00:38:25,239 --> 00:38:27,160
Speaker 1: to date highs is negative twenty two percent.

691
00:38:27,280 --> 00:38:28,320
Speaker 2: That's big, it's big.

692
00:38:28,440 --> 00:38:31,000
Speaker 1: That's bear market level decline. So there's a lot more

693
00:38:31,800 --> 00:38:35,759
Speaker 1: churn going on under the surface. And I think, especially

694
00:38:36,000 --> 00:38:38,399
Speaker 1: in this environment, you want to understand what's going on

695
00:38:38,480 --> 00:38:42,160
Speaker 1: under the surface, not just make assumptions about the market

696
00:38:42,719 --> 00:38:46,000
Speaker 1: at the index level because of what has been that

697
00:38:46,120 --> 00:38:49,720
Speaker 1: bias in terms of performance to just a relatively small

698
00:38:49,719 --> 00:38:50,680
Speaker 1: handful of names.

699
00:38:50,800 --> 00:38:53,520
Speaker 2: So those data points that you bring up are really

700
00:38:53,640 --> 00:38:58,000
Speaker 2: quite interesting because there has been an increasing chorus of

701
00:38:58,040 --> 00:39:05,080
Speaker 2: people talking about passive flows and indexing are destroying price discovery.

702
00:39:05,960 --> 00:39:09,280
Speaker 2: David Ihorn a few weeks ago said passive is destroying

703
00:39:09,400 --> 00:39:13,880
Speaker 2: value and it's damaging market structure. You're essentially making the

704
00:39:13,920 --> 00:39:18,160
Speaker 2: case that there's plenty of price discovery, that it's not uniform,

705
00:39:18,520 --> 00:39:22,760
Speaker 2: that money isn't just flowing into names blindly. If Apple,

706
00:39:23,000 --> 00:39:28,520
Speaker 2: Alphabet and Tesla are in the bottom quintile of performers

707
00:39:28,840 --> 00:39:32,439
Speaker 2: when they are amongst the top ten biggest stocks, that

708
00:39:32,520 --> 00:39:36,120
Speaker 2: really contradicts Oh no, means there's.

709
00:39:34,640 --> 00:39:36,520
Speaker 1: Just there's other stuff going on.

710
00:39:36,640 --> 00:39:39,280
Speaker 2: It's not just fun now houses.

711
00:39:39,800 --> 00:39:43,000
Speaker 1: Passive did just surpass active in terms of the amount

712
00:39:43,080 --> 00:39:47,600
Speaker 1: of money in passive ETFs and funds versus active. That

713
00:39:47,760 --> 00:39:50,840
Speaker 1: just happened at the end of twenty twenty three. But

714
00:39:51,239 --> 00:39:55,680
Speaker 1: dispersion is up and correlations are way down, and I

715
00:39:55,719 --> 00:39:58,799
Speaker 1: think that that's supportive of activity, and that is not

716
00:39:59,120 --> 00:40:02,400
Speaker 1: me saying sell all your passive vehicles and back up

717
00:40:02,440 --> 00:40:05,160
Speaker 1: the truck and load up on active. We have always

718
00:40:05,200 --> 00:40:08,360
Speaker 1: for years thought there's a home for both active and

719
00:40:08,400 --> 00:40:12,680
Speaker 1: power and settle in portfolios. The point is more that

720
00:40:13,000 --> 00:40:17,840
Speaker 1: active in general and broadly has just not been playing

721
00:40:17,840 --> 00:40:21,040
Speaker 1: on a level playing field with passive. I think that's improving,

722
00:40:21,080 --> 00:40:23,920
Speaker 1: and it's your right. There is price discovery again. A

723
00:40:23,960 --> 00:40:25,560
Speaker 1: lot of that has to do with the return of

724
00:40:25,600 --> 00:40:28,320
Speaker 1: the risk free rate and an environment in the zerp.

725
00:40:28,120 --> 00:40:31,120
Speaker 2: Era competition with bonds, you mean, and just.

726
00:40:31,360 --> 00:40:33,960
Speaker 1: You know, the zerp Era zero percent interest rate. That

727
00:40:34,200 --> 00:40:38,280
Speaker 1: was the support for zombie companies and companies that really

728
00:40:38,400 --> 00:40:43,319
Speaker 1: had no business you know, existing. And I think with

729
00:40:43,440 --> 00:40:46,239
Speaker 1: that return of the risk free rate, it is it

730
00:40:46,239 --> 00:40:49,640
Speaker 1: has brought about more price discovery. It is represented a

731
00:40:49,760 --> 00:40:54,200
Speaker 1: reconnection of fundamentals to prices. Not every day, not every week.

732
00:40:54,320 --> 00:40:58,360
Speaker 1: You still get these you know, captriven concentration problems in

733
00:40:58,400 --> 00:41:01,279
Speaker 1: the market like last year, but that's starting to ease

734
00:41:01,320 --> 00:41:04,240
Speaker 1: a bit. And if you're only looking at the index

735
00:41:04,360 --> 00:41:07,600
Speaker 1: level and you see certain ugly days, I think the

736
00:41:07,640 --> 00:41:12,759
Speaker 1: real story, which is arguably a more optimistic story, can

737
00:41:12,800 --> 00:41:15,080
Speaker 1: often be found under the surface, not on the surface.

738
00:41:15,760 --> 00:41:20,160
Speaker 2: That's some really fascinating stuff. And I love that perspective

739
00:41:20,200 --> 00:41:22,960
Speaker 2: of here's what the chatter is saying, but when we

740
00:41:23,000 --> 00:41:25,879
Speaker 2: look at the data, it's telling you something else. All Right,

741
00:41:25,960 --> 00:41:27,480
Speaker 2: last question on Schwab.

742
00:41:27,800 --> 00:41:31,880
Speaker 1: You've been there, I think later twenty four years.

743
00:41:31,680 --> 00:41:35,839
Speaker 2: So your next year is twenty five years. Yes, that longevity,

744
00:41:36,000 --> 00:41:37,319
Speaker 2: first of all, is unusual.

745
00:41:37,560 --> 00:41:40,400
Speaker 1: Well two for all intents and purposes. Two jobs and

746
00:41:40,560 --> 00:41:44,000
Speaker 1: thirty eight years not too bad. So that's not common

747
00:41:44,040 --> 00:41:44,680
Speaker 1: on Wall Street.

748
00:41:44,719 --> 00:41:50,439
Speaker 2: I think it's definitely increasingly rare. The question is, tell

749
00:41:50,520 --> 00:41:54,440
Speaker 2: us what's kept you at one place for a quarter

750
00:41:54,480 --> 00:41:55,279
Speaker 2: of a century.

751
00:41:56,040 --> 00:41:57,400
Speaker 1: A lot of it has to do with the culture.

752
00:41:58,600 --> 00:42:02,200
Speaker 1: And I give tremendous amount of credit to the man

753
00:42:02,280 --> 00:42:06,319
Speaker 1: behind the firmly Chuck Schwab, and who is still with us,

754
00:42:06,320 --> 00:42:10,680
Speaker 1: and he's still a pretty active chairman, and I know

755
00:42:10,840 --> 00:42:15,600
Speaker 1: him personally as well as professionally, and his vision of

756
00:42:15,640 --> 00:42:19,279
Speaker 1: what Schwab should be and has turned into is it

757
00:42:19,320 --> 00:42:22,719
Speaker 1: really I think separates us from maybe the typical Wall

758
00:42:22,719 --> 00:42:26,799
Speaker 1: Street firm, because you know, our sort of marketing tagline

759
00:42:26,800 --> 00:42:30,600
Speaker 1: of sorts of through clients' eyes is actually legitimate. And

760
00:42:30,680 --> 00:42:33,839
Speaker 1: I think the perspective of the individual investor, what they

761
00:42:34,080 --> 00:42:37,160
Speaker 1: maybe not want, but what we know they probably needs.

762
00:42:37,239 --> 00:42:40,520
Speaker 1: Just very different than the institutional world, and I think

763
00:42:40,560 --> 00:42:45,960
Speaker 1: approaching investing through the eyes of individual investors is just

764
00:42:46,080 --> 00:42:51,000
Speaker 1: a different ballgame. And there was nobody that preceded me

765
00:42:51,040 --> 00:42:53,880
Speaker 1: in this role. So when Schwab acquired US Trust in

766
00:42:53,960 --> 00:42:56,080
Speaker 1: two thousand, it was only ten months after I had

767
00:42:56,160 --> 00:43:01,799
Speaker 1: joined US Trust, Chuck and and our CEO at the time,

768
00:43:01,880 --> 00:43:03,960
Speaker 1: Dave Patrick, came to New York to meet all the

769
00:43:04,080 --> 00:43:06,840
Speaker 1: US Trust executives and they sat down with me and said,

770
00:43:06,880 --> 00:43:09,719
Speaker 1: we want to create this role of chief investment strategist

771
00:43:10,040 --> 00:43:14,040
Speaker 1: any interest I'm making a longer conversation very short. I said, yep,

772
00:43:14,120 --> 00:43:16,680
Speaker 1: hell count me in. And the rest is sort of history.

773
00:43:16,680 --> 00:43:19,360
Speaker 1: But they gave me a lot of free rain to

774
00:43:20,760 --> 00:43:24,840
Speaker 1: sort of create this role, but with my full knowledge

775
00:43:24,880 --> 00:43:27,520
Speaker 1: based on what I know was their mission around the

776
00:43:27,640 --> 00:43:31,000
Speaker 1: organization of this is through individual client size, and that's

777
00:43:31,280 --> 00:43:33,000
Speaker 1: a reason why we don't try to do things like

778
00:43:33,040 --> 00:43:36,640
Speaker 1: market timing or year end price target. It's about long

779
00:43:36,719 --> 00:43:43,440
Speaker 1: term planning and strategic acid allocation and just understanding how

780
00:43:43,719 --> 00:43:46,640
Speaker 1: markets work and how behavior comes into the mix. So

781
00:43:46,680 --> 00:43:50,560
Speaker 1: it's just been a great platform for me and I

782
00:43:50,600 --> 00:43:52,680
Speaker 1: love it. I hope I'm there for a.

783
00:43:52,560 --> 00:43:54,200
Speaker 2: Lot another twenty five years.

784
00:43:54,239 --> 00:43:57,840
Speaker 1: Well, boy, that would be interesting. So let me she

785
00:43:58,120 --> 00:43:58,799
Speaker 1: my mom's age.

786
00:43:58,800 --> 00:44:03,200
Speaker 2: Then you mentioned the culture at Schwab. Let me share

787
00:44:03,440 --> 00:44:06,799
Speaker 2: a perspective. I don't know if I ever shared this

788
00:44:06,880 --> 00:44:13,120
Speaker 2: with you. So my firm launched in twenty thirteen with

789
00:44:13,320 --> 00:44:17,120
Speaker 2: very little money. TD was our custodian.

790
00:44:18,040 --> 00:44:21,360
Speaker 1: I think i've heard of TD right now, part.

791
00:44:21,160 --> 00:44:25,840
Speaker 2: Of Schwab and the first couple, and we just the

792
00:44:25,920 --> 00:44:29,280
Speaker 2: reason we did that is our prior firm. The clients

793
00:44:29,320 --> 00:44:32,200
Speaker 2: were custody to TD, and it made it just a

794
00:44:32,239 --> 00:44:36,080
Speaker 2: single letter, you know, LA, in order to transfer the

795
00:44:36,400 --> 00:44:40,399
Speaker 2: accounts over. And it took us about a year or two.

796
00:44:41,280 --> 00:44:45,359
Speaker 2: After you hear it for the hundredth time, where we

797
00:44:45,400 --> 00:44:47,520
Speaker 2: would go on a road trip. So we were a

798
00:44:47,560 --> 00:44:50,719
Speaker 2: small shop, but you know, between our media exposure and

799
00:44:50,760 --> 00:44:54,279
Speaker 2: everything else, had a national footprint and we would go

800
00:44:54,360 --> 00:44:58,960
Speaker 2: to Seattle or San Francisco or Chicago or Austin, Texas

801
00:44:59,440 --> 00:45:02,959
Speaker 2: And do you hear it like the nineteenth time, Hey,

802
00:45:03,000 --> 00:45:05,919
Speaker 2: we love you guys. I would love to have you

803
00:45:06,120 --> 00:45:09,919
Speaker 2: manage our portfolio. But we've been with Schwab and we're

804
00:45:09,920 --> 00:45:12,799
Speaker 2: not leaving them as our custodian. Let us know as

805
00:45:12,840 --> 00:45:15,120
Speaker 2: soon as Schwab is one of your platforms. You know,

806
00:45:15,280 --> 00:45:17,319
Speaker 2: you can only only have to hit me over the

807
00:45:17,320 --> 00:45:20,520
Speaker 2: head with a hammer fourteen times before I'm like, hey,

808
00:45:20,800 --> 00:45:24,680
Speaker 2: maybe I may. And now we have I think we have.

809
00:45:24,840 --> 00:45:26,719
Speaker 2: I'm doing this off the top of my head. You know,

810
00:45:26,880 --> 00:45:31,520
Speaker 2: four billion plus on the Schwab platform from essentially nothing

811
00:45:32,200 --> 00:45:34,439
Speaker 2: years ago. Well, you guys have won a great part.

812
00:45:34,520 --> 00:45:37,200
Speaker 2: You know. I don't again, I always like to disclose things,

813
00:45:37,239 --> 00:45:42,560
Speaker 2: but it was it was dumbfounding in the beginning, where

814
00:45:42,560 --> 00:45:44,920
Speaker 2: it's like I don't understand they're a custodian.

815
00:45:45,000 --> 00:45:47,960
Speaker 1: Why now it's a partnership. I'm glad you use that.

816
00:45:48,040 --> 00:45:51,520
Speaker 2: That's what we ended up learning is oh, the culture

817
00:45:51,560 --> 00:45:54,880
Speaker 2: at Schwab and the way they do things. This isn't

818
00:45:55,120 --> 00:45:57,239
Speaker 2: just hey, leave your money with us. We'll send you

819
00:45:57,280 --> 00:46:00,200
Speaker 2: a statement every quarter and that was it. It's a

820
00:46:00,360 --> 00:46:05,800
Speaker 2: very different relationship. And to Chuck's credit, you guys created

821
00:46:05,840 --> 00:46:11,080
Speaker 2: something that did not exist amongst most custodians beforehand. Am

822
00:46:11,120 --> 00:46:12,080
Speaker 2: I over now?

823
00:46:12,080 --> 00:46:14,560
Speaker 1: No, no, not at all. And we are you know,

824
00:46:14,640 --> 00:46:18,960
Speaker 1: by far the largest in terms of not just custodying

825
00:46:19,000 --> 00:46:23,600
Speaker 1: assets for the RAA community, but representing that partnership in

826
00:46:23,760 --> 00:46:29,960
Speaker 1: everything from research and trading and succession planning. It is.

827
00:46:30,200 --> 00:46:32,040
Speaker 1: It's an important part of our business for sure.

828
00:46:32,360 --> 00:46:34,880
Speaker 2: Let's talk a little bit about the markets and the

829
00:46:34,920 --> 00:46:38,520
Speaker 2: economy today, starting with all right, we're at all time

830
00:46:38,600 --> 00:46:41,040
Speaker 2: highs and the Nasdaq where at all time highs in

831
00:46:41,080 --> 00:46:43,640
Speaker 2: the s and P five hundred. I've heard a bunch

832
00:46:43,719 --> 00:46:45,759
Speaker 2: of people on TV come out and say, oh, you know,

833
00:46:46,120 --> 00:46:50,160
Speaker 2: this makes me nervous. What does the data say about

834
00:46:50,239 --> 00:46:55,040
Speaker 2: what all time highs in broad indexes mean for the

835
00:46:55,080 --> 00:46:56,480
Speaker 2: next couple of quarters.

836
00:46:56,680 --> 00:46:59,440
Speaker 1: Well, it starts to years that have a lot of

837
00:46:59,480 --> 00:47:04,359
Speaker 1: momentum do tend to carry through. But there's with any

838
00:47:04,440 --> 00:47:06,839
Speaker 1: data point like that, if you're looking at aggregate data

839
00:47:06,880 --> 00:47:10,600
Speaker 1: or averages, there are always exceptions to those roles. And

840
00:47:10,640 --> 00:47:12,560
Speaker 1: as we already talked about, there's been a lot more

841
00:47:12,640 --> 00:47:14,440
Speaker 1: churn under the surface and when you pick up if

842
00:47:14,480 --> 00:47:17,160
Speaker 1: you're only looking at index level. But to say that

843
00:47:17,200 --> 00:47:20,000
Speaker 1: this has been a unique cycle, both on the market

844
00:47:20,000 --> 00:47:22,000
Speaker 1: side of things and the economy side of things, is

845
00:47:22,000 --> 00:47:25,160
Speaker 1: the ultimate understatement. And I think that to be an

846
00:47:25,200 --> 00:47:28,640
Speaker 1: analyst of the market and one of the nice things

847
00:47:29,000 --> 00:47:31,640
Speaker 1: for me as strategists at SCHWAB is that I get

848
00:47:31,640 --> 00:47:34,279
Speaker 1: to wear the two hats of both market strategists but

849
00:47:34,320 --> 00:47:37,360
Speaker 1: also economist. We don't have a separate chief economist, and

850
00:47:37,440 --> 00:47:40,160
Speaker 1: I like that because I get to marry the views.

851
00:47:40,200 --> 00:47:43,120
Speaker 1: I'm not beholden to somebody else's view on the economy.

852
00:47:43,200 --> 00:47:47,400
Speaker 1: And on that front, the nature of this economic cycle

853
00:47:47,400 --> 00:47:50,160
Speaker 1: helps to explain why we've had so many funky things

854
00:47:50,200 --> 00:47:52,759
Speaker 1: happen in terms of the market cycle, and it's we've

855
00:47:52,800 --> 00:47:56,880
Speaker 1: been using the rolling recessions terminology because that's actually what

856
00:47:57,000 --> 00:47:59,759
Speaker 1: has happened in the early part of the pandemic during

857
00:47:59,760 --> 00:48:04,360
Speaker 1: this stimulus fueled piece of that cycle, that all of

858
00:48:04,360 --> 00:48:06,920
Speaker 1: that stimulus was essentially funneled into the goods side of

859
00:48:06,920 --> 00:48:09,560
Speaker 1: the economy because we had no access to services. That

860
00:48:09,840 --> 00:48:12,000
Speaker 1: was the breeding ground of the inflation problem with which

861
00:48:12,000 --> 00:48:15,880
Speaker 1: we're still dealing. But we subsequently went into recession like

862
00:48:15,920 --> 00:48:19,680
Speaker 1: conditions for many of those goods oriented categories like manufacturing

863
00:48:19,680 --> 00:48:22,759
Speaker 1: and housing. Housing related a lot of consumer oriented products

864
00:48:22,760 --> 00:48:26,000
Speaker 1: and goods that were big beneficiaries of the lockdown phase.

865
00:48:26,200 --> 00:48:30,400
Speaker 1: And we've gone from hyperinflation to disinflation to some deflation

866
00:48:30,760 --> 00:48:33,120
Speaker 1: based on certain categories of goods. But of course we've

867
00:48:33,120 --> 00:48:35,520
Speaker 1: had the later pickup and off setting strength on the

868
00:48:35,560 --> 00:48:38,799
Speaker 1: services side, and you've seen that roll through in terms

869
00:48:38,840 --> 00:48:43,360
Speaker 1: of market behavior too, And it just makes this backdrop

870
00:48:43,560 --> 00:48:47,640
Speaker 1: kind of an apple compared to history's oranges, and I

871
00:48:47,680 --> 00:48:50,480
Speaker 1: think we have to be mindful of that when trying

872
00:48:50,520 --> 00:48:52,560
Speaker 1: to gage where we are in the market cycle, where

873
00:48:52,600 --> 00:48:56,359
Speaker 1: we are in the economic cycle. It's just a very

874
00:48:56,440 --> 00:48:57,080
Speaker 1: unique period.

875
00:48:57,320 --> 00:49:02,000
Speaker 2: Any other historical parallels that come up, I personally hate

876
00:49:02,080 --> 00:49:06,680
Speaker 2: the nineteen seventies parallel, because you certainly know the employment picture,

877
00:49:06,760 --> 00:49:11,120
Speaker 2: the inflation picture, the geopolitics, everything was just so much

878
00:49:11,239 --> 00:49:13,000
Speaker 2: worse than what we're dealing with.

879
00:49:13,120 --> 00:49:16,600
Speaker 1: It a very very different backdrop relative to the nineteen seventies.

880
00:49:16,640 --> 00:49:20,440
Speaker 1: I guess the only comparison that we're witnessing right now

881
00:49:20,560 --> 00:49:22,560
Speaker 1: is the desire on the part of the Fed and

882
00:49:22,600 --> 00:49:26,160
Speaker 1: maybe Powell in particular, to not repeat the mistakes of

883
00:49:26,200 --> 00:49:30,360
Speaker 1: the nineteen seventies in terms of monetary policy premature, you know,

884
00:49:30,480 --> 00:49:34,080
Speaker 1: hanging of the victory banner, easing policy, only to see

885
00:49:34,280 --> 00:49:37,520
Speaker 1: inflation sort of its head again. So I think that

886
00:49:38,239 --> 00:49:41,040
Speaker 1: is maybe one similarity in terms of what the playbook

887
00:49:41,160 --> 00:49:43,520
Speaker 1: is for the FED. But I totally agree with you

888
00:49:43,600 --> 00:49:46,520
Speaker 1: that the nature of what was driving inflation, the backdrop

889
00:49:46,520 --> 00:49:51,000
Speaker 1: in terms of geopolitics and demographics and labor versus capital

890
00:49:51,239 --> 00:49:53,760
Speaker 1: is not a mirror of what we're experiencing right now.

891
00:49:53,800 --> 00:49:56,880
Speaker 1: But I think the FED took some lessons from the

892
00:49:56,960 --> 00:49:58,040
Speaker 1: mistakes back in that.

893
00:49:58,040 --> 00:50:02,200
Speaker 2: Era if you're looking for parallels, and I think you're right,

894
00:50:02,680 --> 00:50:06,600
Speaker 2: this is totally unique, but the immediate period after war

895
00:50:06,680 --> 00:50:10,520
Speaker 2: war is kind of similar. You have all these gis

896
00:50:10,560 --> 00:50:13,600
Speaker 2: returning and all this pent up. Hey, we couldn't do

897
00:50:13,680 --> 00:50:18,000
Speaker 2: all these things, and a spike in inflation that came down,

898
00:50:18,560 --> 00:50:22,160
Speaker 2: unemployment collapse because you had all these people coming back

899
00:50:22,560 --> 00:50:23,040
Speaker 2: to work.

900
00:50:24,040 --> 00:50:27,320
Speaker 1: It's not perfect, no, but I think you're right. It

901
00:50:27,480 --> 00:50:30,160
Speaker 1: was a military war, not a health war, which was

902
00:50:30,200 --> 00:50:32,279
Speaker 1: the case this time, but had some of those same

903
00:50:32,400 --> 00:50:37,480
Speaker 1: characteristics in terms of supply demand imbalances and the drivers

904
00:50:37,600 --> 00:50:42,520
Speaker 1: of inflation. Obviously, there are plenty of differences, not least

905
00:50:42,560 --> 00:50:45,719
Speaker 1: being what happened on the other side of it, with

906
00:50:45,760 --> 00:50:49,399
Speaker 1: which you know, massive amount of military personnel coming back

907
00:50:49,440 --> 00:50:52,919
Speaker 1: into the private sector and into the civilian workforce, and

908
00:50:53,280 --> 00:50:57,359
Speaker 1: the rebuilding of the global infrastructure. That is one era

909
00:50:57,520 --> 00:51:01,200
Speaker 1: that I have used often as a reference point, with

910
00:51:01,320 --> 00:51:04,160
Speaker 1: that differential being military war versus health war.

911
00:51:04,280 --> 00:51:06,600
Speaker 2: So let's talk about some of the other differentials because

912
00:51:06,680 --> 00:51:10,200
Speaker 2: I think they're informative. Not only did we bring a

913
00:51:10,200 --> 00:51:14,440
Speaker 2: lot of technological usage forward or things that existed. Look,

914
00:51:14,440 --> 00:51:18,200
Speaker 2: we've had FaceTime for fifteen years. It's not like it's new,

915
00:51:18,239 --> 00:51:21,839
Speaker 2: and screen shares and other things like that, but they

916
00:51:21,920 --> 00:51:23,560
Speaker 2: just became more widely adopted.

917
00:51:24,120 --> 00:51:26,640
Speaker 1: It was forced adoption because we have no choice. We

918
00:51:26,680 --> 00:51:27,440
Speaker 1: had no choice.

919
00:51:27,520 --> 00:51:32,000
Speaker 2: But today we have office buildings that are not running

920
00:51:32,040 --> 00:51:36,680
Speaker 2: full documency. Return to office has been you know, we're

921
00:51:37,120 --> 00:51:40,160
Speaker 2: sixty percent seventy percent back. You have a lot of

922
00:51:40,200 --> 00:51:42,440
Speaker 2: hybrid work, you have a lot of people working from home.

923
00:51:43,120 --> 00:51:45,960
Speaker 2: How does this affect how you perceive the economy? What

924
00:51:45,960 --> 00:51:50,080
Speaker 2: does this mean for things like hey, commercial or residential

925
00:51:50,080 --> 00:51:50,920
Speaker 2: real estate investment?

926
00:51:51,000 --> 00:51:54,239
Speaker 1: Yes, so commercial real estate tends to get thought of

927
00:51:54,440 --> 00:51:57,800
Speaker 1: too monolithically. Commercial real estate is a very broad category, obviously,

928
00:51:57,840 --> 00:52:01,040
Speaker 1: and it's inclusive of not just the world of offices,

929
00:52:01,160 --> 00:52:05,000
Speaker 1: but you know, multi family residential and warehousing and retail

930
00:52:05,239 --> 00:52:09,280
Speaker 1: and healthcare facilities, et cetera. So we can't paint commercial

931
00:52:09,320 --> 00:52:12,360
Speaker 1: real estate with one broad brush or segments within SIRI

932
00:52:12,520 --> 00:52:16,920
Speaker 1: that are quite healthy versus say office, and even withinn office,

933
00:52:16,960 --> 00:52:20,480
Speaker 1: of course, big differentials in terms of urban versus suburban.

934
00:52:20,719 --> 00:52:23,760
Speaker 1: Certain regions in the country are doing much better. There's

935
00:52:23,880 --> 00:52:27,239
Speaker 1: the different parts of the country have larger percent that

936
00:52:27,280 --> 00:52:30,560
Speaker 1: have gone back into that more typical office structure. And

937
00:52:30,600 --> 00:52:33,960
Speaker 1: then of course the exposure to commercial real estate, which

938
00:52:34,000 --> 00:52:37,400
Speaker 1: is yes down into the smaller regional banks, many of

939
00:52:37,400 --> 00:52:40,919
Speaker 1: the same banks that suffered the most from last year's

940
00:52:41,000 --> 00:52:44,960
Speaker 1: mini banking crisis. But even there there's you know, a

941
00:52:45,080 --> 00:52:49,000
Speaker 1: vast array in terms of maturity schedules and what type

942
00:52:49,000 --> 00:52:52,600
Speaker 1: of commercial real estates exposure. On our podcast, one of

943
00:52:52,640 --> 00:52:55,200
Speaker 1: the recent guests that we had on that I interviewed

944
00:52:55,200 --> 00:52:57,400
Speaker 1: as actually a friend of mine, Al Rabel, who is

945
00:52:57,440 --> 00:53:00,000
Speaker 1: the founder and CEO of kan Anderson, a big, huge

946
00:53:00,200 --> 00:53:04,399
Speaker 1: private equity private real estate company, and although they're specifically

947
00:53:04,400 --> 00:53:08,799
Speaker 1: more involved in student housing and senior housing, he's an

948
00:53:08,840 --> 00:53:12,440
Speaker 1: expert more broadly, and I asked him at the outset

949
00:53:12,480 --> 00:53:14,920
Speaker 1: of the interview, I said, let me ask you an expert,

950
00:53:14,960 --> 00:53:17,080
Speaker 1: and I'm not an expert, a question about how I've

951
00:53:17,120 --> 00:53:20,080
Speaker 1: been terming it, how I've been describing it and feel

952
00:53:20,120 --> 00:53:22,359
Speaker 1: free to tell me you're dead wrong, Lezanne. I think

953
00:53:22,360 --> 00:53:24,879
Speaker 1: it's this is not a Lemanesque kind of problem. It's

954
00:53:24,920 --> 00:53:27,360
Speaker 1: more of a slow moving trade wreck or a simmering

955
00:53:27,360 --> 00:53:30,040
Speaker 1: problem over time. And fortunately for me, he said, yes,

956
00:53:30,160 --> 00:53:32,960
Speaker 1: that's I think an app to descriptive. That doesn't mean

957
00:53:33,000 --> 00:53:35,080
Speaker 1: the problems aren't still ahead of us, but it's over

958
00:53:35,120 --> 00:53:38,719
Speaker 1: a more graduated period of time, and with some of

959
00:53:38,719 --> 00:53:41,000
Speaker 1: the carnage will come opportunities. And that was maybe a

960
00:53:41,040 --> 00:53:44,120
Speaker 1: more interesting part of the conversation is some of the

961
00:53:44,600 --> 00:53:47,920
Speaker 1: sort of distressed firms looking at this as an eventual

962
00:53:47,960 --> 00:53:51,520
Speaker 1: opportunity to come in and acquire some of these properties,

963
00:53:51,760 --> 00:53:54,920
Speaker 1: you know, significant discounts. So with carnage comes opportunity.

964
00:53:55,280 --> 00:53:58,239
Speaker 2: I'm glad you brought up private equity because during the

965
00:53:58,280 --> 00:54:02,239
Speaker 2: era of zero interest rates, when you couldn't really find

966
00:54:02,239 --> 00:54:06,640
Speaker 2: any sort of yield in the public markets, private equity,

967
00:54:06,880 --> 00:54:11,359
Speaker 2: private debt venture right, pretty good numbers. Seven eight nine

968
00:54:11,400 --> 00:54:15,759
Speaker 2: percent yield versus two three percent. Now that the risk

969
00:54:15,800 --> 00:54:20,399
Speaker 2: free rate is in the threes or fours, and muni

970
00:54:20,520 --> 00:54:23,000
Speaker 2: bonds are giving you the tax equivalent of, depending on

971
00:54:23,040 --> 00:54:26,600
Speaker 2: the state, six seven eight percent yield, how do you

972
00:54:26,640 --> 00:54:28,240
Speaker 2: think about private equity.

973
00:54:28,600 --> 00:54:31,280
Speaker 1: Yeah, it's not my area. So I'm going to answer

974
00:54:31,280 --> 00:54:36,000
Speaker 1: the question by tying it back to something that is

975
00:54:36,800 --> 00:54:40,160
Speaker 1: I spend more time thinking about. To the point you

976
00:54:40,280 --> 00:54:44,120
Speaker 1: made in the early part of asking that question was

977
00:54:44,600 --> 00:54:48,000
Speaker 1: what was a shift in the zero interest rate environment

978
00:54:48,280 --> 00:54:52,000
Speaker 1: by many investors that were looking for anything resembling a

979
00:54:52,040 --> 00:54:56,240
Speaker 1: decent yield, and it forced them just out the risk spectrum,

980
00:54:56,760 --> 00:55:00,320
Speaker 1: whether it was two riskier segments of the fixed income market,

981
00:55:00,600 --> 00:55:04,320
Speaker 1: or into the publicly traded equity markets, or to your point,

982
00:55:04,400 --> 00:55:07,800
Speaker 1: into the private markets, be a private equity or venture.

983
00:55:07,880 --> 00:55:11,839
Speaker 1: And for many of investors, they weren't really comfortable with

984
00:55:11,880 --> 00:55:13,840
Speaker 1: that kind of risk. And it's not just the risk,

985
00:55:14,000 --> 00:55:17,840
Speaker 1: but for many investors it's the transparency and liquidity that

986
00:55:17,920 --> 00:55:20,480
Speaker 1: they had to give up. Now we have an environment

987
00:55:20,680 --> 00:55:25,480
Speaker 1: wherein essentially hold to maturity risk free treasuries and things

988
00:55:25,520 --> 00:55:28,280
Speaker 1: like you know, money market funds, A lot of money

989
00:55:28,320 --> 00:55:31,480
Speaker 1: has has gone back in that direction. On that note,

990
00:55:31,480 --> 00:55:33,719
Speaker 1: and this is somewhat tangential, but I think it's important.

991
00:55:33,880 --> 00:55:37,120
Speaker 1: Too many people view the six trillion dollars that's sitting

992
00:55:37,200 --> 00:55:40,680
Speaker 1: in money markets as some maybe not imminent, but some

993
00:55:40,960 --> 00:55:44,000
Speaker 1: huge source of funding for the equity.

994
00:55:43,600 --> 00:55:45,160
Speaker 2: Market ysh on the sideline.

995
00:55:45,200 --> 00:55:49,160
Speaker 1: On the sidelines, I think a lot of that money

996
00:55:49,200 --> 00:55:52,719
Speaker 1: is actually probably fairly sticky. It's money that represents the

997
00:55:52,760 --> 00:55:57,640
Speaker 1: cash needs or the liquidity side of acid allocation and

998
00:55:57,800 --> 00:56:02,480
Speaker 1: isn't sitting there just waiting to go into riskier assets,

999
00:56:02,560 --> 00:56:05,359
Speaker 1: be it public equity markets or a private I think

1000
00:56:05,440 --> 00:56:07,480
Speaker 1: a lot of that is probably fairly sticky.

1001
00:56:07,640 --> 00:56:12,040
Speaker 2: And it migrated to money market funds because of the

1002
00:56:12,120 --> 00:56:16,880
Speaker 2: five whatever five point three percent yields after a drought

1003
00:56:17,000 --> 00:56:20,000
Speaker 2: of decades of not getting any sort of fields. Hey,

1004
00:56:20,120 --> 00:56:25,800
Speaker 2: I could earn a real rate of return, relatively risk free. Great,

1005
00:56:25,960 --> 00:56:30,480
Speaker 2: I'm gonna reduce my risk profile and capture some of this.

1006
00:56:30,560 --> 00:56:31,160
Speaker 1: That's a great thing.

1007
00:56:31,440 --> 00:56:35,040
Speaker 2: I've never really understood that cash on the sideline. The

1008
00:56:35,120 --> 00:56:37,879
Speaker 2: other thing that's related, and you might see it from

1009
00:56:37,920 --> 00:56:42,080
Speaker 2: your perch at Schwab. Whenever we people talk about fun flows,

1010
00:56:42,480 --> 00:56:45,719
Speaker 2: look at all this money flowing into equity funds or

1011
00:56:45,760 --> 00:56:49,480
Speaker 2: flowing out. It seems like it's a year behind what

1012
00:56:49,560 --> 00:56:53,040
Speaker 2: the market's doing. The market crashes and then there are

1013
00:56:53,120 --> 00:56:56,359
Speaker 2: fun flows out Look at twenty one or twenty three.

1014
00:56:56,880 --> 00:56:59,200
Speaker 2: Even as the market is rallying, the funds are flowing

1015
00:56:59,200 --> 00:56:59,360
Speaker 2: in the.

1016
00:56:59,320 --> 00:57:02,560
Speaker 1: Opposite, performance chasing up and down. That's you know, as

1017
00:57:02,600 --> 00:57:03,640
Speaker 1: old as the day is long.

1018
00:57:04,520 --> 00:57:06,959
Speaker 2: It's just that simple. It's just performance chasing.

1019
00:57:07,160 --> 00:57:09,480
Speaker 1: You know. The other thing about the six trillion dollars

1020
00:57:09,480 --> 00:57:11,920
Speaker 1: that's in money market funds is yes, that's an all

1021
00:57:11,960 --> 00:57:16,240
Speaker 1: time record in level terms, but relative to total stock

1022
00:57:16,240 --> 00:57:19,400
Speaker 1: market capitalization, it's nowhere near a record. So you have

1023
00:57:19,440 --> 00:57:22,120
Speaker 1: to be careful. First of all. Number one, I think

1024
00:57:22,120 --> 00:57:24,800
Speaker 1: it's a mistake to our point that we just made

1025
00:57:24,880 --> 00:57:27,080
Speaker 1: that this is not sort of short term cash on

1026
00:57:27,120 --> 00:57:30,120
Speaker 1: the sidelines, that it's just itching to jump over under

1027
00:57:30,120 --> 00:57:32,200
Speaker 1: the equity side of things. But even if you make

1028
00:57:32,240 --> 00:57:35,200
Speaker 1: that assumption, the firepower has to be put in the

1029
00:57:35,240 --> 00:57:39,560
Speaker 1: context of share of market capitalization, and there it's nowhere

1030
00:57:39,560 --> 00:57:40,640
Speaker 1: near a record high.

1031
00:57:40,720 --> 00:57:43,640
Speaker 2: That's really interesting. So we've talked a little bit about

1032
00:57:43,680 --> 00:57:48,240
Speaker 2: the FED. We haven't really delved into too much about inflation.

1033
00:57:48,440 --> 00:57:51,720
Speaker 2: You hinted at it before, and CPI peaked in June

1034
00:57:51,760 --> 00:57:54,440
Speaker 2: twenty twenty two. How do you look at where we

1035
00:57:54,480 --> 00:57:57,800
Speaker 2: are today in the first quarter of twenty four and

1036
00:57:58,080 --> 00:57:59,959
Speaker 2: what does that mean for people's ports.

1037
00:58:00,600 --> 00:58:05,320
Speaker 1: So we think the disinflation trend is still largely intact,

1038
00:58:05,600 --> 00:58:09,080
Speaker 1: but it doesn't mean it is linear and we'll quickly

1039
00:58:09,080 --> 00:58:12,400
Speaker 1: get down to the FEDS two percent target. Obviously, there's

1040
00:58:12,440 --> 00:58:16,240
Speaker 1: a lot of components within inflation metrics, not to mention

1041
00:58:16,560 --> 00:58:19,280
Speaker 1: lots of ways of measuring inflation. And we can talk

1042
00:58:19,320 --> 00:58:22,640
Speaker 1: about the FED Preferred measure of PCE, and then there's

1043
00:58:22,720 --> 00:58:26,600
Speaker 1: core PCE or supercore supercore, you know, X shelter, and

1044
00:58:26,640 --> 00:58:29,280
Speaker 1: there's the differentials in terms of how things like the

1045
00:58:29,280 --> 00:58:33,160
Speaker 1: shelter components are measured and calculated and what share they

1046
00:58:33,200 --> 00:58:37,320
Speaker 1: represent of metrics like CPI versus PCE. I'd say one

1047
00:58:37,360 --> 00:58:39,920
Speaker 1: of the more important things that has happened this year

1048
00:58:40,360 --> 00:58:43,720
Speaker 1: is number one, Powell and other members of the FED

1049
00:58:44,240 --> 00:58:48,080
Speaker 1: have emphasized more the rates of change, the three month

1050
00:58:48,160 --> 00:58:50,440
Speaker 1: rate of change, the six month rate of change, and

1051
00:58:50,480 --> 00:58:54,680
Speaker 1: then specifically in the sixty minute interview that Powell did

1052
00:58:55,240 --> 00:58:59,200
Speaker 1: following the January FOMC meeting, he started talking more about

1053
00:58:59,200 --> 00:59:01,320
Speaker 1: the twelve month right change. I think that that was

1054
00:59:01,360 --> 00:59:04,640
Speaker 1: a way to almost quantify the notion that they want

1055
00:59:04,680 --> 00:59:07,840
Speaker 1: to make sure that if in one inflation comes down

1056
00:59:07,920 --> 00:59:12,080
Speaker 1: to or near the target, that there's sustainability to that

1057
00:59:12,080 --> 00:59:14,760
Speaker 1: that it's not just sort of a quick shot down

1058
00:59:14,840 --> 00:59:17,400
Speaker 1: and they fear the risk of it moving back up again.

1059
00:59:17,680 --> 00:59:21,640
Speaker 1: In terms of what's happened very recently is that not

1060
00:59:21,720 --> 00:59:25,880
Speaker 1: only did we have the hotter than expected January CPI report,

1061
00:59:26,040 --> 00:59:29,960
Speaker 1: for both CPI and PCE, the three month rate of

1062
00:59:30,080 --> 00:59:32,400
Speaker 1: change has turned back up, the six month rate of

1063
00:59:32,480 --> 00:59:35,040
Speaker 1: change has turned backed up. The twelve month hasn't yet.

1064
00:59:35,400 --> 00:59:37,720
Speaker 1: But based on how these things work, if three month

1065
00:59:37,800 --> 00:59:40,320
Speaker 1: is moving up, six month is moving up, twelve month

1066
00:59:40,360 --> 00:59:43,439
Speaker 1: is probably going to start moving up. And that's part

1067
00:59:43,440 --> 00:59:46,520
Speaker 1: and parcel of why the shift has occurred from a

1068
00:59:46,560 --> 00:59:49,000
Speaker 1: March start to then it was a May start. Maybe

1069
00:59:49,000 --> 00:59:52,400
Speaker 1: it's not until June, and you've really condensed the expectation

1070
00:59:52,520 --> 00:59:54,400
Speaker 1: around the number of rate HIGs. Not to mention that

1071
00:59:54,440 --> 00:59:57,200
Speaker 1: there are a few strategists out there more recently that

1072
00:59:57,280 --> 00:59:59,840
Speaker 1: are saying maybe they don't cut it all this year.

1073
01:00:00,000 --> 01:00:02,440
Speaker 1: I think the market definitely was way over at SKIS

1074
01:00:02,480 --> 01:00:04,880
Speaker 1: earlier in the year when it expected not just a

1075
01:00:04,880 --> 01:00:07,720
Speaker 1: March start, but six rate cuts. There was just nothing

1076
01:00:07,760 --> 01:00:09,600
Speaker 1: in the data that the Fed is supposed to be

1077
01:00:09,640 --> 01:00:12,440
Speaker 1: monitoring on either side of their dual mandate that suggested

1078
01:00:12,600 --> 01:00:14,680
Speaker 1: such an aggressive pivot and I would also say to

1079
01:00:14,680 --> 01:00:16,240
Speaker 1: a lot of investors. I was saying at the time,

1080
01:00:16,320 --> 01:00:19,240
Speaker 1: be careful what you wish for. If you think after

1081
01:00:19,320 --> 01:00:22,400
Speaker 1: the most aggressive tightening cycle in forty years that in

1082
01:00:22,480 --> 01:00:24,560
Speaker 1: short order they're going to pivot to an aggressive rate

1083
01:00:24,560 --> 01:00:28,240
Speaker 1: cutting cycle, the background conditions supporting that are probably not

1084
01:00:28,320 --> 01:00:30,760
Speaker 1: what you would want to see, either as an economic

1085
01:00:30,840 --> 01:00:33,200
Speaker 1: participant or as a market participant.

1086
01:00:32,920 --> 01:00:36,200
Speaker 2: So you wear an economics hat. I have this discussion

1087
01:00:36,240 --> 01:00:39,800
Speaker 2: all the time with people. Someone said, imagine how great

1088
01:00:39,840 --> 01:00:42,880
Speaker 2: the economy would be if oil was thirty dollars a barrel,

1089
01:00:43,280 --> 01:00:46,400
Speaker 2: And I said, hey, if you want thirty dollars barrel oil,

1090
01:00:46,600 --> 01:00:49,560
Speaker 2: you need a really deep recession. Yeah, global, it doesn't

1091
01:00:49,640 --> 01:00:54,000
Speaker 2: happen out of context the idea of careful what you

1092
01:00:54,040 --> 01:00:56,880
Speaker 2: wish for, you want six rate cuts. That means the

1093
01:00:56,960 --> 01:01:01,840
Speaker 2: economy is recession, is having a hard time. So since

1094
01:01:01,960 --> 01:01:05,680
Speaker 2: since we have you wearing the economists hat, where's my recession?

1095
01:01:05,720 --> 01:01:06,720
Speaker 2: I was promised.

1096
01:01:06,400 --> 01:01:08,600
Speaker 1: Recesses, so we had the rolling recessions, but I.

1097
01:01:08,520 --> 01:01:10,720
Speaker 2: Was promised a full recession in twenty two and then

1098
01:01:10,800 --> 01:01:14,560
Speaker 2: twenty three, and not only did we not have recession,

1099
01:01:15,240 --> 01:01:21,720
Speaker 2: unemployment fell to the mid threes. GDP is robust. When

1100
01:01:21,800 --> 01:01:25,480
Speaker 2: you look around the world, this isn't all right. Everybody

1101
01:01:25,640 --> 01:01:28,720
Speaker 2: is with the cleanest shirt in the hamper. It's not

1102
01:01:28,920 --> 01:01:31,960
Speaker 2: that we have a robust growth economy and the rest

1103
01:01:32,000 --> 01:01:33,800
Speaker 2: of the world that doesn't seem to be.

1104
01:01:33,960 --> 01:01:36,480
Speaker 1: So here's what happened. It's in the context of this

1105
01:01:36,560 --> 01:01:39,520
Speaker 1: whole notion of the roll through when we had the

1106
01:01:40,040 --> 01:01:44,000
Speaker 1: individual sectoral recessions in manufacturing and housing and housing related

1107
01:01:44,040 --> 01:01:46,840
Speaker 1: and a lot of consumer and products, and it did

1108
01:01:47,000 --> 01:01:49,920
Speaker 1: end up with negative GDP for the first six months

1109
01:01:49,920 --> 01:01:52,280
Speaker 1: of twenty twenty two. The reason why.

1110
01:01:52,320 --> 01:01:55,360
Speaker 2: Negative not a real basis On a nominal basis, it was.

1111
01:01:55,400 --> 01:01:57,880
Speaker 1: It wasn't but you had and not that back to

1112
01:01:57,920 --> 01:02:01,200
Speaker 1: back negative GDP quarters is the definition of a recession.

1113
01:02:01,240 --> 01:02:03,560
Speaker 1: It's not. It never has been the definition of a recession.

1114
01:02:03,640 --> 01:02:04,480
Speaker 2: Thank you for saying that.

1115
01:02:05,320 --> 01:02:08,240
Speaker 1: When people say, well, the traditional or the typical, it's not.

1116
01:02:08,440 --> 01:02:11,320
Speaker 1: The NBER has been the official arbiters of recession since

1117
01:02:11,320 --> 01:02:13,840
Speaker 1: the mid nineteen seventies, and two quarters in a row

1118
01:02:13,840 --> 01:02:17,000
Speaker 1: of negative GDP has never been the definition. The key

1119
01:02:17,520 --> 01:02:21,240
Speaker 1: line perhaps within that much more comprehensive definition that the

1120
01:02:21,360 --> 01:02:25,320
Speaker 1: NBER uses, that helps to explain why six months of

1121
01:02:25,360 --> 01:02:29,480
Speaker 1: negative GDP ultimately wasn't declarative recession. Again, not because it

1122
01:02:29,560 --> 01:02:32,360
Speaker 1: was two quarters in a row. But the key part

1123
01:02:32,400 --> 01:02:36,880
Speaker 1: of the NBER's definition is spread across the economy. The

1124
01:02:36,920 --> 01:02:39,760
Speaker 1: weakness that led to the first half of twenty twenty

1125
01:02:39,840 --> 01:02:43,080
Speaker 1: two having no real growth in the economy was concentrated.

1126
01:02:43,120 --> 01:02:45,680
Speaker 1: It was concentrated on the good side of the economy.

1127
01:02:45,720 --> 01:02:49,440
Speaker 1: Manufacturing we had the offsetting strength, and services service is

1128
01:02:49,480 --> 01:02:52,440
Speaker 1: a larger employer by far, helping to explain the resilience

1129
01:02:52,480 --> 01:02:55,800
Speaker 1: in the labor market. The services components of inflation are

1130
01:02:55,880 --> 01:02:59,800
Speaker 1: stickier by nature, including the shelter components, helping to explain

1131
01:02:59,800 --> 01:03:04,320
Speaker 1: the roll through in inflation. And again it's just another

1132
01:03:04,360 --> 01:03:07,520
Speaker 1: example of a unique nature of this cycle. So I

1133
01:03:07,560 --> 01:03:10,520
Speaker 1: think when I look forward, I think, okay, So if

1134
01:03:10,560 --> 01:03:13,160
Speaker 1: and when services has their day in the clouds and

1135
01:03:13,840 --> 01:03:15,960
Speaker 1: we start to see more than just some cracks that

1136
01:03:15,960 --> 01:03:19,560
Speaker 1: we've started to see, like an ism services employment component.

1137
01:03:19,600 --> 01:03:23,160
Speaker 1: Going back into contraction territory, what you may get is

1138
01:03:23,200 --> 01:03:26,400
Speaker 1: you have a roll through of recoveries in areas or

1139
01:03:26,440 --> 01:03:29,120
Speaker 1: at least stabilization that have already taken their hits. A

1140
01:03:29,160 --> 01:03:31,640
Speaker 1: lot of people have you no landing as best case scenario,

1141
01:03:32,000 --> 01:03:33,920
Speaker 1: there's going to be a landing, you know, at some

1142
01:03:34,000 --> 01:03:37,080
Speaker 1: point the plane lands. But I do think a near

1143
01:03:37,200 --> 01:03:40,280
Speaker 1: term no landing scenario might also mean a no cutting scenario.

1144
01:03:40,880 --> 01:03:42,800
Speaker 1: And then the question, which I don't know that I

1145
01:03:42,800 --> 01:03:46,080
Speaker 1: have an answer to, is what exactly has been propelling

1146
01:03:46,160 --> 01:03:49,600
Speaker 1: the stock market? Is it the prospect of easier monetary policy?

1147
01:03:50,040 --> 01:03:52,400
Speaker 1: Or is it that growth has more than hung in

1148
01:03:52,440 --> 01:03:55,200
Speaker 1: there and that translates to better top line growth that

1149
01:03:55,240 --> 01:03:57,320
Speaker 1: are bottom line growth. Maybe a little bit of both,

1150
01:03:57,360 --> 01:04:00,040
Speaker 1: but it's hard to sort of isolate one or the

1151
01:04:00,160 --> 01:04:01,120
Speaker 1: other is the key driver.

1152
01:04:01,280 --> 01:04:04,640
Speaker 2: I'm so glad you brought that up, because anytime I'm

1153
01:04:04,680 --> 01:04:07,320
Speaker 2: at a dinner party, i'm out a barbecue, I'm somewhere,

1154
01:04:07,840 --> 01:04:13,400
Speaker 2: and the dominant narrative is thrown at me. So what

1155
01:04:13,520 --> 01:04:16,280
Speaker 2: happens to the markets if the FED doesn't cut sooner

1156
01:04:16,360 --> 01:04:19,760
Speaker 2: or later? And my answer is always, why do you

1157
01:04:19,960 --> 01:04:23,640
Speaker 2: think that whatever that news headline is is what's driving

1158
01:04:23,720 --> 01:04:26,720
Speaker 2: the markets? First of all, it is one hundred factors.

1159
01:04:26,320 --> 01:04:28,120
Speaker 1: Or a million a million factors, right?

1160
01:04:28,240 --> 01:04:32,440
Speaker 2: And second, just because it's on TV or online or

1161
01:04:32,440 --> 01:04:34,800
Speaker 2: in the newspapers, doesn't I love that?

1162
01:04:34,920 --> 01:04:38,360
Speaker 1: And I, you know, I know it's the job of journalists.

1163
01:04:38,400 --> 01:04:40,680
Speaker 1: If I if I'm doing an interview on the phone

1164
01:04:40,720 --> 01:04:43,960
Speaker 1: with a print reporter, if I'm going on a TV program,

1165
01:04:44,000 --> 01:04:46,880
Speaker 1: and especially if questions are concentrated around what the market

1166
01:04:46,960 --> 01:04:49,920
Speaker 1: is doing you know that particular day, right, and the

1167
01:04:50,040 --> 01:04:52,720
Speaker 1: question is always some form of you know, what drove

1168
01:04:52,800 --> 01:04:56,320
Speaker 1: the market today or what turned the market at you know, midday,

1169
01:04:56,520 --> 01:04:59,280
Speaker 1: as if the market is sort of this inanimate thing

1170
01:04:59,320 --> 01:05:03,520
Speaker 1: that just sits around waiting for one particular news headline,

1171
01:05:03,680 --> 01:05:07,880
Speaker 1: And on any given day, any given week, if you

1172
01:05:08,040 --> 01:05:10,840
Speaker 1: just change the sign on what the market was doing,

1173
01:05:11,480 --> 01:05:13,800
Speaker 1: I could come up with plenty of things to point

1174
01:05:13,880 --> 01:05:16,520
Speaker 1: to to say, this is why the market boomed today,

1175
01:05:16,600 --> 01:05:18,080
Speaker 1: or this is why the market went down.

1176
01:05:18,240 --> 01:05:20,520
Speaker 2: It is kind of silly, but no one likes the answer.

1177
01:05:20,960 --> 01:05:21,600
Speaker 2: How do I know?

1178
01:05:21,880 --> 01:05:22,080
Speaker 1: Right?

1179
01:05:22,200 --> 01:05:23,200
Speaker 2: People are not satisfied.

1180
01:05:23,640 --> 01:05:27,000
Speaker 1: I try more often than not to answer questions, especially

1181
01:05:27,040 --> 01:05:29,200
Speaker 1: that are about sort of what's the market going to

1182
01:05:29,280 --> 01:05:32,000
Speaker 1: do with I have no idea? And then sometimes I

1183
01:05:32,080 --> 01:05:34,640
Speaker 1: pause for a fact that, well, that's the truth. I

1184
01:05:34,680 --> 01:05:36,720
Speaker 1: assume you're going to have follow up questions for me,

1185
01:05:36,760 --> 01:05:39,439
Speaker 1: and that's not what the listeners of the viewers want

1186
01:05:39,440 --> 01:05:42,520
Speaker 1: to hear. I don't know, But anyone answering that question,

1187
01:05:42,680 --> 01:05:43,960
Speaker 1: that's the honest answer.

1188
01:05:44,920 --> 01:05:48,480
Speaker 2: Undred percent, And people don't realize that makes the matters worse.

1189
01:05:48,960 --> 01:05:53,040
Speaker 2: The journalist writes up the story, someone else writes the headline,

1190
01:05:53,440 --> 01:05:57,440
Speaker 2: and they're looking for the clickiest, most slations thing to

1191
01:05:57,520 --> 01:05:59,920
Speaker 2: pull out. How many times have you read a story

1192
01:06:00,080 --> 01:06:01,840
Speaker 2: where you read the headline.

1193
01:06:01,800 --> 01:06:03,880
Speaker 1: And the story is, what's we're going to do with it?

1194
01:06:04,000 --> 01:06:07,640
Speaker 2: Right? It's really true. I don't know is probably the

1195
01:06:07,680 --> 01:06:11,440
Speaker 2: most underused phrase on Wall Street, and it really should

1196
01:06:11,520 --> 01:06:14,400
Speaker 2: be because you know, first of all, it's great when

1197
01:06:14,400 --> 01:06:17,360
Speaker 2: you're doing on live TV you get a question, so

1198
01:06:17,600 --> 01:06:20,960
Speaker 2: where's the marketing to be in a year? How am

1199
01:06:20,960 --> 01:06:22,480
Speaker 2: I supposed to know? Nobody knows?

1200
01:06:23,080 --> 01:06:26,560
Speaker 1: It's and again, like nineteen eighty seven's example, even if

1201
01:06:26,600 --> 01:06:29,760
Speaker 1: you nailed nineteen eighty seven and said flat, the market's

1202
01:06:29,800 --> 01:06:31,160
Speaker 1: not going to do anything, No one's going to be, Oh,

1203
01:06:31,240 --> 01:06:33,000
Speaker 1: yes it is. The market is going to do a lot.

1204
01:06:33,120 --> 01:06:34,840
Speaker 1: It's right, it's not going to end the year with

1205
01:06:34,960 --> 01:06:35,800
Speaker 1: much to show for it.

1206
01:06:35,880 --> 01:06:39,720
Speaker 2: That's really funny. So, given everything we've said about the markets,

1207
01:06:39,760 --> 01:06:43,080
Speaker 2: the duck paddling underneath, what's going on below the surface,

1208
01:06:43,960 --> 01:06:49,760
Speaker 2: how should investors think about forward expectations, what should they

1209
01:06:49,800 --> 01:06:52,640
Speaker 2: think about, Hey, you know we've been seeing the twenty

1210
01:06:52,720 --> 01:06:55,280
Speaker 2: tens the market. What do we averaged thirteen fourteen percent

1211
01:06:55,320 --> 01:06:58,280
Speaker 2: a year, even with some bad quarters in that the

1212
01:06:58,320 --> 01:07:02,160
Speaker 2: rest of twenty twenty was amazing, twenty one was huge,

1213
01:07:02,240 --> 01:07:05,400
Speaker 2: twenty three was huge. Here we are starting out twenty

1214
01:07:05,480 --> 01:07:10,200
Speaker 2: four strong. At what point should investors begin to moderate

1215
01:07:10,400 --> 01:07:11,640
Speaker 2: return expectations.

1216
01:07:11,960 --> 01:07:15,480
Speaker 1: The discipline of rebalancing keeps you in gear in perpetuity

1217
01:07:15,520 --> 01:07:17,880
Speaker 1: without having to figure out, Okay, is this the moment

1218
01:07:17,920 --> 01:07:20,000
Speaker 1: I want to lessen risk on my portfolio or take

1219
01:07:20,040 --> 01:07:22,160
Speaker 1: more risk in my portfolio? But I think the two

1220
01:07:22,240 --> 01:07:25,760
Speaker 1: key risks right now have more to do with called

1221
01:07:25,760 --> 01:07:29,000
Speaker 1: the internals of the market than anything out there that

1222
01:07:29,040 --> 01:07:32,640
Speaker 1: we're observing as risk. Obviously, you know, geopolitics and the

1223
01:07:32,720 --> 01:07:36,240
Speaker 1: election and black Swan risks are always the potential. But

1224
01:07:36,320 --> 01:07:40,240
Speaker 1: I think sentiment and valuation now the one important caveat

1225
01:07:40,320 --> 01:07:43,240
Speaker 1: around saying sentiment and valuation are a risk in this case,

1226
01:07:43,320 --> 01:07:48,080
Speaker 1: meaning sentiment's scotten pretty frothy both attitudinal measures and behavioral measures,

1227
01:07:48,200 --> 01:07:51,640
Speaker 1: and valuation is fairly stretched. Is the important caveat is

1228
01:07:51,840 --> 01:07:55,760
Speaker 1: neither even at extremes represents anything resembling market timing tool.

1229
01:07:56,600 --> 01:07:59,480
Speaker 1: As we all learned in the nineteen nineties, valuation can

1230
01:07:59,520 --> 01:08:01,680
Speaker 1: get stress and sentiment can get stretched, and that can

1231
01:08:01,760 --> 01:08:04,680
Speaker 1: last for years. What it does is set up maybe

1232
01:08:04,680 --> 01:08:07,160
Speaker 1: a risk factor to the extent there's a negative catalyst

1233
01:08:07,240 --> 01:08:08,960
Speaker 1: when you sort of have everyone on one side of

1234
01:08:08,960 --> 01:08:11,520
Speaker 1: the boat and your priced for perfection. But again, that

1235
01:08:11,600 --> 01:08:14,480
Speaker 1: environment can last. But I would certainly put both of

1236
01:08:14,480 --> 01:08:17,320
Speaker 1: those in the risk column. In terms of what could

1237
01:08:17,400 --> 01:08:20,440
Speaker 1: the potential negative catalyst be that could cause a contrarian

1238
01:08:20,479 --> 01:08:24,240
Speaker 1: move relative to optimistic sentiment, well, we've already talked about

1239
01:08:24,240 --> 01:08:26,840
Speaker 1: a lot of them. It could be something outsized in

1240
01:08:26,920 --> 01:08:30,880
Speaker 1: terms of inflation or the Fed policy. You know, reaction function,

1241
01:08:31,160 --> 01:08:34,560
Speaker 1: geopolitics is ever present. Given that twenty twenty three was

1242
01:08:34,600 --> 01:08:37,320
Speaker 1: a very low volatility year, you've got the likelihood of

1243
01:08:37,360 --> 01:08:39,800
Speaker 1: mean reversion, and you throw the election into the mix

1244
01:08:39,800 --> 01:08:43,559
Speaker 1: as a potential volatility driver. I don't think that's a stretch. Otherwise,

1245
01:08:43,600 --> 01:08:45,919
Speaker 1: I think you stay up in quality within the equity

1246
01:08:46,000 --> 01:08:49,120
Speaker 1: portion of the portfolio. I think factor based investing makes

1247
01:08:49,160 --> 01:08:52,280
Speaker 1: a lot more sense than monolithic groups of stocks or

1248
01:08:52,360 --> 01:08:55,840
Speaker 1: even maybe at the sector level investing based on characteristics

1249
01:08:55,880 --> 01:08:59,160
Speaker 1: and looking for quality companies with strong balance sheets and

1250
01:08:59,280 --> 01:09:02,679
Speaker 1: ample interest coverage and strong free cash flow and positive

1251
01:09:02,680 --> 01:09:06,760
Speaker 1: earnings trends and revisions, and apply that analysis across the

1252
01:09:06,840 --> 01:09:09,200
Speaker 1: spectrum of sectors and even cap ranges.

1253
01:09:09,439 --> 01:09:13,719
Speaker 2: Really informative and insightful. Let's jump to our speed round

1254
01:09:13,840 --> 01:09:16,519
Speaker 2: our favorite questions that we ask all of our guests,

1255
01:09:17,040 --> 01:09:19,800
Speaker 2: starting with tell us what's entertaining you? What are you

1256
01:09:19,840 --> 01:09:22,400
Speaker 2: watching or listening or streaming these days?

1257
01:09:22,720 --> 01:09:25,040
Speaker 1: So I don't read a lot of books. Every once

1258
01:09:25,080 --> 01:09:26,760
Speaker 1: in a while i'll listen to them, but I'm a

1259
01:09:26,840 --> 01:09:30,840
Speaker 1: big podcast listener. Aside from our own and yours, I've

1260
01:09:30,840 --> 01:09:32,400
Speaker 1: always been a fan of mass.

1261
01:09:32,200 --> 01:09:34,280
Speaker 2: I always tell people you don't have to mention.

1262
01:09:34,240 --> 01:09:36,960
Speaker 1: No, no, I've been a regular listener of Masters in

1263
01:09:37,000 --> 01:09:39,600
Speaker 1: Business in podcast form and listening to you on the

1264
01:09:39,760 --> 01:09:42,880
Speaker 1: on the radio. So even in the beginning, I'm a

1265
01:09:42,920 --> 01:09:45,479
Speaker 1: longtime fan. Now well, because I was a guest sort

1266
01:09:45,479 --> 01:09:46,680
Speaker 1: of in the beginning, you.

1267
01:09:46,640 --> 01:09:49,120
Speaker 2: Weren't sort of. You were one of the early guests.

1268
01:09:49,360 --> 01:09:52,200
Speaker 2: When I couldn't get anyone on, I worked my way

1269
01:09:52,200 --> 01:09:53,800
Speaker 2: through my personal phone book.

1270
01:09:54,520 --> 01:09:57,400
Speaker 1: And then when you couldn't get anybody on, you got

1271
01:09:57,400 --> 01:09:57,720
Speaker 1: me on.

1272
01:09:58,160 --> 01:10:03,840
Speaker 2: Yeah, no, no, seriously, the general response to requests was no.

1273
01:10:04,680 --> 01:10:08,000
Speaker 2: When I asked somebody I knew personally, I don't mean

1274
01:10:08,040 --> 01:10:11,479
Speaker 2: you weren't anybody when I asked someone I knew. All Right,

1275
01:10:11,520 --> 01:10:14,240
Speaker 2: I'll do you a favor, because really, nobody's paying attention

1276
01:10:14,320 --> 01:10:16,960
Speaker 2: to this. That was then now it's ten millions.

1277
01:10:17,120 --> 01:10:19,439
Speaker 1: But I am, but I am. I am a fan.

1278
01:10:19,720 --> 01:10:22,760
Speaker 1: Grant Williams has a few podcasts and he always has

1279
01:10:22,920 --> 01:10:24,880
Speaker 1: really fascinating guests.

1280
01:10:24,520 --> 01:10:27,559
Speaker 2: On very eclectic Mix, very eclectic mix.

1281
01:10:27,640 --> 01:10:31,120
Speaker 1: But I like that it's often macro focused. And there's

1282
01:10:31,120 --> 01:10:33,760
Speaker 1: a number of other podcasts sporadically that I'll listen to

1283
01:10:33,920 --> 01:10:37,160
Speaker 1: outside of the world of finance. I'm a big SmartLess fan.

1284
01:10:37,479 --> 01:10:37,960
Speaker 2: Oh sure.

1285
01:10:38,080 --> 01:10:40,600
Speaker 1: I mean they're just so funny and so lovely and

1286
01:10:40,640 --> 01:10:41,360
Speaker 1: brilliant and.

1287
01:10:41,320 --> 01:10:44,719
Speaker 2: I think they just saw yourself for an ungodly amount

1288
01:10:44,720 --> 01:10:46,160
Speaker 2: of money to them. Yeah.

1289
01:10:47,520 --> 01:10:50,960
Speaker 1: Yeah's and then streaming. I guess the one that I'm

1290
01:10:51,000 --> 01:10:56,400
Speaker 1: in the midst of now is Feud Capodi versus the Swans. Really, yes,

1291
01:10:56,880 --> 01:10:59,640
Speaker 1: so it's it's not a documentary, but it's you know,

1292
01:10:59,680 --> 01:11:03,080
Speaker 1: based on true stories, but with great actors playing parts,

1293
01:11:03,200 --> 01:11:05,519
Speaker 1: and it's multi episode and so that's that's a good

1294
01:11:05,520 --> 01:11:06,639
Speaker 1: one that I'm into right now.

1295
01:11:06,720 --> 01:11:08,679
Speaker 2: So I kind of know the answer to this question,

1296
01:11:08,720 --> 01:11:10,960
Speaker 2: but I want to ask in any way for anyone

1297
01:11:11,040 --> 01:11:14,000
Speaker 2: listening this deep into the podcast, tell us about your

1298
01:11:14,000 --> 01:11:16,519
Speaker 2: early mentors who shaped your career.

1299
01:11:16,680 --> 01:11:21,760
Speaker 1: So Marty's why clearly obviously LUCIERU Kaiser in terms of

1300
01:11:21,800 --> 01:11:25,680
Speaker 1: my entree into the world of television and learning what

1301
01:11:25,720 --> 01:11:28,960
Speaker 1: matters and what doesn't matter. And I got it, Chuck Schwab.

1302
01:11:28,920 --> 01:11:31,679
Speaker 2: I know you said you're you're too busy reading research

1303
01:11:31,720 --> 01:11:34,200
Speaker 2: reports to read a lot of books in addition to

1304
01:11:34,439 --> 01:11:37,160
Speaker 2: Winning on Wall Street by Marty's why, any other books

1305
01:11:37,200 --> 01:11:38,360
Speaker 2: you would recommend to someone?

1306
01:11:38,360 --> 01:11:41,200
Speaker 1: And yes, So one of the best books I ever

1307
01:11:41,240 --> 01:11:43,639
Speaker 1: got about investing was given to be my Marty when

1308
01:11:43,680 --> 01:11:45,920
Speaker 1: I started the business in nineteen eighty six. And it's

1309
01:11:45,960 --> 01:11:47,840
Speaker 1: a little book. It's paperback. A lot of people have

1310
01:11:47,880 --> 01:11:50,639
Speaker 1: probably heard of it, but Reminiscences of a stock Court.

1311
01:11:50,880 --> 01:11:53,479
Speaker 1: It's just so fabulous and I also like and it's

1312
01:11:53,479 --> 01:11:56,680
Speaker 1: similar in its sort of size and structure with paperback.

1313
01:11:56,920 --> 01:11:58,160
Speaker 1: Where are the customer's yachts?

1314
01:11:58,200 --> 01:11:58,679
Speaker 2: Uh huh?

1315
01:11:58,720 --> 01:12:00,880
Speaker 1: So those are my two. And then you know Winning

1316
01:12:00,880 --> 01:12:03,240
Speaker 1: on Wall Street. You know I gotta plug Marty's book

1317
01:12:03,280 --> 01:12:06,960
Speaker 1: and that still resonates even today right now at times

1318
01:12:07,000 --> 01:12:09,680
Speaker 1: I'm listening to a book and I'll listen to, you know,

1319
01:12:09,720 --> 01:12:11,640
Speaker 1: fifteen minutes at a time, and then not listen to

1320
01:12:11,680 --> 01:12:14,240
Speaker 1: it for months and months. Is by Nathaniel Philbrick, and

1321
01:12:14,280 --> 01:12:17,400
Speaker 1: it's just the history of Nantucket, where OHI is my place.

1322
01:12:17,439 --> 01:12:20,400
Speaker 1: I spent parts of the summer and about the era

1323
01:12:20,520 --> 01:12:23,400
Speaker 1: from the sixteen hundreds into the seventeen hundreds when it

1324
01:12:23,400 --> 01:12:27,280
Speaker 1: was the whaling capital of the world. And so that's it.

1325
01:12:27,520 --> 01:12:29,879
Speaker 2: I'm going to share a book with you only because

1326
01:12:30,080 --> 01:12:33,759
Speaker 2: you are now in Naples. I just finished reading Bubble

1327
01:12:33,800 --> 01:12:38,160
Speaker 2: in the Sun, the History of Florida real Estate Booms

1328
01:12:38,200 --> 01:12:43,200
Speaker 2: and Busts, and the theory is the Florida real estate

1329
01:12:43,240 --> 01:12:47,679
Speaker 2: boom in the twenties is the biggest migration in US history,

1330
01:12:48,320 --> 01:12:51,439
Speaker 2: and it's collapse was one of the factors that led

1331
01:12:51,479 --> 01:12:56,680
Speaker 2: to the Great Depression. It's an deeply researched, absolutely fascinating

1332
01:12:56,720 --> 01:12:58,920
Speaker 2: All right, good, I think you get add it to

1333
01:12:58,960 --> 01:13:03,040
Speaker 2: my list. Two questions. What sort of advice would you

1334
01:13:03,080 --> 01:13:06,880
Speaker 2: give to a recent college grad interested in going into

1335
01:13:07,080 --> 01:13:08,440
Speaker 2: finance or investment?

1336
01:13:08,760 --> 01:13:11,559
Speaker 1: I would say, and This is advice I would give

1337
01:13:11,800 --> 01:13:15,360
Speaker 1: to a college grad going really into just about any industry,

1338
01:13:15,800 --> 01:13:18,160
Speaker 1: but I think maybe finance a little bit more. Too

1339
01:13:18,160 --> 01:13:21,000
Speaker 1: many college grads then coming into finance, it's about, well,

1340
01:13:21,040 --> 01:13:23,320
Speaker 1: what did I learn in college? What courses did I take?

1341
01:13:23,520 --> 01:13:26,400
Speaker 1: To be early? Honest, it doesn't matter. You're not bringing

1342
01:13:26,640 --> 01:13:29,240
Speaker 1: something into the mix that the company doesn't already know.

1343
01:13:29,439 --> 01:13:32,080
Speaker 1: So the more broad advice I always give to people

1344
01:13:32,120 --> 01:13:34,720
Speaker 1: who are starting out and they're going through the interview processes,

1345
01:13:34,840 --> 01:13:37,720
Speaker 1: there always seems to be this strong desire to come

1346
01:13:37,760 --> 01:13:41,480
Speaker 1: across as interesting, be interested, focus more on being interested

1347
01:13:41,680 --> 01:13:42,639
Speaker 1: than being interesting.

1348
01:13:42,840 --> 01:13:46,680
Speaker 2: Huh. Good advice. And our final question, what do you

1349
01:13:46,720 --> 01:13:49,479
Speaker 2: know about the world of investing today? You wish you

1350
01:13:49,560 --> 01:13:53,840
Speaker 2: knew thirty six years ago when you were first getting started.

1351
01:13:53,640 --> 01:13:55,880
Speaker 1: To start early and young.

1352
01:13:55,920 --> 01:13:58,840
Speaker 2: Start early and young. The magic of compounding, the.

1353
01:13:58,800 --> 01:14:02,519
Speaker 1: Magic of compounding. And even if it means sacrificing a

1354
01:14:02,560 --> 01:14:05,639
Speaker 1: little of the pleasures when you're much younger and you're

1355
01:14:05,680 --> 01:14:08,639
Speaker 1: trying to divide a very small amount of money into

1356
01:14:08,720 --> 01:14:13,080
Speaker 1: you know, fun versus savings versus work, is starting early

1357
01:14:13,439 --> 01:14:15,920
Speaker 1: is just so powerful, even if it's just putting it

1358
01:14:15,960 --> 01:14:17,560
Speaker 1: in some version of Savings.

1359
01:14:17,840 --> 01:14:21,320
Speaker 2: Liz Anne, this has been just absolutely delightful. Thank you

1360
01:14:21,760 --> 01:14:24,320
Speaker 2: so much for being so generous with your time and

1361
01:14:24,479 --> 01:14:29,599
Speaker 2: allowing me to really improve on our first conversation, which

1362
01:14:30,120 --> 01:14:32,640
Speaker 2: in preparation for this I listened to and was just

1363
01:14:32,760 --> 01:14:33,720
Speaker 2: utterly mortified.

1364
01:14:33,840 --> 01:14:37,320
Speaker 1: Oh I disagree with you, diose to you because I

1365
01:14:37,320 --> 01:14:40,320
Speaker 1: didn't listen to the whole thing at your suggestion. I

1366
01:14:40,400 --> 01:14:44,160
Speaker 1: listened to the first five or ten minutes, and I

1367
01:14:44,200 --> 01:14:45,839
Speaker 1: still remember it like it was yesterday.

1368
01:14:46,120 --> 01:14:51,320
Speaker 2: I remember sitting in that darkened room around that round table, you,

1369
01:14:51,400 --> 01:14:55,040
Speaker 2: me and Larry literally my first television appearance. I want

1370
01:14:55,040 --> 01:15:00,200
Speaker 2: to say that was like three something crazy. So anyway,

1371
01:15:00,200 --> 01:15:04,320
Speaker 2: we have been speaking with the delightful Liz and no

1372
01:15:04,520 --> 01:15:09,600
Speaker 2: E Saunders, chief investment strategist at Schwab, helping to oversee

1373
01:15:09,840 --> 01:15:14,320
Speaker 2: over eight trillion dollars on their platform. If you enjoy

1374
01:15:14,439 --> 01:15:17,320
Speaker 2: this conversation well, be sure to check out any of

1375
01:15:17,360 --> 01:15:21,559
Speaker 2: our previous five hundred discussions we've had over the past

1376
01:15:21,600 --> 01:15:26,760
Speaker 2: ten years. You can find those at iTunes, Spotify, YouTube,

1377
01:15:27,320 --> 01:15:30,960
Speaker 2: wherever you find your favorite podcasts. Be sure to check

1378
01:15:30,960 --> 01:15:35,799
Speaker 2: out my new podcast at the Money, short ten minute

1379
01:15:35,880 --> 01:15:41,759
Speaker 2: Questions and Answers with experts about your money. I'm really

1380
01:15:41,840 --> 01:15:45,759
Speaker 2: enjoying doing this podcast to just get to the meet

1381
01:15:45,840 --> 01:15:48,760
Speaker 2: of an issue ten minutes. You can find those in

1382
01:15:48,800 --> 01:15:51,760
Speaker 2: your master's and business speed. I would be remiss if

1383
01:15:51,760 --> 01:15:53,880
Speaker 2: I did not thank the craft team that helps us

1384
01:15:53,880 --> 01:15:58,640
Speaker 2: put these conversations together each week. Robert Bragg is my

1385
01:15:58,800 --> 01:16:02,919
Speaker 2: audio engineer at tik of Albron is my project manager.

1386
01:16:03,479 --> 01:16:07,960
Speaker 2: Anna Luke is my producer. Sean Russo is my researcher.

1387
01:16:08,760 --> 01:16:12,559
Speaker 2: I'm Barry Radolts. You've been listening to Masters in Business

1388
01:16:13,080 --> 01:16:14,200
Speaker 2: on Bloomberg Radio.