Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Master's in Business with Barry Ridholds on Bloomberg Radio.
Speaker 2: This week on the podcast what Can I Say, I
Speaker 2: have the delightful liz Anne Saunders on She is the
Speaker 2: chief investment strategist and member of the firm's investment committee
Speaker 2: at Schwab. The firm has eight and a half trillion
Speaker 2: dollars on its platform. We've been working with Schwab for
Speaker 2: a long time. Liz Anne was one of the earliest
Speaker 2: guests on the show, and we reminisce a little bit
Speaker 2: about that first appearance. I don't know what else to
Speaker 2: say about her. She's so insightful and so knowledgeable and
Speaker 2: has such a wonderful perch overseeing eight and a half
Speaker 2: trillion dollars of both individual mom and pop investors advisors.
Speaker 2: They're the biggest platform as a estonian for advisors. My disclosure,
Speaker 2: my firm also uses them, and she just sees the
Speaker 2: world from a place that not a lot of people
Speaker 2: in the industry get to do. Not only do they
Speaker 2: have a giant research team, but she gets to see
Speaker 2: fun flows. She gets to see a huge amount of
Speaker 2: activity from the inside, and she on a regular basis,
Speaker 2: speaks to investors, speaks to advisors, speaks to institutions. She
Speaker 2: is as much in the mix and the thick of
Speaker 2: what's going on in the world of investing as anybody,
Speaker 2: and that combination of her unique Perchin perspective and her
Speaker 2: deep experience as either a fund manager or a strategist
Speaker 2: for the past thirty eight years unparalleled in the world
Speaker 2: of investing. I found this conversation to simply be delightful,
Speaker 2: and I think you will also, with no further ado.
Speaker 2: Charles Schwabs Liz Ann Saunders. I listened to the first
Speaker 2: conversation we had. It's like the second year I was
Speaker 2: doing this. It was twenty fifteen. You were great, I
Speaker 2: was awful.
Speaker 1: That was not the first time we met. I remember
Speaker 1: that conversation nine years ago, but that was not the
Speaker 1: first time we met.
Speaker 2: The first time we met was my first time doing television.
Speaker 2: I remember that in a tiny little room around a
Speaker 2: round table with Larry Kudlow, and I'll never forget banging
Speaker 2: down two die cokes, walking out the door to go
Speaker 2: to the men's room, and the producer grabs me, let's go,
Speaker 2: We're live, and that was it. I sat there for
Speaker 2: an hour with my back teeth floating. And that I
Speaker 2: remember a friend said, your fidgety, don't move around, don't
Speaker 2: just pick a spot to look. And the spot was
Speaker 2: your front teeth, which are perfect and white and still
Speaker 2: perfect and white. Well, and I know why, well, I
Speaker 2: know why.
Speaker 1: In between that time that we first sat down and
Speaker 1: did this and then this is a couple of years ago.
Speaker 1: Now we live in Naples, Florida, and it was the
Speaker 1: night before Thanksgiving. We walked out of a restaurant and
Speaker 1: I just walked off the curb the wrong way. Oh,
Speaker 1: and the first thing to hit the pavement, your teeth
Speaker 1: was my teeth.
Speaker 2: So those are not now.
Speaker 1: Parts of it chipped, the part of the right front
Speaker 1: tooth and the tooth next to it. And fortunately my
Speaker 1: sister's next door neighbor was a dentist, and he went
Speaker 1: in Thanksgiving morning and really and fixed it.
Speaker 2: You know, I t boned a car. I was the
Speaker 2: t boney right in front of my dentist's office. And
Speaker 2: when I called the next morning, say hey, I chipped
Speaker 2: my front tooth I needed fixed, they said, oh, you too.
Speaker 2: There was a bad accident in front of that was me. Yeah,
Speaker 2: that was me. My wife was really upset. I totaled
Speaker 2: her car at like five miles an hour. An suv
Speaker 2: plowed into.
Speaker 1: Us totaled five miles an hour.
Speaker 2: So I was making a left. The person behind me
Speaker 2: thought I was going straight and tried to pass me
Speaker 2: on the left. So literally I meant a left right
Speaker 2: into them. And it's funny because that was a pandemic purchase,
Speaker 2: a very inexpensive twenty seventeen Panamera fors which everybody walked away.
Speaker 2: I mean, we were a little banged up, but you know,
Speaker 2: a giant suv just crunched us. And what's terrible is
Speaker 2: when you see the car afterwards and you see the
Speaker 2: driver's door, like, holy cow, how did I just how
Speaker 2: did it walk go in there? That was like geez.
Speaker 2: Whenever people say you don't need to buy a new car,
Speaker 2: it's like, I want the latest, greatest.
Speaker 1: With airbags with one hundred and seventy seven arabs.
Speaker 2: By the way airbags come down, you can't sit. It
Speaker 2: was so disorienting because I'm trying to turn the wheel and.
Speaker 1: I can't imagine driving in a car without a seatbelt on.
Speaker 1: Before we started this ferry, we were talking about our
Speaker 1: age and baby boomers. When I was brought home from
Speaker 1: the hospital in nineteen sixty four, it was in my
Speaker 1: mom's lap.
Speaker 2: Okay, I'll tell you. I'll take that a step further.
Speaker 2: My dad had this giant I'm trying to it was
Speaker 2: an Impala, and we used to lie on the rear
Speaker 2: deck under the back window, like if there's an accident,
Speaker 2: you're a projectile right out.
Speaker 1: We had a station wagon. We'd go from northern New
Speaker 1: Jersey to Brooklyn to visit grandparents, and sleeping bags would
Speaker 1: be laid out in the back.
Speaker 2: And now you can't take a kid home from the
Speaker 2: hospital without the right not just a car seat. It
Speaker 2: has to be the right car.
Speaker 1: I'm not saying what was going on back in the
Speaker 1: sixties was the right thing.
Speaker 2: It toughened you up. You go through a few windshields,
Speaker 2: you know, you learn.
Speaker 1: To dust your specially. I haven't had that.
Speaker 2: All right, let's get serious. So everybody knows you as
Speaker 2: the chief investment strategist at SCHWAB, But let's roll back
Speaker 2: to the early part of your career. You get a
Speaker 2: BA in economics and polysi from the University of Delaware.
Speaker 2: What was the original career plan?
Speaker 1: I didn't have one, none, well, not in college.
Speaker 2: No.
Speaker 1: In fact, what started as that double major ultimately morphed
Speaker 1: into the official degree being in international relations. But to
Speaker 1: be perfectly honest, I just decided to study a couple
Speaker 1: different areas that were very broadbrush because I didn't know
Speaker 1: what I wanted to do when I graduated international relations.
Speaker 2: So you go to the Kennedy School and then become
Speaker 2: a diplomat.
Speaker 1: Well, you know, I thought about going to graduate school
Speaker 1: right away for political science. I looked into American University,
Speaker 1: and then I thought to myself, I don't know what
Speaker 1: I want to do yet. So all I knew throughout
Speaker 1: the latter part of my undergraduate years is that I
Speaker 1: wanted to live and work in New York City. That
Speaker 1: was the dream without a latch. Grow born in bay Ridge, Brooklyn,
Speaker 1: then early part of childhood in Marstown, New Jersey, then
Speaker 1: outside of Philadelphia and Westchester, Pennsylvania. Then of course went
Speaker 1: to Delaware and then New York City for twelve years,
Speaker 1: and then Connecticut. Raised our kids in Darien, Connecticut. And
Speaker 1: now I'm based in Naples, Florida.
Speaker 2: Right, do you have a little golf cart and your.
Speaker 1: Put no golf cart now, but of Vespa.
Speaker 2: Okay, oh that's fun. So you come out of college,
Speaker 2: how did you end up at Avatar Associates working with
Speaker 2: Marty's wide.
Speaker 1: So I interviewed across the spectrum of industries, and they
Speaker 1: were all interviews for grunt positions, entry level positions. But
Speaker 1: I had interviews at a few Wall Street firms, both
Speaker 1: large and small. I think I interviewed at a marketing
Speaker 1: firm and ad agency because I didn't know what I
Speaker 1: wanted to do. But I had some familiarity with Marty
Speaker 1: because in college, one of the courses that I took
Speaker 1: a requirement was, in addition to reading the Wall Street
Speaker 1: Journal every day, was understanding what had happened in the
Speaker 1: world of financial markets throughout the week. And I had
Speaker 1: a professor give me a little sort of hint. He said, Hey,
Speaker 1: just watch Wall Street Week on PBS on Friday nights
Speaker 1: Closer Kaiser at eight thirty to nine o'clock. Then you know,
Speaker 1: you go out and you start your weekend. And I did.
Speaker 1: And Marty was on that show really from its inception
Speaker 1: in the early nineteen seventies. And for those that remember
Speaker 1: the show, you also remember that that predated anything that
Speaker 1: exists Now.
Speaker 2: That was the Orisontal for that show. Before there was
Speaker 2: three or four different financial news networks.
Speaker 1: And it was millions of viewers every week. It was
Speaker 1: that eras version of Must see TV on the subject
Speaker 1: of the market. So I had some familiarity, but in
Speaker 1: advance of the interview, I also did more research on
Speaker 1: Marty on his side of the organization, which was the
Speaker 1: mutual fund, hedge fund, investment newsletter side, and then the
Speaker 1: avatar side that I ultimately joined, which was the institutional
Speaker 1: money management firm that Barry is a reminder in nineteen
Speaker 1: eighty six, the process of doing research on a person
Speaker 1: or a firm, there is just Google them. No, there
Speaker 1: was no Google. There were no computers, there was no Internet.
Speaker 1: So I was in the library with the microfiche machine
Speaker 1: and literally turning the crank and reading newspaper articles. So
Speaker 1: I had some background and had two interviews, and honestly,
Speaker 1: just the voice inside my head said, this feels right.
Speaker 2: You're there for thirteen years, nineteen eighty six to ninety nine.
Speaker 2: That was the Great bullmarket. Tell us a little bit
Speaker 2: what it was like during that period, and then we'll
Speaker 2: talk about what it was like working with Marty's Y
Speaker 2: for the late Great Marty's wife.
Speaker 1: So again I was on the avatar side of this
Speaker 1: Wyg Avatar broader organization, which was institutional money management, managing
Speaker 1: money for a lot of large corporate plans and foundations
Speaker 1: and endowments. And I was a portfolio manager, so I
Speaker 1: was doing bottom up rec search and picking stocks. But
Speaker 1: it was with the context of the top down analysis
Speaker 1: that Marty brought to the picture I learned throughout that
Speaker 1: thirteen years. And part of the reason why I took
Speaker 1: advantage of an opportunity that presented itself to move over
Speaker 1: to US Trust was I was much more interested in
Speaker 1: and fascinated by the top down and not the bottom up.
Speaker 1: I did love picking stocks, it just wasn't where my
Speaker 1: passion was. So my observations were more keen on what
Speaker 1: Marty and his models were doing in the context of
Speaker 1: the big picture and monetary policy analysis and investor sentiment
Speaker 1: and behavior, and that was where I really found my
Speaker 1: passion was in that top down analysis.
Speaker 2: So let's talk a little bit about Marty's Wig, one
Speaker 2: of that era's most famous investors and traders. The technical
Speaker 2: crew know him for the ZWYG thrust Indicationlater he created
Speaker 2: the coal ratio. But he's also the guy who coined
Speaker 2: the phrase don't fight the fed. Tell us a little
Speaker 2: bit what it was like to work with Marty's why.
Speaker 1: I adored Marty, you know, rest in peace. He was quirky.
Speaker 1: He could have a temper, but never about the big stuff.
Speaker 1: It was more about the little stuff. If he couldn't
Speaker 1: find his pencil, and you know, he would toss a phone.
Speaker 1: But he was really sort of warm and fuzzy, but
Speaker 1: had that. He was always sort of anxious and nervous,
Speaker 1: and a lot of people who just observed him from
Speaker 1: afar took it as well, He's just bearish all the time.
Speaker 1: It wasn't the case. I mean, he was essentially a
Speaker 1: market timer, for lack of a better word. He was
Speaker 1: an tactical acid allocator.
Speaker 2: And one of the more rare successful market.
Speaker 1: Times, unbelievably successful, and had to do with the discipline
Speaker 1: of the models that he used and how he segmented
Speaker 1: economical equids, investor liquidity, and then technicals and breath conditions
Speaker 1: and understood how they melded together. And you know, it
Speaker 1: wasn't The history of working for him wasn't without some
Speaker 1: periods that he didn't quite nail, but the big ones
Speaker 1: he really nailed.
Speaker 2: When I was early in my career, I read the
Speaker 2: book Winning on Wall Street, which I think came out
Speaker 2: in like ninety five or ninety six.
Speaker 1: Well, the original one came out earlier than that, but
Speaker 1: there were there were additions that followed that, but it's
Speaker 1: still a mustreet.
Speaker 2: And my takeaway from that is market timing is one
Speaker 2: part science where you're crunching numbers and looking at history,
Speaker 2: but you can't get away from one part art where
Speaker 2: after you're watching the markets for decades like him, there's
Speaker 2: an intuitive feel where just something starts to smell wrong
Speaker 2: and when the data lines up and your spidey sense
Speaker 2: starts to tangle. And he never quite said it that way,
Speaker 2: but I very much got the sense that all the
Speaker 2: data was there to buttress the fact that, hey, I've
Speaker 2: been watching markets for fifty years and something wicked this
Speaker 2: way comes.
Speaker 1: The gut instinct was extraordinary. It was always again in
Speaker 1: the context of the models that he was very disciplined about,
Speaker 1: but there was that just added little piece, and it
Speaker 1: certainly came into play with regard to what essentially was
Speaker 1: his crash call.
Speaker 2: So let's talk about that. So he's a regular on
Speaker 2: Wall Street Week with Lewis Rukeiser. I could still see
Speaker 2: the dollar sign in the street, the s for the
Speaker 2: street in the in the logo the Friday before Black Monday,
Speaker 2: he goes on Rukeiser, what does he say.
Speaker 1: For those that don't remember the show? And it's you
Speaker 1: know what every other goes by? I still hear all
Speaker 1: the time. Oh my gosh, I miss Wall Street Week.
Speaker 1: I miss Lou? What was he like? What was Marty like?
Speaker 1: And younger people just never heard of the show. They
Speaker 1: have no idea who who short Kaiser is, and that's
Speaker 1: kind of sad for somebody that's been around for as
Speaker 1: long as I have. But the structure of the show
Speaker 1: with Lou would come out. He would do ten minutes
Speaker 1: or so of a monologue and it was really brilliant writing.
Speaker 1: He wrote them all himself. There was humor, there was
Speaker 1: great intelligence on what had happened in the market. There
Speaker 1: was really important reminders around what matters and what doesn't.
Speaker 1: And he was just sort of a calming force and influence,
Speaker 1: especially during tumultuous times. But then he would walk over
Speaker 1: to the table where at the table was Lou and
Speaker 1: the three regular panelists that were on that evening, and
Speaker 1: there was twenty one two three panelists on an ongoing basis,
Speaker 1: and he would have a conversation with each panelist and
Speaker 1: then all four would go over to the sofa area
Speaker 1: and interview the special guest for that night. So this
Speaker 1: was the middle part of the show show where he
Speaker 1: was talking to the panelists, and Marty was his typical
Speaker 1: and I think Lou asked him, and you can find
Speaker 1: it on YouTube.
Speaker 2: It's a.
Speaker 1: Bunch of them, a bunch of them, are that's the
Speaker 1: one to watch?
Speaker 2: Yeah? Absolutely, And I.
Speaker 1: Think Lou said, boy, you sound a little trouble. Do
Speaker 1: you think we have a bear market? And Marty basically said, no,
Speaker 1: I think the market's going to crash, And then he
Speaker 1: went further to talk about the nature of what it
Speaker 1: would look like, the probability that it would happen, but
Speaker 1: then there would be a retest, but then once you
Speaker 1: had the retest, the decent chance that you'd be off
Speaker 1: to the races again.
Speaker 2: Pretty much exactly exactly what happened. Like, It's not just oh,
Speaker 2: the market's going to lose some points on Monday. He
Speaker 2: laid out like the next six months and it's exactly
Speaker 2: what happened.
Speaker 1: And it had to do with the interest right backdrop
Speaker 1: at the time and tighter monetary conditions, but also the
Speaker 1: spidey sense to your point, around the the innovation of
Speaker 1: the time of portfolio insurance and felt that that was
Speaker 1: sort of unwinding and wasn't going to represent the insurance
Speaker 1: that a lot of people thought. And he was on
Speaker 1: that the hedge fund side of the dual organization so
Speaker 1: could be could swing for the fences a bit more
Speaker 1: than we could on the institutional side. And I don't
Speaker 1: remember the exact percentages, but was very aggressively long heading
Speaker 1: into what the pre crash peak was in August, and
Speaker 1: then started aggressively both selling and moving to the short
Speaker 1: side of things, heading right into the weekend before the crash.
Speaker 1: And we did something similar on the institutional side, not
Speaker 1: the same extreme, but close to fully invested to a
Speaker 1: very very low equity exposure.
Speaker 2: And people may not remember nineteen eighty seven was at
Speaker 2: least up and through September was a robust year in
Speaker 2: the market. We were up like thirty or forty percent,
Speaker 2: like a really substantial gain, and despite the twenty two
Speaker 2: point seven percent crash, I think we finished the year
Speaker 2: like up one percent.
Speaker 1: I think it was one point eight percent. And you
Speaker 1: know what, Barry, I'm glad you mentioned that, So indulge
Speaker 1: me if you would, on a tangent here. One of
Speaker 1: the things that I have never done, and no one
Speaker 1: at Schwab has ever asked me to do, is what
Speaker 1: I think is the silly exercise of things like yourine
Speaker 1: price targets. Now, in part that's a way for institutional
Speaker 1: strategists to be measured against one another, and the sort
Speaker 1: of narrative embedded in that I suppose might matter to institutions,
Speaker 1: but our eight plus trillion dollars of client assets are
Speaker 1: for the most part, individual investors. Nineteen eighty seven is
Speaker 1: a perfect example of that. If I, at the beginning
Speaker 1: of the year had said the market is going to
Speaker 1: be up less than two percent, that might have sent
Speaker 1: the impression that it was going to be kind of
Speaker 1: a boring year and patted myself on the back at
Speaker 1: the end of the year. But the path that the
Speaker 1: market took to start at the year and then ended
Speaker 1: up one point eight percent was nothing resembling what one
Speaker 1: might infer if you had just heard the year end
Speaker 1: price target of essentially a flat market.
Speaker 2: So I love the mental exercise that Wes Gray of
Speaker 2: Alpha Architect does. Hey, if you knew with perfect clarity,
Speaker 2: if that bird landed on your shoulder and told you
Speaker 2: here's where equity prices are going to be in ten years,
Speaker 2: position your portfolio for that. He says, even God would
Speaker 2: get fired as a portfolio manager because the drawdowns can
Speaker 2: be so vicious. And what do you mean you're fully invested.
Speaker 2: The market is down, you know, thirty forty percent? You
Speaker 2: didn't see this.
Speaker 1: When markets are going up, the benchmark is either an
Speaker 1: index like the S and P five hundred, or you
Speaker 1: know someone you know that's making even more money than
Speaker 1: you are. But it's amazing how quickly the benchmark turns
Speaker 1: into cash or a positive return when markets are going down.
Speaker 2: So let's talk a little bit about a day in
Speaker 2: the life of a chief investment strategist at an eight
Speaker 2: trillion dollar firm. I have to assume every day is
Speaker 2: a little different.
Speaker 1: I was going to say, it depends on the day.
Speaker 2: So take us through a typical day. What's it like.
Speaker 1: Well, there is probably nothing typical about a day, but
Speaker 1: on the rare occasion where I have a decent block
Speaker 1: of time where I am not on camera or traveling,
Speaker 1: I do a lot of research. I remember when my
Speaker 1: daughter was in middle school and she's twenty four years
Speaker 1: old analysis, and she's the youngest. It was a long
Speaker 1: time ago. The school had a career day and I
Speaker 1: was asked to come in as one of the representatives
Speaker 1: to have kids rotate through the classroom. They assigned you
Speaker 1: to and talk about what you do, particularly for a
Speaker 1: job like mine. The directive from the principle was try
Speaker 1: to get the seventh graders to understand what you do.
Speaker 1: So I started by saying, well, basically, I read, write,
Speaker 1: and talk. So that's what I spend my typical day
Speaker 1: doing is some form of reading, writing and talking. And
Speaker 1: the reading part is the digestion of just a fire
Speaker 1: hose of information, proprietary research, internal Schwab research, all the
Speaker 1: research that I get from the variety of research sources
Speaker 1: that we have, analyzing data, analyzing every economic report that
Speaker 1: comes in, everything happening in the market on a day
Speaker 1: to day basis. Even though I don't take a trading approach,
Speaker 1: just looking at technicals and breath statistics and leadership and
Speaker 1: factor analysis, et cetera, et cetera. And then I spent
Speaker 1: a lot of time both literally and figuratively, on the
Speaker 1: road talking to our clients, both the retail clients as
Speaker 1: well as advisor services. Now, in this post COVID environment,
Speaker 1: it's not quite as much as used to be the
Speaker 1: case in terms of travel to do in person events.
Speaker 1: It's maybe sixty percent back in that direction, but we've
Speaker 1: all adopted to the.
Speaker 2: Use of Isn't that a better balance?
Speaker 1: Doesn't it's a better balance, and it's efficient. I used
Speaker 1: to I used to go over to Asia once or
Speaker 1: twice a year to see many of our clients that
Speaker 1: are based over there, and the trips would involve some
Speaker 1: combination of Hong Kong, Shanghai, Beijing, maybe Singapore, and I
Speaker 1: would do a breakfast event, a lunch event, a dinner event.
Speaker 1: The dinner events might have up to one hundred and
Speaker 1: fifty two hundred people, smaller other events, but at the
Speaker 1: end of a trip it was a brutal travel trip.
Speaker 1: I might have interacted in some form with several hundred clients.
Speaker 1: I now do a quarterly webcast for those same clients,
Speaker 1: and there have been webcasts on which we've had more
Speaker 1: than five thousand. Wow, clients, So there is an efficiency
Speaker 1: to continue to weave that in.
Speaker 2: There's no substitute for the face to face. But sometimes
Speaker 2: it's like, do I really need to go here to
Speaker 2: meet with thirty people? It just seems so some of
Speaker 2: the takeaway from a little bit of zoom, a little
Speaker 2: bit of webcasts have become hey, we can be more
Speaker 2: efficient and more productive. Absolutely, all these tools existed ten
Speaker 2: years ago. The pandemic seems.
Speaker 1: Fair for us to right. Absolutely. And then as you
Speaker 1: and I sit here having this conversation, a relatively new
Speaker 1: component of my day to day activity is I know,
Speaker 1: co host a podcast.
Speaker 2: I know that. How are you enjoying that?
Speaker 1: Love it? Absolutely? Love it? So we launched it. I
Speaker 1: think it was November of last year. I co hosted
Speaker 1: with my colleague Kathy Jones, who was our chief fixed
Speaker 1: income strategist, So she's my counterpart on the fixed income
Speaker 1: side of things, where my bias is on the equity
Speaker 1: side of things. And we have just very open, honest conversation,
Speaker 1: sort of you're a fly on the wall hearing what
Speaker 1: we would talk about. It's very unscripted about what's going
Speaker 1: on in the markets, and we talk about the FED
Speaker 1: and economic data and what's a head for the week.
Speaker 1: And we typically also have guests both in weekly. You're
Speaker 1: doing weekly, We're doing it weekly. It drops on Fridays.
Speaker 1: It's audio only, so we can have external guests, internal guests.
Speaker 1: Any people can be wherever they are, and a wide
Speaker 1: range of guests that we have had. We had Claudia
Speaker 1: som we had al Rabel talking about commercial real estate.
Speaker 1: We had Dolly Lenz of real estate fame talking about
Speaker 1: residential real estate. We've had internal guests like our own
Speaker 1: Mike Townshend talking about what's going on in Washington. So
Speaker 1: that's been an absolute blast.
Speaker 2: Isn't this not to toot my own horn, but isn't
Speaker 2: this just such a pleasant formatte not three minutes? There's
Speaker 2: no camera in your face. You know, the world is
Speaker 2: not black and white, and investing, especially has so many
Speaker 2: shades of gray, and to develop really have a decent
Speaker 2: explanation as to what's going on five minutes really is tight.
Speaker 2: Write it really is so to go into that sounds
Speaker 2: great and I love that description of what you do
Speaker 2: is reading, writing and talking is really is great. I
Speaker 2: wanted to ask you something you mentioned all of the
Speaker 2: internal schwab clients, you have advisors, you have individual clients
Speaker 2: like I would love to be let loose on that
Speaker 2: data to see what they do in response to markets.
Speaker 2: How do you look at the behavior of whether it's
Speaker 2: professional or institutional or just mom and pop traders. Do
Speaker 2: you guys monitor that and say, here's the sentiment. It
Speaker 2: looks like people are starting to get really panic.
Speaker 1: We do, and there are a variety of forms that
Speaker 1: we disseminate that type of information out into the public sphere,
Speaker 1: which is not something I do formally. There are groups
Speaker 1: that put that together, but I have access to the information,
Speaker 1: and you're right, particularly as it relates to the sentiment
Speaker 1: in side of things. I have been a sentiment watcher
Speaker 1: for my thirty eight years in this business, learning a
Speaker 1: lot about the power of sentiment from Marty's wig. But
Speaker 1: I think it's important to look at both attitudinal measures
Speaker 1: of sentiment and behavioral measures of sentiment. And behavioral measures.
Speaker 1: With eight plus trillion dollars of client.
Speaker 2: Assets, someone's going to be acting in it's.
Speaker 1: Probably a pretty good eye into the sort of psyche
Speaker 1: and behavior of individual investors. So it is absolutely something
Speaker 1: that I incorporate in the analysis. It's in addition to
Speaker 1: broader metrics that go beyond just schwab things like fundflows
Speaker 1: and obviously the put call ratio and other ways to
Speaker 1: measure the behavior of investors. But it's in conjunction with
Speaker 1: those more attitudinal measures, and that comes from sources like
Speaker 1: AAII American Association of Individual Investors. But frankly, a lot
Speaker 1: of the attitudinal measures of sentiment I pick up just
Speaker 1: from talking to our clients on the road. That's where
Speaker 1: the spidey sense that the gut feel comes in. And
Speaker 1: now being very active on social media too, particularly Twitter
Speaker 1: slash x. By the way, I am not active on
Speaker 1: either Instagram or Facebook. However, a very troubling, huge rash
Speaker 1: of impostors on those platforms of me not just trying
Speaker 1: to get followers.
Speaker 2: Yeah, I was kind of surprised you.
Speaker 1: Were kitching pitching things like.
Speaker 2: Your big bitcoin advocate.
Speaker 1: Apparently that is not me, by the way.
Speaker 2: Not on Facebook, I'm not on.
Speaker 1: I'm not active on Facebook. I'm not And I've had
Speaker 1: a rash of impostors on Twitter.
Speaker 2: I was about to say, you know, Elon Musk is
Speaker 2: touting groc as their AI and I would never subscribe
Speaker 2: to that until they were able to demonstrate, Hey, groc
Speaker 2: has gotten rid of all the spam bots, and it's
Speaker 2: gotten rid of all the like I'm constantly reporting fake backes.
Speaker 2: I'm sure, and how c not. It's so easy to identify. Well,
Speaker 2: if a I can't do that, then it is worthless.
Speaker 1: It is, and it drives me crazy.
Speaker 2: That it's gone away anyway.
Speaker 1: Twitter, somebody will think it's me, right, and it's somebody.
Speaker 1: It's an account with you know, seven followers and nine
Speaker 1: not not that, not that I'm on you know, Taylor Swift,
Speaker 1: but to.
Speaker 2: Be fair, your call on doge coin using the handle
Speaker 2: lizen Sunder's nine seven three one four six nine it
Speaker 2: was pretty well.
Speaker 1: Time good for her, for her, for him or it
Speaker 1: or whatever. It's a North Korean Yeah, no, so for
Speaker 1: for people who might not have been following the actual me,
Speaker 1: it's at Las Anne Sanders. There's there's no e at
Speaker 1: the end of a hand. There's Saunders is not spelled
Speaker 1: with a Z. There's no numbers added to it, there's
Speaker 1: It drives me crazy, and.
Speaker 2: It's it should be one of those things that are
Speaker 2: just so easy to fix, and he is otherwise distracted,
Speaker 2: So it is something that yeah, that's pretty good. And
Speaker 2: I remember when you first when we when we spoke
Speaker 2: last time twenty fifteen, I.
Speaker 1: Think I had just joined Twitter. Yeah.
Speaker 2: And for people who don't follow liz Ane Saunders, but
Speaker 2: you should, and I retweet you on a regular basis.
Speaker 2: You put up some really nice charts, some good tables.
Speaker 2: Everything is databased, everything is fact oriented. It's none of
Speaker 2: the stuff that I see from you. And this is
Speaker 2: why I appreciate your feed. Is you know, I really
Speaker 2: think the market has another leg up here about ten
Speaker 2: to fifteen percent. Then we get a pull up.
Speaker 1: There's none of that, there's no bit just because I
Speaker 1: you know why, I don't know. I can't do that.
Speaker 1: That's right, and by the way, nobody knows. Nobody can
Speaker 1: do that. It's not what we know that matters, meaning
Speaker 1: about the future, what the market's going to do. It's
Speaker 1: what we do along the way. It's as simple as that.
Speaker 2: It's a little bit of a stoic philosophy. You can't
Speaker 2: control the world. All you can control is your reibator,
Speaker 2: what happened, your behavior, And that's very challenging for people
Speaker 2: to accept.
Speaker 1: Fear and greed are really really powerful emotions, especially as
Speaker 1: it relates to our money, because we care a lot
Speaker 1: about our money.
Speaker 2: So let's talk about fear and greed. Let's talk about
Speaker 2: twenty twenty two and twenty twenty three. Twenty two was
Speaker 2: a tough year. We had double digit declines in fixed
Speaker 2: income and equities. I think the SMP was down about
Speaker 2: almost twenty percent. Then NAZAK was down about thirty percent.
Speaker 2: What was twenty twenty two like for you? Dealing with
Speaker 2: a lot of clients and investors concerned about what was
Speaker 2: going on?
Speaker 1: You know, one of the most interesting things about twenty
Speaker 1: twenty two was to tie this into the sentiment conversation
Speaker 1: that we just had and the differential times between behavioral
Speaker 1: measures of sentiment and additudinal measures of sentiment. I'm sure
Speaker 1: you remember the first big wush down into June of
Speaker 1: twenty twenty two that at the time was the hope
Speaker 1: for Okay, maybe this is the wash out point, in
Speaker 1: part because some sentiment measures were at extremes AAII. I
Speaker 1: don't remember whether it was exactly around the low of June,
Speaker 1: but sometime in that spring early summer period, the percentage
Speaker 1: of bears in the weekly AAII survey went to a
Speaker 1: record high and commensurately, the percentage of bulls went to
Speaker 1: a record low, but it wasn't matched by the behavioral measures.
Speaker 1: In fact, AAII, in addition to their weekly or you
Speaker 1: bullish or you bearish? Are your Neutral survey, they also
Speaker 1: track the equity exposure of their same.
Speaker 2: Time My favorite data point of that.
Speaker 1: And at the time where you had record high bearishness
Speaker 1: record low bullishness, the equity exposure was only slightly often
Speaker 1: all time high. So that was a classic example of
Speaker 1: what they what they're saying, and what they're doing are
Speaker 1: sort of diametrically opposed. Fast forward to the October twenty
Speaker 1: twenty two period, there was a little more of that
Speaker 1: across the spectrum, wash out the puke phase as I
Speaker 1: like to call it, using a very technical term. That
Speaker 1: was also a period where because the Magnificent seven or
Speaker 1: the Grade eight, you know that the small handful of
Speaker 1: ten now right now it's getting shrunk, that those stocks
Speaker 1: were dragging performance down. But what was interesting about the
Speaker 1: October low was what was going on under the surface.
Speaker 1: So the indexes at the October low had taken out
Speaker 1: their June low, but under the surface you were seeing
Speaker 1: much improved breadth. You know, positive divergence, to use that
Speaker 1: technical term, and that was a more compelling point in
Speaker 1: the market. Again, the message from us wasn't the bottom
Speaker 1: is in, but the message was this looks more compelling
Speaker 1: than what was happening in June because you had that
Speaker 1: sort of double wash out in sentiment and you had
Speaker 1: that under the surface improvement in breadth where even though
Speaker 1: you know the generals were retreating, there were more soldiers
Speaker 1: kind of approaching the front line.
Speaker 2: And the October twenty twenty two lows were slightly below
Speaker 2: the June lows. And so the technicians will say that's
Speaker 2: a double bottom, but I recall seeing some people say, uh, oh,
Speaker 2: we're going to start a whole new leg down over here,
Speaker 2: and it's hard to see that with sentiment that negatively.
Speaker 1: Not only that, but again the fact that breadth under
Speaker 1: the surface was truth.
Speaker 2: Yeah, And you know, same thing at my firm. We're
Speaker 2: not market timers, we're not traders. In my personal account,
Speaker 2: I went out and bought a bunch of QQQ calls
Speaker 2: and Spider calls just to play around, and Russell two
Speaker 2: thousand calls. Spiders did well, Russell's did nothing, and the
Speaker 2: cues crushed it. Over the next year. But that has
Speaker 2: to be a challenging period. What sort of halls and
Speaker 2: do you get panicky conversations with investors?
Speaker 1: You know, one of the differentiations that I've observed over
Speaker 1: my many years at Schwab is during some of the
Speaker 1: really tumultuous eras twenty twenty two, maybe not as significant
Speaker 1: as the COVID decline or certainly the global financial crisis,
Speaker 1: is there is a pretty direct correlation between the ability
Speaker 1: with the withstand volatility and tough market environments with whether
Speaker 1: you sort of have a discipline strategic acid allocation plan
Speaker 1: versus more of the day traders, the wing it kind.
Speaker 1: That's where you see the bigger emotional swings versus our
Speaker 1: clients that have taken that what we sometimes call an
Speaker 1: advised approach, where they've got that long term plan, they
Speaker 1: have a financial plan, they've got a strategic acid allocation
Speaker 1: structure that is tied to everything personally about them, that
Speaker 1: they have the disciplines around diversification, periodic rebalancing, and they
Speaker 1: tend to ride through the tougher times much better than
Speaker 1: the kind of wing it type investors.
Speaker 2: So let's flip it on its head. Twenty twenty three
Speaker 2: S and P five hundred up almost twenty five percent,
Speaker 2: and nas deck up more than double that. What do
Speaker 2: you do with people who suddenly become uber bullish and hey,
Speaker 2: this is this is a new something. We have to
Speaker 2: be in it to win it. How do you call
Speaker 2: it that?
Speaker 1: You're like, last year was so dominant by such a
Speaker 1: small handful of names. It got less extreme as the
Speaker 1: as the year concluded. But at around the midpoint of
Speaker 1: last year, you not only had the Magnificent seven accounting
Speaker 1: for more than all the performance, but you had a
Speaker 1: record low percentage of the index outperforming the index itself, and.
Speaker 2: Forty five stocks did better than twenty five percent one
Speaker 2: hundred and forty four STO and the S and P
Speaker 2: five hundred if I'm remembering correctly, right, output.
Speaker 1: Wells way, which is low to look at that. So
Speaker 1: at the low point of last year, even today, if
Speaker 1: you look at the percentage of the SMP that has
Speaker 1: outperformed the index over the past twelve months, it's only
Speaker 1: twelve percent. That's close to an all time low.
Speaker 2: If give me those numbers again, twelve to.
Speaker 1: Twelve percent of the overall S and P five hundred.
Speaker 2: So you're talking sixty stocks.
Speaker 1: Right have outperformed the S and P over the prior
Speaker 1: twelve months. Now, if you start to shorten that twelve months,
Speaker 1: it gets better. So right now it's around forty percent
Speaker 1: of the index has outperformed the index over the past month.
Speaker 2: Really, that's much broader. All we hear is people saying
Speaker 2: the market is narrowing. This is how bulls end.
Speaker 1: It's just it's broadening.
Speaker 2: It's going the other way.
Speaker 1: So even justice, yes, it is even just among the
Speaker 1: magnificent seven. Now last year, so that Moniker came because
Speaker 1: those were the seven largest stocks right in the SMPN
Speaker 1: and the Nasdaq. They're not the seventh largest anymore. Six
Speaker 1: of them are still the sixth largest, but Tesla has
Speaker 1: dropped down. It's kind of bouncing between the ninth and
Speaker 1: the ten spot. So leap frogging Tesla has been. Berkshire, Hathaway, Eli,
Speaker 1: Lilly and Broadcom has been, you know, kind of breathing
Speaker 1: down Tesla's neck. Last year, they were the seven largest
Speaker 1: stocks consistently throughout the year. They weren't the seven best performers,
Speaker 1: but they were all strong performers double and triple digit.
Speaker 1: You only had to go down to the sixty third
Speaker 1: ranking within the S and P five hundred to capture
Speaker 1: all seven of those names year to date. As you
Speaker 1: and I are recording this, three of the seven stocks
Speaker 1: are ranked year to date performance in the bottom quintile,
Speaker 1: so they four of them have three of them have
Speaker 1: a four handle in terms of the ranking. So that's Tesla, Apple,
Speaker 1: and Alphabet. Now Nvidia is still the best proing stock.
Speaker 1: But you've got this massive spread in terms of performance
Speaker 1: among just that group of names, and you have the
Speaker 1: sort of stealthy breakouts happening in areas like industrials, even
Speaker 1: to some degree in financials.
Speaker 2: And which have been a giant laggered for right forever.
Speaker 1: But you know, sectors and groups and categories, there's rotation.
Speaker 1: I think all l sqel's that's a healthy thing. I
Speaker 1: think still a bit more work needs to be done.
Speaker 1: But in terms of back to the original part of
Speaker 1: your question, you know, how do you navigate this? First
Speaker 1: of all, understand what's actually going on in the market,
Speaker 1: and understand that indexes can often paint a very different
Speaker 1: picture versus if you look under the surface. And that's
Speaker 1: why in my latest report I said that this may
Speaker 1: be more of a duck market than a bull market.
Speaker 2: That's that's a quite literally a question I have explained.
Speaker 2: I love the metaphor of a duck explained.
Speaker 1: So it was I guess is the quote originally is
Speaker 1: attributed to Michael Kaine, who's talked about a duck being
Speaker 1: very calm on the surface but paddling like the dickens underneath.
Speaker 1: And to put some numbers behind what I mean in
Speaker 1: this context, that both the S and P and the
Speaker 1: Nasdaq are still trading around all time highs with in
Speaker 1: the case of the S and P, no more than
Speaker 1: a two percent draw down from a year to date
Speaker 1: high maximum draw down. It's a little bit worse is
Speaker 1: three percent for the Nasdaq, but that's at the index level.
Speaker 1: Let me just use the Nasdaq as an example of this,
Speaker 1: and as you and I are doing this first week
Speaker 1: in March, we're not very far into the year, but
Speaker 1: the average member Nasdaq member maximum draw down from year
Speaker 1: to date highs is negative twenty two percent.
Speaker 2: That's big, it's big.
Speaker 1: That's bear market level decline. So there's a lot more
Speaker 1: churn going on under the surface. And I think, especially
Speaker 1: in this environment, you want to understand what's going on
Speaker 1: under the surface, not just make assumptions about the market
Speaker 1: at the index level because of what has been that
Speaker 1: bias in terms of performance to just a relatively small
Speaker 1: handful of names.
Speaker 2: So those data points that you bring up are really
Speaker 2: quite interesting because there has been an increasing chorus of
Speaker 2: people talking about passive flows and indexing are destroying price discovery.
Speaker 2: David Ihorn a few weeks ago said passive is destroying
Speaker 2: value and it's damaging market structure. You're essentially making the
Speaker 2: case that there's plenty of price discovery, that it's not uniform,
Speaker 2: that money isn't just flowing into names blindly. If Apple,
Speaker 2: Alphabet and Tesla are in the bottom quintile of performers
Speaker 2: when they are amongst the top ten biggest stocks, that
Speaker 2: really contradicts Oh no, means there's.
Speaker 1: Just there's other stuff going on.
Speaker 2: It's not just fun now houses.
Speaker 1: Passive did just surpass active in terms of the amount
Speaker 1: of money in passive ETFs and funds versus active. That
Speaker 1: just happened at the end of twenty twenty three. But
Speaker 1: dispersion is up and correlations are way down, and I
Speaker 1: think that that's supportive of activity, and that is not
Speaker 1: me saying sell all your passive vehicles and back up
Speaker 1: the truck and load up on active. We have always
Speaker 1: for years thought there's a home for both active and
Speaker 1: power and settle in portfolios. The point is more that
Speaker 1: active in general and broadly has just not been playing
Speaker 1: on a level playing field with passive. I think that's improving,
Speaker 1: and it's your right. There is price discovery again. A
Speaker 1: lot of that has to do with the return of
Speaker 1: the risk free rate and an environment in the zerp.
Speaker 2: Era competition with bonds, you mean, and just.
Speaker 1: You know, the zerp Era zero percent interest rate. That
Speaker 1: was the support for zombie companies and companies that really
Speaker 1: had no business you know, existing. And I think with
Speaker 1: that return of the risk free rate, it is it
Speaker 1: has brought about more price discovery. It is represented a
Speaker 1: reconnection of fundamentals to prices. Not every day, not every week.
Speaker 1: You still get these you know, captriven concentration problems in
Speaker 1: the market like last year, but that's starting to ease
Speaker 1: a bit. And if you're only looking at the index
Speaker 1: level and you see certain ugly days, I think the
Speaker 1: real story, which is arguably a more optimistic story, can
Speaker 1: often be found under the surface, not on the surface.
Speaker 2: That's some really fascinating stuff. And I love that perspective
Speaker 2: of here's what the chatter is saying, but when we
Speaker 2: look at the data, it's telling you something else. All Right,
Speaker 2: last question on Schwab.
Speaker 1: You've been there, I think later twenty four years.
Speaker 2: So your next year is twenty five years. Yes, that longevity,
Speaker 2: first of all, is unusual.
Speaker 1: Well two for all intents and purposes. Two jobs and
Speaker 1: thirty eight years not too bad. So that's not common
Speaker 1: on Wall Street.
Speaker 2: I think it's definitely increasingly rare. The question is, tell
Speaker 2: us what's kept you at one place for a quarter
Speaker 2: of a century.
Speaker 1: A lot of it has to do with the culture.
Speaker 1: And I give tremendous amount of credit to the man
Speaker 1: behind the firmly Chuck Schwab, and who is still with us,
Speaker 1: and he's still a pretty active chairman, and I know
Speaker 1: him personally as well as professionally, and his vision of
Speaker 1: what Schwab should be and has turned into is it
Speaker 1: really I think separates us from maybe the typical Wall
Speaker 1: Street firm, because you know, our sort of marketing tagline
Speaker 1: of sorts of through clients' eyes is actually legitimate. And
Speaker 1: I think the perspective of the individual investor, what they
Speaker 1: maybe not want, but what we know they probably needs.
Speaker 1: Just very different than the institutional world, and I think
Speaker 1: approaching investing through the eyes of individual investors is just
Speaker 1: a different ballgame. And there was nobody that preceded me
Speaker 1: in this role. So when Schwab acquired US Trust in
Speaker 1: two thousand, it was only ten months after I had
Speaker 1: joined US Trust, Chuck and and our CEO at the time,
Speaker 1: Dave Patrick, came to New York to meet all the
Speaker 1: US Trust executives and they sat down with me and said,
Speaker 1: we want to create this role of chief investment strategist
Speaker 1: any interest I'm making a longer conversation very short. I said, yep,
Speaker 1: hell count me in. And the rest is sort of history.
Speaker 1: But they gave me a lot of free rain to
Speaker 1: sort of create this role, but with my full knowledge
Speaker 1: based on what I know was their mission around the
Speaker 1: organization of this is through individual client size, and that's
Speaker 1: a reason why we don't try to do things like
Speaker 1: market timing or year end price target. It's about long
Speaker 1: term planning and strategic acid allocation and just understanding how
Speaker 1: markets work and how behavior comes into the mix. So
Speaker 1: it's just been a great platform for me and I
Speaker 1: love it. I hope I'm there for a.
Speaker 2: Lot another twenty five years.
Speaker 1: Well, boy, that would be interesting. So let me she
Speaker 1: my mom's age.
Speaker 2: Then you mentioned the culture at Schwab. Let me share
Speaker 2: a perspective. I don't know if I ever shared this
Speaker 2: with you. So my firm launched in twenty thirteen with
Speaker 2: very little money. TD was our custodian.
Speaker 1: I think i've heard of TD right now, part.
Speaker 2: Of Schwab and the first couple, and we just the
Speaker 2: reason we did that is our prior firm. The clients
Speaker 2: were custody to TD, and it made it just a
Speaker 2: single letter, you know, LA, in order to transfer the
Speaker 2: accounts over. And it took us about a year or two.
Speaker 2: After you hear it for the hundredth time, where we
Speaker 2: would go on a road trip. So we were a
Speaker 2: small shop, but you know, between our media exposure and
Speaker 2: everything else, had a national footprint and we would go
Speaker 2: to Seattle or San Francisco or Chicago or Austin, Texas
Speaker 2: And do you hear it like the nineteenth time, Hey,
Speaker 2: we love you guys. I would love to have you
Speaker 2: manage our portfolio. But we've been with Schwab and we're
Speaker 2: not leaving them as our custodian. Let us know as
Speaker 2: soon as Schwab is one of your platforms. You know,
Speaker 2: you can only only have to hit me over the
Speaker 2: head with a hammer fourteen times before I'm like, hey,
Speaker 2: maybe I may. And now we have I think we have.
Speaker 2: I'm doing this off the top of my head. You know,
Speaker 2: four billion plus on the Schwab platform from essentially nothing
Speaker 2: years ago. Well, you guys have won a great part.
Speaker 2: You know. I don't again, I always like to disclose things,
Speaker 2: but it was it was dumbfounding in the beginning, where
Speaker 2: it's like I don't understand they're a custodian.
Speaker 1: Why now it's a partnership. I'm glad you use that.
Speaker 2: That's what we ended up learning is oh, the culture
Speaker 2: at Schwab and the way they do things. This isn't
Speaker 2: just hey, leave your money with us. We'll send you
Speaker 2: a statement every quarter and that was it. It's a
Speaker 2: very different relationship. And to Chuck's credit, you guys created
Speaker 2: something that did not exist amongst most custodians beforehand. Am
Speaker 2: I over now?
Speaker 1: No, no, not at all. And we are you know,
Speaker 1: by far the largest in terms of not just custodying
Speaker 1: assets for the RAA community, but representing that partnership in
Speaker 1: everything from research and trading and succession planning. It is.
Speaker 1: It's an important part of our business for sure.
Speaker 2: Let's talk a little bit about the markets and the
Speaker 2: economy today, starting with all right, we're at all time
Speaker 2: highs and the Nasdaq where at all time highs in
Speaker 2: the s and P five hundred. I've heard a bunch
Speaker 2: of people on TV come out and say, oh, you know,
Speaker 2: this makes me nervous. What does the data say about
Speaker 2: what all time highs in broad indexes mean for the
Speaker 2: next couple of quarters.
Speaker 1: Well, it starts to years that have a lot of
Speaker 1: momentum do tend to carry through. But there's with any
Speaker 1: data point like that, if you're looking at aggregate data
Speaker 1: or averages, there are always exceptions to those roles. And
Speaker 1: as we already talked about, there's been a lot more
Speaker 1: churn under the surface and when you pick up if
Speaker 1: you're only looking at index level. But to say that
Speaker 1: this has been a unique cycle, both on the market
Speaker 1: side of things and the economy side of things, is
Speaker 1: the ultimate understatement. And I think that to be an
Speaker 1: analyst of the market and one of the nice things
Speaker 1: for me as strategists at SCHWAB is that I get
Speaker 1: to wear the two hats of both market strategists but
Speaker 1: also economist. We don't have a separate chief economist, and
Speaker 1: I like that because I get to marry the views.
Speaker 1: I'm not beholden to somebody else's view on the economy.
Speaker 1: And on that front, the nature of this economic cycle
Speaker 1: helps to explain why we've had so many funky things
Speaker 1: happen in terms of the market cycle, and it's we've
Speaker 1: been using the rolling recessions terminology because that's actually what
Speaker 1: has happened in the early part of the pandemic during
Speaker 1: this stimulus fueled piece of that cycle, that all of
Speaker 1: that stimulus was essentially funneled into the goods side of
Speaker 1: the economy because we had no access to services. That
Speaker 1: was the breeding ground of the inflation problem with which
Speaker 1: we're still dealing. But we subsequently went into recession like
Speaker 1: conditions for many of those goods oriented categories like manufacturing
Speaker 1: and housing. Housing related a lot of consumer oriented products
Speaker 1: and goods that were big beneficiaries of the lockdown phase.
Speaker 1: And we've gone from hyperinflation to disinflation to some deflation
Speaker 1: based on certain categories of goods. But of course we've
Speaker 1: had the later pickup and off setting strength on the
Speaker 1: services side, and you've seen that roll through in terms
Speaker 1: of market behavior too, And it just makes this backdrop
Speaker 1: kind of an apple compared to history's oranges, and I
Speaker 1: think we have to be mindful of that when trying
Speaker 1: to gage where we are in the market cycle, where
Speaker 1: we are in the economic cycle. It's just a very
Speaker 1: unique period.
Speaker 2: Any other historical parallels that come up, I personally hate
Speaker 2: the nineteen seventies parallel, because you certainly know the employment picture,
Speaker 2: the inflation picture, the geopolitics, everything was just so much
Speaker 2: worse than what we're dealing with.
Speaker 1: It a very very different backdrop relative to the nineteen seventies.
Speaker 1: I guess the only comparison that we're witnessing right now
Speaker 1: is the desire on the part of the Fed and
Speaker 1: maybe Powell in particular, to not repeat the mistakes of
Speaker 1: the nineteen seventies in terms of monetary policy premature, you know,
Speaker 1: hanging of the victory banner, easing policy, only to see
Speaker 1: inflation sort of its head again. So I think that
Speaker 1: is maybe one similarity in terms of what the playbook
Speaker 1: is for the FED. But I totally agree with you
Speaker 1: that the nature of what was driving inflation, the backdrop
Speaker 1: in terms of geopolitics and demographics and labor versus capital
Speaker 1: is not a mirror of what we're experiencing right now.
Speaker 1: But I think the FED took some lessons from the
Speaker 1: mistakes back in that.
Speaker 2: Era if you're looking for parallels, and I think you're right,
Speaker 2: this is totally unique, but the immediate period after war
Speaker 2: war is kind of similar. You have all these gis
Speaker 2: returning and all this pent up. Hey, we couldn't do
Speaker 2: all these things, and a spike in inflation that came down,
Speaker 2: unemployment collapse because you had all these people coming back
Speaker 2: to work.
Speaker 1: It's not perfect, no, but I think you're right. It
Speaker 1: was a military war, not a health war, which was
Speaker 1: the case this time, but had some of those same
Speaker 1: characteristics in terms of supply demand imbalances and the drivers
Speaker 1: of inflation. Obviously, there are plenty of differences, not least
Speaker 1: being what happened on the other side of it, with
Speaker 1: which you know, massive amount of military personnel coming back
Speaker 1: into the private sector and into the civilian workforce, and
Speaker 1: the rebuilding of the global infrastructure. That is one era
Speaker 1: that I have used often as a reference point, with
Speaker 1: that differential being military war versus health war.
Speaker 2: So let's talk about some of the other differentials because
Speaker 2: I think they're informative. Not only did we bring a
Speaker 2: lot of technological usage forward or things that existed. Look,
Speaker 2: we've had FaceTime for fifteen years. It's not like it's new,
Speaker 2: and screen shares and other things like that, but they
Speaker 2: just became more widely adopted.
Speaker 1: It was forced adoption because we have no choice. We
Speaker 1: had no choice.
Speaker 2: But today we have office buildings that are not running
Speaker 2: full documency. Return to office has been you know, we're
Speaker 2: sixty percent seventy percent back. You have a lot of
Speaker 2: hybrid work, you have a lot of people working from home.
Speaker 2: How does this affect how you perceive the economy? What
Speaker 2: does this mean for things like hey, commercial or residential
Speaker 2: real estate investment?
Speaker 1: Yes, so commercial real estate tends to get thought of
Speaker 1: too monolithically. Commercial real estate is a very broad category, obviously,
Speaker 1: and it's inclusive of not just the world of offices,
Speaker 1: but you know, multi family residential and warehousing and retail
Speaker 1: and healthcare facilities, et cetera. So we can't paint commercial
Speaker 1: real estate with one broad brush or segments within SIRI
Speaker 1: that are quite healthy versus say office, and even withinn office,
Speaker 1: of course, big differentials in terms of urban versus suburban.
Speaker 1: Certain regions in the country are doing much better. There's
Speaker 1: the different parts of the country have larger percent that
Speaker 1: have gone back into that more typical office structure. And
Speaker 1: then of course the exposure to commercial real estate, which
Speaker 1: is yes down into the smaller regional banks, many of
Speaker 1: the same banks that suffered the most from last year's
Speaker 1: mini banking crisis. But even there there's you know, a
Speaker 1: vast array in terms of maturity schedules and what type
Speaker 1: of commercial real estates exposure. On our podcast, one of
Speaker 1: the recent guests that we had on that I interviewed
Speaker 1: as actually a friend of mine, Al Rabel, who is
Speaker 1: the founder and CEO of kan Anderson, a big, huge
Speaker 1: private equity private real estate company, and although they're specifically
Speaker 1: more involved in student housing and senior housing, he's an
Speaker 1: expert more broadly, and I asked him at the outset
Speaker 1: of the interview, I said, let me ask you an expert,
Speaker 1: and I'm not an expert, a question about how I've
Speaker 1: been terming it, how I've been describing it and feel
Speaker 1: free to tell me you're dead wrong, Lezanne. I think
Speaker 1: it's this is not a Lemanesque kind of problem. It's
Speaker 1: more of a slow moving trade wreck or a simmering
Speaker 1: problem over time. And fortunately for me, he said, yes,
Speaker 1: that's I think an app to descriptive. That doesn't mean
Speaker 1: the problems aren't still ahead of us, but it's over
Speaker 1: a more graduated period of time, and with some of
Speaker 1: the carnage will come opportunities. And that was maybe a
Speaker 1: more interesting part of the conversation is some of the
Speaker 1: sort of distressed firms looking at this as an eventual
Speaker 1: opportunity to come in and acquire some of these properties,
Speaker 1: you know, significant discounts. So with carnage comes opportunity.
Speaker 2: I'm glad you brought up private equity because during the
Speaker 2: era of zero interest rates, when you couldn't really find
Speaker 2: any sort of yield in the public markets, private equity,
Speaker 2: private debt venture right, pretty good numbers. Seven eight nine
Speaker 2: percent yield versus two three percent. Now that the risk
Speaker 2: free rate is in the threes or fours, and muni
Speaker 2: bonds are giving you the tax equivalent of, depending on
Speaker 2: the state, six seven eight percent yield, how do you
Speaker 2: think about private equity.
Speaker 1: Yeah, it's not my area. So I'm going to answer
Speaker 1: the question by tying it back to something that is
Speaker 1: I spend more time thinking about. To the point you
Speaker 1: made in the early part of asking that question was
Speaker 1: what was a shift in the zero interest rate environment
Speaker 1: by many investors that were looking for anything resembling a
Speaker 1: decent yield, and it forced them just out the risk spectrum,
Speaker 1: whether it was two riskier segments of the fixed income market,
Speaker 1: or into the publicly traded equity markets, or to your point,
Speaker 1: into the private markets, be a private equity or venture.
Speaker 1: And for many of investors, they weren't really comfortable with
Speaker 1: that kind of risk. And it's not just the risk,
Speaker 1: but for many investors it's the transparency and liquidity that
Speaker 1: they had to give up. Now we have an environment
Speaker 1: wherein essentially hold to maturity risk free treasuries and things
Speaker 1: like you know, money market funds, A lot of money
Speaker 1: has has gone back in that direction. On that note,
Speaker 1: and this is somewhat tangential, but I think it's important.
Speaker 1: Too many people view the six trillion dollars that's sitting
Speaker 1: in money markets as some maybe not imminent, but some
Speaker 1: huge source of funding for the equity.
Speaker 2: Market ysh on the sideline.
Speaker 1: On the sidelines, I think a lot of that money
Speaker 1: is actually probably fairly sticky. It's money that represents the
Speaker 1: cash needs or the liquidity side of acid allocation and
Speaker 1: isn't sitting there just waiting to go into riskier assets,
Speaker 1: be it public equity markets or a private I think
Speaker 1: a lot of that is probably fairly sticky.
Speaker 2: And it migrated to money market funds because of the
Speaker 2: five whatever five point three percent yields after a drought
Speaker 2: of decades of not getting any sort of fields. Hey,
Speaker 2: I could earn a real rate of return, relatively risk free. Great,
Speaker 2: I'm gonna reduce my risk profile and capture some of this.
Speaker 1: That's a great thing.
Speaker 2: I've never really understood that cash on the sideline. The
Speaker 2: other thing that's related, and you might see it from
Speaker 2: your perch at Schwab. Whenever we people talk about fun flows,
Speaker 2: look at all this money flowing into equity funds or
Speaker 2: flowing out. It seems like it's a year behind what
Speaker 2: the market's doing. The market crashes and then there are
Speaker 2: fun flows out Look at twenty one or twenty three.
Speaker 2: Even as the market is rallying, the funds are flowing
Speaker 2: in the.
Speaker 1: Opposite, performance chasing up and down. That's you know, as
Speaker 1: old as the day is long.
Speaker 2: It's just that simple. It's just performance chasing.
Speaker 1: You know. The other thing about the six trillion dollars
Speaker 1: that's in money market funds is yes, that's an all
Speaker 1: time record in level terms, but relative to total stock
Speaker 1: market capitalization, it's nowhere near a record. So you have
Speaker 1: to be careful. First of all. Number one, I think
Speaker 1: it's a mistake to our point that we just made
Speaker 1: that this is not sort of short term cash on
Speaker 1: the sidelines, that it's just itching to jump over under
Speaker 1: the equity side of things. But even if you make
Speaker 1: that assumption, the firepower has to be put in the
Speaker 1: context of share of market capitalization, and there it's nowhere
Speaker 1: near a record high.
Speaker 2: That's really interesting. So we've talked a little bit about
Speaker 2: the FED. We haven't really delved into too much about inflation.
Speaker 2: You hinted at it before, and CPI peaked in June
Speaker 2: twenty twenty two. How do you look at where we
Speaker 2: are today in the first quarter of twenty four and
Speaker 2: what does that mean for people's ports.
Speaker 1: So we think the disinflation trend is still largely intact,
Speaker 1: but it doesn't mean it is linear and we'll quickly
Speaker 1: get down to the FEDS two percent target. Obviously, there's
Speaker 1: a lot of components within inflation metrics, not to mention
Speaker 1: lots of ways of measuring inflation. And we can talk
Speaker 1: about the FED Preferred measure of PCE, and then there's
Speaker 1: core PCE or supercore supercore, you know, X shelter, and
Speaker 1: there's the differentials in terms of how things like the
Speaker 1: shelter components are measured and calculated and what share they
Speaker 1: represent of metrics like CPI versus PCE. I'd say one
Speaker 1: of the more important things that has happened this year
Speaker 1: is number one, Powell and other members of the FED
Speaker 1: have emphasized more the rates of change, the three month
Speaker 1: rate of change, the six month rate of change, and
Speaker 1: then specifically in the sixty minute interview that Powell did
Speaker 1: following the January FOMC meeting, he started talking more about
Speaker 1: the twelve month right change. I think that that was
Speaker 1: a way to almost quantify the notion that they want
Speaker 1: to make sure that if in one inflation comes down
Speaker 1: to or near the target, that there's sustainability to that
Speaker 1: that it's not just sort of a quick shot down
Speaker 1: and they fear the risk of it moving back up again.
Speaker 1: In terms of what's happened very recently is that not
Speaker 1: only did we have the hotter than expected January CPI report,
Speaker 1: for both CPI and PCE, the three month rate of
Speaker 1: change has turned back up, the six month rate of
Speaker 1: change has turned backed up. The twelve month hasn't yet.
Speaker 1: But based on how these things work, if three month
Speaker 1: is moving up, six month is moving up, twelve month
Speaker 1: is probably going to start moving up. And that's part
Speaker 1: and parcel of why the shift has occurred from a
Speaker 1: March start to then it was a May start. Maybe
Speaker 1: it's not until June, and you've really condensed the expectation
Speaker 1: around the number of rate HIGs. Not to mention that
Speaker 1: there are a few strategists out there more recently that
Speaker 1: are saying maybe they don't cut it all this year.
Speaker 1: I think the market definitely was way over at SKIS
Speaker 1: earlier in the year when it expected not just a
Speaker 1: March start, but six rate cuts. There was just nothing
Speaker 1: in the data that the Fed is supposed to be
Speaker 1: monitoring on either side of their dual mandate that suggested
Speaker 1: such an aggressive pivot and I would also say to
Speaker 1: a lot of investors. I was saying at the time,
Speaker 1: be careful what you wish for. If you think after
Speaker 1: the most aggressive tightening cycle in forty years that in
Speaker 1: short order they're going to pivot to an aggressive rate
Speaker 1: cutting cycle, the background conditions supporting that are probably not
Speaker 1: what you would want to see, either as an economic
Speaker 1: participant or as a market participant.
Speaker 2: So you wear an economics hat. I have this discussion
Speaker 2: all the time with people. Someone said, imagine how great
Speaker 2: the economy would be if oil was thirty dollars a barrel,
Speaker 2: And I said, hey, if you want thirty dollars barrel oil,
Speaker 2: you need a really deep recession. Yeah, global, it doesn't
Speaker 2: happen out of context the idea of careful what you
Speaker 2: wish for, you want six rate cuts. That means the
Speaker 2: economy is recession, is having a hard time. So since
Speaker 2: since we have you wearing the economists hat, where's my recession?
Speaker 2: I was promised.
Speaker 1: Recesses, so we had the rolling recessions, but I.
Speaker 2: Was promised a full recession in twenty two and then
Speaker 2: twenty three, and not only did we not have recession,
Speaker 2: unemployment fell to the mid threes. GDP is robust. When
Speaker 2: you look around the world, this isn't all right. Everybody
Speaker 2: is with the cleanest shirt in the hamper. It's not
Speaker 2: that we have a robust growth economy and the rest
Speaker 2: of the world that doesn't seem to be.
Speaker 1: So here's what happened. It's in the context of this
Speaker 1: whole notion of the roll through when we had the
Speaker 1: individual sectoral recessions in manufacturing and housing and housing related
Speaker 1: and a lot of consumer and products, and it did
Speaker 1: end up with negative GDP for the first six months
Speaker 1: of twenty twenty two. The reason why.
Speaker 2: Negative not a real basis On a nominal basis, it was.
Speaker 1: It wasn't but you had and not that back to
Speaker 1: back negative GDP quarters is the definition of a recession.
Speaker 1: It's not. It never has been the definition of a recession.
Speaker 2: Thank you for saying that.
Speaker 1: When people say, well, the traditional or the typical, it's not.
Speaker 1: The NBER has been the official arbiters of recession since
Speaker 1: the mid nineteen seventies, and two quarters in a row
Speaker 1: of negative GDP has never been the definition. The key
Speaker 1: line perhaps within that much more comprehensive definition that the
Speaker 1: NBER uses, that helps to explain why six months of
Speaker 1: negative GDP ultimately wasn't declarative recession. Again, not because it
Speaker 1: was two quarters in a row. But the key part
Speaker 1: of the NBER's definition is spread across the economy. The
Speaker 1: weakness that led to the first half of twenty twenty
Speaker 1: two having no real growth in the economy was concentrated.
Speaker 1: It was concentrated on the good side of the economy.
Speaker 1: Manufacturing we had the offsetting strength, and services service is
Speaker 1: a larger employer by far, helping to explain the resilience
Speaker 1: in the labor market. The services components of inflation are
Speaker 1: stickier by nature, including the shelter components, helping to explain
Speaker 1: the roll through in inflation. And again it's just another
Speaker 1: example of a unique nature of this cycle. So I
Speaker 1: think when I look forward, I think, okay, So if
Speaker 1: and when services has their day in the clouds and
Speaker 1: we start to see more than just some cracks that
Speaker 1: we've started to see, like an ism services employment component.
Speaker 1: Going back into contraction territory, what you may get is
Speaker 1: you have a roll through of recoveries in areas or
Speaker 1: at least stabilization that have already taken their hits. A
Speaker 1: lot of people have you no landing as best case scenario,
Speaker 1: there's going to be a landing, you know, at some
Speaker 1: point the plane lands. But I do think a near
Speaker 1: term no landing scenario might also mean a no cutting scenario.
Speaker 1: And then the question, which I don't know that I
Speaker 1: have an answer to, is what exactly has been propelling
Speaker 1: the stock market? Is it the prospect of easier monetary policy?
Speaker 1: Or is it that growth has more than hung in
Speaker 1: there and that translates to better top line growth that
Speaker 1: are bottom line growth. Maybe a little bit of both,
Speaker 1: but it's hard to sort of isolate one or the
Speaker 1: other is the key driver.
Speaker 2: I'm so glad you brought that up, because anytime I'm
Speaker 2: at a dinner party, i'm out a barbecue, I'm somewhere,
Speaker 2: and the dominant narrative is thrown at me. So what
Speaker 2: happens to the markets if the FED doesn't cut sooner
Speaker 2: or later? And my answer is always, why do you
Speaker 2: think that whatever that news headline is is what's driving
Speaker 2: the markets? First of all, it is one hundred factors.
Speaker 1: Or a million a million factors, right?
Speaker 2: And second, just because it's on TV or online or
Speaker 2: in the newspapers, doesn't I love that?
Speaker 1: And I, you know, I know it's the job of journalists.
Speaker 1: If I if I'm doing an interview on the phone
Speaker 1: with a print reporter, if I'm going on a TV program,
Speaker 1: and especially if questions are concentrated around what the market
Speaker 1: is doing you know that particular day, right, and the
Speaker 1: question is always some form of you know, what drove
Speaker 1: the market today or what turned the market at you know, midday,
Speaker 1: as if the market is sort of this inanimate thing
Speaker 1: that just sits around waiting for one particular news headline,
Speaker 1: And on any given day, any given week, if you
Speaker 1: just change the sign on what the market was doing,
Speaker 1: I could come up with plenty of things to point
Speaker 1: to to say, this is why the market boomed today,
Speaker 1: or this is why the market went down.
Speaker 2: It is kind of silly, but no one likes the answer.
Speaker 2: How do I know?
Speaker 1: Right?
Speaker 2: People are not satisfied.
Speaker 1: I try more often than not to answer questions, especially
Speaker 1: that are about sort of what's the market going to
Speaker 1: do with I have no idea? And then sometimes I
Speaker 1: pause for a fact that, well, that's the truth. I
Speaker 1: assume you're going to have follow up questions for me,
Speaker 1: and that's not what the listeners of the viewers want
Speaker 1: to hear. I don't know, But anyone answering that question,
Speaker 1: that's the honest answer.
Speaker 2: Undred percent, And people don't realize that makes the matters worse.
Speaker 2: The journalist writes up the story, someone else writes the headline,
Speaker 2: and they're looking for the clickiest, most slations thing to
Speaker 2: pull out. How many times have you read a story
Speaker 2: where you read the headline.
Speaker 1: And the story is, what's we're going to do with it?
Speaker 2: Right? It's really true. I don't know is probably the
Speaker 2: most underused phrase on Wall Street, and it really should
Speaker 2: be because you know, first of all, it's great when
Speaker 2: you're doing on live TV you get a question, so
Speaker 2: where's the marketing to be in a year? How am
Speaker 2: I supposed to know? Nobody knows?
Speaker 1: It's and again, like nineteen eighty seven's example, even if
Speaker 1: you nailed nineteen eighty seven and said flat, the market's
Speaker 1: not going to do anything, No one's going to be, Oh,
Speaker 1: yes it is. The market is going to do a lot.
Speaker 1: It's right, it's not going to end the year with
Speaker 1: much to show for it.
Speaker 2: That's really funny. So, given everything we've said about the markets,
Speaker 2: the duck paddling underneath, what's going on below the surface,
Speaker 2: how should investors think about forward expectations, what should they
Speaker 2: think about, Hey, you know we've been seeing the twenty
Speaker 2: tens the market. What do we averaged thirteen fourteen percent
Speaker 2: a year, even with some bad quarters in that the
Speaker 2: rest of twenty twenty was amazing, twenty one was huge,
Speaker 2: twenty three was huge. Here we are starting out twenty
Speaker 2: four strong. At what point should investors begin to moderate
Speaker 2: return expectations.
Speaker 1: The discipline of rebalancing keeps you in gear in perpetuity
Speaker 1: without having to figure out, Okay, is this the moment
Speaker 1: I want to lessen risk on my portfolio or take
Speaker 1: more risk in my portfolio? But I think the two
Speaker 1: key risks right now have more to do with called
Speaker 1: the internals of the market than anything out there that
Speaker 1: we're observing as risk. Obviously, you know, geopolitics and the
Speaker 1: election and black Swan risks are always the potential. But
Speaker 1: I think sentiment and valuation now the one important caveat
Speaker 1: around saying sentiment and valuation are a risk in this case,
Speaker 1: meaning sentiment's scotten pretty frothy both attitudinal measures and behavioral measures,
Speaker 1: and valuation is fairly stretched. Is the important caveat is
Speaker 1: neither even at extremes represents anything resembling market timing tool.
Speaker 1: As we all learned in the nineteen nineties, valuation can
Speaker 1: get stress and sentiment can get stretched, and that can
Speaker 1: last for years. What it does is set up maybe
Speaker 1: a risk factor to the extent there's a negative catalyst
Speaker 1: when you sort of have everyone on one side of
Speaker 1: the boat and your priced for perfection. But again, that
Speaker 1: environment can last. But I would certainly put both of
Speaker 1: those in the risk column. In terms of what could
Speaker 1: the potential negative catalyst be that could cause a contrarian
Speaker 1: move relative to optimistic sentiment, well, we've already talked about
Speaker 1: a lot of them. It could be something outsized in
Speaker 1: terms of inflation or the Fed policy. You know, reaction function,
Speaker 1: geopolitics is ever present. Given that twenty twenty three was
Speaker 1: a very low volatility year, you've got the likelihood of
Speaker 1: mean reversion, and you throw the election into the mix
Speaker 1: as a potential volatility driver. I don't think that's a stretch. Otherwise,
Speaker 1: I think you stay up in quality within the equity
Speaker 1: portion of the portfolio. I think factor based investing makes
Speaker 1: a lot more sense than monolithic groups of stocks or
Speaker 1: even maybe at the sector level investing based on characteristics
Speaker 1: and looking for quality companies with strong balance sheets and
Speaker 1: ample interest coverage and strong free cash flow and positive
Speaker 1: earnings trends and revisions, and apply that analysis across the
Speaker 1: spectrum of sectors and even cap ranges.
Speaker 2: Really informative and insightful. Let's jump to our speed round
Speaker 2: our favorite questions that we ask all of our guests,
Speaker 2: starting with tell us what's entertaining you? What are you
Speaker 2: watching or listening or streaming these days?
Speaker 1: So I don't read a lot of books. Every once
Speaker 1: in a while i'll listen to them, but I'm a
Speaker 1: big podcast listener. Aside from our own and yours, I've
Speaker 1: always been a fan of mass.
Speaker 2: I always tell people you don't have to mention.
Speaker 1: No, no, I've been a regular listener of Masters in
Speaker 1: Business in podcast form and listening to you on the
Speaker 1: on the radio. So even in the beginning, I'm a
Speaker 1: longtime fan. Now well, because I was a guest sort
Speaker 1: of in the beginning, you.
Speaker 2: Weren't sort of. You were one of the early guests.
Speaker 2: When I couldn't get anyone on, I worked my way
Speaker 2: through my personal phone book.
Speaker 1: And then when you couldn't get anybody on, you got
Speaker 1: me on.
Speaker 2: Yeah, no, no, seriously, the general response to requests was no.
Speaker 2: When I asked somebody I knew personally, I don't mean
Speaker 2: you weren't anybody when I asked someone I knew. All Right,
Speaker 2: I'll do you a favor, because really, nobody's paying attention
Speaker 2: to this. That was then now it's ten millions.
Speaker 1: But I am, but I am. I am a fan.
Speaker 1: Grant Williams has a few podcasts and he always has
Speaker 1: really fascinating guests.
Speaker 2: On very eclectic Mix, very eclectic mix.
Speaker 1: But I like that it's often macro focused. And there's
Speaker 1: a number of other podcasts sporadically that I'll listen to
Speaker 1: outside of the world of finance. I'm a big SmartLess fan.
Speaker 2: Oh sure.
Speaker 1: I mean they're just so funny and so lovely and
Speaker 1: brilliant and.
Speaker 2: I think they just saw yourself for an ungodly amount
Speaker 2: of money to them. Yeah.
Speaker 1: Yeah's and then streaming. I guess the one that I'm
Speaker 1: in the midst of now is Feud Capodi versus the Swans. Really, yes,
Speaker 1: so it's it's not a documentary, but it's you know,
Speaker 1: based on true stories, but with great actors playing parts,
Speaker 1: and it's multi episode and so that's that's a good
Speaker 1: one that I'm into right now.
Speaker 2: So I kind of know the answer to this question,
Speaker 2: but I want to ask in any way for anyone
Speaker 2: listening this deep into the podcast, tell us about your
Speaker 2: early mentors who shaped your career.
Speaker 1: So Marty's why clearly obviously LUCIERU Kaiser in terms of
Speaker 1: my entree into the world of television and learning what
Speaker 1: matters and what doesn't matter. And I got it, Chuck Schwab.
Speaker 2: I know you said you're you're too busy reading research
Speaker 2: reports to read a lot of books in addition to
Speaker 2: Winning on Wall Street by Marty's why, any other books
Speaker 2: you would recommend to someone?
Speaker 1: And yes, So one of the best books I ever
Speaker 1: got about investing was given to be my Marty when
Speaker 1: I started the business in nineteen eighty six. And it's
Speaker 1: a little book. It's paperback. A lot of people have
Speaker 1: probably heard of it, but Reminiscences of a stock Court.
Speaker 1: It's just so fabulous and I also like and it's
Speaker 1: similar in its sort of size and structure with paperback.
Speaker 1: Where are the customer's yachts?
Speaker 2: Uh huh?
Speaker 1: So those are my two. And then you know Winning
Speaker 1: on Wall Street. You know I gotta plug Marty's book
Speaker 1: and that still resonates even today right now at times
Speaker 1: I'm listening to a book and I'll listen to, you know,
Speaker 1: fifteen minutes at a time, and then not listen to
Speaker 1: it for months and months. Is by Nathaniel Philbrick, and
Speaker 1: it's just the history of Nantucket, where OHI is my place.
Speaker 1: I spent parts of the summer and about the era
Speaker 1: from the sixteen hundreds into the seventeen hundreds when it
Speaker 1: was the whaling capital of the world. And so that's it.
Speaker 2: I'm going to share a book with you only because
Speaker 2: you are now in Naples. I just finished reading Bubble
Speaker 2: in the Sun, the History of Florida real Estate Booms
Speaker 2: and Busts, and the theory is the Florida real estate
Speaker 2: boom in the twenties is the biggest migration in US history,
Speaker 2: and it's collapse was one of the factors that led
Speaker 2: to the Great Depression. It's an deeply researched, absolutely fascinating
Speaker 2: All right, good, I think you get add it to
Speaker 2: my list. Two questions. What sort of advice would you
Speaker 2: give to a recent college grad interested in going into
Speaker 2: finance or investment?
Speaker 1: I would say, and This is advice I would give
Speaker 1: to a college grad going really into just about any industry,
Speaker 1: but I think maybe finance a little bit more. Too
Speaker 1: many college grads then coming into finance, it's about, well,
Speaker 1: what did I learn in college? What courses did I take?
Speaker 1: To be early? Honest, it doesn't matter. You're not bringing
Speaker 1: something into the mix that the company doesn't already know.
Speaker 1: So the more broad advice I always give to people
Speaker 1: who are starting out and they're going through the interview processes,
Speaker 1: there always seems to be this strong desire to come
Speaker 1: across as interesting, be interested, focus more on being interested
Speaker 1: than being interesting.
Speaker 2: Huh. Good advice. And our final question, what do you
Speaker 2: know about the world of investing today? You wish you
Speaker 2: knew thirty six years ago when you were first getting started.
Speaker 1: To start early and young.
Speaker 2: Start early and young. The magic of compounding, the.
Speaker 1: Magic of compounding. And even if it means sacrificing a
Speaker 1: little of the pleasures when you're much younger and you're
Speaker 1: trying to divide a very small amount of money into
Speaker 1: you know, fun versus savings versus work, is starting early
Speaker 1: is just so powerful, even if it's just putting it
Speaker 1: in some version of Savings.
Speaker 2: Liz Anne, this has been just absolutely delightful. Thank you
Speaker 2: so much for being so generous with your time and
Speaker 2: allowing me to really improve on our first conversation, which
Speaker 2: in preparation for this I listened to and was just
Speaker 2: utterly mortified.
Speaker 1: Oh I disagree with you, diose to you because I
Speaker 1: didn't listen to the whole thing at your suggestion. I
Speaker 1: listened to the first five or ten minutes, and I
Speaker 1: still remember it like it was yesterday.
Speaker 2: I remember sitting in that darkened room around that round table, you,
Speaker 2: me and Larry literally my first television appearance. I want
Speaker 2: to say that was like three something crazy. So anyway,
Speaker 2: we have been speaking with the delightful Liz and no
Speaker 2: E Saunders, chief investment strategist at Schwab, helping to oversee
Speaker 2: over eight trillion dollars on their platform. If you enjoy
Speaker 2: this conversation well, be sure to check out any of
Speaker 2: our previous five hundred discussions we've had over the past
Speaker 2: ten years. You can find those at iTunes, Spotify, YouTube,
Speaker 2: wherever you find your favorite podcasts. Be sure to check
Speaker 2: out my new podcast at the Money, short ten minute
Speaker 2: Questions and Answers with experts about your money. I'm really
Speaker 2: enjoying doing this podcast to just get to the meet
Speaker 2: of an issue ten minutes. You can find those in
Speaker 2: your master's and business speed. I would be remiss if
Speaker 2: I did not thank the craft team that helps us
Speaker 2: put these conversations together each week. Robert Bragg is my
Speaker 2: audio engineer at tik of Albron is my project manager.
Speaker 2: Anna Luke is my producer. Sean Russo is my researcher.
Speaker 2: I'm Barry Radolts. You've been listening to Masters in Business
Speaker 2: on Bloomberg Radio.