1
00:00:02,520 --> 00:00:11,840
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Masters in

2
00:00:11,920 --> 00:00:15,440
Speaker 1: Business with Barry Ritholts on Bloomberg Radio.

3
00:00:18,239 --> 00:00:21,320
Speaker 2: This week on the podcast strap Yourself in for another

4
00:00:21,360 --> 00:00:25,640
Speaker 2: great one. Liz Anne Sanders, chief investment strategist at Schwab,

5
00:00:26,000 --> 00:00:30,920
Speaker 2: helping to manage eleven trillion dollars in client assets. What

6
00:00:31,040 --> 00:00:34,000
Speaker 2: a fascinating career she's had. She's been on all of

7
00:00:34,040 --> 00:00:38,000
Speaker 2: the best of lists. She's just really insightful. What she

8
00:00:38,400 --> 00:00:42,520
Speaker 2: does is really kind of unique. She combines top down

9
00:00:42,800 --> 00:00:47,280
Speaker 2: market analysis with looking at everything from sentiment to economic

10
00:00:47,360 --> 00:00:51,360
Speaker 2: data to fun flows to really what the clients of

11
00:00:51,440 --> 00:00:57,800
Speaker 2: Schwab are doing. I know Liz for almost twenty five years.

12
00:00:57,840 --> 00:01:00,440
Speaker 2: Every time I speak with her, it's always it's great.

13
00:01:00,840 --> 00:01:05,039
Speaker 2: This is another conversation that is also fabulous. With no

14
00:01:05,160 --> 00:01:09,920
Speaker 2: further ado, my discussion with Liz Anne Sondershwa's.

15
00:01:08,959 --> 00:01:09,520
Speaker 3: Great to see you.

16
00:01:09,640 --> 00:01:11,399
Speaker 2: I know, it's always I always have so much on

17
00:01:11,440 --> 00:01:13,039
Speaker 2: each other for a long time, a long time. It's

18
00:01:13,080 --> 00:01:16,400
Speaker 2: always so much fun chatting with you. I want to

19
00:01:16,440 --> 00:01:18,440
Speaker 2: talk about what you're doing with the podcast and what

20
00:01:18,440 --> 00:01:21,600
Speaker 2: you're doing at SCHWAB, but I have to start with

21
00:01:21,680 --> 00:01:25,880
Speaker 2: a little bit of your background undergraduate economics and polisci

22
00:01:26,200 --> 00:01:31,200
Speaker 2: at Delaware MBA and finance from Fordham which at the

23
00:01:31,240 --> 00:01:33,680
Speaker 2: time you went there, was it called Gabell. No, it's

24
00:01:33,800 --> 00:01:38,199
Speaker 2: now called Gabelli School of Was the career plan always

25
00:01:38,240 --> 00:01:39,319
Speaker 2: Wall Street? No?

26
00:01:40,480 --> 00:01:45,319
Speaker 3: I honestly, I think if you brought me back to

27
00:01:45,400 --> 00:01:49,120
Speaker 3: my college days and asked what is your career plan,

28
00:01:49,480 --> 00:01:51,120
Speaker 3: if I was honest, I probably would have said not

29
00:01:51,240 --> 00:01:54,640
Speaker 3: quite sure. Yet. The decision to do a double major

30
00:01:54,720 --> 00:01:59,000
Speaker 3: there was to keep it very open and broad. All

31
00:01:59,040 --> 00:02:00,560
Speaker 3: I knew was that I want to live and work

32
00:02:00,600 --> 00:02:04,120
Speaker 3: in New York City. So got out of undergrad pounded

33
00:02:04,160 --> 00:02:07,960
Speaker 3: the pavement in New York, but across a spectrum of industries,

34
00:02:08,000 --> 00:02:11,160
Speaker 3: not all Wall Street. I interviewed at a sports marketing

35
00:02:11,800 --> 00:02:17,760
Speaker 3: firm and an ad agency, and I had two interviews

36
00:02:17,800 --> 00:02:20,880
Speaker 3: in a row at Zwig Avatar. Did a lot of

37
00:02:20,919 --> 00:02:22,840
Speaker 3: research on the company, which, by the way, this was

38
00:02:22,840 --> 00:02:25,720
Speaker 3: in nineteen eighty six, So doing research on a company

39
00:02:25,760 --> 00:02:29,320
Speaker 3: meant going to the library, pulling up a microfiche machine,

40
00:02:29,360 --> 00:02:33,120
Speaker 3: actually cranking the handle, and look at newspaper clippings, and

41
00:02:33,840 --> 00:02:39,480
Speaker 3: was fascinated by Marty Swig, the co founder, and enjoyed

42
00:02:39,480 --> 00:02:43,040
Speaker 3: the interview process like the people with whom I met,

43
00:02:43,200 --> 00:02:46,080
Speaker 3: and I don't know. A little voice just said, this

44
00:02:46,240 --> 00:02:47,480
Speaker 3: seems to make sense.

45
00:02:47,520 --> 00:02:51,440
Speaker 2: And I recall reading a book Marty's Wyg wrote, I

46
00:02:51,480 --> 00:02:53,320
Speaker 2: want to say in the late nineties when I was

47
00:02:53,360 --> 00:02:58,280
Speaker 2: on a trading desk winning on walls, late eighties, late eighties. Well, yes,

48
00:02:58,480 --> 00:03:01,560
Speaker 2: I got his book when I started around the time

49
00:03:01,600 --> 00:03:02,960
Speaker 2: of the Netscape IPO.

50
00:03:03,400 --> 00:03:08,480
Speaker 3: He did, you know, newer versions? He did updated versions.

51
00:03:08,720 --> 00:03:11,359
Speaker 2: So whatever that version was in ninety six ninety seven,

52
00:03:11,520 --> 00:03:15,200
Speaker 2: And I vividly recall that, how did you how did

53
00:03:15,200 --> 00:03:17,160
Speaker 2: you get the gig with Marty's Wyg? What was that

54
00:03:17,320 --> 00:03:18,440
Speaker 2: like it?

55
00:03:19,080 --> 00:03:22,000
Speaker 3: I was a grunt at the outset. I did whatever

56
00:03:22,040 --> 00:03:26,160
Speaker 3: they needed me to do. But they were a firm

57
00:03:26,240 --> 00:03:31,320
Speaker 3: that believed in promoting from within and educating their young people,

58
00:03:31,960 --> 00:03:35,880
Speaker 3: so I saw that as an opportunity. They paid for

59
00:03:36,360 --> 00:03:40,600
Speaker 3: grad school one hundred percent, so I made the easy

60
00:03:40,760 --> 00:03:45,400
Speaker 3: financial decision to do that at night while still learning

61
00:03:45,400 --> 00:03:50,560
Speaker 3: a living and having my education paid for. And so

62
00:03:50,600 --> 00:03:52,840
Speaker 3: many things that I learned from Marty, I could consider

63
00:03:52,920 --> 00:03:56,360
Speaker 3: him the first mentor, whether he realized it or not.

64
00:03:57,040 --> 00:04:01,440
Speaker 2: People, by the way, people don't realize specially the generation

65
00:04:01,560 --> 00:04:04,560
Speaker 2: that came of age in two thousand. What a legend.

66
00:04:04,920 --> 00:04:06,559
Speaker 3: He was unbelievable.

67
00:04:06,720 --> 00:04:08,800
Speaker 2: I think at one point in time he owned the

68
00:04:09,360 --> 00:04:12,520
Speaker 2: most expensive apartment in the United States. Is that true?

69
00:04:13,360 --> 00:04:17,320
Speaker 3: Yes, it was the top three floors of the Pierre,

70
00:04:17,600 --> 00:04:21,320
Speaker 3: which is now owned by the Commerce Secretary.

71
00:04:21,680 --> 00:04:25,440
Speaker 2: H that's amazing. And he was always the answer to Hey,

72
00:04:25,480 --> 00:04:28,080
Speaker 2: do any of these technicians make any money? And the

73
00:04:28,120 --> 00:04:30,760
Speaker 2: answer is yeah, I'm looking at Marty's wife. I mean,

74
00:04:30,920 --> 00:04:34,120
Speaker 2: for the younger folks, go look up Marty's wig. He

75
00:04:34,240 --> 00:04:37,440
Speaker 2: was absolutely a legend. I remember him from my early

76
00:04:37,560 --> 00:04:39,279
Speaker 2: days because he was on Rukeser.

77
00:04:39,480 --> 00:04:42,159
Speaker 3: He was one of the originals on the original Wall

78
00:04:42,200 --> 00:04:43,120
Speaker 3: Street week YEP.

79
00:04:43,279 --> 00:04:45,640
Speaker 2: I mean back in the day when all of financial

80
00:04:45,680 --> 00:04:47,719
Speaker 2: media was an hour that was television a week.

81
00:04:47,680 --> 00:04:49,599
Speaker 3: And even it was a half hour. That's eight thirty

82
00:04:49,640 --> 00:04:54,839
Speaker 3: pm Friday nights on PBS produced by Maryland Public Television.

83
00:04:55,320 --> 00:04:57,800
Speaker 3: And Marty was not only one of the original panelists,

84
00:04:57,800 --> 00:05:01,520
Speaker 3: he was I think the original elf, as Lou used

85
00:05:01,560 --> 00:05:03,120
Speaker 3: to describe them.

86
00:05:03,240 --> 00:05:04,360
Speaker 2: The people came back.

87
00:05:04,560 --> 00:05:08,720
Speaker 3: And that's another thing that intrigued me about joining the firm.

88
00:05:08,960 --> 00:05:11,320
Speaker 3: Is I remember getting a little bit of a kind

89
00:05:11,360 --> 00:05:15,240
Speaker 3: of a wink wink, nod nod from an economics professor

90
00:05:15,440 --> 00:05:17,920
Speaker 3: that I had not just to me, but to the class.

91
00:05:18,720 --> 00:05:22,680
Speaker 3: And he made a funny comment about given that one

92
00:05:22,720 --> 00:05:26,800
Speaker 3: of the jobs that we had as students was to

93
00:05:26,839 --> 00:05:28,880
Speaker 3: read the Wall Street Journal every day and just keep

94
00:05:28,960 --> 00:05:31,919
Speaker 3: up on markets and the economy, and that if you

95
00:05:32,400 --> 00:05:36,120
Speaker 3: had too many late nights at the Stone Balloon, you

96
00:05:36,279 --> 00:05:40,039
Speaker 3: might want to just get a really brilliant thirty minute

97
00:05:40,080 --> 00:05:43,440
Speaker 3: recap by watching Wall Street Week on Friday night before

98
00:05:43,440 --> 00:05:45,240
Speaker 3: you then go out. So I thought, all right, I'll

99
00:05:45,240 --> 00:05:47,400
Speaker 3: see what this Wall Street Week is all about, and

100
00:05:47,480 --> 00:05:50,640
Speaker 3: so I started watching it before I joined the business,

101
00:05:51,040 --> 00:05:56,080
Speaker 3: before I started at at zyg Avatar, and then I

102
00:05:56,240 --> 00:05:59,960
Speaker 3: joined the show in nineteen ninety seven, which was surreal.

103
00:06:00,320 --> 00:06:03,160
Speaker 2: So you were not that far out of school when

104
00:06:03,200 --> 00:06:03,839
Speaker 2: you start.

105
00:06:03,680 --> 00:06:07,279
Speaker 3: Well, I was. It was eleven years so since you

106
00:06:07,320 --> 00:06:11,279
Speaker 3: and I have talked about our first experience together, which

107
00:06:11,360 --> 00:06:17,080
Speaker 3: was on TV TV appearance and I went on the

108
00:06:17,120 --> 00:06:22,080
Speaker 3: show as a special guest. So I remember getting the little,

109
00:06:22,360 --> 00:06:25,880
Speaker 3: you know, pink slip from the receptionist that told you

110
00:06:25,920 --> 00:06:28,680
Speaker 3: who had called. There was voicemail at that time.

111
00:06:28,760 --> 00:06:29,560
Speaker 2: It said Lewis R.

112
00:06:30,680 --> 00:06:32,880
Speaker 3: Rich de Brof the producer of Wall Street Week called,

113
00:06:32,880 --> 00:06:34,240
Speaker 3: They'd like you to come on as a guest, and

114
00:06:34,279 --> 00:06:35,919
Speaker 3: I thought it was somebody playing a prank on me.

115
00:06:36,480 --> 00:06:40,320
Speaker 3: Really yeah, until I called and it was legit and

116
00:06:40,440 --> 00:06:44,119
Speaker 3: I went on as a guest, and then shortly after

117
00:06:44,160 --> 00:06:47,320
Speaker 3: that they asked me to become a regular panelist, and

118
00:06:47,360 --> 00:06:48,000
Speaker 3: it was a thrill.

119
00:06:48,240 --> 00:06:51,080
Speaker 2: So you were Zwag for a number of years. Had

120
00:06:51,120 --> 00:06:52,640
Speaker 2: you end up thirteen.

121
00:06:52,320 --> 00:06:54,440
Speaker 3: Years eighty six to ninety nine?

122
00:06:54,720 --> 00:06:56,920
Speaker 2: How did you end up at US Trust?

123
00:06:57,960 --> 00:07:00,680
Speaker 3: So that was kind of funny. I so I was

124
00:07:00,680 --> 00:07:03,760
Speaker 3: on the Avatar side of the YG Avatar broad set

125
00:07:03,760 --> 00:07:06,440
Speaker 3: of companies, which was the institutional money management side. I

126
00:07:06,480 --> 00:07:10,400
Speaker 3: was a portfolio manager co ran stock selection, but I

127
00:07:10,480 --> 00:07:14,600
Speaker 3: was always much more intrigued by interested in and with

128
00:07:14,720 --> 00:07:17,760
Speaker 3: a desire to spend more of my time doing top

129
00:07:17,840 --> 00:07:24,240
Speaker 3: down macro research as as a bottom I just the

130
00:07:24,600 --> 00:07:28,160
Speaker 3: inner voice said, you don't really love this that much,

131
00:07:28,320 --> 00:07:33,840
Speaker 3: and there wasn't really an opportunity, uh for that. It

132
00:07:33,880 --> 00:07:37,080
Speaker 3: wasn't that I was pigeonholed, but it was a growing

133
00:07:37,160 --> 00:07:40,360
Speaker 3: role as a portfolio manager. So I got recruited over

134
00:07:40,400 --> 00:07:43,679
Speaker 3: to US Trust to co run their large cap growth theory,

135
00:07:43,720 --> 00:07:46,760
Speaker 3: which which put me yet again in that position, but

136
00:07:46,880 --> 00:07:51,280
Speaker 3: felt like the platform was broader and my inclusion on

137
00:07:51,320 --> 00:07:55,040
Speaker 3: the Investment Policy Committee. They actually purposely wanted some top

138
00:07:55,080 --> 00:07:59,400
Speaker 3: down analysis based on my learnings for working.

139
00:07:58,800 --> 00:08:02,200
Speaker 2: Growth means here's a universe, it's it's one hundred of

140
00:08:02,240 --> 00:08:03,200
Speaker 2: the S and P five.

141
00:08:03,360 --> 00:08:07,800
Speaker 3: And we were a concentrated manager only owning now less

142
00:08:07,840 --> 00:08:10,920
Speaker 3: than twenty five typically with a four to five year

143
00:08:11,000 --> 00:08:12,000
Speaker 3: holding period.

144
00:08:11,800 --> 00:08:15,240
Speaker 2: So not a closet index there now high active ship.

145
00:08:15,320 --> 00:08:19,080
Speaker 3: But I also didn't love the pigeonholing aspect of it,

146
00:08:19,160 --> 00:08:23,080
Speaker 3: where you know, the mantra had to be large cap growth.

147
00:08:23,440 --> 00:08:28,200
Speaker 3: I liked thinking bigger picture and thinking about different parts

148
00:08:28,200 --> 00:08:31,559
Speaker 3: of the market cycle and what works. So ten months

149
00:08:31,600 --> 00:08:34,920
Speaker 3: after I joined US Trust, Schwab acquired US Trust.

150
00:08:35,200 --> 00:08:36,120
Speaker 2: That was two thousands.

151
00:08:36,120 --> 00:08:39,720
Speaker 3: That was two thousand, and you've been there since then,

152
00:08:39,920 --> 00:08:43,320
Speaker 3: for it'll be twenty six years at the beginning of

153
00:08:43,400 --> 00:08:50,400
Speaker 3: next year. And when I realized I did indeed want

154
00:08:50,440 --> 00:08:53,199
Speaker 3: to be adopted by the new parent company was when

155
00:08:53,880 --> 00:08:57,520
Speaker 3: Chuck Schwab himself came to New York with our CEO

156
00:08:57,600 --> 00:09:01,360
Speaker 3: at the time, Dave Patrick, and sat with me and

157
00:09:01,480 --> 00:09:04,280
Speaker 3: said we would like to create this role of chief

158
00:09:04,320 --> 00:09:07,320
Speaker 3: investment strategist, which didn't exist at Schwab before. This was

159
00:09:07,600 --> 00:09:10,959
Speaker 3: the beginning of our entree into actually giving advice as

160
00:09:10,960 --> 00:09:14,440
Speaker 3: opposed to just being a platform for traders.

161
00:09:14,640 --> 00:09:16,760
Speaker 2: So let's let's dive into that. So I was going

162
00:09:16,840 --> 00:09:19,440
Speaker 2: to ask you what the process was like. But they

163
00:09:19,840 --> 00:09:23,840
Speaker 2: acquired us trust for the assets and for the platform.

164
00:09:24,280 --> 00:09:26,120
Speaker 2: You were a bonus that came along with it.

165
00:09:26,240 --> 00:09:29,959
Speaker 3: Well, well, that's kind of you to say, Well, they

166
00:09:29,960 --> 00:09:33,320
Speaker 3: did offer me the role. It had not existed before.

167
00:09:33,720 --> 00:09:34,440
Speaker 2: That's a big deal.

168
00:09:34,480 --> 00:09:38,400
Speaker 3: And I said yes, please, yeah, absolutely, And the rest

169
00:09:38,520 --> 00:09:40,559
Speaker 3: is twenty six years of history.

170
00:09:40,320 --> 00:09:45,439
Speaker 2: So let's dive into this. What are the let's take

171
00:09:45,480 --> 00:09:49,040
Speaker 2: a look at the numbers on the Schwab platform as

172
00:09:49,040 --> 00:09:52,360
Speaker 2: a custodian or however Schwab is touching for one, Okay,

173
00:09:52,880 --> 00:09:55,319
Speaker 2: how many trillions of dollars are on that platform?

174
00:09:55,440 --> 00:09:57,400
Speaker 3: Eleven point two to three trillion.

175
00:09:57,080 --> 00:09:59,080
Speaker 2: All right, so keep working at it.

176
00:09:59,240 --> 00:10:04,080
Speaker 3: And that is yeah, yet the size of the US economy.

177
00:10:03,760 --> 00:10:10,480
Speaker 2: Wow, that's unbelievable. And at the time, what was Schwab

178
00:10:10,559 --> 00:10:11,520
Speaker 2: in two thousand.

179
00:10:11,360 --> 00:10:13,720
Speaker 3: Oh gosh, you know what, it was less than that?

180
00:10:13,800 --> 00:10:18,480
Speaker 3: Because I remember getting this little plexiglass. Well, no, it

181
00:10:18,559 --> 00:10:22,160
Speaker 3: was a it was a holder for sticky notes, uh huh,

182
00:10:22,200 --> 00:10:24,760
Speaker 3: and it had a star on it and it said,

183
00:10:24,800 --> 00:10:27,320
Speaker 3: you know, one trillion in clin essets. But that was

184
00:10:27,440 --> 00:10:30,600
Speaker 3: after Uh, that'sition of me.

185
00:10:30,800 --> 00:10:36,240
Speaker 2: And so that's an incredible growth. Schwab really is a

186
00:10:36,280 --> 00:10:40,160
Speaker 2: platform that are so many things to so many different people.

187
00:10:40,720 --> 00:10:45,160
Speaker 2: There's an institutional business, there's a business and full disclosure.

188
00:10:45,240 --> 00:10:49,040
Speaker 2: Were custody at our firm, at Schwab, most of our

189
00:10:49,080 --> 00:10:51,800
Speaker 2: assets are there, so you custody for ori I, A

190
00:10:51,920 --> 00:10:57,360
Speaker 2: S and others, self directed investors, individuals who doesn't Schwab

191
00:10:57,520 --> 00:10:59,600
Speaker 2: work with, it's pretty much everybody.

192
00:10:59,120 --> 00:11:04,080
Speaker 3: Well institutions. So the way we define institutional when we

193
00:11:04,120 --> 00:11:06,920
Speaker 3: talk about it and use that term somewhat generically, we're

194
00:11:06,960 --> 00:11:09,840
Speaker 3: actually referring to the part of the business that you're

195
00:11:09,880 --> 00:11:14,240
Speaker 3: involved with. So independent wealth management firms rias that that

196
00:11:14,360 --> 00:11:18,320
Speaker 3: platform with Schwab via the custody of assets, but a

197
00:11:18,360 --> 00:11:20,760
Speaker 3: heck of a lot more than just that. So that's

198
00:11:20,760 --> 00:11:28,400
Speaker 3: how we defined institutional of them totally using rounded numbers here,

199
00:11:28,440 --> 00:11:31,480
Speaker 3: but of the ten of the eleven and a quarter

200
00:11:31,600 --> 00:11:36,160
Speaker 3: trillion is about evenly divided between individual investors on a

201
00:11:36,240 --> 00:11:39,160
Speaker 3: platform self directed and well not always. No, we have

202
00:11:39,280 --> 00:11:42,560
Speaker 3: we have a whole wealth management arm that all feeds

203
00:11:42,600 --> 00:11:46,160
Speaker 3: not just to the individual investor side of what we do,

204
00:11:46,360 --> 00:11:50,800
Speaker 3: but to people in our world, so advisors on our platform.

205
00:11:51,080 --> 00:11:54,240
Speaker 3: So that's about evenly split. And then the remainder is

206
00:11:55,480 --> 00:12:00,880
Speaker 3: workplace services, so stock plans for big companies and for

207
00:12:01,120 --> 00:12:07,040
Speaker 3: one k So it's what we but we were dominated

208
00:12:07,080 --> 00:12:12,360
Speaker 3: by individual investors, even on the quote institutional side, because

209
00:12:12,400 --> 00:12:16,719
Speaker 3: most of the advisors on our platform manage money for individuals.

210
00:12:17,160 --> 00:12:18,920
Speaker 2: That's really so that's really we would.

211
00:12:18,679 --> 00:12:24,439
Speaker 3: Consider the advisor our client, but we're providing a platform

212
00:12:24,480 --> 00:12:27,840
Speaker 3: there for them, you guys, to advise for the most

213
00:12:27,880 --> 00:12:29,080
Speaker 3: part individual investment.

214
00:12:29,120 --> 00:12:31,080
Speaker 2: And I know I've told you the story before, but

215
00:12:31,160 --> 00:12:35,360
Speaker 2: when we launched our WM in twenty thirteen, we launched

216
00:12:35,440 --> 00:12:39,680
Speaker 2: with TD years later acquired by Schwab. Hold that aside,

217
00:12:40,400 --> 00:12:44,360
Speaker 2: and we were very data driven. We ran a lot

218
00:12:44,400 --> 00:12:48,920
Speaker 2: of analytics, and every time we didn't win a prospect,

219
00:12:49,400 --> 00:12:51,360
Speaker 2: when we would go through the list of the reasons,

220
00:12:51,720 --> 00:12:54,880
Speaker 2: the number one reason is, hey, you guys don't custody

221
00:12:54,880 --> 00:12:57,920
Speaker 2: with Schwab and my money is at Schwab and call

222
00:12:58,040 --> 00:13:01,520
Speaker 2: us if you ever decide to true, and finally we

223
00:13:01,600 --> 00:13:03,720
Speaker 2: all looked at each other, Hey, there's no reason not

224
00:13:03,760 --> 00:13:07,120
Speaker 2: to open a second custodian, and so we did, and

225
00:13:07,160 --> 00:13:11,839
Speaker 2: it caused like a flood of new clients and new

226
00:13:11,880 --> 00:13:16,920
Speaker 2: families joining us. Because but the crazy thing is, it's like,

227
00:13:17,520 --> 00:13:22,120
Speaker 2: I have never seen a financial institution with that much

228
00:13:22,160 --> 00:13:25,800
Speaker 2: brand loyalty from the audience, from the clients. Because think

229
00:13:25,840 --> 00:13:28,200
Speaker 2: about it, when you talk to people about Wells Fargo

230
00:13:28,320 --> 00:13:33,880
Speaker 2: or City Bank or any large financial traditional bank. Maybe

231
00:13:33,960 --> 00:13:36,640
Speaker 2: a little bit at JP Morgan Chase, but for the

232
00:13:36,640 --> 00:13:39,520
Speaker 2: most part, no one says, oh, I don't want to

233
00:13:39,520 --> 00:13:42,000
Speaker 2: be with you. You are not affiliated with I'm making

234
00:13:42,080 --> 00:13:44,400
Speaker 2: up stuff Key Bank. But we just heard it so

235
00:13:44,440 --> 00:13:46,439
Speaker 2: many times it's like, all right, they don't have to

236
00:13:46,520 --> 00:13:48,840
Speaker 2: hit me in the head so many times before I

237
00:13:48,920 --> 00:13:49,480
Speaker 2: realized this.

238
00:13:50,720 --> 00:13:53,600
Speaker 3: The power of our reputation is really extraordinary.

239
00:13:53,720 --> 00:13:55,480
Speaker 2: And Schwab dates back.

240
00:13:55,640 --> 00:14:00,160
Speaker 3: You know, about fifty three years years, that's easy, the

241
00:14:00,800 --> 00:14:06,480
Speaker 3: nineteen seventies. And you know, Chuck has has written about

242
00:14:07,160 --> 00:14:11,400
Speaker 3: the history of Schwab and his history. His most recent

243
00:14:11,440 --> 00:14:14,959
Speaker 3: book was called Invested, and it was essentially a memoir

244
00:14:15,320 --> 00:14:17,640
Speaker 3: of his time in this business.

245
00:14:17,720 --> 00:14:20,640
Speaker 2: And when you say Chuck Chuck Schwab himself, Chuck Schwab,

246
00:14:20,760 --> 00:14:23,360
Speaker 2: who people used to think wasn't a real guy. Oh,

247
00:14:23,360 --> 00:14:26,200
Speaker 2: it's a real guy in the commercials is him, is him,

248
00:14:26,280 --> 00:14:28,920
Speaker 2: And he's still up and about. You were telling me

249
00:14:29,000 --> 00:14:31,600
Speaker 2: he was. He's just won a golf tournament at eighty eight.

250
00:14:32,120 --> 00:14:34,520
Speaker 3: Last year he won the nantucka golf club that's a

251
00:14:34,720 --> 00:14:37,680
Speaker 3: member member at eighty seven, and he almost wanted again

252
00:14:37,720 --> 00:14:42,480
Speaker 3: this year at eighty eight. So regularly shoots below his age.

253
00:14:42,920 --> 00:14:48,720
Speaker 3: Still a very active chair of the board. But the

254
00:14:49,160 --> 00:14:53,640
Speaker 3: culture that he has imbued in Schwab is really second

255
00:14:53,720 --> 00:14:57,080
Speaker 3: to none. And you know, our sort of corporate for

256
00:14:57,840 --> 00:15:00,720
Speaker 3: lack of a better word, tagline is through client size,

257
00:15:01,440 --> 00:15:05,400
Speaker 3: and he has fostered this leave, eat and breathe. Everything

258
00:15:05,440 --> 00:15:08,560
Speaker 3: you do has to be from the perspective of clients.

259
00:15:08,640 --> 00:15:11,840
Speaker 2: So you're really the perfect person to ask a question,

260
00:15:12,000 --> 00:15:15,560
Speaker 2: and I'll ask it specifically about Schwab, but it's obviously

261
00:15:15,680 --> 00:15:21,880
Speaker 2: true about the entire industry. You've witnessed a shift from

262
00:15:21,960 --> 00:15:28,040
Speaker 2: a lot of self directed investors over to the advisor

263
00:15:28,160 --> 00:15:31,480
Speaker 2: driven side. What has that process been like at Schwab.

264
00:15:32,520 --> 00:15:34,600
Speaker 2: So we're talking just trillions dollars.

265
00:15:34,680 --> 00:15:40,160
Speaker 3: Not just the advisor side, but investors at Schwab who

266
00:15:41,040 --> 00:15:46,040
Speaker 3: who want guidance, who want advice, whether it's through advisors

267
00:15:46,040 --> 00:15:50,880
Speaker 3: on our platform or directly with us on our private

268
00:15:50,920 --> 00:15:55,000
Speaker 3: client side of the business. And it's just the natural

269
00:15:55,040 --> 00:16:00,080
Speaker 3: evolution of Schwab moving decades ago from a platform and

270
00:16:00,280 --> 00:16:06,200
Speaker 3: for the self directed to a behemoth that actually provides

271
00:16:06,240 --> 00:16:10,080
Speaker 3: that guidance and advice now both directly through certain channels

272
00:16:10,120 --> 00:16:12,680
Speaker 3: and indirectly through the advisor channel.

273
00:16:13,080 --> 00:16:17,640
Speaker 2: So true or false? And I love this question because

274
00:16:17,680 --> 00:16:20,880
Speaker 2: so many people doubt it. We are today in a

275
00:16:21,040 --> 00:16:26,760
Speaker 2: golden age for investing for individuals. How do you answer that?

276
00:16:27,520 --> 00:16:30,760
Speaker 3: Can I say yes, yeah, true, just yes No. I

277
00:16:30,800 --> 00:16:31,480
Speaker 3: didn't say true.

278
00:16:31,480 --> 00:16:33,640
Speaker 2: I said yes yes, golden age of investing.

279
00:16:33,800 --> 00:16:36,080
Speaker 3: Well, I think it's both true and false, depending on

280
00:16:36,120 --> 00:16:40,160
Speaker 3: how you define okay, explain the age of investing. I

281
00:16:40,520 --> 00:16:44,960
Speaker 3: think we are as it relates to individual investors that

282
00:16:45,280 --> 00:16:51,320
Speaker 3: understand that discipline is such an important part of the

283
00:16:51,360 --> 00:16:54,440
Speaker 3: process that they don't think of getting get out as

284
00:16:54,480 --> 00:16:59,000
Speaker 3: investing strategies. I fully agree that those are really gambling

285
00:16:59,000 --> 00:17:02,680
Speaker 3: on moments in time. You wrote about it brilliantly in

286
00:17:03,200 --> 00:17:06,240
Speaker 3: your book The Emotional Side, And so I think it's

287
00:17:06,359 --> 00:17:10,359
Speaker 3: true in the sense that a lot of those more

288
00:17:11,240 --> 00:17:16,520
Speaker 3: seasoned investors that take that disciplined approach are are more

289
00:17:16,600 --> 00:17:22,760
Speaker 3: equipped now and have more access to UH information and guidance,

290
00:17:22,800 --> 00:17:24,480
Speaker 3: and when used in the right way, has been to

291
00:17:24,560 --> 00:17:27,840
Speaker 3: the great benefit of their success. But then you have

292
00:17:29,000 --> 00:17:33,399
Speaker 3: retail traders, which I'm not here to say that they're,

293
00:17:33,520 --> 00:17:36,159
Speaker 3: you know, the ultimate contrarian indicator, but I think the

294
00:17:36,240 --> 00:17:41,480
Speaker 3: perspective there is one of very short time horizons, the

295
00:17:41,960 --> 00:17:44,159
Speaker 3: you know, by the dip mentality, which you know, to

296
00:17:44,240 --> 00:17:45,120
Speaker 3: their credit.

297
00:17:45,160 --> 00:17:50,440
Speaker 2: That works in a bull market.

298
00:17:48,280 --> 00:17:50,920
Speaker 3: But a lot of the you know, younger retail trader

299
00:17:51,320 --> 00:17:55,880
Speaker 3: uh that was born out of the pandemic era. UH.

300
00:17:56,160 --> 00:17:59,040
Speaker 3: It's not that they have blinders on to the long

301
00:17:59,119 --> 00:18:02,040
Speaker 3: term or the big pick, sure, but they've been they've

302
00:18:02,040 --> 00:18:04,920
Speaker 3: been I guess so far anyway to your point, properly

303
00:18:05,040 --> 00:18:09,359
Speaker 3: schooled by virtue of by the tip has worked. But

304
00:18:09,720 --> 00:18:15,760
Speaker 3: I'm starting to get some anecdotal evidence that they're I'm

305
00:18:15,760 --> 00:18:18,639
Speaker 3: not sure that there is a full understanding of what

306
00:18:18,680 --> 00:18:22,800
Speaker 3: a market cycle actually looks like and that there is downside.

307
00:18:23,720 --> 00:18:27,960
Speaker 3: So I think there's more bifurcation and there's a wider

308
00:18:28,160 --> 00:18:32,480
Speaker 3: spread in terms of how investors are approaching the market

309
00:18:32,560 --> 00:18:37,040
Speaker 3: or how traders are approaching the market, and they they're

310
00:18:37,040 --> 00:18:39,800
Speaker 3: not in conflict, but they're kind of at different ends

311
00:18:39,800 --> 00:18:42,960
Speaker 3: of the spectrum from a what works, what doesn't work?

312
00:18:43,280 --> 00:18:45,560
Speaker 3: What are the benefits of taking a long term approach

313
00:18:45,680 --> 00:18:49,640
Speaker 3: having those disciplines as opposed to just you know, fomo,

314
00:18:50,320 --> 00:18:53,480
Speaker 3: I'm in and you know, buy every dip.

315
00:18:53,920 --> 00:18:57,320
Speaker 2: Think about everybody who was born in the nineteen nineties,

316
00:18:57,960 --> 00:19:01,959
Speaker 2: by the time they come out of college post financial crisis,

317
00:19:02,520 --> 00:19:07,080
Speaker 2: they've pretty much only known one of the greatest rampaging

318
00:19:07,440 --> 00:19:08,440
Speaker 2: markets in history.

319
00:19:08,640 --> 00:19:12,480
Speaker 3: Was brutal from an economic market perspective, but it was

320
00:19:12,520 --> 00:19:15,840
Speaker 3: five weeks in the case of the market, right mids

321
00:19:15,840 --> 00:19:16,960
Speaker 3: in the case of the recession.

322
00:19:17,200 --> 00:19:21,520
Speaker 2: So although people still didn't believe it throughout that summer,

323
00:19:21,600 --> 00:19:24,720
Speaker 2: as from the March twenty twenty Lowes till the end

324
00:19:24,720 --> 00:19:26,960
Speaker 2: of the year, I think the SMP five hundred was

325
00:19:27,040 --> 00:19:29,520
Speaker 2: up sixty nine percent, and people fought it the whole

326
00:19:29,520 --> 00:19:33,679
Speaker 2: way because their personal experience didn't jibe with what there

327
00:19:33,720 --> 00:19:39,119
Speaker 2: was exactly inequities, which is fascinating. Coming up, we continue

328
00:19:39,160 --> 00:19:44,879
Speaker 2: our conversation with Lizanne Saunders discussing her experience as a

329
00:19:45,000 --> 00:19:48,960
Speaker 2: market strategist. To Chub, I'm buried Ritults. You're listening to

330
00:19:49,080 --> 00:20:05,440
Speaker 2: Masters and Business on Bloomberg Radio. I'm Barry rut Holts.

331
00:20:05,680 --> 00:20:09,240
Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My

332
00:20:09,640 --> 00:20:12,800
Speaker 2: extra special guest this week is liz Anne Sanders. She

333
00:20:13,080 --> 00:20:17,679
Speaker 2: is the chief market strategist for Schwab, helping to oversee

334
00:20:17,920 --> 00:20:24,800
Speaker 2: eleven plus trillion dollars in client assets. So Schwab created

335
00:20:24,920 --> 00:20:29,240
Speaker 2: the market strategist role for you. What does it mean

336
00:20:29,600 --> 00:20:33,399
Speaker 2: being a market strategist? How does that differ from either

337
00:20:33,440 --> 00:20:38,160
Speaker 2: a PM on the equity side or an economist more broadly.

338
00:20:38,280 --> 00:20:41,639
Speaker 3: Well, it's certainly differentiated from a PM in that I

339
00:20:41,800 --> 00:20:44,879
Speaker 3: am I'm not picking stocks. I'm not a trader. I

340
00:20:44,920 --> 00:20:49,080
Speaker 3: don't analyze individual stocks. So it's purely top down.

341
00:20:50,119 --> 00:20:54,920
Speaker 2: Top down meaning markets, economy. Yes, do you look at sectors?

342
00:20:54,960 --> 00:20:56,840
Speaker 2: Do you look at now?

343
00:20:57,080 --> 00:21:01,160
Speaker 3: So we have my colleague and co host on our

344
00:21:01,200 --> 00:21:04,400
Speaker 3: on Investment podcast as Kathy Jones, So she's my counterpart

345
00:21:04,840 --> 00:21:08,440
Speaker 3: on the fixed income side. She's our chief fixed income strategist.

346
00:21:08,480 --> 00:21:12,240
Speaker 3: And I say often it sounds like it's jokingly, but

347
00:21:12,280 --> 00:21:15,360
Speaker 3: it's actually quite serious that I was thrilled when we

348
00:21:15,480 --> 00:21:18,160
Speaker 3: brought Kathy on because then I was able to stop

349
00:21:18,160 --> 00:21:20,119
Speaker 3: pretending like I was a deep dive expert on the

350
00:21:20,119 --> 00:21:22,520
Speaker 3: fixed income side of things. My background is on the

351
00:21:22,560 --> 00:21:25,480
Speaker 3: equity side of things. But what's unique I think about

352
00:21:25,560 --> 00:21:29,119
Speaker 3: this role as as it has existed in the almost

353
00:21:29,160 --> 00:21:31,520
Speaker 3: twenty six years that I've been at SCHWAB and have

354
00:21:31,600 --> 00:21:35,679
Speaker 3: been in this role, is it it blends the market

355
00:21:35,720 --> 00:21:39,520
Speaker 3: analysis with the economic analysis, so we don't have these

356
00:21:39,640 --> 00:21:43,840
Speaker 3: distinct roles of chief economists and chief investment strategists. And

357
00:21:43,880 --> 00:21:50,000
Speaker 3: that was always pleasing to me because I'm not sure

358
00:21:50,119 --> 00:21:53,399
Speaker 3: I would either be as effective or enjoy what I

359
00:21:53,480 --> 00:21:57,320
Speaker 3: do as much if I had to have my market

360
00:21:57,440 --> 00:22:03,119
Speaker 3: views beholden to economic views that were completely distinct. I

361
00:22:03,119 --> 00:22:07,760
Speaker 3: think having that overlap and analysis has been a benefit.

362
00:22:07,880 --> 00:22:13,520
Speaker 3: I also, because our investor base are almost all individual investors,

363
00:22:13,880 --> 00:22:16,560
Speaker 3: that's a very different audience that if you're one of

364
00:22:16,600 --> 00:22:20,400
Speaker 3: the big investment banking research wirehouse firms, where a good

365
00:22:20,480 --> 00:22:25,320
Speaker 3: chunk of your client base that is a consumer of

366
00:22:26,200 --> 00:22:30,679
Speaker 3: strategists work being institutions. I think it's a very different

367
00:22:30,720 --> 00:22:34,160
Speaker 3: animal in terms of what is valuable, what makes sense,

368
00:22:34,160 --> 00:22:38,560
Speaker 3: and maybe importantly again in keeping with your book, thinking

369
00:22:38,600 --> 00:22:41,159
Speaker 3: about not just what matters, but what doesn't matter, what

370
00:22:41,200 --> 00:22:44,440
Speaker 3: shouldn't matter. And I remember one of the first things

371
00:22:44,480 --> 00:22:48,159
Speaker 3: that Chuck talked to me about twenty five years ago

372
00:22:48,720 --> 00:22:53,080
Speaker 3: was him not being a believer in the whole year

373
00:22:53,200 --> 00:22:57,240
Speaker 3: end price target, which was music to my ears, because

374
00:22:57,240 --> 00:23:00,760
Speaker 3: I think, particularly for individual investors, there's really not that

375
00:23:00,920 --> 00:23:04,640
Speaker 3: much practical value to that. It's sort of one point

376
00:23:04,680 --> 00:23:09,919
Speaker 3: in time. Every strategist has to adjust those forecasts constantly.

377
00:23:10,440 --> 00:23:14,000
Speaker 3: It doesn't tell you about how to manage through market cycles.

378
00:23:14,040 --> 00:23:16,920
Speaker 3: It's just one end point to one end point, and

379
00:23:17,160 --> 00:23:20,000
Speaker 3: so that is certainly one of the differentiators as well,

380
00:23:20,040 --> 00:23:24,440
Speaker 3: in addition to having that blended market analysis and economic

381
00:23:24,480 --> 00:23:29,080
Speaker 3: analysis role, not sort of falling into the trap of

382
00:23:29,240 --> 00:23:31,679
Speaker 3: the way strategists get pitted against one another.

383
00:23:32,000 --> 00:23:34,840
Speaker 2: I love that you call it a trap, because it's

384
00:23:34,960 --> 00:23:38,600
Speaker 2: easy to see what happens when people make a forecast

385
00:23:38,720 --> 00:23:42,880
Speaker 2: like that and then they tend to marry it regardless

386
00:23:42,920 --> 00:23:45,960
Speaker 2: of what data comes along. I think it was Ned

387
00:23:46,040 --> 00:23:50,680
Speaker 2: Davis's book was called Being Right or Making Money, and

388
00:23:51,320 --> 00:23:55,520
Speaker 2: he explained how frequently people would just get so hung

389
00:23:55,640 --> 00:24:00,679
Speaker 2: up on admitting error that they would stay position, the

390
00:24:00,680 --> 00:24:05,280
Speaker 2: wrong posture, the wrong holdings, rather than admit they were

391
00:24:05,320 --> 00:24:06,560
Speaker 2: wrong and adjust to.

392
00:24:06,520 --> 00:24:09,840
Speaker 3: Whatever they and the trend. You know, one of Marty's

393
00:24:09,840 --> 00:24:12,240
Speaker 3: wig was well known for quite quite a bit, but

394
00:24:12,680 --> 00:24:14,560
Speaker 3: you know, he coined the term don't fight the fed.

395
00:24:15,000 --> 00:24:17,800
Speaker 3: But he also was known for saying, the trend is

396
00:24:17,840 --> 00:24:24,720
Speaker 3: your friend, and so staying in gear requires constant thinking

397
00:24:24,760 --> 00:24:27,040
Speaker 3: and rethinking. In fact, I always use an example of

398
00:24:27,080 --> 00:24:29,919
Speaker 3: the perils of the year on price Target. If a

399
00:24:29,960 --> 00:24:34,200
Speaker 3: strategist at the beginning of nineteen eighty seven basically said

400
00:24:34,320 --> 00:24:37,280
Speaker 3: the market's going to close pretty flat relative to where

401
00:24:37,320 --> 00:24:40,520
Speaker 3: it ended nineteen eighty six by the end of the year,

402
00:24:40,600 --> 00:24:43,800
Speaker 3: they were right from a point to point. However, to

403
00:24:43,920 --> 00:24:47,640
Speaker 3: suggest that the market was just boring and flat all year,

404
00:24:48,920 --> 00:24:51,040
Speaker 3: does that little hit, Yeah, it was just a tiny

405
00:24:51,040 --> 00:24:55,160
Speaker 3: little tick. That was September nineteen. It was no October nineteenth.

406
00:24:55,200 --> 00:24:58,399
Speaker 3: October nineteenth. But there were you know, there were warning sides.

407
00:24:58,400 --> 00:25:01,560
Speaker 3: And here can I tell you another funny early story.

408
00:25:01,680 --> 00:25:06,520
Speaker 3: So I started in the summer of eighty six and

409
00:25:07,119 --> 00:25:10,840
Speaker 3: as and we were Marty's side of the business, which

410
00:25:10,920 --> 00:25:14,280
Speaker 3: was mutual funds, which was the Zweig Demenna hedge Fund,

411
00:25:14,320 --> 00:25:17,679
Speaker 3: which is still ongoing under the leadership of Joe Demenna.

412
00:25:18,840 --> 00:25:21,960
Speaker 3: We would be generically thought of as market timers. We

413
00:25:21,960 --> 00:25:25,679
Speaker 3: were tactical ass at allocators on the avatar institutional side,

414
00:25:26,000 --> 00:25:29,720
Speaker 3: much more traditional market timing on the ZWYG side, particularly

415
00:25:29,800 --> 00:25:33,440
Speaker 3: the hedge fund and coming into eighty seven, we were

416
00:25:34,240 --> 00:25:38,879
Speaker 3: over the cross of strategies. Cross strategies were essentially fully invested,

417
00:25:39,359 --> 00:25:42,800
Speaker 3: but started to get much more pessimistic about the market.

418
00:25:42,880 --> 00:25:43,440
Speaker 3: In August.

419
00:25:43,680 --> 00:25:47,480
Speaker 2: You had a huge runoff, huge run up until was

420
00:25:47,520 --> 00:25:47,840
Speaker 2: it like.

421
00:25:50,760 --> 00:25:55,920
Speaker 3: And so we started to adjust allocations down more extreme

422
00:25:56,119 --> 00:25:58,760
Speaker 3: on the hedge fund side, where Marty went I think

423
00:25:58,800 --> 00:26:02,360
Speaker 3: to essentlely a short position.

424
00:26:02,400 --> 00:26:04,040
Speaker 2: And famously discuss.

425
00:26:05,600 --> 00:26:09,159
Speaker 3: The Friday night before the crash. He was on you

426
00:26:09,200 --> 00:26:14,800
Speaker 3: can YouTube it now and Lou asked him or made

427
00:26:14,840 --> 00:26:20,080
Speaker 3: a comment. He said, Marty, you seem particularly bearish, and

428
00:26:20,080 --> 00:26:23,320
Speaker 3: and Marty was seen as this perma bear he.

429
00:26:23,359 --> 00:26:24,560
Speaker 2: Was just but he wasn't.

430
00:26:25,080 --> 00:26:28,119
Speaker 3: He was just He always was a nervous He always

431
00:26:28,160 --> 00:26:30,239
Speaker 3: had a little bit of that that angst and that

432
00:26:30,320 --> 00:26:34,359
Speaker 3: rumble way. So he would at times be nervous when

433
00:26:34,480 --> 00:26:38,639
Speaker 3: his view on the market was very bullish. But so

434
00:26:38,680 --> 00:26:41,440
Speaker 3: then Lou concluded the question with do you think we

435
00:26:41,520 --> 00:26:47,080
Speaker 3: have a bear market ahead of us? And Marty said, well, no,

436
00:26:47,200 --> 00:26:50,800
Speaker 3: I think it's more likely to be a crash and

437
00:26:50,960 --> 00:26:53,560
Speaker 3: pretty much it could happen any day. And then he

438
00:26:53,640 --> 00:26:56,159
Speaker 3: not only said that, but then he laid out and

439
00:26:56,240 --> 00:26:58,040
Speaker 3: I think it could be really ugly. But then I

440
00:26:58,080 --> 00:27:01,160
Speaker 3: think we we immediately rally off the low, but then

441
00:27:01,200 --> 00:27:05,119
Speaker 3: we probably retest the low before we take off again.

442
00:27:05,600 --> 00:27:09,760
Speaker 3: So here I am less than a year in the business.

443
00:27:10,200 --> 00:27:13,720
Speaker 3: We had gone from being almost fully invested in equities

444
00:27:13,800 --> 00:27:16,200
Speaker 3: down to I don't know twenty or twenty five percent

445
00:27:16,200 --> 00:27:20,280
Speaker 3: invested in equities right into right before the crash. So

446
00:27:20,600 --> 00:27:23,199
Speaker 3: the little voice in my head is thinking, what's the

447
00:27:23,240 --> 00:27:25,919
Speaker 3: big deal? Why is everybody freaking out? You just figure

448
00:27:25,960 --> 00:27:29,200
Speaker 3: out before the crash that there's going to be a crash,

449
00:27:29,520 --> 00:27:32,600
Speaker 3: You move money out right, and then you take advantage

450
00:27:32,640 --> 00:27:35,840
Speaker 3: of cheaper price, you put it back in easy easy, right,

451
00:27:36,240 --> 00:27:37,000
Speaker 3: Little did I know?

452
00:27:37,840 --> 00:27:43,280
Speaker 2: And to just reflect how accurate ZUIG was Monday down

453
00:27:43,320 --> 00:27:47,280
Speaker 2: twenty two percent, a rally that failed the next day.

454
00:27:47,320 --> 00:27:48,640
Speaker 2: You didn't quite get back down to.

455
00:27:48,560 --> 00:27:49,880
Speaker 3: You you didn't fully retest.

456
00:27:49,920 --> 00:27:57,439
Speaker 2: But a day is kind of twenty two eight, all right,

457
00:27:57,480 --> 00:28:02,200
Speaker 2: I'm rousing and and double check those numbers. I could

458
00:28:02,240 --> 00:28:05,400
Speaker 2: be wrong, but you know, portfolio insurance was a big

459
00:28:05,440 --> 00:28:09,119
Speaker 2: part of that, probably made what was a ten percent

460
00:28:09,200 --> 00:28:13,040
Speaker 2: correction more than double. So maybe that's why you didn't readtest.

461
00:28:13,119 --> 00:28:15,360
Speaker 2: And then it was off to the race to break.

462
00:28:16,119 --> 00:28:20,800
Speaker 3: And we had started buying after the crash, so ended

463
00:28:20,840 --> 00:28:23,840
Speaker 3: the year with just off the charts performance. And again,

464
00:28:24,359 --> 00:28:26,720
Speaker 3: you know, naive young me is thinking, you don't know

465
00:28:26,720 --> 00:28:28,480
Speaker 3: why everybody's freaking right so much?

466
00:28:28,560 --> 00:28:31,120
Speaker 2: Why are these people talking about how difficult this is hard?

467
00:28:31,359 --> 00:28:36,120
Speaker 2: So the obvious question, how significant was Marty to shaping

468
00:28:36,200 --> 00:28:39,719
Speaker 2: your framework for understanding.

469
00:28:39,080 --> 00:28:44,320
Speaker 3: Extraordinarily impactful because I think the thing that resonated with

470
00:28:44,480 --> 00:28:47,160
Speaker 3: me the most, and you wrote about it in your book,

471
00:28:47,200 --> 00:28:50,240
Speaker 3: and it's the likes of the Sir John Templeton quote

472
00:28:50,240 --> 00:28:53,200
Speaker 3: about bull markets are born and pessimism the ground, skepticism mature,

473
00:28:53,200 --> 00:28:55,160
Speaker 3: and optimism die in euphoria. I think that's such a

474
00:28:55,160 --> 00:28:57,760
Speaker 3: brilliant way to describe a market cycle, in part because

475
00:28:57,800 --> 00:28:59,720
Speaker 3: the only terms used in there have to do with

476
00:28:59,720 --> 00:29:03,440
Speaker 3: them exactly. There's nothing in that line about market cycles.

477
00:29:03,440 --> 00:29:05,320
Speaker 3: It has anything to do with what we all obsess

478
00:29:05,360 --> 00:29:08,480
Speaker 3: about on a day to day basis, monetary policy, fiscal policy,

479
00:29:08,520 --> 00:29:11,240
Speaker 3: what the next inflation report is going to be, even

480
00:29:11,320 --> 00:29:15,600
Speaker 3: earnings and valuation. And Marty understood that too, and so

481
00:29:15,880 --> 00:29:18,640
Speaker 3: much of the work that he did was steeped in

482
00:29:18,680 --> 00:29:19,920
Speaker 3: that sentiment analysis.

483
00:29:19,960 --> 00:29:23,920
Speaker 2: I love that you brought that up, because so I

484
00:29:23,960 --> 00:29:28,680
Speaker 2: took the technical analysis training course with Ralph Aknpora, and

485
00:29:28,800 --> 00:29:31,640
Speaker 2: I don't really think of myself as a technician, but

486
00:29:31,720 --> 00:29:34,640
Speaker 2: I certainly wouldn't buy anything without looking at a chart.

487
00:29:35,320 --> 00:29:35,440
Speaker 1: Right.

488
00:29:36,080 --> 00:29:38,760
Speaker 2: I don't need to see an analysts research report, but

489
00:29:38,800 --> 00:29:40,800
Speaker 2: I have to at least get a sense of is

490
00:29:40,840 --> 00:29:42,560
Speaker 2: it trend up? Is it trend down? Has this been

491
00:29:42,560 --> 00:29:47,840
Speaker 2: going sideways for years? And the best technicians I know

492
00:29:48,800 --> 00:29:53,400
Speaker 2: have always brought in behavioral economics and sentiment before we

493
00:29:53,480 --> 00:29:56,240
Speaker 2: called it behavioral, absolutely, and Marty certainly was one of them.

494
00:29:56,320 --> 00:30:03,680
Speaker 3: Absolutely, And so my maybe sort of added focus on

495
00:30:04,040 --> 00:30:07,479
Speaker 3: the emotional side, the sentiment side of the market very

496
00:30:07,560 --> 00:30:11,360
Speaker 3: much was borne out of my time working for Marty,

497
00:30:11,400 --> 00:30:16,440
Speaker 3: and I still think it's extraordinarily important. And one of

498
00:30:16,040 --> 00:30:20,800
Speaker 3: the messages we always impart to our investors is ideally

499
00:30:20,880 --> 00:30:23,640
Speaker 3: you don't figure out the hard way whether there's a

500
00:30:23,720 --> 00:30:26,960
Speaker 3: wider or narrow gap between your financial resk tolerance and

501
00:30:27,000 --> 00:30:29,720
Speaker 3: your emotional risk tolerance, because those two at times can

502
00:30:29,760 --> 00:30:33,280
Speaker 3: be completely different. And I always describe financial risk tolerance

503
00:30:33,320 --> 00:30:36,880
Speaker 3: as kind of what's on the proverbial paper your time

504
00:30:36,920 --> 00:30:40,680
Speaker 3: arise in. Do you need income? What is this money for?

505
00:30:40,840 --> 00:30:44,560
Speaker 3: Is it for retirement diversification? Blah blah blah blah blah.

506
00:30:44,600 --> 00:30:47,320
Speaker 3: But if you are going to, you know, panic and

507
00:30:47,440 --> 00:30:51,000
Speaker 3: sell everything at the first bear market level declines in

508
00:30:51,040 --> 00:30:56,080
Speaker 3: your portfolio, you're maybe not as restolerant investor as you thought.

509
00:30:56,120 --> 00:31:00,440
Speaker 3: And it's just the vast majority of mistakes that we

510
00:31:00,520 --> 00:31:03,800
Speaker 3: see extreme mistakes purely driven by emotion.

511
00:31:04,440 --> 00:31:06,640
Speaker 2: You know, there's a line I remember from when I

512
00:31:06,680 --> 00:31:09,760
Speaker 2: was on a trading desk that I didn't really understand then,

513
00:31:10,320 --> 00:31:13,760
Speaker 2: but it sums up that gap between your financial risk

514
00:31:13,800 --> 00:31:17,880
Speaker 2: tolerance and your emotional risk tolerance, which is figure out

515
00:31:17,920 --> 00:31:20,920
Speaker 2: who you are, because Wall Street is an expensive place

516
00:31:21,000 --> 00:31:23,040
Speaker 2: to learn exactly right, You don't know who you are.

517
00:31:23,120 --> 00:31:27,600
Speaker 2: You don't know what your emotional pain allowance is. You

518
00:31:27,680 --> 00:31:33,720
Speaker 2: don't want to panic out. The word capitulation technically means surrender,

519
00:31:34,200 --> 00:31:38,640
Speaker 2: so you go to a march O nine. That capitulation

520
00:31:38,840 --> 00:31:42,200
Speaker 2: meant people just couldn't take the pain anymore. Make it stop,

521
00:31:42,680 --> 00:31:44,960
Speaker 2: just get me out of everything. And that's how bottoms are.

522
00:31:44,960 --> 00:31:46,400
Speaker 3: Can I share the March O nine?

523
00:31:46,560 --> 00:31:48,280
Speaker 2: Oh, we were talking about We were talking about it.

524
00:31:48,960 --> 00:31:51,400
Speaker 3: But we didn't have microphones in front of us, so

525
00:31:52,440 --> 00:31:56,160
Speaker 3: it was let's go back to March sixth of two

526
00:31:56,200 --> 00:32:00,440
Speaker 3: thousand and nine. So I lived in Darien, Connecticut for

527
00:32:00,640 --> 00:32:03,360
Speaker 3: twenty two years. We raised our kids in dairy Enne

528
00:32:04,200 --> 00:32:07,120
Speaker 3: and it's one of the hotbeds of Wall Street.

529
00:32:07,240 --> 00:32:09,920
Speaker 2: In fact, bedroom communities short communitation.

530
00:32:09,480 --> 00:32:13,680
Speaker 3: Short commune to the city. Our town made the cover

531
00:32:13,760 --> 00:32:16,600
Speaker 3: of BusinessWeek in two thousand and eight the latter part

532
00:32:16,640 --> 00:32:19,800
Speaker 3: of two thousand and eight as the town most impacted

533
00:32:19,800 --> 00:32:22,680
Speaker 3: by the financial crisis in the country, and they did

534
00:32:22,680 --> 00:32:25,080
Speaker 3: it based on the percentage of the working population that

535
00:32:25,120 --> 00:32:27,800
Speaker 3: worked either on Wall Street in some capacity or in

536
00:32:27,840 --> 00:32:33,479
Speaker 3: real estate, and so it was I was surrounded by

537
00:32:33,520 --> 00:32:36,320
Speaker 3: Wall Street people, not a lot of Wall Street women.

538
00:32:37,720 --> 00:32:41,160
Speaker 3: It was also a town where most of the women

539
00:32:41,320 --> 00:32:44,920
Speaker 3: who were raising kids were stay at home, so I

540
00:32:45,040 --> 00:32:48,400
Speaker 3: was always steeped in conversation about the markets, and in

541
00:32:48,440 --> 00:32:50,760
Speaker 3: the role that I had, I would always get peppered

542
00:32:50,800 --> 00:32:53,080
Speaker 3: with questions So my husband and I are at a

543
00:32:53,120 --> 00:32:55,760
Speaker 3: dinner party in dairy Enne. It was toward the end

544
00:32:56,440 --> 00:32:59,080
Speaker 3: dinner and dessert had served, maybe about a quarter of

545
00:32:59,120 --> 00:33:02,080
Speaker 3: the people had left, a smaller crowd just sitting around chatting,

546
00:33:02,080 --> 00:33:04,600
Speaker 3: and the host of the party, who was at that

547
00:33:04,720 --> 00:33:09,840
Speaker 3: time a thirty plus year veteran of Wall Street, said, Lezanne,

548
00:33:09,840 --> 00:33:12,320
Speaker 3: I must say I don't envy you right now. And

549
00:33:12,360 --> 00:33:14,760
Speaker 3: he was a bit dramatic, and he kind of paused

550
00:33:14,760 --> 00:33:17,640
Speaker 3: for effect, and I said, oh, what do you mean?

551
00:33:18,360 --> 00:33:21,040
Speaker 3: And he said, well, I really think that there's no

552
00:33:21,240 --> 00:33:24,360
Speaker 3: chance that this stock market ever gets to another high.

553
00:33:24,680 --> 00:33:27,720
Speaker 3: I think there's a decent chance that retail investors will

554
00:33:27,760 --> 00:33:32,240
Speaker 3: never buy again, never, never, just which makes me question

555
00:33:32,600 --> 00:33:36,959
Speaker 3: the viability of a company like Schwab. And So I

556
00:33:36,960 --> 00:33:41,120
Speaker 3: don't even remember what I said. I think I did

557
00:33:41,160 --> 00:33:44,440
Speaker 3: some generic version. Well I beg to differ, but I didn't.

558
00:33:44,560 --> 00:33:47,840
Speaker 3: I was also ready to leave. You know, I like

559
00:33:47,880 --> 00:33:50,800
Speaker 3: a nine handle on my bedtime, So if it's eleven thirty,

560
00:33:50,800 --> 00:33:54,640
Speaker 3: I'm like, okay, chop chop. So I just I wanted

561
00:33:54,680 --> 00:33:58,120
Speaker 3: to end the night. We get in the car, unprompted,

562
00:33:59,080 --> 00:34:01,960
Speaker 3: and I haven't had to a story at all. Before

563
00:34:02,000 --> 00:34:03,600
Speaker 3: my husband puts the key in the car. He looked

564
00:34:03,640 --> 00:34:06,080
Speaker 3: to me, he said, did you hear it? And I said,

565
00:34:06,280 --> 00:34:08,799
Speaker 3: the bell ringing. He said, I knew you were thinking that.

566
00:34:09,600 --> 00:34:12,880
Speaker 3: So I called my friend the next morning and I said,

567
00:34:13,280 --> 00:34:15,880
Speaker 3: I am working on a report. And all of my

568
00:34:16,000 --> 00:34:19,000
Speaker 3: research reports written research reports. I use rock song titles,

569
00:34:19,000 --> 00:34:22,440
Speaker 3: some rock chick from way back. So I said, I

570
00:34:22,480 --> 00:34:24,160
Speaker 3: am working on a report that I want a title,

571
00:34:24,200 --> 00:34:27,000
Speaker 3: Here comes the Sun? Can I share the anecdote?

572
00:34:27,239 --> 00:34:28,480
Speaker 2: No name, just no name.

573
00:34:28,600 --> 00:34:31,400
Speaker 3: I said, I'm not going to mention name. He said, sure,

574
00:34:31,520 --> 00:34:33,840
Speaker 3: I think you're going to regret it. Every time I

575
00:34:33,880 --> 00:34:37,560
Speaker 3: see him, he does like the fists to the forehead, like,

576
00:34:37,760 --> 00:34:42,840
Speaker 3: oh my gosh. And that was when the last person

577
00:34:42,920 --> 00:34:46,239
Speaker 3: is standing has gone down, that is, And I think

578
00:34:46,280 --> 00:34:49,440
Speaker 3: that's interesting. What's interesting about senema is we know sentiment

579
00:34:49,480 --> 00:34:51,920
Speaker 3: at extremes serves as a contrarian indicator.

580
00:34:52,040 --> 00:34:54,200
Speaker 2: Right most of the time, you could pretty much ignore

581
00:34:54,200 --> 00:34:55,359
Speaker 2: it without middle ring.

582
00:34:55,400 --> 00:34:59,359
Speaker 3: Without anything resembling precise timing. That said, as we all

583
00:34:59,400 --> 00:35:03,160
Speaker 3: earned in the late nineteen nineties, extremely optimistic sentiment can

584
00:35:03,239 --> 00:35:06,359
Speaker 3: last for a really long time. You know. Greenspan made

585
00:35:06,440 --> 00:35:07,880
Speaker 3: is a rational exuberance common.

586
00:35:07,719 --> 00:35:09,160
Speaker 2: In ninety December ninety seven.

587
00:35:09,239 --> 00:35:11,719
Speaker 3: It wasn't until you know, three plus years later that

588
00:35:11,800 --> 00:35:12,560
Speaker 3: the market top.

589
00:35:12,400 --> 00:35:14,280
Speaker 2: Down in March two thousand, almost four years.

590
00:35:14,360 --> 00:35:18,400
Speaker 3: That said, when sentiment gets to such an extreme of despair,

591
00:35:18,920 --> 00:35:23,720
Speaker 3: it's not a precise contrarian timing, but there's a narrower window.

592
00:35:23,920 --> 00:35:27,920
Speaker 3: Pay attention, yes, pay more attention to extremes of despair

593
00:35:28,960 --> 00:35:32,359
Speaker 3: than you do extremes of enthusiasts, because the ladder can

594
00:35:32,440 --> 00:35:33,160
Speaker 3: last a long time.

595
00:35:33,280 --> 00:35:37,400
Speaker 2: Tops are a process. Spotttoms are a moment, absolutely, And

596
00:35:37,440 --> 00:35:40,720
Speaker 2: you know, there are all these old trader cliches and stuff,

597
00:35:40,800 --> 00:35:45,440
Speaker 2: but they become cliches for a reason. And you know,

598
00:35:46,239 --> 00:35:50,840
Speaker 2: we all experience the world in a very narrow window

599
00:35:51,000 --> 00:35:55,280
Speaker 2: of as eight billion people on the planet. Our experiences

600
00:35:55,360 --> 00:35:58,480
Speaker 2: are maybe tenth of a percent of what the rest

601
00:35:58,480 --> 00:36:01,040
Speaker 2: of the world is experiencing, and so we tend to

602
00:36:01,080 --> 00:36:04,200
Speaker 2: extrapolate out to the rest of the world. But very

603
00:36:04,239 --> 00:36:09,200
Speaker 2: often what's happening in the markets is not reflecting your

604
00:36:09,200 --> 00:36:14,160
Speaker 2: personal experience. But after you've lived through enough cycles, you

605
00:36:14,400 --> 00:36:17,080
Speaker 2: start to be able to hear those sort of things

606
00:36:17,960 --> 00:36:20,880
Speaker 2: I had that was a pure death of equities business

607
00:36:20,920 --> 00:36:24,520
Speaker 2: we call cover from the late seventies and a year

608
00:36:24,560 --> 00:36:26,640
Speaker 2: or two later that was it. It was the next

609
00:36:26,960 --> 00:36:30,680
Speaker 2: thousand per second market. Yeah, absolutely amazing story.

610
00:36:30,800 --> 00:36:33,120
Speaker 3: I have one other anecdote that's an interesting one to

611
00:36:33,120 --> 00:36:36,360
Speaker 3: think about how emotions come into play. Was out in

612
00:36:36,840 --> 00:36:40,279
Speaker 3: Silicon Valley area, maybe about a year ago, a little

613
00:36:40,320 --> 00:36:43,000
Speaker 3: less than a year ago, and heard from a client

614
00:36:43,880 --> 00:36:47,200
Speaker 3: that he had finally given in to his financial consultant

615
00:36:47,280 --> 00:36:49,920
Speaker 3: suggestion that he trimmed just back about ten percent of

616
00:36:49,960 --> 00:36:52,359
Speaker 3: his n video holdings. He was an ex employee, had

617
00:36:52,400 --> 00:36:55,520
Speaker 3: a lot just you know, diversification.

618
00:36:55,239 --> 00:36:57,360
Speaker 2: Right, We're going to leave some money on the table

619
00:36:57,440 --> 00:36:59,960
Speaker 2: in order to reduce draw down Volatiley.

620
00:37:00,080 --> 00:37:02,360
Speaker 3: He ended up splitting the difference. He didn't want to

621
00:37:02,360 --> 00:37:05,520
Speaker 3: trim any He trimmed five percent, and then the stock

622
00:37:05,560 --> 00:37:08,520
Speaker 3: went up by twenty some odd percent in the short term,

623
00:37:09,120 --> 00:37:12,440
Speaker 3: and he was mad at the financial consultant that the

624
00:37:12,440 --> 00:37:16,439
Speaker 3: stock had gone up, and to his our financial consultant's credit, said,

625
00:37:17,000 --> 00:37:20,000
Speaker 3: would you really be happier if the ninety five percent

626
00:37:20,040 --> 00:37:21,960
Speaker 3: you still own went down twenty percent?

627
00:37:22,320 --> 00:37:26,120
Speaker 2: Listen in the beginning of this show, Video psychologists value

628
00:37:26,200 --> 00:37:29,959
Speaker 2: that he was almost more, and to his credit, he said,

629
00:37:30,000 --> 00:37:32,000
Speaker 2: you know what, that's the way I should think about it.

630
00:37:32,120 --> 00:37:34,919
Speaker 3: Was more concerned about the top tick the bottom tick

631
00:37:35,360 --> 00:37:38,400
Speaker 3: I trimmed it wasn't I brilliant because then the stock

632
00:37:38,440 --> 00:37:42,360
Speaker 3: went down twenty percent. So our emotions play tricks on

633
00:37:42,440 --> 00:37:44,080
Speaker 3: us in a lot of different directions.

634
00:37:44,480 --> 00:37:46,279
Speaker 2: You brought up my book. I try not to talk

635
00:37:46,280 --> 00:37:51,120
Speaker 2: about it on the show. Well, the regret minimization chapter

636
00:37:51,600 --> 00:37:55,319
Speaker 2: is all about your role as an individual investor is

637
00:37:55,400 --> 00:37:58,800
Speaker 2: not to outperform the market or top tick or bottom

638
00:37:58,800 --> 00:38:02,480
Speaker 2: tick stocks. It's hey, how can you avoid making decisions

639
00:38:02,520 --> 00:38:05,520
Speaker 2: that you're gonna say ten years later? What an idiot?

640
00:38:05,560 --> 00:38:08,680
Speaker 2: I was, just as Charlie Munger said, what can you

641
00:38:08,719 --> 00:38:12,239
Speaker 2: do to be less stupid? And if you know, we

642
00:38:12,280 --> 00:38:15,120
Speaker 2: see these portfolios that started out as a million or

643
00:38:15,160 --> 00:38:19,600
Speaker 2: two million dollars, but through either smarts or good luck

644
00:38:19,680 --> 00:38:22,920
Speaker 2: or some combination, they had a big slug of Nvidia

645
00:38:23,040 --> 00:38:25,720
Speaker 2: ten years ago and now they have a twenty million

646
00:38:25,719 --> 00:38:29,480
Speaker 2: dollar portfolio, eighteen million of which is in Vidia. Hey,

647
00:38:29,560 --> 00:38:31,640
Speaker 2: do you really want to ride this up and down?

648
00:38:31,719 --> 00:38:32,839
Speaker 3: You've won yet?

649
00:38:32,880 --> 00:38:35,920
Speaker 2: Me think about what twenty million dollars in long term

650
00:38:36,239 --> 00:38:39,120
Speaker 2: investing does for you. Do you really want to ride

651
00:38:39,160 --> 00:38:42,600
Speaker 2: this down when it takes one of its regular drawdowns,

652
00:38:42,719 --> 00:38:45,279
Speaker 2: and what I want to say it gave up about

653
00:38:45,320 --> 00:38:48,759
Speaker 2: a trillion dollars in market cap this year before recovering.

654
00:38:50,040 --> 00:38:52,440
Speaker 3: But can I can I say something else. I'm not

655
00:38:52,440 --> 00:38:55,280
Speaker 3: an analyst. I don't cover Nvidia, but the whole focus,

656
00:38:55,440 --> 00:38:57,799
Speaker 3: the uber focus on the Magnificent seven. Let's just use

657
00:38:57,800 --> 00:39:02,399
Speaker 3: that as an example of a cohort. So we're dealing

658
00:39:02,440 --> 00:39:04,680
Speaker 3: with cap weighted indexes in the case of the SMP

659
00:39:05,280 --> 00:39:07,720
Speaker 3: and the NASDAC, and I think one of the messages

660
00:39:07,760 --> 00:39:10,920
Speaker 3: we impart to individual investors is, don't feel like you

661
00:39:11,120 --> 00:39:13,960
Speaker 3: have to have the same concentration as what's embedded in

662
00:39:14,000 --> 00:39:16,879
Speaker 3: these cap weighted indexes. That's an institutional problem. If you're

663
00:39:16,920 --> 00:39:19,759
Speaker 3: benchmarked against the SMP on a quarterly basis, you are

664
00:39:19,800 --> 00:39:22,279
Speaker 3: at the mercy of the construction of that index. But

665
00:39:22,480 --> 00:39:26,200
Speaker 3: as an example of how I describe this, in Vidia

666
00:39:26,280 --> 00:39:28,960
Speaker 3: is the best performing stock within the mag seven year

667
00:39:29,000 --> 00:39:32,359
Speaker 3: to date, but it's the forty seventh best performing stock

668
00:39:32,400 --> 00:39:35,520
Speaker 3: in the S and P five hundred. It's the number

669
00:39:35,600 --> 00:39:39,759
Speaker 3: one contributor to S and P gains by virtue of

670
00:39:39,800 --> 00:39:43,799
Speaker 3: the multiplier of the cap size. So there's forty six

671
00:39:43,840 --> 00:39:47,759
Speaker 3: stocks in the SMP that are outperforming in video this

672
00:39:47,840 --> 00:39:51,680
Speaker 3: year in Vidias I think ranked number six hundred and

673
00:39:51,719 --> 00:39:54,759
Speaker 3: thirty something in the NASDAK, meaning there's six hundred and

674
00:39:54,840 --> 00:39:57,719
Speaker 3: thirty some odd stocks within the NASDAQ that are outperforming

675
00:39:57,760 --> 00:40:01,840
Speaker 3: the best performing MAG seven. So it's the constant trait.

676
00:40:01,880 --> 00:40:07,400
Speaker 3: It's the contribution that sometimes gets conflated with the performance.

677
00:40:07,600 --> 00:40:10,000
Speaker 2: I have a buddy who's a technician who looks at

678
00:40:10,040 --> 00:40:15,000
Speaker 2: a ratio of the marketcap SMP versus the ecal weight SMP,

679
00:40:15,640 --> 00:40:18,000
Speaker 2: and what we've been seeing this year is the equal weight.

680
00:40:20,000 --> 00:40:21,680
Speaker 2: I'm trying to remember where we are now. I haven't

681
00:40:21,719 --> 00:40:23,640
Speaker 2: looked at it recently, but when it's going up, it's

682
00:40:23,680 --> 00:40:25,960
Speaker 2: telling you the big caps are faltering. And when the

683
00:40:26,040 --> 00:40:28,800
Speaker 2: ratio is going down, it's telling you the big caps

684
00:40:28,800 --> 00:40:31,520
Speaker 2: are doing well. Unless I'm doing that backwards. It depends

685
00:40:31,560 --> 00:40:34,839
Speaker 2: on which one is the numertor which one is the denominator.

686
00:40:35,160 --> 00:40:40,600
Speaker 2: But clearly the outsized weight market cap wise is Nvidia

687
00:40:40,840 --> 00:40:43,800
Speaker 2: number one or two behind Microsoft or Apples.

688
00:40:43,440 --> 00:40:47,040
Speaker 3: Number one right now, but it's been you know, Meta

689
00:40:47,080 --> 00:40:50,239
Speaker 3: and Alphabet have actually been kind of battling, and then

690
00:40:50,360 --> 00:40:52,480
Speaker 3: also Microsoft. Those are the four of the mags seven

691
00:40:52,520 --> 00:40:54,279
Speaker 3: that are outperforming the S and P or to date,

692
00:40:54,360 --> 00:40:56,839
Speaker 3: the other three are underperforming. And in fact, a few

693
00:40:56,920 --> 00:40:59,120
Speaker 3: days ago, because I tracked this on a daily basis,

694
00:40:59,480 --> 00:41:02,879
Speaker 3: Apple was down I think seven percent year to date.

695
00:41:02,920 --> 00:41:06,080
Speaker 3: That was its worst year to date performance and it

696
00:41:06,239 --> 00:41:10,880
Speaker 3: was the five hundred and third ranked contributor to the SMP.

697
00:41:11,560 --> 00:41:14,520
Speaker 3: So the multiplier of capsize works in the other direction

698
00:41:14,600 --> 00:41:17,600
Speaker 3: if you're an underperformer as well. A lot of people say, well,

699
00:41:17,600 --> 00:41:19,160
Speaker 3: what do you mean five hundred and three the SMBs

700
00:41:19,200 --> 00:41:23,400
Speaker 3: five hundred stock in B shares, But you've got share exactly.

701
00:41:23,680 --> 00:41:26,560
Speaker 2: So that's a great trivia question. How many companies? How

702
00:41:26,560 --> 00:41:27,080
Speaker 2: many stocks?

703
00:41:27,080 --> 00:41:28,600
Speaker 3: How many stocks are in the S and P five

704
00:41:28,640 --> 00:41:30,879
Speaker 3: hundred and there's also not two thousand in the rust

705
00:41:30,920 --> 00:41:31,440
Speaker 3: of two thousand?

706
00:41:31,560 --> 00:41:33,200
Speaker 2: Are the Wilship five thousands like thirty?

707
00:41:33,680 --> 00:41:35,640
Speaker 3: Well, yeah, the Wilshire five thousand used to be about

708
00:41:35,680 --> 00:41:39,120
Speaker 3: eight thousand stocks and now there's just fewer stocks.

709
00:41:39,080 --> 00:41:42,720
Speaker 2: Roughly absolutely coming up, we continue our conversation with Lysanne

710
00:41:42,760 --> 00:41:48,919
Speaker 2: Sonder's market strategist for Schwab discussing the current environment. I'm

711
00:41:48,920 --> 00:42:03,560
Speaker 2: Barry Rittalls. You're listening to Masters in Business on Bloomberg Radio.

712
00:42:05,320 --> 00:42:08,560
Speaker 2: I'm Barry Ridults. You're listening to Master some Business on

713
00:42:08,600 --> 00:42:12,080
Speaker 2: Bloomberg Radio. My extra special guest this week is les

714
00:42:12,080 --> 00:42:16,759
Speaker 2: Ane Soanders. She is the chief market strategist at Schwab,

715
00:42:17,040 --> 00:42:22,560
Speaker 2: helping to oversee eleven trillion dollars in change in client assets.

716
00:42:23,280 --> 00:42:25,560
Speaker 2: So I went back and looked at my notes. The

717
00:42:25,680 --> 00:42:29,360
Speaker 2: last time we had a conversation like this was spring

718
00:42:29,440 --> 00:42:32,840
Speaker 2: of twenty twenty four, was six months before the election.

719
00:42:33,440 --> 00:42:36,600
Speaker 2: I don't think the election surprised many people. It sort

720
00:42:36,640 --> 00:42:39,960
Speaker 2: of felt like that was inevitable. Maybe that's a little

721
00:42:39,960 --> 00:42:43,760
Speaker 2: bit of hindsight bias. How has this year played out

722
00:42:43,960 --> 00:42:47,400
Speaker 2: since January twentieth relative to expectations?

723
00:42:47,840 --> 00:42:51,640
Speaker 3: Well, you know, let's focus on not so much the

724
00:42:51,719 --> 00:42:55,240
Speaker 3: beginning of the year, but the setup going into April second.

725
00:42:55,360 --> 00:42:58,880
Speaker 3: I think that was a pivotal point because we knew

726
00:42:59,080 --> 00:43:01,879
Speaker 3: tariffs were coming. But I think there was complacency as

727
00:43:01,920 --> 00:43:04,400
Speaker 3: to what the announcement would be on April second, an

728
00:43:04,440 --> 00:43:07,000
Speaker 3: assumption that, okay, ten percent across the board tariffs. It's

729
00:43:07,040 --> 00:43:08,400
Speaker 3: kind of built into expectations.

730
00:43:08,520 --> 00:43:11,759
Speaker 2: You call it complacency. I call it a failure of imagination.

731
00:43:12,040 --> 00:43:16,319
Speaker 3: Because afterwhids failure to imagine the cheesecake factory menu being

732
00:43:16,360 --> 00:43:20,640
Speaker 3: held up, and reciprocal tariffs of a massive size.

733
00:43:21,239 --> 00:43:24,760
Speaker 2: Yeah, right, Because you think about it, he talked about tariffs.

734
00:43:25,160 --> 00:43:27,440
Speaker 2: I called himself tariff man. It's the most beautiful in

735
00:43:27,440 --> 00:43:31,279
Speaker 2: the dictionary. None of us imagined that he would just and.

736
00:43:31,960 --> 00:43:36,319
Speaker 3: That reciprocity wasn't about tariffs that other countries had as

737
00:43:36,400 --> 00:43:40,720
Speaker 3: part of their policy, but reciprocity relative to trade deficits,

738
00:43:40,960 --> 00:43:43,959
Speaker 3: and the confusion that that brought about when you think

739
00:43:44,000 --> 00:43:47,400
Speaker 3: about there are many countries, particularly.

740
00:43:47,040 --> 00:43:49,640
Speaker 2: Smaller Vietnam is the classic using.

741
00:43:49,680 --> 00:43:52,839
Speaker 3: But also you know the Madagascar and Bangladesh. We're never

742
00:43:52,920 --> 00:43:55,640
Speaker 3: going to have a trade surplus. They can't afford to

743
00:43:55,680 --> 00:43:58,960
Speaker 3: buy thirteeny and in the case of you know, a

744
00:43:59,000 --> 00:44:01,520
Speaker 3: place like Madagascar are they produce most of the vanilla

745
00:44:01,560 --> 00:44:05,400
Speaker 3: in the world. That gives them literally and figuratively an industry,

746
00:44:05,840 --> 00:44:08,399
Speaker 3: and they can't afford to buy what we export, which

747
00:44:08,440 --> 00:44:10,799
Speaker 3: is much more value add So I think that was

748
00:44:10,840 --> 00:44:12,480
Speaker 3: a big surprise factor.

749
00:44:13,200 --> 00:44:16,880
Speaker 2: A math effectively a conceptual math error.

750
00:44:17,000 --> 00:44:20,399
Speaker 3: Yeah, and of course running trade deficits. The other side

751
00:44:20,440 --> 00:44:22,960
Speaker 3: of that is a capital a count surplus, so we

752
00:44:23,680 --> 00:44:26,839
Speaker 3: export dollars into the rest of the world, and those

753
00:44:26,880 --> 00:44:28,480
Speaker 3: dollars have to be put to work, and they get

754
00:44:28,480 --> 00:44:32,839
Speaker 3: put in some and equities, and so I think that

755
00:44:33,000 --> 00:44:38,080
Speaker 3: became a significant concern. I also have been really shocked

756
00:44:38,120 --> 00:44:44,080
Speaker 3: Berry at how the general public doesn't understand literally who

757
00:44:44,160 --> 00:44:45,040
Speaker 3: pays the tariffs.

758
00:44:45,360 --> 00:44:47,480
Speaker 2: It's a vat tax, it's evaluated tax.

759
00:44:47,520 --> 00:44:50,520
Speaker 3: On the first time, I decided, I was speaking to

760
00:44:50,640 --> 00:44:55,359
Speaker 3: an audience in Naples, Florida in the spring that well

761
00:44:55,360 --> 00:44:59,040
Speaker 3: to do audience, so assuming they have some investment expertise,

762
00:44:59,120 --> 00:45:03,880
Speaker 3: but we're we're not deep in the import export business.

763
00:45:03,880 --> 00:45:05,880
Speaker 3: And I decided, let me just lay out the actual

764
00:45:05,880 --> 00:45:09,680
Speaker 3: definition of tariffs. I said, notwithstanding the shorthanded headlines of

765
00:45:09,719 --> 00:45:12,680
Speaker 3: tariffs on China, tariffs on Mexico fill in the blank,

766
00:45:13,239 --> 00:45:16,760
Speaker 3: tariffs are paid by the US company importing the goods,

767
00:45:16,760 --> 00:45:19,880
Speaker 3: are not paid by the targeted country. It is not

768
00:45:20,040 --> 00:45:22,439
Speaker 3: the case that, as I've heard from friends who didn't

769
00:45:22,520 --> 00:45:25,080
Speaker 3: understand how this work, that in order for China to

770
00:45:25,080 --> 00:45:27,399
Speaker 3: export goods into the United States, China has to pay

771
00:45:27,400 --> 00:45:29,560
Speaker 3: a tariff to the United States. Barry, do you know

772
00:45:29,560 --> 00:45:31,640
Speaker 3: how many people came up to me after that event

773
00:45:31,680 --> 00:45:35,600
Speaker 3: and said I had no idea, and that's what's a

774
00:45:35,600 --> 00:45:40,000
Speaker 3: little frustrating because there's still that shorthand and at times

775
00:45:40,120 --> 00:45:44,280
Speaker 3: when there are comments made by the administration that China

776
00:45:44,400 --> 00:45:46,640
Speaker 3: again fill in the blank of the country paying us

777
00:45:46,680 --> 00:45:49,600
Speaker 3: more in tariffs, it's the US company. It's a tax

778
00:45:49,680 --> 00:45:55,040
Speaker 3: on US companies. Now a valid debate is who ultimately

779
00:45:55,080 --> 00:45:58,560
Speaker 3: bears the cost and is it the exporters that will

780
00:45:58,600 --> 00:46:00,919
Speaker 3: lower their price to offset the tariff that the US

781
00:46:01,000 --> 00:46:03,920
Speaker 3: company has to pay. Very little indication that that is happening.

782
00:46:04,239 --> 00:46:06,440
Speaker 3: And then of course it's do companies need it in

783
00:46:06,480 --> 00:46:08,839
Speaker 3: their profit margins or do they pass it on to.

784
00:46:09,280 --> 00:46:12,480
Speaker 2: But either way, either companies are going to have lower profits,

785
00:46:12,520 --> 00:46:16,719
Speaker 2: which means the stock market could support a lower pe multiple,

786
00:46:17,040 --> 00:46:21,200
Speaker 2: or there's only so many dollars it's finite, right if

787
00:46:21,280 --> 00:46:23,919
Speaker 2: they're so what we saw, we saw this is taking

788
00:46:23,960 --> 00:46:28,319
Speaker 2: place in three steps in anticipation of the tariffs going

789
00:46:28,320 --> 00:46:31,800
Speaker 2: into effect, and especially with the ninety eight pason.

790
00:46:31,600 --> 00:46:33,879
Speaker 3: April well, so that was the thing that has happened.

791
00:46:34,120 --> 00:46:36,160
Speaker 2: Excess import inventory.

792
00:46:35,680 --> 00:46:39,719
Speaker 3: Bill one week from April second to the intra day

793
00:46:39,760 --> 00:46:42,600
Speaker 3: low on April ninth, there was sort of a complete

794
00:46:42,600 --> 00:46:45,640
Speaker 3: about phase. So what none of US can do is

795
00:46:45,719 --> 00:46:48,960
Speaker 3: try to gauge what the next social media post is

796
00:46:49,000 --> 00:46:52,560
Speaker 3: going to be. There's been so many fits and starts

797
00:46:52,600 --> 00:46:57,920
Speaker 3: from a tariff perspective, whether it's delays, tariffs coming down exceptions.

798
00:46:58,600 --> 00:47:01,600
Speaker 3: This has been an elongate process. It was certainly wasn't

799
00:47:01,640 --> 00:47:03,560
Speaker 3: a moment in time kind of thing. But what we

800
00:47:03,600 --> 00:47:07,440
Speaker 3: can analyze, especially as as a strategist, are the setups.

801
00:47:07,600 --> 00:47:11,640
Speaker 3: So we already talked about the setup going into April. Second, well,

802
00:47:11,680 --> 00:47:16,520
Speaker 3: the setup shifted very quickly, so you went from complacent

803
00:47:16,680 --> 00:47:18,240
Speaker 3: sentiment to despairing sentiment.

804
00:47:18,440 --> 00:47:20,920
Speaker 2: You had a VIXA in the low teens that spiked

805
00:47:21,000 --> 00:47:24,719
Speaker 2: up by thirty and I want on the eighth, I

806
00:47:24,800 --> 00:47:27,000
Speaker 2: wanted to buy, and I'm like, I have no idea,

807
00:47:27,040 --> 00:47:28,680
Speaker 2: what the hell the next tweet is going to be?

808
00:47:29,160 --> 00:47:32,359
Speaker 2: Can I really put money in my personal account put

809
00:47:32,400 --> 00:47:35,719
Speaker 2: money on at risk that could be destroyed by it.

810
00:47:35,760 --> 00:47:39,120
Speaker 3: But then then you had the market technically oversold, breath

811
00:47:39,160 --> 00:47:42,400
Speaker 3: and fully washed out. So then you get the really

812
00:47:42,600 --> 00:47:46,600
Speaker 3: just incrementally positive newsday on April night and off to

813
00:47:46,680 --> 00:47:49,040
Speaker 3: the races. But then you had the power of the

814
00:47:49,040 --> 00:47:52,880
Speaker 3: retail trader and that cohort has become unbelievably power powerful,

815
00:47:53,200 --> 00:47:55,759
Speaker 3: representing somewhere in the twenty to twenty five percent of

816
00:47:55,840 --> 00:47:59,960
Speaker 3: daily trading volume, and that by the dip mentality was

817
00:48:00,120 --> 00:48:02,799
Speaker 3: such a fuel for the market. What concerns me a

818
00:48:02,840 --> 00:48:05,640
Speaker 3: little bit now is if I track a lot of

819
00:48:05,640 --> 00:48:09,160
Speaker 3: the baskets to track like micro baskets of stocks, Goldman

820
00:48:09,239 --> 00:48:12,280
Speaker 3: has a lot of them, Ubs has the Meme stock basket.

821
00:48:12,320 --> 00:48:15,000
Speaker 3: You go back to that inter day low on April ninth,

822
00:48:15,560 --> 00:48:20,120
Speaker 3: and it's baskets like the Memes, nonprofitable tech, heavily shorted stocks.

823
00:48:20,719 --> 00:48:23,840
Speaker 3: That is the perfect example of retail traders kind of

824
00:48:23,880 --> 00:48:27,120
Speaker 3: powering this market higher. And in the heavily shorted piece

825
00:48:27,200 --> 00:48:31,080
Speaker 3: of that, it's also suggested maybe of retail traders with

826
00:48:31,160 --> 00:48:33,360
Speaker 3: a little bit of the stiket to the man which

827
00:48:33,520 --> 00:48:37,440
Speaker 3: which throw the initial Meme stock plays back in twenty

828
00:48:37,480 --> 00:48:42,240
Speaker 3: twenty one thing. Yeah, and it's it's alive and well again.

829
00:48:42,400 --> 00:48:47,160
Speaker 3: It actually has forced institutions in some cases to cover shorts,

830
00:48:47,160 --> 00:48:50,319
Speaker 3: which has added to the fuel. Now, I think as

831
00:48:50,360 --> 00:48:53,600
Speaker 3: we think about the setup, we're arguably back in a

832
00:48:53,840 --> 00:48:59,080
Speaker 3: similar pre April second a bit of complacency and which

833
00:48:59,120 --> 00:49:02,080
Speaker 3: maybe means vulnerability to the extent you get some sort

834
00:49:02,080 --> 00:49:02,799
Speaker 3: of negative cost.

835
00:49:03,239 --> 00:49:05,319
Speaker 2: So that's where I wanted to go. Since we're talking

836
00:49:05,320 --> 00:49:08,480
Speaker 2: about the current environment. It felt like a lot of

837
00:49:08,560 --> 00:49:12,919
Speaker 2: savvy companies loaded up on inventory in that ninety day

838
00:49:13,000 --> 00:49:16,839
Speaker 2: pause front run of the tariffs right exactly, and then

839
00:49:16,960 --> 00:49:21,120
Speaker 2: they were capable until that ran down of not really

840
00:49:21,160 --> 00:49:25,000
Speaker 2: being affected by tariffs. And then even as the tariffs

841
00:49:25,040 --> 00:49:29,319
Speaker 2: started to bite, they see it seemed like they were

842
00:49:29,400 --> 00:49:33,400
Speaker 2: eating the increase and not passing it along. But that

843
00:49:33,440 --> 00:49:35,880
Speaker 2: can only go on for so long. It feels like

844
00:49:35,960 --> 00:49:38,480
Speaker 2: the next phase is consumers are going to pay.

845
00:49:38,480 --> 00:49:42,040
Speaker 3: And to your point, Barry, there there wasn't much of

846
00:49:42,080 --> 00:49:45,560
Speaker 3: that eating it at the early stages because of that

847
00:49:45,600 --> 00:49:50,279
Speaker 3: inventory build by front running the tariffs and building inventories

848
00:49:50,280 --> 00:49:55,399
Speaker 3: at a low cost basis providing some time flexibility around

849
00:49:55,719 --> 00:49:57,560
Speaker 3: when to make the decision of eating it and the

850
00:49:57,560 --> 00:50:01,040
Speaker 3: profit margins or passing it on to the consumers. We're

851
00:50:01,080 --> 00:50:04,360
Speaker 3: now starting to see attempts to pass on to the consumer.

852
00:50:04,480 --> 00:50:07,439
Speaker 3: But maybe the more interesting thing to consider right now

853
00:50:07,560 --> 00:50:11,600
Speaker 3: is so much focus on goods that are impacted by tariffs,

854
00:50:11,880 --> 00:50:14,279
Speaker 3: what's the rate of inflation in those goods? Trying to

855
00:50:14,400 --> 00:50:17,880
Speaker 3: gauge the tariff impact on the inflation statistics. But what

856
00:50:18,080 --> 00:50:22,000
Speaker 3: we're also starting to see is demand destruction and switching

857
00:50:22,000 --> 00:50:23,880
Speaker 3: on the part of consumers. So I think we have

858
00:50:24,000 --> 00:50:28,320
Speaker 3: to analyze the impact of tariffs in a parallel fashion,

859
00:50:28,560 --> 00:50:31,920
Speaker 3: not just gauging what the inflation impact is. And you

860
00:50:31,960 --> 00:50:34,799
Speaker 3: can do that by separating out goods and services within

861
00:50:34,840 --> 00:50:38,439
Speaker 3: the goods categories of an inflation metric like CPI look

862
00:50:38,480 --> 00:50:41,320
Speaker 3: at those that are directly impacted by tariffs, not impacted

863
00:50:41,320 --> 00:50:44,680
Speaker 3: by tariffs, but there's the demands destruction side of things.

864
00:50:44,760 --> 00:50:48,839
Speaker 3: So we track the weekly consumer spending data, and if

865
00:50:48,880 --> 00:50:52,799
Speaker 3: you separate that into tariff impacted categories, that's where you're

866
00:50:52,800 --> 00:50:54,360
Speaker 3: seeing a compression in that spend.

867
00:50:54,440 --> 00:50:57,360
Speaker 2: So to be fair, when you look at the US

868
00:50:57,400 --> 00:51:00,719
Speaker 2: as a thirty thirty one trillion dollar economy, when you

869
00:51:00,760 --> 00:51:03,960
Speaker 2: look at the value of imported and by the way,

870
00:51:03,960 --> 00:51:07,360
Speaker 2: that economy is much more services than goods oriented, and

871
00:51:07,400 --> 00:51:10,480
Speaker 2: then you look at the percentage of goods that are imported,

872
00:51:11,520 --> 00:51:14,799
Speaker 2: it's a trillion or two trillion out of I know

873
00:51:14,880 --> 00:51:17,840
Speaker 2: it sounds crazy to say, eh, what's a trillion, but

874
00:51:17,920 --> 00:51:21,120
Speaker 2: it's a trillion out of thirty plus trillion dollars. So

875
00:51:21,440 --> 00:51:24,640
Speaker 2: the worst case scenario is it takes a quarter or

876
00:51:24,719 --> 00:51:27,879
Speaker 2: half a point out of GDP but probably doesn't tip

877
00:51:27,960 --> 00:51:30,320
Speaker 2: us into a recession. Is that a fair way to

878
00:51:30,360 --> 00:51:30,759
Speaker 2: describe it.

879
00:51:30,800 --> 00:51:33,560
Speaker 3: Yeah, in and of itself, it probably doesn't. But there's,

880
00:51:33,880 --> 00:51:37,560
Speaker 3: you know, the feedback loop that happens if company right labor.

881
00:51:37,920 --> 00:51:41,520
Speaker 3: Where if companies because they don't have that ability to

882
00:51:41,600 --> 00:51:44,840
Speaker 3: pass most of it onto consumers in part because of

883
00:51:44,880 --> 00:51:47,560
Speaker 3: the demand destruction that I'm talking about, then there's that

884
00:51:47,640 --> 00:51:50,520
Speaker 3: eating and profit margins, and then does that feed into

885
00:51:50,560 --> 00:51:52,399
Speaker 3: the labor market side of things. I think that's why

886
00:51:52,440 --> 00:51:55,640
Speaker 3: the FED did what it did, the risk, the risk management,

887
00:51:55,719 --> 00:51:58,239
Speaker 3: the insurance cut to try to stem ay weakness in

888
00:51:58,280 --> 00:51:59,000
Speaker 3: the labor circuit.

889
00:51:59,080 --> 00:52:01,560
Speaker 2: So let's talk about the crosscurrents since you do both

890
00:52:01,600 --> 00:52:05,200
Speaker 2: markets and the economy. We've had a softening labor market,

891
00:52:05,239 --> 00:52:06,960
Speaker 2: at least in the past few months, and then the

892
00:52:07,000 --> 00:52:12,640
Speaker 2: whole I don't know if that re statement is precise,

893
00:52:12,840 --> 00:52:16,560
Speaker 2: but it certainly makes it clear we were too optimistic

894
00:52:16,600 --> 00:52:20,400
Speaker 2: about the labor market over the past four quarters. Inflation

895
00:52:21,320 --> 00:52:25,160
Speaker 2: sort of residual, sticky inflation that hasn't come down to

896
00:52:25,239 --> 00:52:28,839
Speaker 2: the FEDS two percent target. We can argue about whether

897
00:52:28,880 --> 00:52:30,959
Speaker 2: that really should be a three percent target, but hold

898
00:52:30,960 --> 00:52:35,320
Speaker 2: that aside. Yet at the same time, we see corporate

899
00:52:35,320 --> 00:52:39,720
Speaker 2: profits continue to grow and markets making new all times highs,

900
00:52:39,840 --> 00:52:44,560
Speaker 2: which that combination expanding profits all time price hise tends

901
00:52:44,560 --> 00:52:47,520
Speaker 2: to be bullish historically. How do you navigate all of

902
00:52:47,520 --> 00:52:48,960
Speaker 2: these positives and negatives?

903
00:52:49,040 --> 00:52:53,200
Speaker 3: Well, here's one way to think about the connectivity between

904
00:52:53,239 --> 00:52:56,720
Speaker 3: the market and the economy. I think it's very circular

905
00:52:56,800 --> 00:52:59,920
Speaker 3: right now, or maybe chicken and egg. And what does

906
00:53:00,000 --> 00:53:03,440
Speaker 3: does make me harken back to the late nineteen nineties

907
00:53:03,600 --> 00:53:05,760
Speaker 3: as a bit of a comp to the current environment.

908
00:53:05,760 --> 00:53:07,759
Speaker 3: It's not so much is it a bubble? And there's

909
00:53:07,760 --> 00:53:10,279
Speaker 3: more there there in the AI world.

910
00:53:10,120 --> 00:53:12,000
Speaker 2: A lot of revenue, a lot of actual.

911
00:53:11,680 --> 00:53:17,800
Speaker 3: Denominator in the valuation equations, right, Not clicks and eyeballs,

912
00:53:17,840 --> 00:53:20,239
Speaker 3: not every company just adding dot com, you know, to

913
00:53:20,280 --> 00:53:24,319
Speaker 3: the end of their name, but the wealth effect. And

914
00:53:24,400 --> 00:53:27,799
Speaker 3: it's chicken and egg. And what makes me think back

915
00:53:27,840 --> 00:53:30,680
Speaker 3: to the late nineteen nineties is in that ninety nine

916
00:53:30,840 --> 00:53:34,320
Speaker 3: blowoff into the peak in two thousand, whether it was

917
00:53:34,400 --> 00:53:37,400
Speaker 3: valuation metrics like the Buffet model, which looks at total

918
00:53:37,440 --> 00:53:40,759
Speaker 3: market cap of all US stocks as a share of

919
00:53:40,880 --> 00:53:41,959
Speaker 3: total GDP.

920
00:53:41,800 --> 00:53:44,480
Speaker 2: Which is at all time highs which and way.

921
00:53:44,520 --> 00:53:46,680
Speaker 3: Higher than it was back at the peak in ninety

922
00:53:46,760 --> 00:53:49,480
Speaker 3: nine or two thousand. At the time, households exposure to

923
00:53:49,520 --> 00:53:52,759
Speaker 3: equities as a share of their financial assets well at

924
00:53:52,800 --> 00:53:56,280
Speaker 3: an all time high, significantly higher. So if we remember

925
00:53:56,760 --> 00:53:59,560
Speaker 3: when the market topped out in March of two thousand

926
00:54:00,120 --> 00:54:01,640
Speaker 3: and then we started what was a two and a

927
00:54:01,640 --> 00:54:04,360
Speaker 3: half year bear market, we ended up getting a recession

928
00:54:04,400 --> 00:54:07,120
Speaker 3: declared in two thousand and one. It was a very

929
00:54:07,160 --> 00:54:10,400
Speaker 3: mild recession. It was one of the proof points which

930
00:54:10,600 --> 00:54:13,840
Speaker 3: for what I always say, drives me crazy that people

931
00:54:13,880 --> 00:54:17,319
Speaker 3: think of recession as traditionally or classically defined as two

932
00:54:17,360 --> 00:54:19,160
Speaker 3: quarters in a row of GDP. That's never been the

933
00:54:19,160 --> 00:54:23,640
Speaker 3: definition of recession NB. Well, it drives me crazy. And

934
00:54:23,640 --> 00:54:26,920
Speaker 3: in fact, one with the benefit of revisions, wasn't two

935
00:54:27,000 --> 00:54:29,160
Speaker 3: quarters in a row of negative GDP?

936
00:54:29,760 --> 00:54:32,359
Speaker 2: Same thing? In twenty twenty two people were talking about

937
00:54:32,400 --> 00:54:33,360
Speaker 2: it the revision.

938
00:54:33,480 --> 00:54:36,640
Speaker 3: The revision took out that one plus plus.

939
00:54:36,680 --> 00:54:40,560
Speaker 2: When you have a spike in inflation, it's not that

940
00:54:40,600 --> 00:54:43,560
Speaker 2: the economy is contracting, it's that we back.

941
00:54:43,360 --> 00:54:44,800
Speaker 3: Out increase exactly.

942
00:54:44,880 --> 00:54:48,280
Speaker 2: The economy is so hog that inflation makes it look negative.

943
00:54:48,640 --> 00:54:51,640
Speaker 2: It's not a contraction, it's just a price problem.

944
00:54:51,680 --> 00:54:54,800
Speaker 3: But that one recession was actually very mild.

945
00:54:55,000 --> 00:54:58,000
Speaker 2: Began in March, I think ended in October.

946
00:54:58,200 --> 00:55:02,520
Speaker 3: Short, it was mild. There was not really a financial

947
00:55:02,640 --> 00:55:06,319
Speaker 3: system crisis. It wasn't a credit crunch. I think it

948
00:55:06,400 --> 00:55:09,480
Speaker 3: was the weakness in the stock market caused the economy

949
00:55:09,480 --> 00:55:11,759
Speaker 3: to contract because of the wealth effect at the time.

950
00:55:12,200 --> 00:55:15,279
Speaker 2: I'm going to take it just a step further. I

951
00:55:15,400 --> 00:55:19,239
Speaker 2: have vivid recollections of speaking to people speaking to clients

952
00:55:19,320 --> 00:55:23,040
Speaker 2: or other people's clients in ninety six, ninety seven, ninety eight,

953
00:55:23,120 --> 00:55:26,880
Speaker 2: ninety nine, who had been in the market for fifteen

954
00:55:26,960 --> 00:55:29,839
Speaker 2: twenty years. Hey, we want to trade up to an

955
00:55:29,840 --> 00:55:32,239
Speaker 2: Isica house. Hey we want to buy a beach house,

956
00:55:32,239 --> 00:55:35,760
Speaker 2: a lake house, a vacation property. And the person said,

957
00:55:35,960 --> 00:55:38,239
Speaker 2: I'm not sure if the market's going to go higher

958
00:55:38,320 --> 00:55:40,760
Speaker 2: from here, but I want to pull half a million

959
00:55:40,760 --> 00:55:43,879
Speaker 2: out of my account and buy real estate. It's like, Hey,

960
00:55:44,160 --> 00:55:45,799
Speaker 2: you're going to have that house for the next twenty

961
00:55:45,840 --> 00:55:48,880
Speaker 2: five to thirty years, even if the market keeps going higher.

962
00:55:48,920 --> 00:55:53,759
Speaker 2: Who cares? You're sitting on such profits. Why not? And

963
00:55:53,840 --> 00:55:56,760
Speaker 2: so I kind of got a sense that it wasn't

964
00:55:56,760 --> 00:56:00,720
Speaker 2: so much the wealth effect as people had heard done

965
00:56:00,840 --> 00:56:04,839
Speaker 2: the big buys before the market crash, which tends to

966
00:56:05,400 --> 00:56:09,200
Speaker 2: freeze people in place. So I saw a lot of

967
00:56:09,320 --> 00:56:13,520
Speaker 2: rotation out of equities just because people were sitting on Look.

968
00:56:13,560 --> 00:56:15,759
Speaker 2: From eighty two to two thousand, the Dow gained a

969
00:56:15,880 --> 00:56:20,520
Speaker 2: thousand percent. People were taking a little of the house

970
00:56:20,560 --> 00:56:24,120
Speaker 2: money off the table and lending the less. The rest ride,

971
00:56:24,560 --> 00:56:27,520
Speaker 2: and then the dot com implosion, I want to say

972
00:56:27,560 --> 00:56:30,719
Speaker 2: eighty to eighty three percent peaked a troth on Nasdaq.

973
00:56:30,840 --> 00:56:36,080
Speaker 2: On the queues, yeah, the S and P. Yeah, And

974
00:56:36,120 --> 00:56:38,759
Speaker 2: the Dow held up the best because it was least

975
00:56:38,800 --> 00:56:42,720
Speaker 2: exposed back then before Microsoft and Intel.

976
00:56:42,280 --> 00:56:46,319
Speaker 3: And price waited not capital right, that's right. So well,

977
00:56:46,360 --> 00:56:49,040
Speaker 3: I just think we and again it's a bit circular

978
00:56:49,680 --> 00:56:52,640
Speaker 3: in that, you know, if and when we get another

979
00:56:52,640 --> 00:56:57,080
Speaker 3: bear market, we essentially had one this year, just missed

980
00:56:57,120 --> 00:57:00,440
Speaker 3: it on the S and P the index level. But

981
00:57:00,680 --> 00:57:05,000
Speaker 3: here's here's another set of statistics. The average max the

982
00:57:05,120 --> 00:57:08,560
Speaker 3: average member maximum draw down for the S and P

983
00:57:08,680 --> 00:57:11,120
Speaker 3: year to date is twenty four percent. The average member

984
00:57:11,160 --> 00:57:14,040
Speaker 3: has had a bear market. The average member within the

985
00:57:14,120 --> 00:57:18,680
Speaker 3: NASDAQS maximum draw down is forty seven percent. Wow, now

986
00:57:19,080 --> 00:57:23,160
Speaker 3: you want cap weighted, well, the average member just each

987
00:57:23,200 --> 00:57:27,520
Speaker 3: individual member was there? No, because it's individual members, you

988
00:57:27,640 --> 00:57:31,120
Speaker 3: just track what each member maximum draw down was at

989
00:57:31,120 --> 00:57:33,080
Speaker 3: any point and then take an average of that. But

990
00:57:33,200 --> 00:57:35,960
Speaker 3: here's the maybe more interesting one. In an environment since

991
00:57:36,040 --> 00:57:38,880
Speaker 3: the April ninth inter day low, we haven't had much

992
00:57:39,080 --> 00:57:41,800
Speaker 3: any kind of pullback in either the SMP or the Nasdaq,

993
00:57:42,200 --> 00:57:44,840
Speaker 3: But just since that low, in an environment where the

994
00:57:44,880 --> 00:57:47,880
Speaker 3: SMP hasn't even had a two percent pullback, the average

995
00:57:47,960 --> 00:57:51,240
Speaker 3: member within the s and P since the closing low

996
00:57:51,280 --> 00:57:54,120
Speaker 3: on April eighth, has had a fourteen percent maximum draw

997
00:57:54,160 --> 00:57:56,520
Speaker 3: down and within the Nasdaq has had a thirty two

998
00:57:56,560 --> 00:57:58,920
Speaker 3: percent maximum draw down. So there's a lot of rotation

999
00:57:59,040 --> 00:58:01,480
Speaker 3: in churn under the surf, which you don't pick up

1000
00:58:01,520 --> 00:58:06,080
Speaker 3: if you're only focused on the index level, which has

1001
00:58:06,120 --> 00:58:07,440
Speaker 3: that cat bias to it.

1002
00:58:08,320 --> 00:58:12,120
Speaker 2: That's amazing. So last question before I get to my favorites.

1003
00:58:13,360 --> 00:58:15,120
Speaker 2: We're talking about a lot of things that are in

1004
00:58:15,160 --> 00:58:18,640
Speaker 2: the headlines. What do you think investors are not thinking

1005
00:58:18,680 --> 00:58:23,720
Speaker 2: about or talking about, but perhaps should be what topics, assets,

1006
00:58:24,160 --> 00:58:24,880
Speaker 2: data points?

1007
00:58:25,360 --> 00:58:28,320
Speaker 3: There was one I thought about this morning, and it's

1008
00:58:28,360 --> 00:58:30,840
Speaker 3: not so much what people aren't talking about, so I'm

1009
00:58:30,840 --> 00:58:32,680
Speaker 3: going to answer in a different way. It's what I

1010
00:58:32,720 --> 00:58:35,680
Speaker 3: hear a lot of people talking about. That isn't quite

1011
00:58:36,680 --> 00:58:38,760
Speaker 3: the right way to think about it, And that is

1012
00:58:38,800 --> 00:58:40,480
Speaker 3: the cash on the sidelines argument.

1013
00:58:41,720 --> 00:58:44,600
Speaker 2: So zwy hated that, and I'm not a fan either.

1014
00:58:44,480 --> 00:58:47,840
Speaker 3: But it often the specificity around that has to do

1015
00:58:47,920 --> 00:58:49,000
Speaker 3: with the amount of money.

1016
00:58:48,760 --> 00:58:53,640
Speaker 2: And money market seven.

1017
00:58:51,800 --> 00:58:55,840
Speaker 3: Trillion and change, and that that is sitting there as

1018
00:58:56,400 --> 00:59:00,840
Speaker 3: either if not imminent, but ample fuel. If that money

1019
00:59:00,880 --> 00:59:05,120
Speaker 3: decides to repatriate from money markets into the equity market, boy,

1020
00:59:05,200 --> 00:59:06,160
Speaker 3: we go off to the race.

1021
00:59:06,240 --> 00:59:08,160
Speaker 2: That money mostly come from bonds?

1022
00:59:08,240 --> 00:59:08,600
Speaker 3: It did?

1023
00:59:08,760 --> 00:59:11,400
Speaker 2: You're getting such low yeal in bond so mine.

1024
00:59:11,280 --> 00:59:12,400
Speaker 3: I think a lot of it's sticky.

1025
00:59:12,640 --> 00:59:16,400
Speaker 2: My Schwab money market account last summer. So we bought

1026
00:59:16,400 --> 00:59:20,520
Speaker 2: a house, a beach property in February last summer, I

1027
00:59:20,560 --> 00:59:23,520
Speaker 2: was getting like five three five two in the Schwab

1028
00:59:23,920 --> 00:59:26,480
Speaker 2: What is it? Snock snacks. I don't even remember the symbol.

1029
00:59:26,840 --> 00:59:28,920
Speaker 2: I'm like, why do I need to mess around with

1030
00:59:29,320 --> 00:59:31,520
Speaker 2: ten or twenty year bonds? But getting much better.

1031
00:59:31,720 --> 00:59:35,360
Speaker 3: But here's the other angle to that. If you think

1032
00:59:35,480 --> 00:59:39,520
Speaker 3: of seven trillion dollars as some massive fuel for the market.

1033
00:59:39,960 --> 00:59:42,200
Speaker 3: You need to look at it as a ratio relative

1034
00:59:42,240 --> 00:59:45,520
Speaker 3: to the total market capitalization.

1035
00:59:45,720 --> 00:59:48,080
Speaker 2: And it's gone up less than the stock it's.

1036
00:59:47,880 --> 00:59:52,160
Speaker 3: Only twelve percent all time low. In that the history

1037
00:59:52,200 --> 00:59:54,280
Speaker 3: that we have for that data is eleven percent. To

1038
00:59:54,280 --> 00:59:58,520
Speaker 3: put that in context, in eight oh nine, when money

1039
00:59:58,680 --> 01:00:02,040
Speaker 3: was flying to money markets because it was fleeing the

1040
01:00:02,080 --> 01:00:07,080
Speaker 3: equity market, at the peak money market assets relative to

1041
01:00:07,200 --> 01:00:10,640
Speaker 3: the size of the stock market was more than sixty percent.

1042
01:00:11,680 --> 01:00:13,880
Speaker 3: Now we're only at about twelve percent. So the math

1043
01:00:14,000 --> 01:00:18,040
Speaker 3: is such that even if all seven trillion dollars was

1044
01:00:18,080 --> 01:00:20,640
Speaker 3: to leave on mass and go into the equity market

1045
01:00:21,400 --> 01:00:25,200
Speaker 3: as a fuel at twelve percent of total market cap

1046
01:00:25,320 --> 01:00:28,080
Speaker 3: versus say, you know, sixty three percent of total market

1047
01:00:28,120 --> 01:00:31,600
Speaker 3: cap in nine, that's a very different Not to mention

1048
01:00:32,040 --> 01:00:34,600
Speaker 3: back to our initial point, I think a lot of

1049
01:00:34,600 --> 01:00:37,400
Speaker 3: that money is sticky. That was money that was forced

1050
01:00:37,400 --> 01:00:41,480
Speaker 3: out the risk spectrum into other categories within the fixed

1051
01:00:41,520 --> 01:00:43,800
Speaker 3: income market in order to pick up yield when there

1052
01:00:43,920 --> 01:00:46,440
Speaker 3: was none to be had. So I don't think we

1053
01:00:46,480 --> 01:00:50,320
Speaker 3: should consider that some sidelines cache that is just itching

1054
01:00:50,360 --> 01:00:53,080
Speaker 3: to find its way back into the riskier asset classes.

1055
01:00:53,280 --> 01:00:57,600
Speaker 2: Someone once debunked the cash on the sideline argument, and

1056
01:00:57,640 --> 01:01:00,440
Speaker 2: it might have even been Marty's wig in winning on

1057
01:01:00,520 --> 01:01:04,000
Speaker 2: Wall Street by explaining it this way, Hey, I'm gonna

1058
01:01:04,040 --> 01:01:06,400
Speaker 2: buy a million dollars worth of stock. It means I

1059
01:01:06,400 --> 01:01:09,200
Speaker 2: have a million dollars worth of cash, but no stock.

1060
01:01:09,760 --> 01:01:12,680
Speaker 2: I buy a million of the spy. Now I have

1061
01:01:12,760 --> 01:01:16,439
Speaker 2: the spy and they have a million of care.

1062
01:01:16,560 --> 01:01:17,680
Speaker 3: Every buyer there's a seller.

1063
01:01:18,400 --> 01:01:20,520
Speaker 2: There's no cash on the side line. It just changes

1064
01:01:20,680 --> 01:01:23,440
Speaker 2: hands the same dollar amount. So it's been one of

1065
01:01:23,480 --> 01:01:25,520
Speaker 2: those things that has persisted forever.

1066
01:01:25,600 --> 01:01:28,880
Speaker 3: And they're also the more buyers than sellers. No, no, no, no.

1067
01:01:29,840 --> 01:01:33,400
Speaker 2: That you you are tagging all my favorite pure.

1068
01:01:33,080 --> 01:01:37,720
Speaker 3: There's maybe more enthusiasm on the buy side versus the enthusiastic,

1069
01:01:37,720 --> 01:01:40,520
Speaker 3: but there's no more buyers and sellers vice versa.

1070
01:01:40,640 --> 01:01:43,160
Speaker 2: For my head trader used to say, there are more

1071
01:01:43,200 --> 01:01:45,640
Speaker 2: buyers than sellers at this level, and now you go

1072
01:01:45,720 --> 01:01:48,160
Speaker 2: up to the nice next price level where there are

1073
01:01:48,160 --> 01:01:50,280
Speaker 2: a matching number of buyers and sellers and the price

1074
01:01:50,320 --> 01:01:54,440
Speaker 2: stabilizes if a price is going up. Okay, at that

1075
01:01:54,560 --> 01:01:58,520
Speaker 2: particular at twenty seven to fifty five, there may be

1076
01:01:58,520 --> 01:02:00,919
Speaker 2: more buyers than stock for sale, But at twenty seven

1077
01:02:01,040 --> 01:02:05,360
Speaker 2: seventy five. Then that's how you end up with price stability.

1078
01:02:05,480 --> 01:02:08,320
Speaker 2: So yeah, more buyers and sellers. No, no, they're an

1079
01:02:08,360 --> 01:02:11,400
Speaker 2: equal amount of buyers and sellers. That's how the other

1080
01:02:11,480 --> 01:02:15,120
Speaker 2: line I love has been trade takes place where there's

1081
01:02:15,160 --> 01:02:19,240
Speaker 2: a disagreement about value but an agreement on price. And

1082
01:02:19,280 --> 01:02:22,880
Speaker 2: that seems to really explain that. All right, I have

1083
01:02:22,960 --> 01:02:26,720
Speaker 2: to get you out to catch your plane, so I

1084
01:02:26,760 --> 01:02:28,880
Speaker 2: only have you for a limited amount of time. Let's

1085
01:02:29,080 --> 01:02:33,240
Speaker 2: let's speed through our favorite questions, starting with tell us

1086
01:02:33,240 --> 01:02:35,920
Speaker 2: about your mentors who have helped shape your career. I'm

1087
01:02:35,920 --> 01:02:37,040
Speaker 2: pretty sure I know that too.

1088
01:02:37,720 --> 01:02:41,480
Speaker 3: Shocker, Marty Swag, Yeah, Chuck Schwab okay. And in the

1089
01:02:41,480 --> 01:02:45,760
Speaker 3: world not too shabby, not too shabby mentors, Yeah, boy

1090
01:02:45,960 --> 01:02:48,240
Speaker 3: was I lucky? And I will say in the world

1091
01:02:48,320 --> 01:02:51,520
Speaker 3: of media another name we've already touched on Lewis Rukaiser.

1092
01:02:51,960 --> 01:02:53,920
Speaker 3: One of the best pieces of advice he gave me

1093
01:02:54,040 --> 01:02:55,560
Speaker 3: was was when I was on the show for the

1094
01:02:55,560 --> 01:02:59,600
Speaker 3: first time as a guest and he was saying hello

1095
01:02:59,640 --> 01:03:01,800
Speaker 3: to me for the first time, welcome me onto the show.

1096
01:03:01,840 --> 01:03:03,920
Speaker 3: This was off camera, and he asked me whether my

1097
01:03:03,960 --> 01:03:06,320
Speaker 3: parents were still alive and whether they were finance people,

1098
01:03:06,320 --> 01:03:08,160
Speaker 3: and I said, nope, far from it. He said, okay,

1099
01:03:08,160 --> 01:03:10,560
Speaker 3: when you come out here and do the interview with me,

1100
01:03:11,800 --> 01:03:14,600
Speaker 3: get them to understand what you're talking about. And that

1101
01:03:14,720 --> 01:03:19,240
Speaker 3: was such a moment of Okay, get people to understand what.

1102
01:03:19,160 --> 01:03:22,400
Speaker 2: You're talking that's so funny. My mom was a real

1103
01:03:22,520 --> 01:03:25,320
Speaker 2: estate agent, my wife is an art teacher, and it's

1104
01:03:25,360 --> 01:03:29,280
Speaker 2: always make them understand it. Don't don't don't clutter it

1105
01:03:29,360 --> 01:03:30,200
Speaker 2: up with jargon.

1106
01:03:30,400 --> 01:03:31,800
Speaker 3: That's right, make it ndred percent.

1107
01:03:31,880 --> 01:03:34,960
Speaker 2: Well, that's interesting that it was. It was Rukaiz who

1108
01:03:35,000 --> 01:03:38,080
Speaker 2: said that let's talk about books. I mentions Wyg's winning

1109
01:03:38,120 --> 01:03:40,360
Speaker 2: on Wall Street. What are some of your favorites? What

1110
01:03:40,400 --> 01:03:41,080
Speaker 2: are you reading right now?

1111
01:03:41,160 --> 01:03:43,360
Speaker 3: So my favorite? So I'm not reading a book right now,

1112
01:03:43,680 --> 01:03:45,320
Speaker 3: I must say I don't have a lot of time.

1113
01:03:45,400 --> 01:03:47,960
Speaker 3: I read constantly. I drink from a fire hose of information,

1114
01:03:48,480 --> 01:03:52,400
Speaker 3: but it tends to be you know, like reports, reports

1115
01:03:52,400 --> 01:03:56,160
Speaker 3: and deep dive fed research. But my favorite book of

1116
01:03:56,200 --> 01:03:58,800
Speaker 3: all time, and it is market related, is Reminiscences of

1117
01:03:58,840 --> 01:04:03,240
Speaker 3: a Stop operatorsolute favorite. I tell young people to buy

1118
01:04:03,280 --> 01:04:06,120
Speaker 3: it all the time. It still resonates today.

1119
01:04:06,320 --> 01:04:12,360
Speaker 2: And your substitute AI for railroads and Telegram exactly. It's

1120
01:04:12,400 --> 01:04:12,760
Speaker 2: the same.

1121
01:04:12,800 --> 01:04:15,600
Speaker 3: It's the same, it's the same story. But I am

1122
01:04:15,640 --> 01:04:20,080
Speaker 3: a big podcast listener. Uh huh. So that's the longer

1123
01:04:20,160 --> 01:04:24,560
Speaker 3: form way, including Masters in Business, well that I absorb

1124
01:04:24,680 --> 01:04:29,560
Speaker 3: information beyond the traditional drivers that come into my inbox.

1125
01:04:29,640 --> 01:04:32,040
Speaker 2: Literally, it's easy when you're traveling, if you're on a plane,

1126
01:04:32,120 --> 01:04:34,240
Speaker 2: the car. I just find it's so easy. All right,

1127
01:04:34,280 --> 01:04:36,960
Speaker 2: So you told us what you're what What other podcasts

1128
01:04:36,960 --> 01:04:40,240
Speaker 2: are you listening to? What are you watching on Netflix?

1129
01:04:40,480 --> 01:04:44,840
Speaker 3: I listen to Masters in Business. I love Grant Williams

1130
01:04:44,840 --> 01:04:47,960
Speaker 3: series of podcasts. I love them because their long form

1131
01:04:48,000 --> 01:04:51,919
Speaker 3: and the big picture and top down, my favorite non

1132
01:04:52,000 --> 01:04:55,480
Speaker 3: investing podcast is SmartLess. I just love those.

1133
01:04:55,600 --> 01:04:56,400
Speaker 2: Those guys are great.

1134
01:04:56,480 --> 01:04:58,280
Speaker 3: They're great, They're they're so fun.

1135
01:04:58,400 --> 01:05:02,040
Speaker 2: I'm going to tell you I listened. I've had Michael

1136
01:05:02,080 --> 01:05:03,600
Speaker 2: Lewis on the podcast I have.

1137
01:05:03,840 --> 01:05:07,000
Speaker 3: I have met and have interviewed Michael Lewis on stage

1138
01:05:07,000 --> 01:05:08,240
Speaker 3: at SCHWABS Impact Comfience.

1139
01:05:08,280 --> 01:05:11,560
Speaker 2: And the story he told and I'm not even gonna

1140
01:05:11,600 --> 01:05:14,840
Speaker 2: mention it, the story he told on SmartLess about a

1141
01:05:14,880 --> 01:05:16,360
Speaker 2: family tragedy.

1142
01:05:16,080 --> 01:05:20,280
Speaker 3: Was just it was unbelievable. And what his friends said

1143
01:05:20,280 --> 01:05:22,840
Speaker 3: to him ers therapist said to him, the reason why

1144
01:05:22,920 --> 01:05:26,000
Speaker 3: you're so exhausted after this life's tragedy is in your mind,

1145
01:05:26,040 --> 01:05:30,720
Speaker 3: you're rewriting the future without her, without her right And

1146
01:05:30,880 --> 01:05:34,360
Speaker 3: that was such a moment of wow. But yeah, that

1147
01:05:34,440 --> 01:05:36,680
Speaker 3: was one of the most impactful interviews.

1148
01:05:36,280 --> 01:05:39,000
Speaker 2: I've heard that stayed with me for a long time.

1149
01:05:38,800 --> 01:05:41,640
Speaker 3: In terms of what I'm watching. Well, Morning Show just

1150
01:05:41,720 --> 01:05:42,960
Speaker 3: started back up again.

1151
01:05:42,920 --> 01:05:44,200
Speaker 2: So we'll get back into that.

1152
01:05:44,320 --> 01:05:45,720
Speaker 3: And I loved Department Q.

1153
01:05:47,560 --> 01:05:50,640
Speaker 2: Was it was intense, it was a little slow, but

1154
01:05:50,800 --> 01:05:55,360
Speaker 2: they really it really paid off. If you like Department Q.

1155
01:05:57,200 --> 01:05:59,600
Speaker 2: There's a movie I want to say it's on Netflix

1156
01:05:59,760 --> 01:06:05,200
Speaker 2: call called Black Bag. That's the sort of espionage thing.

1157
01:06:05,760 --> 01:06:10,440
Speaker 2: And I walked in on my wife watching Killing Eve,

1158
01:06:11,760 --> 01:06:12,640
Speaker 2: which she's like.

1159
01:06:12,600 --> 01:06:15,160
Speaker 3: It was great, like a scam. It was great.

1160
01:06:15,720 --> 01:06:18,480
Speaker 2: There's there's been a ton of stuff. We just finished

1161
01:06:18,520 --> 01:06:21,840
Speaker 2: The Gilded Age, which is which that feels modern.

1162
01:06:22,240 --> 01:06:25,880
Speaker 3: I'm obsessed with that era in New York City. I

1163
01:06:25,920 --> 01:06:28,400
Speaker 3: have read every book written about it. I'm just so

1164
01:06:28,400 --> 01:06:30,320
Speaker 3: so that is so right up my alley.

1165
01:06:30,480 --> 01:06:33,760
Speaker 2: So we watched The Crown, but we never watched Dalton

1166
01:06:33,760 --> 01:06:36,640
Speaker 2: Abbey and I all said, oh, you like Gilded Age

1167
01:06:36,680 --> 01:06:40,000
Speaker 2: in the Crown Abbey, so that's on my uh. And

1168
01:06:40,120 --> 01:06:43,080
Speaker 2: during the pandemic, I had never seen a single episode

1169
01:06:43,200 --> 01:06:46,200
Speaker 2: of Madmen, and that was mind blind to watch. That

1170
01:06:46,560 --> 01:06:48,040
Speaker 2: felt like more like a documentary.

1171
01:06:48,080 --> 01:06:49,560
Speaker 3: It's fun to go back and watch some of the

1172
01:06:49,560 --> 01:06:50,160
Speaker 3: old shows.

1173
01:06:50,200 --> 01:06:52,520
Speaker 2: Absolutely, All right, all last two questions. We'll get you

1174
01:06:52,560 --> 01:06:55,760
Speaker 2: out of here on time. A recent college grad is

1175
01:06:55,800 --> 01:06:59,200
Speaker 2: interested in the career and investing or doing market strategy,

1176
01:06:59,280 --> 01:07:01,000
Speaker 2: what sort of advice would you give that?

1177
01:07:01,160 --> 01:07:03,960
Speaker 3: Well, the world you live in and indirectly I live

1178
01:07:04,000 --> 01:07:07,760
Speaker 3: in on the advisor side, that's an incredible growth area

1179
01:07:08,400 --> 01:07:13,520
Speaker 3: in the broader realm of financial services, independent rias, wealth

1180
01:07:13,560 --> 01:07:16,640
Speaker 3: management firms, even the wealth management divisions at the big

1181
01:07:16,640 --> 01:07:22,000
Speaker 3: wirehouse firms, because it's essentially a first generation business and

1182
01:07:22,120 --> 01:07:24,760
Speaker 3: so there's a lot of succession planning happening right now,

1183
01:07:25,080 --> 01:07:28,520
Speaker 3: and I think for young investors that's such a great

1184
01:07:28,560 --> 01:07:32,040
Speaker 3: avenue to go in. More generic advice that I give

1185
01:07:32,120 --> 01:07:34,680
Speaker 3: young people, especially as they embark on the networking and

1186
01:07:34,760 --> 01:07:38,120
Speaker 3: interview part of the process, is be way more focused

1187
01:07:38,160 --> 01:07:43,200
Speaker 3: on being interested than being interesting. Don't go in there

1188
01:07:43,200 --> 01:07:45,160
Speaker 3: and say, here's all the fabulous things have I done,

1189
01:07:45,240 --> 01:07:49,840
Speaker 3: Especially if that's limited to an undergraduate education, but be interested,

1190
01:07:50,120 --> 01:07:54,720
Speaker 3: ask questions, be engaged, show the enthusiasm. That way, you're

1191
01:07:54,720 --> 01:07:57,360
Speaker 3: not bringing something into the mix by virtue of what

1192
01:07:57,520 --> 01:08:00,480
Speaker 3: you know. Econ you know two o eight course took

1193
01:08:00,760 --> 01:08:02,320
Speaker 3: that they think, oh god, we have to hire this

1194
01:08:02,360 --> 01:08:04,880
Speaker 3: person because we don't know anything about that, so we're

1195
01:08:04,920 --> 01:08:06,480
Speaker 3: bringing is be interested?

1196
01:08:06,800 --> 01:08:09,960
Speaker 2: Huh? Really interesting? And our final question, what do you

1197
01:08:10,000 --> 01:08:12,600
Speaker 2: know about the world of investing today? You wish you

1198
01:08:12,680 --> 01:08:16,360
Speaker 2: knew back in the nineteen eighties when you were first

1199
01:08:16,400 --> 01:08:17,160
Speaker 2: getting started.

1200
01:08:18,360 --> 01:08:20,640
Speaker 3: It seemed to be a little bit easier to analyze

1201
01:08:20,680 --> 01:08:25,480
Speaker 3: markets in that day using kind of traditional stuff models.

1202
01:08:27,200 --> 01:08:30,200
Speaker 3: To think now about how much more of an influence

1203
01:08:30,280 --> 01:08:34,479
Speaker 3: there is of geopolitics and macro and how much more

1204
01:08:34,520 --> 01:08:39,040
Speaker 3: complicated an ecosystem, not to mention the channels of information

1205
01:08:39,200 --> 01:08:42,760
Speaker 3: that occur through social media. I kind of wish it

1206
01:08:42,840 --> 01:08:46,519
Speaker 3: was back to what at the time didn't feel terribly simple,

1207
01:08:47,040 --> 01:08:50,559
Speaker 3: but I think then was a little bit more simple

1208
01:08:50,600 --> 01:08:54,280
Speaker 3: and more concrete in terms of what drives markets. I

1209
01:08:54,280 --> 01:08:58,160
Speaker 3: think there's more psychology now with a wider band of

1210
01:08:58,200 --> 01:09:01,640
Speaker 3: what that means and what that represents months, and it

1211
01:09:01,680 --> 01:09:04,400
Speaker 3: would have been interesting to kind of know that in advance,

1212
01:09:04,479 --> 01:09:07,840
Speaker 3: the little birdie landing on your shoulder, saying, Here's what

1213
01:09:08,720 --> 01:09:10,280
Speaker 3: I don't know if I would have believed that forty

1214
01:09:10,360 --> 01:09:12,439
Speaker 3: years from that point, I'd still be doing this. But

1215
01:09:13,560 --> 01:09:18,240
Speaker 3: just how much more complex an ecosystem that the markets

1216
01:09:18,280 --> 01:09:19,120
Speaker 3: live in these days?

1217
01:09:19,320 --> 01:09:23,200
Speaker 2: Huh? Really interesting? Lizanne as always delightful. Thank you so

1218
01:09:23,320 --> 01:09:28,080
Speaker 2: much for with your time' always really really interesting. We

1219
01:09:28,280 --> 01:09:31,320
Speaker 2: have been speaking with liz Ane Saunders. She is the

1220
01:09:31,439 --> 01:09:37,200
Speaker 2: chief investment strategist at Schwab, helping to oversee eleven trillion

1221
01:09:37,280 --> 01:09:41,479
Speaker 2: dollars in client funds. If you enjoy this conversation, well

1222
01:09:41,640 --> 01:09:44,080
Speaker 2: check out any of the five hundred and sixty four

1223
01:09:44,560 --> 01:09:47,240
Speaker 2: we've done over the past eleven and a half years.

1224
01:09:47,680 --> 01:09:53,280
Speaker 2: You can find those at YouTube, Spotify, Bloomberg, iTunes, wherever

1225
01:09:53,360 --> 01:09:56,360
Speaker 2: you get your favorite podcasts. Be sure to check out

1226
01:09:56,400 --> 01:09:59,839
Speaker 2: my new book How Not to Invest The ideas, numbers

1227
01:09:59,840 --> 01:10:03,800
Speaker 2: and behavior that destroyed wealth and How to Avoid Them

1228
01:10:03,840 --> 01:10:07,120
Speaker 2: at your favorite bookstore. Now, I would be remiss if

1229
01:10:07,120 --> 01:10:09,400
Speaker 2: I did not thank the Crack staff that helps put

1230
01:10:09,439 --> 01:10:15,800
Speaker 2: these conversations together each week. Alexis Noriega is my video producer.

1231
01:10:15,960 --> 01:10:19,640
Speaker 2: Anna Luke is the podcast producer. Sage Bauman is the

1232
01:10:19,680 --> 01:10:23,760
Speaker 2: head of podcasts here at Bloomberg. Sean Russo is my researcher.

1233
01:10:24,439 --> 01:10:28,160
Speaker 2: I'm Barry Ritolts. You've been listening to Masters in Business

1234
01:10:28,520 --> 01:10:34,559
Speaker 2: on Bloomberg Radio.