Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.
Speaker 1: My guest today is somebody who I know for a
Speaker 1: very long time. Her name is liz Ane Sandres, and
Speaker 1: she's the chief market strategist for a little outfit called
Speaker 1: Charles Schwab that is running several trillion dollars in client assets.
Speaker 1: Way back when I began doing media, the very first
Speaker 1: television show I did was with a gentleman named Larry Cudlow,
Speaker 1: and it was done in this tiny, little hole of
Speaker 1: a studio in Englewood, New Jersey. Not the big, giant
Speaker 1: modern studio that you know today, but it was really
Speaker 1: kind of a small office park. And I had showed up,
Speaker 1: probably a little early because of traffic getting there from Manhattan.
Speaker 1: And while I was in the green room waiting to
Speaker 1: go on the air, it was live to tape. Over
Speaker 1: the course of an hour, I started drinking diet coke
Speaker 1: and the next thing you know, I finish two cans
Speaker 1: of soda and I get up to go to the
Speaker 1: bathroom when the producer comes in and says, Okay, let's go,
Speaker 1: it's live. But I have to no, no, it's now,
Speaker 1: it's live. So I'm hyper caffeinated. I'm sitting at this
Speaker 1: round table. There's Larry Cudlow to my left, which is
Speaker 1: an unusual place for him to be because he's usually
Speaker 1: to everybody's right. And they're directly across from me is
Speaker 1: liz Ane Sanders. And a friend who had been doing
Speaker 1: television for a long time gave me a little bit
Speaker 1: of advice. He had said, pick something to focus on,
Speaker 1: and don't dart your eyes, and don't look nervous. Just
Speaker 1: focus on that one thing. And liz Anne began speaking,
Speaker 1: and she had the whitest teeth I had ever seen.
Speaker 1: She explains how her teeth cut so white during our interview.
Speaker 1: The secret is no coffee. But anyway, during the show,
Speaker 1: I just fixated on this. Oh my god, look at
Speaker 1: those white choppers. She's so articulate, she's so beautiful, and
Speaker 1: her teeth are so damn white. It's it's incredible. So
Speaker 1: that was my first experience doing television. I managed not
Speaker 1: to throw up on the glass table, which was a
Speaker 1: genuine possibility. I know these days, Uh, many of your
Speaker 1: favorite TV pundits looked so comfortable and casual on screen.
Speaker 1: The first time you do it, it's kind of a
Speaker 1: nerve wracking experience. Anyway, I had a great time chatting
Speaker 1: with Liz. She has an amazing background, from Marty's Wide
Speaker 1: who was a legend on Wall Street, to Lewis Ruth Kaiser,
Speaker 1: now to Charlie Schwab. I mean talk about being blessed
Speaker 1: with working with amazing people. She has had just an
Speaker 1: unusual background and not what you typically expects. Never really
Speaker 1: ran into the old boys club, never really ran into
Speaker 1: the sort of stereotypical, misogynistic Wall Street ways that we've
Speaker 1: heard about over the years. She considers itself very fortunate,
Speaker 1: and there have been several of our other female guests
Speaker 1: who have referenced her as you know, a a um,
Speaker 1: one of the pioneers who basically cleared a path for
Speaker 1: them to become strategists and analysts and others. So, without
Speaker 1: any further ado or me babbling on, here's my conversation
Speaker 1: with Charles Schwab's liz An Saunders. This is Masters in
Speaker 1: Business with Barry Ridholts on Bloomberg Radio. My special guest
Speaker 1: this week is liz An Saunders. She is the chief
Speaker 1: investment strategist at Charles Schwab. Liz, Welcome to Bloomberg thanks
Speaker 1: very so, Liz, and I go way back. In fact,
Speaker 1: the very first television appearance I ever did, you're the
Speaker 1: other guest with Larry Cudlow about a hundred years ago,
Speaker 1: was was it Cudlow and Company? Or with that it's
Speaker 1: like Cudlo and Kramer. No, it was Cudlow and Clock.
Speaker 1: So which which was before Cudlow Report? Right? Was that?
Speaker 1: The thin after? I think it went Cudlo and Kramer,
Speaker 1: Cudlow and Company, and then the Cudlow report that they
Speaker 1: were changing it constantly. Before we digress too far, let
Speaker 1: me give you a little bit of background as to
Speaker 1: whom my guess is. She was named Smart Money's Power
Speaker 1: thirty list of most influential people on Wall Street, one
Speaker 1: of the most one of the twenty five most powerful
Speaker 1: women in finance by American Banker, and she was a
Speaker 1: regular panelist and actually was a guest host on PBSS
Speaker 1: Wall Street Week with Louis Rukaiser. Thank you so much
Speaker 1: for joining us, Thanks for having me. So let's start
Speaker 1: with the real basics. How did you get into the
Speaker 1: financial services industry? You know, it was a little bit
Speaker 1: of a fluke. I went to undergraduate school University of Delaware,
Speaker 1: go Hens, Blue Hens, Colue, Hens, home of Flacco and
Speaker 1: Gannon and some other notables, and I had a well.
Speaker 1: I started with what was effectively a double major in
Speaker 1: economics and political science, which ultimately became a major in
Speaker 1: international relations, not that I had any idea what I
Speaker 1: wanted to do at the time. With that thought about
Speaker 1: going to graduate school right after undergraduate little from political science.
Speaker 1: But then I thought, I took my g R E
Speaker 1: S and I thought, what am I doing? Um, Why
Speaker 1: am I going to full time to school again? Not
Speaker 1: knowing what I want to do. So I put that
Speaker 1: on hold. I said, let me let me go up
Speaker 1: to New York. I knew I wanted to live in
Speaker 1: and be in New York, and just hit the pavement.
Speaker 1: So I had grandparents living at the time, my families
Speaker 1: from Brooklyn. So went up lived with my grandfather for
Speaker 1: a couple of weeks and reached out to a couple
Speaker 1: of head hunters that we knew that did entry level
Speaker 1: positions and interviewed at every variety of firm marketing firms,
Speaker 1: at agencies, Wall Street firms. And there's something just clicked
Speaker 1: about this interview I had with those Avatar organization, and
Speaker 1: I had developed some familiarity with Marty's Wage during my
Speaker 1: college years, so I was a little bit star struck.
Speaker 1: Really like the people, like the size of the firm,
Speaker 1: like their willingness and interest in the past at promoting
Speaker 1: from within. So I started there and and I was
Speaker 1: there for thirteen years and went to business school at night.
Speaker 1: So let's talk a little bit about Marty's Wig for
Speaker 1: the young uns who are listening who may not know
Speaker 1: who he was. Zwig was really a legend on Wall legend,
Speaker 1: truly a legend. And and I I was introduced to
Speaker 1: Marty and then interestingly Lewis Ruckiser and Wall Street Week
Speaker 1: during college when one of my tas for I think
Speaker 1: a macro economics course suggested watching Wall Street Week on
Speaker 1: Friday nights as a good way half hour before going
Speaker 1: out at night, before starting to drink, to get a
Speaker 1: recap of what happened that week. So in other words,
Speaker 1: you would you would watch Ruckeiser and then you would
Speaker 1: have to get a drink, and then I would, now, well,
Speaker 1: then I would go out and uh and have a
Speaker 1: differ and kind of fun to do what college students.
Speaker 1: And Marty had been a regular panelist really from the
Speaker 1: show's inception in the early nineteen seventies. So that was
Speaker 1: how I became familiar with Marty and then joined in
Speaker 1: nineteen eighty six, which to your point, he was he
Speaker 1: was already godlike in the business, had one best selling
Speaker 1: book under his belt, was writing those wage forecasts, which
Speaker 1: Hulbert had ranked the number one newsletter. He had wagged
Speaker 1: him into Partners, was one of the first hedge funds.
Speaker 1: He had branded mutual funds, and he was he was
Speaker 1: really iconic even at that point. And for people who
Speaker 1: still may not know who he is, go to YouTube
Speaker 1: and google Marty's wage ru Kaiser seven oct a week
Speaker 1: before the crib Friday, before we before the broadcast Friday,
Speaker 1: but it was recorded record that day and and he
Speaker 1: basically explains why, after being fairly constructive all year, pretty
Speaker 1: much flipped and said, I'm really concerned about the state
Speaker 1: of this market, and I think it's set up for
Speaker 1: a serious, serious correction. He said crash. Did he say crash?
Speaker 1: Is that what it was? And then on Monday it
Speaker 1: was Black Monday, And and not only did he suggest
Speaker 1: that the crash was coming, he laid out very precisely
Speaker 1: what he thought. The next few days thereafter would look
Speaker 1: like the retest of the lows and then a massive rebound.
Speaker 1: And you know, we were a tactical asset allocation for
Speaker 1: a market timing firm, and we had been effectively fully
Speaker 1: invested in equities leading into the peak in August and
Speaker 1: then started to trim back exposure. We're only about invested
Speaker 1: on the eve of the crash, and then the day
Speaker 1: after the crash we started buying. So here I am
Speaker 1: twenty two years old, brand new in the business, thinking, well,
Speaker 1: what's the big deal? You just figure out before when
Speaker 1: it's going to crash, get out, and then everything goes
Speaker 1: on sale, get back in, done? What could be? What
Speaker 1: are all these people complaining about? My naivete assumed that
Speaker 1: that was something many could do easily, and we know
Speaker 1: that's something that's that's so fascinating. You know. Dave Rosenberg,
Speaker 1: who I know, you know, tells the story of his
Speaker 1: first day in the private sector after having been a
Speaker 1: government economist, was essentially that Monday, and he just walked
Speaker 1: around astonished at at the sheer turmoil and panic. It
Speaker 1: was really incredible. But you had a very different experience.
Speaker 1: We had a different experience because we weren't facing massive
Speaker 1: losses and client portfolios. We weren't looking at the potential
Speaker 1: demise of the firm. Quite the contrary. You know, we
Speaker 1: had so nailed it. And I love to use the
Speaker 1: term week now as if I had anything to do
Speaker 1: with it at twenty two years old. But it was such,
Speaker 1: it was such a boom for everything Marty did and
Speaker 1: and the success of our firm and performance that year,
Speaker 1: that I had a very different perspective than a lot
Speaker 1: of people, to say the least. We're speaking with liz
Speaker 1: Anne Saunders of Charles Schwab. When we continue our conversation,
Speaker 1: we'll disc us the role these days of women on
Speaker 1: Wall Street. You're listening to Masters in Business with Barry
Speaker 1: rid Holts on Bloomberg Radio. I'm Barry rid Holts. You're
Speaker 1: listening to Masters in Business on Bloomberg Radio. My special
Speaker 1: guest today is liz Anne Saunders. She is the chief
Speaker 1: investment strategist at Charles Schwab, which these days is running
Speaker 1: how much money? Well, we have client assets of about
Speaker 1: two and a half trillion, not too shabby, not too shabby,
Speaker 1: and um, you also have a number of divisions where
Speaker 1: you're managing money directly yourself. So yes, personally. We made
Speaker 1: acquisition about four years ago of what at the time
Speaker 1: was called Windward Investments, now called Windhaven Investments. It's a
Speaker 1: global tactical asset allocation firm managing via e t f
Speaker 1: S model driven and uh I joined the team as
Speaker 1: chair of the Investment committee last June in addition to
Speaker 1: my chief investment strategist role at SCHWAB. So does the
Speaker 1: experience with Marty help you? It does. In fact, when
Speaker 1: when we were in the early stages of of disseminating
Speaker 1: the change and the information about me joining the team,
Speaker 1: there was this assumption that the main reason why I
Speaker 1: was tapped for this role was because I was known
Speaker 1: in the retail world, certainly among our investors, and that
Speaker 1: it would be an easy transition without a lot of
Speaker 1: people realizing that my background through my thirteen years at
Speaker 1: swy Avatar was in tactical ascid allocation model driven. In fact,
Speaker 1: the founder of of wind Haven, Steve Kokierrow, when putting
Speaker 1: together the model many many many years ago and writing
Speaker 1: the white paper associated with how the model looks at
Speaker 1: asset classes it makes its decisions, he actually cited Marty
Speaker 1: in a couple of occasions, particularly the famous line of
Speaker 1: Marty's the phrase he coined, which is don't fight the Fed.
Speaker 1: Don't fight the Fed. And there have been people fighting
Speaker 1: the Fed this entire cycle. I can't begin to count
Speaker 1: how often I see an email about the FEDS doing
Speaker 1: this and that, and well, okay, but the market's up two.
Speaker 1: So what you're saying is this hasn't happened yet. Is
Speaker 1: what you're fearing certainly hasn't happened. And the response is
Speaker 1: always just you wait, well it's six years. It's anybody
Speaker 1: who listened to your advice has either lost their money
Speaker 1: or been fired. You you can't as a professional, you
Speaker 1: just can't ignore that sort of move. You can't now.
Speaker 1: I'm also, though, I guess, in a in a bit
Speaker 1: of a middle camp in that absolutely don't fight the
Speaker 1: FED and their provision of liquidity and monetary conditions absolutely
Speaker 1: as always an important driver behind moves in in the
Speaker 1: equity market. But I also am not in the camp
Speaker 1: that believes it's only been three rounds of quantitative easy
Speaker 1: and exert that has been the support under the stock market.
Speaker 1: I think many of the other traditional fundamentals have also
Speaker 1: been supports, So I don't know they would have gotten
Speaker 1: this same power and magnitude of gain and consistency of
Speaker 1: performance had it not been at the FED. But it's
Speaker 1: one of many conditions that have allowed the market to
Speaker 1: do what it's So let's let's go over some of those.
Speaker 1: As long as as as we're going down this path,
Speaker 1: let's talk a little bit about earnings. Right, we saw
Speaker 1: an absolute earnings collapse, they came snapping back. Are earning
Speaker 1: supportive of this sort of Earnings are up very consistent
Speaker 1: with what the appreciation and the market has been looking
Speaker 1: at past cycles, and you've had valuation expansion off of
Speaker 1: the you know, the epic low in invaluations this time
Speaker 1: actually post stated at the two thousand and nine low.
Speaker 1: You ultimately got the low in pe s in two
Speaker 1: thousand and ten. Just because the earning cycle doesn't always
Speaker 1: match the market cycle, earnings accelerated at that point faster
Speaker 1: than the market. So despite a rally, PE ratios actually fell.
Speaker 1: Markets went up and made stocks look cheaper, which is
Speaker 1: not only that, but corporations have been such huge buyers
Speaker 1: of their own stocks too. I often get the question
Speaker 1: because I talked a lot about investor trends and investor
Speaker 1: sentiment and the persistent skepticism by individual investors, and the
Speaker 1: lack of interest in the market and very weak mutual
Speaker 1: fund flows, all of those facets that we look at
Speaker 1: all the time. Then I get asked, Okay, well, it's
Speaker 1: obviously hasn't been the individual that's been the big buyer.
Speaker 1: Hasn't been the hedge funds, hasn't been big institutions where
Speaker 1: you're not seeing that in droves either. Hedge fund that
Speaker 1: long exposure has not gone stratospheric really during this entire
Speaker 1: bowl market, and we've seen that. We've seen that in
Speaker 1: hedge fund performance grammatically underperformed, specifically because they didn't have
Speaker 1: enough US equity and specifically in the last couple of years.
Speaker 1: So even this many years into a rip roaring bull market,
Speaker 1: there has been this pervasive skepticism where we have seen
Speaker 1: consistent buying and has been the most powerful buyer supporting
Speaker 1: this bull market has been companies themselves buying backgrounds. So
Speaker 1: so do you track the number of shares or the
Speaker 1: dollar amount? How significant is corporate share buy backs to
Speaker 1: to the underlying rally. I think it's been. It's certainly
Speaker 1: not the entire piece of it, but I think it
Speaker 1: in terms of buying interest in the market. If you
Speaker 1: look at the various faction traditional pension funds, um other
Speaker 1: you know, mutual funds, hedge funds, even high frequency trading
Speaker 1: firms they're in and at all the time. Or the
Speaker 1: big wammy the individual investor. By far, its corporations that
Speaker 1: have been the most consistent buyer. My colleague Josh Brown
Speaker 1: calls that the relentless bid the combination of acid allocation
Speaker 1: models which just buy every time money flows in the
Speaker 1: share buy biocks that are going out there. And you know,
Speaker 1: people forget, you've still been in a relentless bond bull
Speaker 1: market and every time there's a rebalance, that's money that
Speaker 1: flows out of bonds into equities. It's been amazing, It
Speaker 1: has been amazing. So so let's let's continue along this
Speaker 1: this path. Before we get into, um the role of
Speaker 1: women on Wall Street, maybe we'll save that for a
Speaker 1: little later. Let's talk a little bit about E t
Speaker 1: F s versus passive investing. I know Schwab has a
Speaker 1: number of different funds they men how significant is this
Speaker 1: move towards passive and e t F s. So I
Speaker 1: think what we're seeing at Schwab probably is fairly consistent
Speaker 1: with the broader industry. I think we represent obviously a
Speaker 1: good chunk of the of the industry. But at the
Speaker 1: end of last year, e t f s that were
Speaker 1: custodied at Schwab amounted to about two thirty billion dollars,
Speaker 1: but traditional mutual funds were one point one trillion dollars,
Speaker 1: So they're still big. Yes, Now the growth rate of
Speaker 1: e t f s is much higher than the growth
Speaker 1: rate of mutual funds. There's still positive growth rates, but
Speaker 1: the growth rate is greatly exceeded in ETFs than than
Speaker 1: than mutual funds. But mutual funds aren't going away anytime soon.
Speaker 1: And I think the shift between active and passive to
Speaker 1: some degree tracks a market cycle. When you're in a
Speaker 1: fairly consistent, low drama equity US centric equity bowl market
Speaker 1: like we've been in the last several years, that tends
Speaker 1: to have investor shift more toward passive strategies. And we
Speaker 1: actually think that there is a home for both in
Speaker 1: portfolios that a lot of investors probably should be taking
Speaker 1: a more passive approach UH indexing to UH whatever the
Speaker 1: you know, whether it's brought market into caes or if
Speaker 1: they want to take more of an endowment approach their
Speaker 1: portfolios and have asset allocation across asset classes that historically
Speaker 1: we're not that accessible. E t F s allow them that. However,
Speaker 1: when you get into a less highly correlated, more volatile
Speaker 1: market period, like I would argue we are in the
Speaker 1: beginning of now, that's when you start to see some
Speaker 1: active strategies start to do a little bit better. I'm
Speaker 1: Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio.
Speaker 1: My special guest this week is liz An Saunders. She
Speaker 1: is the chief strategist at Charles Schwab and when we
Speaker 1: were talking earlier, I mentioned that you had been named
Speaker 1: one of the twenty five most powerful women in Finance
Speaker 1: by American Banker because of how you bench press room,
Speaker 1: or maybe because us is that is it? It sometimes
Speaker 1: feels that way, It sometimes feels. So I'm gonna give
Speaker 1: you a quote that I really liked from Michelle Myers,
Speaker 1: one of the other few women we've had on the show,
Speaker 1: uh and the first being Shiela Bear of the FDI C.
Speaker 1: But Michelle Myers said had cited the quote lack of
Speaker 1: women at the top of the industry as a challenge
Speaker 1: for women in finance. Do you agree with that? So
Speaker 1: my view has always been from my perspective and the
Speaker 1: career path I have chosen in this business, being a
Speaker 1: woman has actually been a huge advantage. But my chosen
Speaker 1: career path was not ultimately to be the CEO of
Speaker 1: a major investment bank. So I think if if I
Speaker 1: was trying to climb a ladder to that type of
Speaker 1: senior management position, I probably would have a lot of
Speaker 1: bruises on my head from the glass ceiling. It's just
Speaker 1: not something I have encountered. And that's what I try
Speaker 1: to impart to young women who I speak with. Just
Speaker 1: in the last week, I've spoken at to universities my
Speaker 1: alma mater graduate school as well as my son's current
Speaker 1: college right now, spoke to two groups of of women
Speaker 1: there and have encouraged them that there are great opportunities
Speaker 1: for women on Wall Street. And I think the reason
Speaker 1: why it's increasingly important going forward is that very soon
Speaker 1: we are going to cross the point where women control
Speaker 1: more of the wealth in this country than men do,
Speaker 1: and they more often than not like to work with
Speaker 1: with other women. So are you referring to the transition
Speaker 1: that's taking place amongst the baby boomers. As that wealth
Speaker 1: trans there's two wealth transfers that are going to take place,
Speaker 1: on average, and I'm only speaking statistically on average, the
Speaker 1: husband dies first. Men have a shorter lifespan. At that point,
Speaker 1: the wife will end up holding all those assets, and
Speaker 1: then those assets will eventually pass, much of them will
Speaker 1: pass to the next generation. So and that next generation
Speaker 1: there's more women graduating from college and graduate school than
Speaker 1: there are men, so to the extent that that has
Speaker 1: a tie to career and financial success, that that next
Speaker 1: generation is likely to have a little bit of a
Speaker 1: female bias as well amongst people in the industry or
Speaker 1: just amongst whoever is inheriting those is ever inheriting those assets.
Speaker 1: So there there's going to be control majority control of
Speaker 1: the investible assets in this country by women within the
Speaker 1: next several years. But isn't that true statistically for many
Speaker 1: different things that involve women, that they're going to be
Speaker 1: greater in numbers they're graduating college and greater numbers grad school.
Speaker 1: Go down the list of things that were once frowned
Speaker 1: upon within society that that really seems to be changing.
Speaker 1: So the question for you is Joe's a woman starting
Speaker 1: out in this industry still encounter the same sort of
Speaker 1: obstacles that you did when you began, or you you
Speaker 1: might have but got fortunate. A lot of it was, Um,
Speaker 1: I was in the right place at the right time
Speaker 1: and doing the right things in terms of the early
Speaker 1: stages of my career. And of course I'm twenty nine
Speaker 1: years in the business now, so I don't have direct
Speaker 1: experience with what it's like today for women coming into
Speaker 1: the business. I do think it's probably a little bit easier.
Speaker 1: I just think the approach to gender differentiation on Wall
Speaker 1: Street generically has changed from kind of the go go
Speaker 1: days of the early eights the right when you when
Speaker 1: you look at some of the more popular movies or
Speaker 1: shows about that era of Wall Street, it is concentrated
Speaker 1: in that era exaggerated, no question about that. But I
Speaker 1: think that being a woman in this business, number one,
Speaker 1: you're a minority, which has a negative tone to it,
Speaker 1: that word, but it also means you're a little bit different.
Speaker 1: And I think being a little bit different relative to
Speaker 1: I don't know called the middle aged white guy that
Speaker 1: dominates Wall Street is not necessarily a bad thing. It
Speaker 1: it gives you that level of differentiation right out of
Speaker 1: the blocks, before you've done anything or said anything. And
Speaker 1: I I I hope that women do consider this as
Speaker 1: an industry. To the point about women controlling more assets,
Speaker 1: they like to work with other women. It's why I
Speaker 1: think in the r i A space independent investment advisors,
Speaker 1: there's a lot more women owned investment advisors and they're
Speaker 1: very popular with other women investors because they like that camaraderie.
Speaker 1: There tends to be more women are I A s.
Speaker 1: Than there are female traders or female brokers. It's just
Speaker 1: more conducive to that one on one RelA and I
Speaker 1: to your point, I think that's the pocket of the
Speaker 1: business that is still very very male dominated and probably
Speaker 1: hard to infiltrate, which is trading desks and sales trading,
Speaker 1: a position trading. And I'm not sure that changes in
Speaker 1: in my career lifetime, but that wasn't an area I
Speaker 1: was ever involved in, so it never hit me personally,
Speaker 1: but I've certainly watched, you know, friends and colleagues have
Speaker 1: a much more difficult time trying to infant infiltrate what
Speaker 1: is still probably a boy's network. I started on a
Speaker 1: training's desk, it was very rough and tumble, of a
Speaker 1: lot of sharp elbows, And I don't know if that
Speaker 1: is as much mail as it was just generally a
Speaker 1: different philosophical approach the world. I'm Barry Ridholt. You're listening
Speaker 1: to Masters in Business on Bloomberg Radio. My guest today
Speaker 1: is liz Ane Saunders. She is the chief investment strategist
Speaker 1: at Charles Schwab, managing two point something trillion dollars? Is
Speaker 1: that right? You gonna have trillion? But I wouldn't managing yes, incline,
Speaker 1: I don't think anybody is really managed trillion dollars that
Speaker 1: at least not not that we're aware of. Um. So
Speaker 1: let's talk a little bit about where we are in
Speaker 1: the cycle and what you see as things that investors
Speaker 1: are doing right and things that are are investors are
Speaker 1: doing wrong. Let's let's start with the first question. When
Speaker 1: when you look at an investment, how do you go
Speaker 1: about evaluating that? What's your process? Like? Well, depends on
Speaker 1: the investment. Most of my work that I do, uh
Speaker 1: in my in my role as strategists at Schwab is
Speaker 1: very top down foot view. So unlike my y Avatar
Speaker 1: days when I was actually picking stock on a day
Speaker 1: to day basis, that's largely not what I do right now,
Speaker 1: so I'm looking at at major macro trends. But I
Speaker 1: would say that the thing that I look for most,
Speaker 1: whether it's at the industry level, the sector level, the
Speaker 1: asset class level, is inflection points. And I think that
Speaker 1: is one of the things that trips investors up more
Speaker 1: than anything else, is not understanding the power of inflection
Speaker 1: points and the fact that the market, the stock market
Speaker 1: as a leading indicator, is going to often have its
Speaker 1: best performance when it launches off one of those inflection points.
Speaker 1: But if you think about it, if you think about
Speaker 1: how the stock market relates to the economy, an inflection
Speaker 1: point on the downside is the bottom of the V,
Speaker 1: so when the data has stopped getting worse, but it's
Speaker 1: only starting to get better. But by definition, the bottom
Speaker 1: of an inflection point, that point at the V where
Speaker 1: things turn. That's when the data is most ugly in
Speaker 1: an absolute sense. You you don't have the benefit of
Speaker 1: looking ahead to say, okay, we're at the bottom. We
Speaker 1: know it's moving forward, but the market's job is to
Speaker 1: find that point and move higher. And I think that's
Speaker 1: what investors missed quite often as they because there's so
Speaker 1: much emotional tie to our money that they want to
Speaker 1: feel good about the data that surrounds them, the economic data,
Speaker 1: the earnings data, all the broad fundamental data that they
Speaker 1: miss off. They missed those opportunities because they want that
Speaker 1: confirmation to come from the data that isn't going to
Speaker 1: confirm until it's largely well into the process. So let's
Speaker 1: use the last cycle as an example. Market bottomed in
Speaker 1: March o nine. The recession officially ended when June nine,
Speaker 1: Juno and we didn't learn that from the nb R
Speaker 1: until it was I think months later, it was September.
Speaker 1: So if you waited to find out that the old
Speaker 1: clear whistle had been blown, you probably missed or so absolutely.
Speaker 1: And I remember I had an interesting appearance on Good
Speaker 1: Morning America in May of two thousand and nine, and
Speaker 1: it was one Diane Sawyer was still hosting the show,
Speaker 1: and she did the pre interview with me that i'd
Speaker 1: be war and I was scheduled to come on to
Speaker 1: talk not about the recession of the market, but really
Speaker 1: about the A b c's of credit to fault swaps.
Speaker 1: I was coming on to attempt to explain to their
Speaker 1: more broad audience what these derivatives were, that we're causing
Speaker 1: so much trouble. Yet at the end of our conversation
Speaker 1: the night before, she said, so, do you think this
Speaker 1: thing will ever end? And I said, well, I think
Speaker 1: the bear market's already over, and I think the recession
Speaker 1: is ending. I think it's probably over now, maybe a
Speaker 1: month from now, maybe two months from now. So unbeknounts
Speaker 1: to me. The next morning, I go on air and
Speaker 1: she introduces me by saying, Liz Anna is here to
Speaker 1: declare the recession officially over. And I laughed. I said, well,
Speaker 1: last time I checked, I had no official capacity to
Speaker 1: declare recessions. Um, you know, having started her over, I
Speaker 1: got so much hate mail from that appearance, from people
Speaker 1: saying everything from your an idiot two. Isn't it easy
Speaker 1: for you to say things are getting better because you
Speaker 1: have a job and you're employed, And but the point
Speaker 1: I was trying to make was I think things have
Speaker 1: stopped getting but at the point they stopped getting worse,
Speaker 1: they are at their most brutal point in time. It
Speaker 1: still looks horrible. You know. The funny thing is about
Speaker 1: the pushback you get. I did a piece some time
Speaker 1: ago and it was not supposed to be a market call.
Speaker 1: It was simply, hey, let's do an evaluation of the
Speaker 1: dow and figure out where it was. And this was
Speaker 1: later oh six or early o seven, and and basically
Speaker 1: you come up with a number, housing and banking all
Speaker 1: the stuff, and you come up with a number about hundred.
Speaker 1: And at the time, I want to say the dow
Speaker 1: was twelve thousand or thirteen thousand, and the pushback is
Speaker 1: oh my, And and then within the piece it was
Speaker 1: and by the way, if we break ten thousand on
Speaker 1: the way to hundred, hey, who knows? You could see
Speaker 1: sixty eight hundred. It was like buried. It was not
Speaker 1: the piece was in, Hey, we're going to down sixty hundred.
Speaker 1: It's hey, let's figure out what the look at. And
Speaker 1: so for two years all I heard was your perma bear,
Speaker 1: you hate to you asked you. Hey. So around the
Speaker 1: same time we had the bullish call, it was just
Speaker 1: every indicator we tracked was pinned all the way, like
Speaker 1: the VU meters. For you kids, that's an analog meter
Speaker 1: on the old stereos and for you younger kids, that's
Speaker 1: how people used to listen to music. But um, but
Speaker 1: at that point suddenly I'm a perma bowl and it
Speaker 1: dawned on me. It's like, oh, these people don't care
Speaker 1: anything about what I'm saying. They're seeing the world through
Speaker 1: a pained, money losing perspective of whatever is going on
Speaker 1: is hurting their portfolio, and therefore it's Liz and Sander's fault, right.
Speaker 1: So so I I've learned. I've learned to use that
Speaker 1: as a you know, a bit of confirmation. When when
Speaker 1: you were out on a limb and you know, Herb
Speaker 1: Greenberg used to call it, the hate ometer was spinning
Speaker 1: out of control. That's usually a good sign that you're
Speaker 1: onto something. You know, Sir Baron Rothschild, by when there's by,
Speaker 1: when there's blood in the street, even if it's your own,
Speaker 1: any number of Warren Buffett quotes, I want to buy
Speaker 1: when everybody else is selling. There's a reason why the
Speaker 1: great investors have coined phrases like that. They're trying to
Speaker 1: get the heart of what we're talking about. Let me
Speaker 1: tell you one other absolutely dead true story, and I
Speaker 1: won't name names to protect the not so innocent at
Speaker 1: the time. Now I'm not saying names. The weekend, the
Speaker 1: literally the weekend before the bottom in March of oh nine,
Speaker 1: which was March nine was the bottom. So whatever, whatever
Speaker 1: the Friday or Saturday night date was. My husband and
Speaker 1: I are at a cocktail party and we live in
Speaker 1: Dairy in Connecticut, which had the lovely distinction in two
Speaker 1: thousand and eight of being named made the cover of
Speaker 1: Business Week as the number one town in the country
Speaker 1: most affected by the financial crisis based on a certain
Speaker 1: population in below. So I'm surrounded by Wall Street people.
Speaker 1: Our entire circle of friends are Wall Street people. So
Speaker 1: the conversation, naturally at that time was about what was
Speaker 1: going on. And one of my friends who has been
Speaker 1: in the business thirty five years, said, las Anne, I
Speaker 1: I don't envy you. I think there's no reason ever
Speaker 1: again why an individual investor would want to be in
Speaker 1: the market, and it has to make you wonder about
Speaker 1: the sustainability of schwab and I I sort of looked
Speaker 1: at him, and my husband looked at me kind of funny,
Speaker 1: and I said, well, I you know, I beg to
Speaker 1: differ um. In fact, I think that the conditions are
Speaker 1: starting to look pretty interesting. We get in the car
Speaker 1: and my husband looked at me. He said, did you
Speaker 1: hear it, and I knew immediately what he meant. I said,
Speaker 1: you mean the bell ringing? He said, I knew you
Speaker 1: were thinking that as soon as he said it. Which
Speaker 1: we all know the phrase they never ring a bell
Speaker 1: at tops and bottoms, but that was one of those. Okay,
Speaker 1: the last man standing is down. There's just no one
Speaker 1: else left. And that's what bottoms feel like. See, I've
Speaker 1: always learned that they don't ring a bell at the top,
Speaker 1: but the bottom. You know, if it's not a bell,
Speaker 1: when your bell has been wrong more than you could
Speaker 1: possibly take, that's more often than not the bottom. There
Speaker 1: is a visceral panic on the streets. Like I know,
Speaker 1: Manhattan isn't America. Manhattan is a small island off the
Speaker 1: east coast of America. But you could walk down the
Speaker 1: streets in February and March of oh nine and it
Speaker 1: was palpa. There was genuine fear and angst and dare
Speaker 1: I say panic. It was out there, and if you
Speaker 1: were tuned to it, it was really just a question
Speaker 1: of when do you you're gonna risk being a little early.
Speaker 1: You could break it up into four pieces, put a
Speaker 1: little to work now, a little to work next week,
Speaker 1: next month, but at that point that was pretty much
Speaker 1: you know, that sensation of ringing a bell. A handful
Speaker 1: more people claim to have heard it today than actually
Speaker 1: heard it. Everybody is fantastic in hindsight, myself included. Hindsight
Speaker 1: bias is the greatest thing. But there's no doubt that
Speaker 1: you walked around and it it was. It was visceral.
Speaker 1: So so let's talk a little bit about here we are.
Speaker 1: We're in year six of a bull market. We're up
Speaker 1: over two on the SMP five hundred. We've had prior
Speaker 1: guests like Ralph at Kampora and Las law Borrini and
Speaker 1: Jeff's out. I know, you know most of these gentlemen
Speaker 1: who are in the secular bull market camp Dittoh. So
Speaker 1: that was the question, is I think we're I think
Speaker 1: I think what we we started a secular bull market. No. Nine,
Speaker 1: there's there's no Investipdia definition for a secular bowl market.
Speaker 1: You can it's it's it's more I can do well
Speaker 1: if it walks like a duck and quacks like a duck.
Speaker 1: So you have to look at what ultimately were the
Speaker 1: various characteristics of the three big secular bowl market markets
Speaker 1: we've had. In the post so the nineteen twenties, the
Speaker 1: mid forties to mid sixties, and then the Big one
Speaker 1: eight two to two thousand, and you had negative real
Speaker 1: interest rates at their beginning. You actually had a very high,
Speaker 1: sort of secular high unemployment rate. In other words, you
Speaker 1: know epic economic problem that that ultimately finally came to
Speaker 1: a head with a double digit unemployment rate um and
Speaker 1: secular low kind of valuations which many argue that we
Speaker 1: didn't quite have this time, because you're really only very
Speaker 1: quickly dipped into single digit territory at the lows. The difference, though,
Speaker 1: is that versus two, when I think the PE got
Speaker 1: down to around six, is you had runaway inflation and
Speaker 1: double digging interest rates, which risk for huge downward pressure
Speaker 1: on valuation. Risk free rate of return in eight two
Speaker 1: is like twelve percent. Why would I want? I can
Speaker 1: get twelve percent with no risk from Uncle Sam? Why
Speaker 1: on earth where I want to buy equities as opposed
Speaker 1: to getting three from Uncle Sam? All right, I'll take Hey,
Speaker 1: I get a three percent dividend yields and I have
Speaker 1: potential upside. That's why you never saw that same. But
Speaker 1: I think a nine PE was certainly low enough in
Speaker 1: that kind of background to suggest that those conditions are places.
Speaker 1: And now just look at the six years of returns
Speaker 1: that we have had. Uh, you know, pretty much straight
Speaker 1: shot up and uh, and that just does not happen
Speaker 1: if we were still in a secular bear market. We've
Speaker 1: been speaking with liz Anne Saunders, chief investment strategist at
Speaker 1: Charles Schwab. If people want to find your writings or
Speaker 1: follow you, what's the best way for them to dot com?
Speaker 1: You don't have to be a client. You just on
Speaker 1: the public site and it's all there for people to
Speaker 1: read the insights section. Yep, it's not hard to find.
Speaker 1: If you've enjoyed this conversation, be sure and listen to
Speaker 1: all of our podcast extras where we let the tape
Speaker 1: run and continue chatting. You can check out my daily
Speaker 1: column on Bloomberg View dot com or follow me on
Speaker 1: Twitter at Ridhults. I'm Barry Ridhoults. You're listening to Masters
Speaker 1: in Business on Bloomberg Radio. Welcome back to the show.
Speaker 1: This is the podcast portion where we basically kick off
Speaker 1: our shoes. Relax. I'm gonna take my headphones off because
Speaker 1: my engineer doesn't need to tell me how much time
Speaker 1: is left in this segment. If if the buildings on
Speaker 1: fire or something, just jump up and down. So a
Speaker 1: few let's get a few things um out of the
Speaker 1: way before we go. I didn't get your Twitter handle
Speaker 1: mentioned on the radio at liz Ane Saunders. How's anyone
Speaker 1: gonna remember though? At l I Z A N N
Speaker 1: NO E S O N D E R S not Sanders,
Speaker 1: not Sanders. If you google your name, it comes up.
Speaker 1: And that about the fourth thing you just have to start.
Speaker 1: You just have to put Lizanne in. And so let
Speaker 1: me ask you. We weren't planning on talking about this,
Speaker 1: and I don't even know what you're about to talk
Speaker 1: about Twitter. Let's talk. We were just talking during the break.
Speaker 1: We're talking about new, brand new on Twitter. So how
Speaker 1: long have you been on Twitter? All right? A couple
Speaker 1: of months ago, Morgan Stanley came out or some other
Speaker 1: big house I don't remember, might not have been Morgan Stanley,
Speaker 1: I think it was. But before I throw them under
Speaker 1: the bus, some big wirehouse came out with a set
Speaker 1: of guidelines for Twitter and they basically create a list
Speaker 1: of pre approved tweets that anybody who works for them,
Speaker 1: and it was really kind of absurd. So my question
Speaker 1: for you is, how do you have a lot of
Speaker 1: room to well? At this stage everything does have to
Speaker 1: be pre approved, but I have yet to get told
Speaker 1: I could not tweet something that I suggested I wanted
Speaker 1: to everything's been approved. How much are you tweeting, like, hey,
Speaker 1: here's my weekly? Not as often as I will probably
Speaker 1: when I don't have to go through the process. We're
Speaker 1: very soon at the point where we won't have to
Speaker 1: get pre approval to tweet links to things we've done,
Speaker 1: or radio appearances or TV appearances that will basically happen
Speaker 1: whenever we want. You're kind of a live wire. Are
Speaker 1: they're afraid you're gonna be you know, you're a you're
Speaker 1: a bomb throw are They're afraid you're gonna really cause them.
Speaker 1: They hope to get to the point very soon where
Speaker 1: they make the same assumption about me and other subject
Speaker 1: matter experts that they do when they allow us or
Speaker 1: send us off to do radio or TV, which every
Speaker 1: characters is essentially we're not right, We're not going to
Speaker 1: embarrass ourselves or or shame the firm, And but we're
Speaker 1: we're new at at the firm, in in being out
Speaker 1: there in there I give them credit for giving you
Speaker 1: some rope to give some rope, but you know, Schwab,
Speaker 1: part of our our our culture is to be on
Speaker 1: top of things like this. And I think the reason
Speaker 1: why we came through the financial crisis relatively unscathed was
Speaker 1: because it's a it's a culture of honesty and integrity,
Speaker 1: and we want to maintain that and everything that we do.
Speaker 1: It's it's a conservative approach to all right, we'll get
Speaker 1: involved in this, but we'll go a little slow. I
Speaker 1: didn't have My most fun tweet was actually just today
Speaker 1: because of well yeah, because I was in my office
Speaker 1: and I hadn't thought about tweeting it, and one of
Speaker 1: you know, many headlines today came across of the Duke
Speaker 1: win and I looked up and I realized, I looked
Speaker 1: on my shelf in my office, and there is my
Speaker 1: signed ball from Coach k from having I was a
Speaker 1: guest lecturer at Duke in two thousand and six, and
Speaker 1: the thank you was as signed ball that's in a
Speaker 1: loose sight box. So I took a photo of it
Speaker 1: and and just said, uh, you know, I had the
Speaker 1: great pleasure of being a guest lecture a number of
Speaker 1: years ago. How cool is this gift now having gotten
Speaker 1: and that was obviously pre the thousandth win, So I
Speaker 1: don't know whether now between that having happened, the thousand
Speaker 1: win and now me tweeting it, I may have you
Speaker 1: get some money for it on eBay. Yeah, that's the sore.
Speaker 1: They're loosening up a little bit. In other words, and
Speaker 1: it's been fun. Twitter is a is a lot of fun.
Speaker 1: Very close friend of mine is who you may know
Speaker 1: is Anthony Nodo who is the Sacks and now the UM.
Speaker 1: I don't know him, but I certainly Twitter. So he's
Speaker 1: our next door neighbor and close friends. I'll have to
Speaker 1: bring him in for the show. That would be fun.
Speaker 1: He would be an interesting he would be He would
Speaker 1: be great because he brought Twitter public when he was
Speaker 1: at Goldman and and then when one of the things
Speaker 1: I always ask guest says, hey, who do you think
Speaker 1: would be good for the show. I think he'd be great.
Speaker 1: He's to the extent he's listening, He's probably gonna say
Speaker 1: what is she doing? But if you remember, before going
Speaker 1: back to Goldman, Sachs, he did a stint at the
Speaker 1: NFL as the CFO of the NFL under Roger Goodell,
Speaker 1: he's got something. He's got some and no head injuries,
Speaker 1: no lasting problems, not as far as we can The
Speaker 1: CFOs were very different helmets than the rest of the players,
Speaker 1: and they got a player at Army, so he and
Speaker 1: he was an army ranger, so he might have had some.
Speaker 1: So he's a he's a serious thing. Yeah, he'd he'd
Speaker 1: be a good he'd be a good one for you know,
Speaker 1: that's really that's fascinating something I find myself as his
Speaker 1: pitch pitch woman here right. It's um, well, you know,
Speaker 1: it's always very easy to just we all have a
Speaker 1: circle of contacts and friends, and I'm always looking to,
Speaker 1: you know, move outside of that comfort zone. I'm a
Speaker 1: little bit of a foodie. This I promise this is
Speaker 1: not fast food over here. But a few weeks ago
Speaker 1: we had Bobby Flag and it was a fascinating conversation.
Speaker 1: Down to earth New York or no BS sort of guy.
Speaker 1: And it forces you to think, like you said earlier,
Speaker 1: as a woman in what's predominantly a male business, it
Speaker 1: kind of forces you to be a little different, think
Speaker 1: outside of the box, and force forces everybody else around
Speaker 1: you to to interact in a slightly different way. So
Speaker 1: I'm always saying what can we do? That's just not
Speaker 1: not that we've done a thousand of these and it's
Speaker 1: become boring. They're always interesting, They're always my engineer makes
Speaker 1: fun of me. Count how many times Barry says fascinating
Speaker 1: during during the interview. Because I find this stuff fast,
Speaker 1: I agree. I think, first of all, this is this
Speaker 1: is a very cool conversation to have because it's it's
Speaker 1: real topics for in depth, in depth, full sentences, not
Speaker 1: sound bites. What's your favorite stock pick? Where's the market
Speaker 1: gonna be a year coming back? We'll you know, it's
Speaker 1: that sort of stuff I used, like what is the
Speaker 1: value to zero? Value to that? Right? And and a
Speaker 1: lot of people do so talking about really cool. You
Speaker 1: worked for Marty's Wide for how long? Thirteen years? I mean,
Speaker 1: by the way, he passed away sadly two years ago,
Speaker 1: not too long ago. And I wrote a I wrote
Speaker 1: a tribute that and it I The title of it
Speaker 1: was a take on the book he recommended that I
Speaker 1: read when I first joined the firm, which is Reminiscences
Speaker 1: of a stock operator. So now is this true? So
Speaker 1: let's let's there's a million digressions here. So I heard
Speaker 1: that that book was kind of a lost book until
Speaker 1: Marty's Wig started talking about it and it suddenly became
Speaker 1: a best set. It's very possible. And Laslow Barrini too,
Speaker 1: that's his baby. In fact, all his his weekly or
Speaker 1: monthly Pecity puts out his called reminiscences. He always has
Speaker 1: a quote from the book, so that I get it,
Speaker 1: and I view people from that eighties era that we're
Speaker 1: real acolytes of that. I get Laslow stuff, and he
Speaker 1: was a guest on the show, and I never put
Speaker 1: together like you recognize reminiscence as a reminiscence of a
Speaker 1: stock stock operator or reminiscence of a trade role, however
Speaker 1: you want to describe it. But I didn't realize that
Speaker 1: that was his reference. That's really fascinating. So this this
Speaker 1: tribute that I wrote was Reminiscences of Marty's Wig, and
Speaker 1: it um is the number one most read report I
Speaker 1: have ever written in all my years. And that's amazing that.
Speaker 1: So I get emails all the time on the show.
Speaker 1: A lot of kids in college, a lot of people
Speaker 1: in grad school, and the question that always comes up
Speaker 1: is how much is this contextualized for them relative to
Speaker 1: Who's Marty's Why? And you know the interesting thing about Google,
Speaker 1: which is a phenomenal company and Google as a search
Speaker 1: I showed some of the other day. You know, you
Speaker 1: can drag an image to Google search and you'll find
Speaker 1: similar or the source of Very often I have an
Speaker 1: image and I'm like, where is this from? You drag
Speaker 1: it to the search box and it will show you
Speaker 1: where facial recognition. It's it's crazy. However, the one flaw
Speaker 1: that Google has is that stuff that predates the late nineties.
Speaker 1: You know, you search for Marty's Why, and you'll get
Speaker 1: the book and you'll get a couple of things. But
Speaker 1: he obviously didn't have a big Internet footprints because there
Speaker 1: wasn't an Internet. There wasn't an Internet. So I think
Speaker 1: people who are you know, history didn't begin in nineteen two.
Speaker 1: It goes further back. So explain to people who maybe
Speaker 1: a little younger and may not be familiar with Marty's Wide.
Speaker 1: We talked a little bit about his phenomenal call on
Speaker 1: around the eighty seven crash, but that was really one
Speaker 1: in a series of really and it was and it
Speaker 1: was what what he looked at the way he analyzed
Speaker 1: markets that allowed him to see what was happening. And
Speaker 1: I think we were already talked about the fact that
Speaker 1: he coined the phrase don't fight the Fed, just a
Speaker 1: little quip that became famous. It was his whole basis
Speaker 1: for thinking about the role of monetary liquidity in financial markets,
Speaker 1: which is what ultimately led to this cute little phrase,
Speaker 1: But it was really what was underneath it. He also
Speaker 1: created the pot call ratio, which a lot of people
Speaker 1: don't realize what coal ratio meaning looking at the options,
Speaker 1: how many are bullish? How many embarrash? Ratio was invented
Speaker 1: by by Marty. I didn't know. That's interesting. He was
Speaker 1: the creator of, and pioneer of, and and probably first
Speaker 1: user of many of the sentiment indicators that we all
Speaker 1: look at very regularly now, and and really believed that
Speaker 1: more than anything that crowd psychology that moved from fear
Speaker 1: and greed so dominated many of the traditional fundamentals. In fact,
Speaker 1: he was often asked the question if you could pick
Speaker 1: one of your hundreds of indicators that you look at
Speaker 1: only one You had two time markets based on one
Speaker 1: single indicator, and his answer was always time and newsweek covers.
Speaker 1: We have. If you had a bull or a bear
Speaker 1: on both covers within a week, trouble trouble, well, the
Speaker 1: opposite were typically happy. And that was to our point,
Speaker 1: pre Internet, pre all of the financial media and publications
Speaker 1: that we have right now, where you had a much
Speaker 1: smaller subset, and if on those two big popular national
Speaker 1: magazines you had double bulls, you know, watch out below
Speaker 1: or vice versa. Paul McCray Montgomery, who passed away last year,
Speaker 1: was the guy who literally invent of the magazine cover indicator.
Speaker 1: I want to say about thirty years ago. But he
Speaker 1: would write about it in a very academic way. It
Speaker 1: wasn't oh look this is on the cover, We're going
Speaker 1: to hell. It was always there's actual research, right, here's
Speaker 1: the data. He also was the one who started looking
Speaker 1: at the length of women's skirts as a potential indicator.
Speaker 1: He looked at a lot of Super Bowl indicator guides, no, no, but,
Speaker 1: and the Super Bowl indicator turns out to be pretty
Speaker 1: much nonsense, just a lot a lot of them. Um,
Speaker 1: So what else, uh did Marty look at in his
Speaker 1: So I'm going to a different question, So let me
Speaker 1: not beat around the bush and get to it. A
Speaker 1: line I've heard my whole career is hey, you know,
Speaker 1: there's no such thing as a wealthy technician. Marty kind
Speaker 1: of proves that to be. I think he did not
Speaker 1: prove that, but there was. It was not just technical indicators.
Speaker 1: He was not just a chartist. He was, but he
Speaker 1: also believed and I think he kind of co coined
Speaker 1: the phrase the trend is your friend with with our
Speaker 1: other friend ned Davis, who had worked with Marty many
Speaker 1: many years sharing research and schwab is still big clients
Speaker 1: of ned Davis and retired. Now he's still he's still
Speaker 1: relatively active. He still writes UM he's got a big,
Speaker 1: huge organization and the phenomenal They sold it last year
Speaker 1: to UM or two years ago? Was it Alliance Bernstein?
Speaker 1: Somebody bought them. I don't remember who it was. I
Speaker 1: don't yes had a parent now, UM I know, as
Speaker 1: I s I sold to Avercre. Really luth Old is
Speaker 1: under a Weeden. So is ned Davis still independent of somebody?
Speaker 1: I don't know. That's a very good Quest's go to
Speaker 1: the Google machine. There you go. But you know, Marty
Speaker 1: so he certainly looked at a lot of technical factors,
Speaker 1: many of the traditional ones that we look at right
Speaker 1: now um sentiment indicators, but also to the point of
Speaker 1: the trend is your friend? He he looked at momentum factors.
Speaker 1: But the biggest component, if you wanted to look us
Speaker 1: at the breakdown of the model, the biggest component was
Speaker 1: the monetary environment. Was was economic liquidity um which is
Speaker 1: in the seventies, eighties, nineties or across. Yes, yes, and yes.
Speaker 1: He looked at monetary policy. What the central we basically
Speaker 1: had monetary liquidity, investor liquidity, and momentum. Where the three
Speaker 1: categories of indicators, so monetary liquidity would be all the
Speaker 1: interest rate fed policy indicators, monetary base, money supply. Do
Speaker 1: you remember the days when you would wait till Friday
Speaker 1: afternoon for the money supply? Isn't an incredible waves you
Speaker 1: go through in almost thirty years in the business of
Speaker 1: what are the hot popular indicators? You wait with bated
Speaker 1: breath together, I remember when it was a trade deficit.
Speaker 1: It really is amazing what sort of captures And in
Speaker 1: many cases it's because those are more market moving figures
Speaker 1: at the time, but it is incredible. You're right, you look,
Speaker 1: nobody pays attention to that anymore. Yeah, fans got a
Speaker 1: four trillion dollar balance sheet, but so who cares about
Speaker 1: the weekly uh weekly factors? By the way, Ned davis
Speaker 1: majority stake purchased by Euromoney in June two thousand and eleven. So,
Speaker 1: and I also, they've they've been, they've kept I think
Speaker 1: a distance because I didn't even know that, and then
Speaker 1: I've been They're still running it independently from from all
Speaker 1: indications to this user. Before this show launched, I did
Speaker 1: an interview with Ned Davis and it was really the
Speaker 1: format that set this show up. It was, I want
Speaker 1: to say, about two or three years ago, absolutely fascinating. Um.
Speaker 1: It was a privilege speaking to him. And I know
Speaker 1: his partner, Ed Mendel, who's also so I think one
Speaker 1: of the owners of the Atlanta Falcons also a delight,
Speaker 1: just invited me to a game. That really tell him.
Speaker 1: I said, hello, I hope to be able to work
Speaker 1: it into my schedule. He he's a really interesting guy.
Speaker 1: Another see if I get him up here to sit down.
Speaker 1: He's like one of these guys that's a very insightful
Speaker 1: business person. It happens to be the business of finance,
Speaker 1: but it's still a business. But he understands the business
Speaker 1: better than you know. It's really is a great combination
Speaker 1: because because Ned understood the markets and and and ands
Speaker 1: to the business and was really a great a great partnership. Um.
Speaker 1: But I remember was it big mo was the chart
Speaker 1: that everybody used to look at and I think, uh,
Speaker 1: and you are still present. It's well, as long as
Speaker 1: it's it's showing work, it works. So so tell us
Speaker 1: what life was like working on a daily basis with
Speaker 1: with his why what what was that? And I have
Speaker 1: to give credit to Marty's partner, Ned Babbitt to who
Speaker 1: who is also a well known guy. Not no, not
Speaker 1: quite to the level of Marty because he his writings
Speaker 1: were a little bit more quiet and but a little
Speaker 1: bit um he was he was sort of he was
Speaker 1: a former broker and he a Futton broker, um, but
Speaker 1: knew how to run the business. And then actually the
Speaker 1: third guy that I must give credit to the head
Speaker 1: of marketing effectively that that really grew both this wide
Speaker 1: side of the business and the avatar side of the business,
Speaker 1: which was the institutional side, was Bruce pollo Quin who
Speaker 1: was just got um was just made a member of
Speaker 1: the House of Representatives representing Mains, just got elected and
Speaker 1: then November, so he was sworn in and I guess
Speaker 1: January whenever they do that, Um, he's I think he's
Speaker 1: on the House Financial uh Services whatever committee committee. Um,
Speaker 1: so he now gets quoted anytime there's discussion about the budget.
Speaker 1: So would you say these three guys were oh, oh absolutely, absolutely,
Speaker 1: And they were very different personalities. Bruce was a hyperactive
Speaker 1: Harvard Prep school kind of guy, looked at two with
Speaker 1: the horn room glasses and talked a million miles a
Speaker 1: minute and go, go, go, go go. And Ned was
Speaker 1: a little bit more quiet and reserved and um, and
Speaker 1: Marty was Marty was was a character. He really was.
Speaker 1: He was um uh. Many people saw him as as
Speaker 1: fairly volatile and personality, um would you know, throw pencils
Speaker 1: and break stuff, but the biggest heart in in in
Speaker 1: the world. And he was known as a warrior. Um.
Speaker 1: But in the tribute I wrote to him, I said,
Speaker 1: he really was a warrior. He just he was so
Speaker 1: seeped in in markets and wanted to understand them and
Speaker 1: and was so engrossed in it. And he was just
Speaker 1: he was a really neat guy. They all were really
Speaker 1: neat guys to to work for. And it was very
Speaker 1: much not the Wall Street Boys network. I think that
Speaker 1: was probably also what was intriguing to me and maybe
Speaker 1: why I had have the Hollis had the view that
Speaker 1: I have that being a woman in this business is
Speaker 1: a great thing because I wasn't ever jaded in my
Speaker 1: early years from being in an environment like that. Uh,
Speaker 1: there was not a chauvinistic bone in in any of them,
Speaker 1: which was a special experience that that's really fascinating. And
Speaker 1: people may not realize this, but when Marty passed away,
Speaker 1: his I believe his wife put the apartment they lived
Speaker 1: in up for sale and it was known as the
Speaker 1: most expensive or most valuable apartment in New York City.
Speaker 1: Is a stunning apartment, really beautiful apartment. It's the top
Speaker 1: of the Pierre Um and really quite extraordinarily beautiful. And
Speaker 1: it's where Marty had some, though not all, of his
Speaker 1: memorabilias well. It was also well known for being a
Speaker 1: memorabilia collector and he had he had them. He was
Speaker 1: the one that bought the Marilyn Monroe Happy Birthday dress.
Speaker 1: Oh really had the Harley Davidson from Easy Writer, that
Speaker 1: Fonda Road and you name it. Music memorabili and guitars
Speaker 1: and gold records and the original Terminator costume just really
Speaker 1: really cool uh stuff. So he was fun. He was
Speaker 1: a quirky, fun different guy. Not not the usual walls,
Speaker 1: not far from it, and I think that was always
Speaker 1: part of his charm. So his tactical model, what was
Speaker 1: the thinking behind it? How did that? And I'm not
Speaker 1: asking for secrets, I'm asking generally speaking, how did the
Speaker 1: tactical model run? Again, it was I'm trying to remember
Speaker 1: the weights. It's now been so I I left in
Speaker 1: so that was a long time ago. But I think
Speaker 1: it was economic liquidity, investor liquidity and percent momentum. What
Speaker 1: is investor liquidity that's basically sentiment, so measuring direct sentiment
Speaker 1: in the sense that you're actually looking at asset flows
Speaker 1: in cash levels that investors will have. And then the
Speaker 1: attitudinal measures of sentiment like the Pook call ratio, like
Speaker 1: AII or investors in intelligence, those types of measures that
Speaker 1: measure the attitudes of investors. So that was what we
Speaker 1: called investor liquidity. And then fift was momentum, which is
Speaker 1: a lot of those shorter term technical in with the
Speaker 1: trend that type of those of indicators. So now let's
Speaker 1: let's get into some of the questions we missed earlier.
Speaker 1: I asked you what what it was like working um
Speaker 1: with Marty? What's a day in the life of liz
Speaker 1: An Sanders at Schwab Like, Oh, gosh, depends on the day.
Speaker 1: Can I tell you When people say to me, God,
Speaker 1: you're up so early. You could work so early every day?
Speaker 1: What what's it like? My answer is always, Hey, it's different.
Speaker 1: Everything's different every which is what You're absolutely right. It's
Speaker 1: it's the thing I think that is most intriguing about this,
Speaker 1: this industry, certainly what you and I do, is it
Speaker 1: changes every day. I had a funny comment made of me, uh,
Speaker 1: or made to me. Uh. This is maybe about a
Speaker 1: year ago, and I was speaking at a large client
Speaker 1: event and an investor who had been there the last
Speaker 1: time I was in whatever city it was a couple
Speaker 1: of years before, said something funny. He said, are you
Speaker 1: giving the same speech you gave two years ago? Which
Speaker 1: I didn't want to laugh in his face. But first
Speaker 1: of all, I don't write speeches. I speak off the cuff.
Speaker 1: I don't use notes, no bullet point. Now I have
Speaker 1: I have charts that I show, so I always have
Speaker 1: a PowerPoint presentation, so in effect, that serves as an outline.
Speaker 1: If I do the same thing and people said to me,
Speaker 1: you know you said, and I'm like, I don't know.
Speaker 1: I just the art comes up and I describe in context.
Speaker 1: But so you can use the same set of slides,
Speaker 1: but it's a different but even I might even use
Speaker 1: the same exact deck if you want to call it that.
Speaker 1: But it's an event and an evening event. And if
Speaker 1: the lunch event are advisors that are on Schwab's platform,
Speaker 1: so they're professional money managers. And then I use the
Speaker 1: same charts talking to an audience of individual investors, are
Speaker 1: Retail on its same exact visuals, very different message, very
Speaker 1: different in terms of what I what I choose to explain,
Speaker 1: what I don't, the assumptions I make, Not that I'm
Speaker 1: dumbing it down, it's just but the funny comment back
Speaker 1: to the sky was number one. I don't write a
Speaker 1: speech and then recite it, but to suggest that I
Speaker 1: could be talking about the same things two years later.
Speaker 1: No thing's changed. What's changed over to But that's what
Speaker 1: makes this this business and what we do so fascinating
Speaker 1: because it's something different every day and I I would say,
Speaker 1: but a day in the life of las Anne is
Speaker 1: I read, write, and talk, So read and talk. I
Speaker 1: like that. That's essentially that's what we do. We read,
Speaker 1: write and talk. When I'm on the road, which I
Speaker 1: travel every week, um um talking, traveled that much on
Speaker 1: the road everywhere. Not Monday through Friday every week, but
Speaker 1: once a week at least, I'm going somewhere every week.
Speaker 1: I get a little reprieve in the August time frame
Speaker 1: because big events are not happening, typically in the dead
Speaker 1: of vacation season, and then I get a little reprieve
Speaker 1: in the December, you know, Thanksgiving. Usually beginning of December
Speaker 1: is still pretty big Z. But mid December to early
Speaker 1: January is a break, and then mid July to the
Speaker 1: end of August as a break. But other than that,
Speaker 1: it's it's it's every week. So when I'm on the road,
Speaker 1: I'm talking, and when I'm not I'm reading and writing.
Speaker 1: So um I. Mondays are generally publishing days, so that's
Speaker 1: what I'm doing a lot of my writing. The Friday
Speaker 1: before and the weekend is a lot of prep and
Speaker 1: thinking and editing, writing notes and sending torturing. My research
Speaker 1: assistant with can you put this chart together? Can you
Speaker 1: get this data for me? And and then I read constantly.
Speaker 1: I haven't read a fun book in forever, but I
Speaker 1: the day to day stuff I read constantly. They make
Speaker 1: fun of me in the office. I go on vacation
Speaker 1: like February, talking about February, and I'll bring a stack
Speaker 1: of eight books with me and they're all, it'll be
Speaker 1: seven unrelated finance books and then whatever Michael Lewis's last
Speaker 1: book is, and they're like, why would you bring that? Well,
Speaker 1: I'll read them on the way. Who reads it? You
Speaker 1: can't read two books a day, flash boys. I start
Speaker 1: that after Breakfast on the Beach finished the same day, absolutely,
Speaker 1: And it was a fact the year, A couple of
Speaker 1: years before the big short started on. I actually saved
Speaker 1: it for Wednesday. I didn't want to peek too soon
Speaker 1: in my now, but you are you happened? That would
Speaker 1: be talking about somebody who's really cornered the market on
Speaker 1: business books that are also really really fun and enjoyable
Speaker 1: and fascinating to But there are lots of other books,
Speaker 1: all right. So this last vacation and they were making
Speaker 1: fun of me because they're like, why are you slipping
Speaker 1: all these books, so Carrie always is the person who
Speaker 1: played Princess Brian. That's exactly right. So he has this
Speaker 1: book out that's charming and delightful about his experience making
Speaker 1: the movie, and it's just love it's lovely and my
Speaker 1: first date with my husband. Really, we've always loved that movie.
Speaker 1: It's it's a lightful, delightful movie. Very different character for
Speaker 1: Robin Wright than the one she's playing now, to say
Speaker 1: the least. And she is just so gorgeous in that
Speaker 1: movie and everybody in mean, there are famous lines from
Speaker 1: that movie that we say sometimes and people look at
Speaker 1: I don't think that word means what what you think?
Speaker 1: Have fun storming the castle? We say that to people
Speaker 1: all the time. They're like, what are you what are
Speaker 1: you talking about? Um? But I finished that book before lunch.
Speaker 1: That's not a heavy And then the third book I
Speaker 1: I actually one of the books I only got like
Speaker 1: halfway through. So some you could finish by lunch, some
Speaker 1: you could kill in a day. How to Be Less
Speaker 1: Wrong was by a mathematician that explains how do you
Speaker 1: statistics in everyday life? And it's really you know, it
Speaker 1: starts out with this wonderful anecdote of and I'm forgetting
Speaker 1: the gentleman's name, but he was a professor of Columbia.
Speaker 1: So the Army comes to him, and the Air Force
Speaker 1: comes to him. There really wasn't an air force then
Speaker 1: it was the Army Air Corps comes to him during
Speaker 1: World War Two and says, we're trying to figure out
Speaker 1: the optimal place to add armor to our various bombers.
Speaker 1: And here's what we have coming back to us, and
Speaker 1: here's the dispersion pattern. Here's what's on the wings, and
Speaker 1: here's what on the fuselage, and here's what's on the
Speaker 1: tail and blow and he says, um, you don't have
Speaker 1: any planes coming back with holes in about the engine. Yeah,
Speaker 1: that's adequately armored. And you know they're all He's like, no, no, no,
Speaker 1: you get hit there, you don't come back. You completely
Speaker 1: misunderstanding the whole statistics. This sample set is giving you information.
Speaker 1: You're just looking at it backwards. And the answer is
Speaker 1: you need more armor on your actual engines if you
Speaker 1: want those planes to come back as opposed to astray
Speaker 1: you know, even a nick sending them down. So it
Speaker 1: was kind of as it got further along the book,
Speaker 1: it got a little heavy, are a little more in
Speaker 1: depth mathematics, and so you start to slow down. You're
Speaker 1: you're reading pace. But um, that's my only like you,
Speaker 1: that's my time. I'm not a big book reader. And
Speaker 1: there's so many I and I and I get them.
Speaker 1: I get lovely gifts from people a good finance or
Speaker 1: generally generally I read constantly, But it's all the day
Speaker 1: to day stuff that right from all the research providers
Speaker 1: that I get, and your stuff and blogs and and
Speaker 1: so keeping up with that fire hose and stuff. It
Speaker 1: is totally drinking from a fire hose. So we had
Speaker 1: a conversation in our office, I want to say last year,
Speaker 1: and all of us made a commitment to read more
Speaker 1: finance related books stop and thinking about you have Marty
Speaker 1: Zack's book. Here's a guy who's sitting on right, a
Speaker 1: legendary investor who basically says, I'm going to take a
Speaker 1: thousand hours out of my year to explain to you
Speaker 1: everything I've learned about markets over the past four decades.
Speaker 1: Now you could do that, or you could read a
Speaker 1: newspaper and watch television. Which do you think net net
Speaker 1: is going to have a longer lasting impact on you?
Speaker 1: As an investor, so so we kind of all And
Speaker 1: I always have a giant queue of books and I'm
Speaker 1: always working my way through it, and I find finding
Speaker 1: interesting books that are not written by finance people but
Speaker 1: are applicable to finance is really fascinating. And whether it's
Speaker 1: about science and technology or just about ways of thinking.
Speaker 1: Have you read Abundance by Peter Diamonds. It's on my
Speaker 1: I haven't. I haven't read it cover to cover, like
Speaker 1: a like a novel. It's dog eared, and I've probably
Speaker 1: read every word in various times and for different reasons.
Speaker 1: But I'll tell you if you want, if you are
Speaker 1: feeling at all pessimistic about the future of our world,
Speaker 1: the future of this country, that's a book you got
Speaker 1: to read. It is it is such a He's the
Speaker 1: founder of the X Prize um, and it just talks
Speaker 1: about you never know where a brilliant idea is going
Speaker 1: to come from, and where where you're going to find
Speaker 1: creativity and innovation, and when you have two to three
Speaker 1: billion more people coming into the world of innovation and information,
Speaker 1: you just never know where a good idea is going
Speaker 1: to come from. He uses as an example one of
Speaker 1: the more recent X prize was for anybody. You know,
Speaker 1: the Exerprize is about setting up a financial incentive for
Speaker 1: people to solve problems. And it might be a large
Speaker 1: could be could be for a you know, an individual
Speaker 1: in their garage just you know. X y Z company
Speaker 1: is sponsoring a twenty million dollar exerprize to figure out
Speaker 1: fill in the blank. And one of them was figure
Speaker 1: out how to contain an oil spill immediately after it's
Speaker 1: happened so that it doesn't spread. And he talks about
Speaker 1: the fact that the winner of that was a tattoo artist. Oh,
Speaker 1: he said, the light bulb went on when he thought
Speaker 1: about how whatever chemicals are used to prevent the ink
Speaker 1: when it's applied from spreading and on the skin, and
Speaker 1: he adopted the same thinking and I think partnered up
Speaker 1: with with chemists and ultimately won the prize. So he
Speaker 1: just used as an example of you never know where
Speaker 1: the next great thing is going to come from. And uh,
Speaker 1: you know, don't don't don't assume that that the greatness
Speaker 1: of us as innovators and creative people is diminishing. That's
Speaker 1: funny because I had a conversation with a reporter yesterday.
Speaker 1: A young gentleman at U n C who was asking,
Speaker 1: I'm sorry, that's wrong. It was a different reporter and
Speaker 1: it was UM, I think it was U S News
Speaker 1: and World Report about they had looked into something and
Speaker 1: I had written about in two thousand, Fortune did this,
Speaker 1: you know, ten stocks you know for the next ten years,
Speaker 1: and it was a debut, you know, it was Enron
Speaker 1: and a bunch of others. It was just a horror show.
Speaker 1: And so now there was more recently and I remember
Speaker 1: who did it, UM thirty stocks for the next thirty years.
Speaker 1: And the person asked me, why is this a bad idea?
Speaker 1: And to your concept, I said, there is a kid today,
Speaker 1: he's fourteen. Right in thirteen years or so, he will
Speaker 1: be out of college at a grad school, twenty seven
Speaker 1: years old, at some startups somewhere, and I can't tell
Speaker 1: you what the hell this guy is going to invent,
Speaker 1: but it's gonna cure cancer or change change batteries. So
Speaker 1: it's just an article of the day about, hey, if
Speaker 1: we swap aluminum for this, I odd this this diode
Speaker 1: in batteries, it's you know, lighter, last longer, and by
Speaker 1: the way, you could recharge a battery in thirty seconds.
Speaker 1: Nobody has the slightest clue where this next thing is
Speaker 1: going to go. So how are you going to pick
Speaker 1: thirty companies for thirty years? Go back thirty years ago?
Speaker 1: Most of them don't even don't even exist, you know,
Speaker 1: look at the nifty you know they by the way
Speaker 1: they NASA and its construction in two thousand relative to
Speaker 1: what it is right now. Does So you've been around
Speaker 1: long enough as have I to remember the nineties really vividly.
Speaker 1: Microsoft essentially bailed out Apple with a hundred and fifty
Speaker 1: million dollar investment, and my thesis at the time was, well,
Speaker 1: they wanted another operating system to keep the Justice Department
Speaker 1: at Bay. Had Apple gone under, there would have been
Speaker 1: really the only oh yes, it would have been anti
Speaker 1: trust problem. If I would have said to you, by
Speaker 1: the way, that was a terrible mistake Microsoft made. Apple
Speaker 1: is going to come out with all these great products
Speaker 1: and they're just gonna kick Microsoft. But Microsoft is still
Speaker 1: be a cash cow, right right. I got an email
Speaker 1: from a friend and her signature is typed on glass
Speaker 1: sent by Magic, which is really what an iPhone or
Speaker 1: iPad is, by the way, so we're not even talking
Speaker 1: a hundred years from that. We're talking fifteen years from now,
Speaker 1: Apple become the biggest market cap in the world. Microsoft
Speaker 1: will still be a cash cow, but they'll really have
Speaker 1: no waning influence on technology. You would have said, you've
Speaker 1: lost your mind. You're hallucinating that. Not only is that
Speaker 1: not realistic, it's probably impossible. And that's like all of
Speaker 1: fifteen sixteen years ago. So now double that thirty years
Speaker 1: from now. Which of these companies. So whether it's you know,
Speaker 1: Moore's law with the speed with which things are changing
Speaker 1: and innovations kicking in grows exponentially and uh so that's
Speaker 1: you know, also that Peter Diamandous concept, and he named
Speaker 1: a university off of its singularity, And uh, I agree,
Speaker 1: I think that there is. I think that's beyond our lifetime,
Speaker 1: the singularity. I'm hoping it's beyond lifetime. So when I
Speaker 1: had Byron ween on, he talked about he left a
Speaker 1: lot of money to Harvard, he gave a lot of
Speaker 1: money to all these different charities. He's very much a philanthropist.
Speaker 1: But he made a bunch of money investing in biotechs
Speaker 1: twenty five years ago. And he goes, I don't even
Speaker 1: look at my bought him, I put him a wife
Speaker 1: for twenty five years, and now they're worth millions and
Speaker 1: millions of dollars. People are just starting You had the
Speaker 1: sixty minutes piece not too long ago. You had the
Speaker 1: vice piece not too long ago about the combination of genomics, immunalogy,
Speaker 1: and and there was one other factor where essentially cancer
Speaker 1: for the first time ever seems to be coming up
Speaker 1: on a potential cure, right, which I I think, not
Speaker 1: because I have any medical expertise, but maybe it's just
Speaker 1: hope is in our lifetime thing. I don't even think
Speaker 1: it's in our lifetime. I think it's somewhere in the
Speaker 1: next five to ten years. So if you if you
Speaker 1: see the sixty minutes piece, showed them taking um polio
Speaker 1: vax polio virus, not even the vaccine, genetically alterning it
Speaker 1: and dripping it into the brain to kill what is
Speaker 1: normally and now granted it's only a fifty percent success rate,
Speaker 1: but that's huge. Fifty This was a fatal You get
Speaker 1: that that diagnosis, get your personal affairs in order and
Speaker 1: now and now we're giving it to people in order
Speaker 1: to cure. So so I don't know when we're gonna
Speaker 1: there are some four hundred different types of cancer, and
Speaker 1: it's going to be a process before all of them
Speaker 1: are gotten. And maybe we don't get all of them,
Speaker 1: but we get some. But that has changed so rapidly.
Speaker 1: If I would have asked somebody five years ago, hey,
Speaker 1: what do you think about curing cancer? You have been
Speaker 1: hearing that my whole life. It's a century away. And
Speaker 1: suddenly a couple of different technologies. You get the ability
Speaker 1: to manipulate DNA, you get all of the increases in
Speaker 1: technology that everything gets finer and finer. How does anyone
Speaker 1: have a clue where the next great idea is going
Speaker 1: to come from? I couldn't agree more. That's why I
Speaker 1: love the acronym brain, which is biotechnology, robotics, artificial intelligence,
Speaker 1: nanotechnology for what are just the whether you hear it
Speaker 1: reference to this is what kids should be studying, like
Speaker 1: the STEM, which was science technology. Yeah, my son just
Speaker 1: called us about two months ago. He's a freshman at
Speaker 1: Indiana University, and part of the reason why he went
Speaker 1: there was the Kelly School of Business, which is a
Speaker 1: very very well round, world rounded business undergraduate business school.
Speaker 1: But he called a couple of months ago and said, um,
Speaker 1: I think I want a minor in business, but major
Speaker 1: in math. That's a combat. That's an absolute comma. Even
Speaker 1: Wall Street firms are looking for math oriented, no doubt
Speaker 1: about it. Look if you if you look at the
Speaker 1: world of quantitative investing, if you say, let's put away
Speaker 1: the historic myths and the things that are unproven and
Speaker 1: just say, what do we know actually works mathematically, whether
Speaker 1: it's Jim O'Shaughnessy or rob or not. Or we had
Speaker 1: Cliff ass In this recently who basically laid out the
Speaker 1: the argument for value and momentum together is very much
Speaker 1: an unbeatable combination. And the reason we know that is
Speaker 1: mathematics as opposed to all the specific myths. Uh. We see.
Speaker 1: So in the last couple of minutes we have you
Speaker 1: for I know we have to get you out of
Speaker 1: here eventually. Let's see if there's a handful of questions
Speaker 1: I want to come up with you. Well, one, I'm
Speaker 1: going to jump in and answer something you haven't asked
Speaker 1: me yet, because we've talked so much about mentors and
Speaker 1: Martin um. But how how cool I'll sort of ask
Speaker 1: the sheer luck but bliss that I have had in
Speaker 1: my career going from working for Marty's wage to working
Speaker 1: for Charles Schwab, for Chuck the man, and people don't
Speaker 1: realize Charles Schwab is a real person. Chuck still is
Speaker 1: the chairman of the company right and and very active
Speaker 1: chairman that somebody else we should get it. Very active chairman.
Speaker 1: I'm going to have you extend and invite. Also, he's
Speaker 1: I think we could say he's a master of business.
Speaker 1: He has certainly a master point something. He's about as iconic.
Speaker 1: He really he democratized investing for these So again for
Speaker 1: the young uns who don't understand this, there used to
Speaker 1: be fees that were set for everybody, and then there
Speaker 1: was a rule change that allowed competition by reducing fees,
Speaker 1: and Schwab essentially said, okay, let's go. We were the
Speaker 1: first disc out brokerage firm, first discount brokerage the early
Speaker 1: seventy years ago. So we just last year celebrated and
Speaker 1: he really he he changed the business as we know
Speaker 1: it um and has been a pioneer all along the way.
Speaker 1: Um stepped back in a CEO a number of years
Speaker 1: ago and and then ultimately found his successor in Walt Bettinger,
Speaker 1: who is our CEO now. But he is still chairman
Speaker 1: of the board and a very active chairman, much to
Speaker 1: the thrill of all of us that get to still
Speaker 1: have him around on a day to day basis. And
Speaker 1: he's been in the business for more than four years.
Speaker 1: How old was he when he started? Seventies seven now
Speaker 1: really so, yeah, he was in his thirty. He looks
Speaker 1: pretty good for seven. He looks fantastic. He stays in
Speaker 1: great shape. He's a ski or a golfer and no kidding, yeah,
Speaker 1: and he's uh, he's he's a prince among men. And
Speaker 1: so I have and then my my media part of
Speaker 1: what I do. I got to start on Wall Street
Speaker 1: week with Lewis Rukaiser. Really seriously you Marty's wide Lewis Ruckeiser,
Speaker 1: Chuck Schwab. That pinched me, you should be buying lottery
Speaker 1: tickets every other week. Basic that I have, I have
Speaker 1: been very, very blessed. That's amazing. One of the questions
Speaker 1: I had asked you earlier, who else were some of
Speaker 1: your mentors? You actually guest hosted for ru Kaiser? Right, so, um,
Speaker 1: I was a regular. I was a guest initially in
Speaker 1: and then he right away I got asked to be
Speaker 1: a regular panelist. So my first show as a regular
Speaker 1: panelist was in early and then maybe it was two
Speaker 1: or three years later. I don't remember exact time frame,
Speaker 1: but there was a small subset about three of us
Speaker 1: of panelists that Lou picked to stand in for him
Speaker 1: if he was on vacation or not feeling well. And
Speaker 1: so only one time, but um I got to play
Speaker 1: Lewis Ruckeiser. So I did the walk in, I did
Speaker 1: the monologue, I walked over to the table, sat down
Speaker 1: with the panelist, went an interview you a guest, and
Speaker 1: it was it was incredibly nerve wracking. You're a natural,
Speaker 1: you know what I I don't. Fortunately, I don't get
Speaker 1: jitters either when I to public speaking or this type
Speaker 1: of thing. But standing in loose show shoes for a
Speaker 1: four power show. Uh. And it was, you know, quite
Speaker 1: a few years ago, so I was much younger than
Speaker 1: I am now. It was it was daunting but fun.
Speaker 1: I tell the story. You you actually play a role
Speaker 1: in my media career because I tell the story the
Speaker 1: first time I did you and I the first time before,
Speaker 1: I had just finished a diet coke in the green
Speaker 1: room and I was heading to the bathroom when they
Speaker 1: tapped me, Hey, we're on the let's go, and they
Speaker 1: bring me in and it's I'm sitting here. It's a
Speaker 1: small round table. Next to my left was Larry Caudlow.
Speaker 1: To my right was you and a friend of mine
Speaker 1: who was a strategist at a at a firm I
Speaker 1: had worked at previously. I got a gentleman named Barry
Speaker 1: Hyman had said to me, look, don't look nervous, don't
Speaker 1: dart your eyes back and forth. Find something to look at.
Speaker 1: And I was looking for something to go. Liz Anna
Speaker 1: Sanders has the whitest teeth I've ever seen. And I
Speaker 1: swear this every word is true. That was my focus.
Speaker 1: I was just looking at you. Think about the conversation
Speaker 1: we had before we walked down into the studio. What
Speaker 1: was it about. Oh I don't know them so long ago.
Speaker 1: Oh that's right. Oh that's hilarious. That's absolutely hilarious. No smoking,
Speaker 1: no cost never never had a cigarette, Never had a
Speaker 1: cup of coffee. Don't drink, don't smoke, um, well, drink
Speaker 1: other stuff, just okay, no coffee. So um So that
Speaker 1: was my first show, and I remember it was a
Speaker 1: glass table, which was the only thing that prevented me
Speaker 1: from throwing up, because I remember thinking, if you puke
Speaker 1: on this table, it's just gonna skitter it in my lap,
Speaker 1: all over my It was just, you know, my father
Speaker 1: in law, who's no longer with us, was the only
Speaker 1: person who was honest with me. I go back into
Speaker 1: the office the next day thunderous applause, or at least
Speaker 1: that's how I remember. There were five standing ovation. It
Speaker 1: was just great, and everybody, my supervisor in the head
Speaker 1: of everybody loved so I called Harry. So, Harry, what
Speaker 1: do you think. I don't know. You looked kind of nervous.
Speaker 1: You you would your lips would draw. You was smacking.
Speaker 1: So every time, this is absolutely true, every time I
Speaker 1: the first three or four times I did television, everybody
Speaker 1: loved it, and Harry was the only guy give me
Speaker 1: the straight dope. So by the fifth or sixth appearance,
Speaker 1: how was that, He goes, I have to tell you,
Speaker 1: you looked very comfortable. You were articulate. You sounded like
Speaker 1: you knew that was That was when I said, oh, okay,
Speaker 1: So I really appreciated him, not sugarcoating it. You gotta
Speaker 1: work a little bit. You You looked very uncomfortable. All
Speaker 1: I guess I gotta I gotta work on that. So
Speaker 1: this isn't about me, though this is supposed to be
Speaker 1: about you. You were the there at the first and
Speaker 1: I remember thinking, God, she is just so smooth and effortless.
Speaker 1: Can I tell you the best tip I got ever
Speaker 1: that I have I've It's always in my mind when
Speaker 1: I do something like this, or I do a TV appearance,
Speaker 1: or I get up in front of a room. Came
Speaker 1: from Lewis Ruckaiser. So the very first time I was
Speaker 1: on the show was as a guest. So I was
Speaker 1: doing the ten minute interview after the discussion around the
Speaker 1: table with the pans. Were you working at the time
Speaker 1: at Gavatar? And I had not met lou before. I
Speaker 1: was a huge fan, but I had not met him.
Speaker 1: And just before he came out to do his monologue,
Speaker 1: I was behind the scenes and that was when I
Speaker 1: met him literally for the first time, shook hands. He said,
Speaker 1: thank you for being on the show. Are you nervous?
Speaker 1: I said a little bit, he said, and he asked
Speaker 1: me what I thought wasn't an odd question at the time,
Speaker 1: two part questions. He said, are your parents still alive?
Speaker 1: Are they still with us. I said yes. He said,
Speaker 1: are they in the business? I said, uh, television, business, finance?
Speaker 1: He said, no, your business are they? Are they Wall
Speaker 1: Street people? I said no, no, no, are from it.
Speaker 1: My my my mom was largely a stay at home mom.
Speaker 1: She had some jobs, but not certainly not in finance,
Speaker 1: and my dad was an ad sales person for a
Speaker 1: trade magazine. He grabbed both of my elbows and said, Okay,
Speaker 1: I want you to do me a favor when you
Speaker 1: come out here to do the interview with me. Get
Speaker 1: them to understand what you're talking about. And I have
Speaker 1: always taken that to heart because I think even though
Speaker 1: what we do is fairly complicated, what's going on in
Speaker 1: the world is often fairly complicated, there is a way
Speaker 1: to explain it and talk about it to investors that
Speaker 1: is much less complicated. And I find that the people
Speaker 1: who have come up to me and said thank you
Speaker 1: for speaking in in plain English and not using a
Speaker 1: lot of jargon and making it easier and understand more
Speaker 1: often than not, those are people on the more sophisticated
Speaker 1: end of the spectrum than they are on the lesser end.
Speaker 1: And I find I'm almost thirty years in this business. Now,
Speaker 1: to me, there's nothing that's more of a turn off
Speaker 1: than when I hear somebody get up on stage or
Speaker 1: on TV that one wants to sound like the smartest
Speaker 1: guy in the room and is throwing all sorts of jargon,
Speaker 1: and they're very William F. Buckley like in there in
Speaker 1: the way they speak. And I just much more appreciate
Speaker 1: somebody who just speaks in plain English, doesn't try to
Speaker 1: get overly flowery in the language. And and I that's
Speaker 1: always in the back of my mind. Okay, get your
Speaker 1: get mom and dad to understand what you're talking. But
Speaker 1: it's funny you say that because my mother is now retired,
Speaker 1: was a real estate agent. My wife is an art teacher.
Speaker 1: And that's the same concept in my head. That's my tale.
Speaker 1: You do the same thing. Speak to mom, speak to
Speaker 1: my wife. So neither of them in the business. Although
Speaker 1: my mom was kind of a she's the one who
Speaker 1: first turned me onto equities. Okay, so she was an
Speaker 1: investor in the eighties and and and nineties, and but
Speaker 1: she was really she was a real estate agent by profession.
Speaker 1: That was what she did. So the issue was always
Speaker 1: get her to understand these complex economic issues or the
Speaker 1: sentiment issues or any of the technical shoes. If you
Speaker 1: could get somebody who's not a Wolf Street professional to
Speaker 1: get it, hey, then everybody should be all right. So
Speaker 1: in the last few minutes we have and I'm really
Speaker 1: enjoying these digressions, but I know our time is only finite.
Speaker 1: Let me ask you a few of the standard questions
Speaker 1: I'd like to ask people. Um, and there are a
Speaker 1: whole bunch of other questions. So we discussed investing books,
Speaker 1: we discussed investors, we mentors, and who the other investors were.
Speaker 1: So so let me ask you these last two questions.
Speaker 1: M M, I really don't love that question, and I
Speaker 1: don't like this question. We you know, can I tell
Speaker 1: you something? I write all these questions down and we
Speaker 1: got a conversation through. So there are two questions I
Speaker 1: always ask people, and let me give you these. The
Speaker 1: first one is, we've seen a whole lot of changes
Speaker 1: over the past your twenty nine years in the market,
Speaker 1: every thing from decimalization to market crashes to high frequency trading.
Speaker 1: What sort of shifts do you see coming in the
Speaker 1: not too distant future that you think are significant for
Speaker 1: investors thinking over the next several years. So call it
Speaker 1: a medium term time horizon, I think we will continue
Speaker 1: to see greater access to a variety of asset classes,
Speaker 1: so further democratization of investing for many individuals, I think,
Speaker 1: whether it's through E t f s or or other
Speaker 1: avenues through which individuals can take almost an endowment approach
Speaker 1: to their own portfolios and further moving away from that
Speaker 1: traditional stocks, bonds, cash. But I also think we're in
Speaker 1: a period of likely greater volatility in those asset classes,
Speaker 1: so not necessarily a smooth ride for investors trying to
Speaker 1: navigate that, which means that I hope there's an additional
Speaker 1: place for education. And we're also at SCHWAB we are
Speaker 1: big proponents of investor education, and I would like to
Speaker 1: see more coming down the pike on that front. And
Speaker 1: I'm not just talking about seminars for investors of an
Speaker 1: older age. I actually wrote a letter to the principle
Speaker 1: of my kids high school, my my son's now out
Speaker 1: of high school, my daughters in high school, um, just
Speaker 1: asking whether they had ever considered having some sort of course,
Speaker 1: not in the stock market, but something that I would
Speaker 1: call life economics. How absurd is it that at that level,
Speaker 1: or even before we don't teach the basics of how
Speaker 1: a credit card works, and how compound interest works, and
Speaker 1: how to balance a checkbook and how taxes are taken
Speaker 1: out of our paycheck. I'm all for the arts, and
Speaker 1: I love when my daughter has to do a map
Speaker 1: of what ancient Greece look like, But I think shouldn't
Speaker 1: that also be in conjunction with the way money works
Speaker 1: in our economy? You know, we what a four oh
Speaker 1: one k is, what an I ra is, all these
Speaker 1: basic things that that we sort of get thrown to
Speaker 1: the wolves. So I would like to see we're we're
Speaker 1: as a firm sort of on a mission because it's
Speaker 1: it's a it's a big part of what we do
Speaker 1: it at shua But I'd like to see that become
Speaker 1: more pervasive, so that we start the education about money
Speaker 1: at a much younger age than we do now. So
Speaker 1: that's my longer term hope. That's that's really fascinating. That's um.
Speaker 1: You know, we talked about the lack of civics. You know,
Speaker 1: it used to be something on a civic Here's how
Speaker 1: you learn how to be a citizen and in a
Speaker 1: complex modern world, here's how you learn how to handle
Speaker 1: your own money. That would be a fantastic Uh, it
Speaker 1: should be. It should be a required course at least
Speaker 1: in high school. So we're gonna have to nominate you
Speaker 1: for the Board of Education. No politics. And so the
Speaker 1: last question I I always ask people and I get
Speaker 1: a variety of really interesting responses, but let's see yours is, so,
Speaker 1: what do you know today about investing, markets, finance that
Speaker 1: you wish you knew when you started your career. I
Speaker 1: think I wish I truly knew, even though when I
Speaker 1: started my career was working for somebody that spent a
Speaker 1: lot of time focusing on the behavioral side of markets
Speaker 1: and crowd psychology and the sentiment around peaks and valleys
Speaker 1: in the market. It's not until now that I realized
Speaker 1: that that really matters more than anything else. And if
Speaker 1: you can figure that out, you can maybe not nail
Speaker 1: perfectly tops and bottoms, but that I think is generally
Speaker 1: what keeps you on the right side of things, and
Speaker 1: which often means as as someone who's doing the investing,
Speaker 1: you know we we we observe the world of investing,
Speaker 1: but we're also investors. Um some of the best decisions
Speaker 1: are often some of the most uncomfortable ones. So I
Speaker 1: I wish I would have understood. I think I probably
Speaker 1: would have been made better calls and decisions around the
Speaker 1: peak in two thousand than I did. UM, but it
Speaker 1: certainly helped me and some of the more recent inflection
Speaker 1: points in the market. Liz, thank you so much for
Speaker 1: being so generous with your time this. This has really
Speaker 1: been great for those of you who are joining us late.
Speaker 1: I don't know how that's possible. UM at Liz Anne
Speaker 1: Saunders or schwab dot com for all of the various commentary,
Speaker 1: research analysis she puts out. If you enjoy this conversation,
Speaker 1: you're probably looking at it on iTunes, so look up
Speaker 1: an inch or down an inch and you'll see the
Speaker 1: rest of the series. This may actually be the fort
Speaker 1: show we've done. We started almost a year ago, and UM,
Speaker 1: you may be looking them with forty. That's right you
Speaker 1: when you said twenty nine, I'm like, you're twenty nine
Speaker 1: a year or too older than twenty nine. You look
Speaker 1: fantastic for whatever age you were at. So that's UM.
Speaker 1: I'm gonna stop there before I take a hole. Um,
Speaker 1: you've been listening to Masters in Business on Bloomberg Radio.
Speaker 1: I want to thank Charles Moulmer, my engineer, Michael bat Nick,
Speaker 1: my head of research. I'm Barry rit Halts. You're listening
Speaker 1: to Masters and Business on Bloomberg Radio.