Market Cycles and Investment Strategy With Charles Schwab's Liz Ann Sonders

30:09I think that's such a brilliant way to describe a market cycle, in part because the only terms used in there have to do with emotions. Exactly. There's nothing in that line about market cycles that has anything to do with what we all obsess about on a day-to-day basis, monetary policy, fiscal policy, what the next inflation report is going to be, even earnings and valuation. And Marty understood that too. And so much of the work that he did was steeped in that sentiment analysis. I love that you brought that up because, so I took the technical analysis training course with Ralph Alcampora. And I don't really think of myself as a technician, but I certainly wouldn't buy anything without looking at a chart.

30:50It has to be a component. I don't need to see an analyst's research report, but I have to at least get a sense of, is it trend up? Is it trend down? Has this been going sideways for years? And the best technicians I know have always brought in behavioral economics and sentiment before we called it behavioral finance. And Marty certainly was one of those people. Absolutely. And so my maybe sort of added focus on the emotional side, the sentiment side of the market very much was born out of my time working for Marty. And I still think it's extraordinarily important. And one of the messages we always impart to our investors is ideally you don't figure out the hard way, whether there's a wider or narrow gap between your financial risk tolerance and your emotional risk tolerance.

31:43Because those two at times can be completely different. And I always describe financial risk tolerance as kind of what's on the proverbial paper. Your time arising, do you need income? What is this money for? Is it for retirement? Diversification, blah, blah, blah, blah, blah. But if you are going to panic and sell everything at the first bear market level declines in your portfolio, you're maybe not as risk tolerant investor as you thought. And it's just the vast majority of mistakes that we see, extreme mistakes, purely driven by emotion. You know, there's a line I remember from when I was on a trading desk that I didn't really understand then, but it sums up that gap between your financial risk tolerance and your emotional risk tolerance, which is figure out who you are because Wall Street is an expensive place to learn.

32:36Exactly. Right? You don't know who you are. You don't know what your emotional pain allowance is. You don't want to panic out. The word capitulation technically means surrender. So you go to a March 09, that capitulation meant people just couldn't take the pain anymore, make it stop, just get me out of everything. And that's how bottoms are. Can I share the March 09? Oh, we were talking about it earlier. We were talking about it earlier, but we didn't have microphones in front of us. That's right. So it was, let's go back to March 6th of 2009. So I lived in Darien, Connecticut for 22 years. We raised our kids in Darien, and it's one of the hotbeds of Wall Street.

33:22In fact - Bedroom community, short commute to the city. Short commute to the city. our town made the cover of Business Week in 2008, the latter part of 2008, as the town most impacted by the financial crisis in the country. And they did it based on the percentage of the working population that worked either on Wall Street in some capacity or in real estate. And so I was surrounded by Wall Street people, not a lot of Wall Street women. it was also a town where most of the women who were raising kids were stay at home. So I was always steeped in conversation about the markets. And in the role that I had, I would always get peppered with questions.

34:06So my husband and I are at a dinner party in Darien. It was toward the end, dinner and dessert had served, maybe about a quarter of the people had left, a smaller crowd just sitting around chatting. And the host of the party, who was at that time, a 30-plus year veteran of Wall Street, said, Lizanne, I must say, I don't envy you right now. And he was a bit dramatic and he kind of paused for effect. And I said, oh, what do you mean? And he said, well, I really think that there's no chance that the stock market ever gets to another high. I think there's a decent chance that retail investors will never buy again.

34:44Wait, never. Never. Never. Just dumb. Which makes me question the viability of a company like Schwab. And so I don't even remember what I said. I think I did some generic version. Well, I beg to differ. But I didn't. I was also ready to leave. You know, I like a nine handle on my bedtime. So if it's 1130, I'm like, okay, chop, chop. So I just, I wanted to end the night. We get in the car, unprompted. And I haven't had to embellish a story at all. And before my husband puts the key in the car, he looked to me. He said, did you hear it? And I said, the bell ringing? He said, I knew you were thinking that.

35:24So I called my friend the next morning and I said, I am working on a report. And all of my research reports, written research reports, I use rock song titles. I'm a rock chick from way back. So I said, I am working on a report that I want a title. Here comes the sun. Can I share the anecdote? No name, just the anecdote. No name. I said, I'm not going to mention name. he said, sure, I think you're going to regret it. Every time I see him, he does like the fist to the forehead, like, oh my gosh. And that was when the last person is standing has gone down. That is, and I think that's interesting.

36:02What's interesting about sentiment is we know sentiment at extremes serves as a contrarian indicator. Right. Most of the time you could pretty much ignore that middle range. Without anything resembling precise timing. That said, as we all learned in the late 1990s, extremely optimistic sentiment can last for a really long time. Greenspan made his irrational exuberance comment in 96. December 96. And it wasn't until three plus years later that the market topped out. March 2000, almost four years. That said, when sentiment gets to such an extreme of despair, it's not a precise contrarian timing, but there's a narrower window.

36:39Pay attention. Yes. Pay more attention to extremes of despair than you do extremes of enthusiasm because the latter can last a long time. Tops are a process. Bottoms are a moment. Absolutely. And there are all these old trader cliches and stuff, but they become cliches for a reason. And we all experience the world in a very narrow window of 8 billion people on the planet. Our experiences are maybe a tenth of a percent of what the rest of the world is experiencing. And so we tend to extrapolate out to the rest of the world. But very often what's happening in the markets is not reflecting your personal experience.

37:25But after you've lived through enough cycles, you start to be able to hear those sort of things. That was a pure death of equities business we cover from the late 70s and a year or two later, that was it. It was the next 1 ,000 % rally. The next secular bull market. Yeah, absolutely. Amazing story. I have one other anecdote that's an interesting one to think about how emotions come into play. Was out in Silicon Valley area maybe about a year ago, a little less than a year ago, and heard from a client that he had finally given in to his financial consultant's suggestion that he trimmed just back about 10 % of his NVIDIA holdings.

38:06He was an ex-employee, had a lot. Just diversification. Right. We're going to leave some money on the table in order to reduce your And he ended up splitting the difference. He didn't want to trim any. He trimmed 5%. And then the stock went up by 20 some odd percent in the short term. And he was mad at the financial consultant that the stock had gone up. And to our financial consultant's credit said, would you really be happier if the 95 % you still own went down 20 %? Listen, in the beginning of this year, NVIDIA lost a third of its value. That he was almost more, and to his credit, he said, you know what, that's the way I should think about it.

38:46Was more concerned about the top tick, the bottom tick. I trimmed it. Wasn't I brilliant? Because then the stock went down 20%. So our emotions play tricks on us in a lot of different directions. You brought up my book. I try not to talk about it on the show. It was a great book. But the regret minimization chapter is all about your role as an individual investor is not to outperform the market or top tick or bottom tick stocks. It's, hey, how can you avoid making decisions that you're going to say 10 years later, what an idiot I was. Just as Charlie Munger said, what can you do to be less stupid?

39:25And if we see these portfolios that started out as a million or$2 million, but through either smarts or good luck or some combination, they had a big slug of Nvidia 10 years ago. And now they have a$20 million portfolio, 18 million of which is Nvidia. Hey, do you really want to ride this up and down? You've won. Think about what$20 million in long-term investing does for you. Do you really want to ride this down when it takes one of its regular drawdowns? And I want to say it gave up about a trillion dollars in market cap this year before recovering. But can I say something else? I'm not an analyst.

40:08I don't cover NVIDIA. But the whole focus, the Uber focus on the Magnificent Seven, let's just use that as an example of a cohort. So we're dealing with cap-weighted indexes in the case of the S &P and the NASDAQ. And I think one of the messages we impart to individual investors is don't feel like you have to have the same concentration as what's embedded in these cap weighted indexes, that's an institutional problem. If you're benchmarked against the S &P on a quarterly basis, you are at the mercy of the construction of that index. But as an example of how I describe this, NVIDIA is the best performing stock within the MAG 7 year to date, but it's the 47th best performing stock in the S &P 500.

40:49It's the number one contributor to S &P gains by virtue of the multiplier of the capsize. So there's 46 stocks in the S &P that are outperforming NVIDIA this year. NVIDIA is, I think, ranked number 630 something in the NASDAQ, meaning there's 630 some odd stocks within the NASDAQ that are outperforming the best performing MAG7. So it's the contribution that sometimes gets conflated with the performance. I have a buddy who's a technician who looks at a ratio of the market cap S &P versus the equal weight S &P. And what we've been seeing this year is the equal weight, I'm trying to remember where we are now.

41:36I haven't looked at it recently, but when it's going up, it's telling you the big caps are faltering. And when the ratio is going down, it's telling you the big caps are doing well, unless I'm doing that backwards. It depends on which one is the numerator, which one is the denominator. But clearly the outsized weight market cap wise. Is NVIDIA number one or two behind Microsoft or Apple? It's number one right now, but it's been, you know, Meta and Alphabet have actually been kind of battling. And then also Microsoft, those are the four of the Mag 7 that are outperforming the S &P year to date.

42:09The other three are underperforming. And in fact, a few days ago, because I track this on a daily basis, Apple was down, I think, 7 % year to date. That was its worst year-to-date performance. And it was the 503rd ranked contributor to the S &P. So the multiplier of cap size works in the other direction if you're an underperformer as well. And a lot of people say, well, what do you mean 503? The S &P has 500 stocks. A and B shares. You have Google, you have Berkshire, you have a few big companies like that. That's a great trivia question. How many stocks are in the S &P 500? And there's also not 2 ,000 in the Russell 2000.

42:46Or the Wilshire 5 ,000, it's like 3 ,400. Yeah, the Wilshire 5 ,000 used to be about 8 ,000 stocks. And now there's just fewer stocks that are publicly traded. Absolutely. Coming up, we continue our conversation with Lizanne Saunders, market strategist for Schwab, discussing the current environment. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio.

43:20I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Lizanne Saunders. She is the chief market strategist at Schwab, helping to oversee$11 trillion in change in client assets. So I went back and looked at my notes. The last time we had a conversation like this was spring of 2024. It was six months before the election. I don't think the election surprised many people. It sort of felt like that was inevitable. Maybe that's a little bit of hindsight bias. How has this year played out since January 20th relative to expectations? Well, let's focus on not so much the beginning of the year, but the setup going into April 2nd.

44:10I think that was a pivotal point because we knew tariffs were coming, but I think there was complacency as to what the announcement would be on April 2nd. An assumption that, okay, 10 % across the board tariffs, it's kind of built into expectations. You call it complacency. I call it a failure of imagination. A failure to imagine the Cheesecake Factory menu being held up and reciprocal tariffs of a massive size. Right. Because you think about it, he talked about tariffs. He said, I called himself tariff man. It's the most beautiful word in the dictionary. None of us imagined that he would just overturn the order.

44:47And that reciprocity wasn't about tariffs that other countries had as part of their policy, but reciprocity relative to trade deficits and the confusion that that brought about. When you think about there are many countries, particularly smaller - Vietnam is the classic example. But also the Madagascar and Bangladesh, we're never going to have a trade surplus. They can't afford to buy - They're teeny compared. They're teeny. And in the case of a place like Madagascar, they produce most of the vanilla in the world. That gives them literally and figuratively an industry. And they can't afford to buy what we export, which is much more value-add.

45:25So I think that was a big surprise factor. A math error. It's effectively a conceptual math error. Yeah. And of course, running trade deficits, the other side of that is a capital account surplus. So we export dollars into the rest of the world and those dollars have to be put to work and they get put in treasuries and equities. And so I think that became a significant concern. I also have been really shocked, Barry, at how the general public doesn't understand literally who pays the tariffs. It's a VAT tax. It's a value added tax on consumption. The first time I decided, I was speaking to an audience in Naples, Florida in the spring, that well-to-do audience, so assuming they have some investment expertise, but we're not deep in the import-export business.

46:18And I decided, let me just lay out the actual definition of tariffs. I said, notwithstanding the shorthanded headlines of tariffs on China, tariffs on Mexico, fill in the blank. Tariffs are paid by the U.S. company importing the goods. are not paid by the targeted country. It is not the case that, as I've heard from friends who didn't understand how this worked, that in order for China to export goods into the United States, China has to pay a tariff to the United States. Barry, do you know how many people came up to me after that event and said, I had no idea? And that's what's a little frustrating because there's still that shorthand.

46:54And at times when there are comments made by the administration that, you know, China, again, fill in the blank of the country, paying us more in tariffs. It's the US company. It's a tax on US companies. Now, a valid debate is who ultimately bears the cost. And is it the exporters that will lower their price to offset the tariff that the US company has to pay? Very little indication that that is happening. And then of course, it's do companies eat it in their profit margins or do they pass it on to the consumers? But either way, either companies are going to have lower profits, which means the stock market could support a lower PE multiple, or there's only so many dollars, it's finite.

47:36So what we saw, we saw this is taking place in three steps. In anticipation of the tariffs going into effect, and especially with the 90-day pause on April - Well, so that was the thing that happened. There's a ton of excess import, inventory builds. In one week from April 2nd to the intraday low on April 9th, there was sort of a complete about phase. So what none of us can do is try to gauge what the next social media post is going to be. There's been so many fits and starts from a tariff perspective, whether it's delays, tariffs coming down, exceptions. This has been an elongated process. It certainly wasn't a moment in time kind of thing.

48:18But what we can analyze, especially as a strategist, are the setups. So we already talked about the setup going into April 2nd. Well, the setup shifted very quickly. So you went from complacent sentiment to despairing sentiment. You had a VIX in the low teens that spiked up to 30. And on the 8th, I wanted to buy. And I'm like, I have no idea what the hell the next tweet is going to be. Right. Can I really put money in my personal account, put money on at risk that could be destroyed by a tweet? But then you had the market technically oversold, breathed fully washed out. So then you get what was really just incrementally positive news intraday on April 9th and off to the races.

49:02But then you had the power of the retail trader and that cohort has become unbelievably powerful, representing somewhere in the 20 to 25 % of daily trading volume. And that buy the dip mentality was such a fuel for the market. What concerns me a little bit now is if I track a lot of the baskets that track like micro baskets of stocks, Goldman has a lot of them, UBS has the meme stock basket. You go back to that intraday low on April 9th and it's baskets like the memes, non-profitable tech, heavily shorted stocks. That is the perfect example of retail traders kind of powering this market higher.

49:40And in the heavily shorted piece of that, it's also suggestive maybe of retail traders with a little bit of the stick it to the man, which drove the initial meme stock craze back in 2021. The AMC sort of GameStop thing. Yeah. And it's alive and well. Again, it actually has forced institutions in some cases to cover shorts, which has added to the fuel. Now, I think as we think about the setup, we're arguably back in a similar pre-April 2nd, a bit of complacency, which maybe means some vulnerability to the extent you get some sort of negative catalyst. So that's where I wanted to go since we're talking about the current environment.

50:21It felt like a lot of savvy companies loaded up on inventory in that 90-day pause. Front-run tariffs. Right, exactly. And then they were capable, until that ran down, of not really being affected by tariffs. And then even as the tariffs started to bite, it seemed like they were eating the increase and not passing it along. But that can only go on for so long. And it feels like the next phase is consumers are going to pick it up. To your point, Barry, there wasn't much of that eating it at the early stages because of that inventory build by front running the tariffs and building inventories at a low cost basis, providing some time flexibility around when to make the decision of eating it in the profit margins or passing it on to the consumers.

51:15We're now starting to see attempts to pass on to the consumer. But maybe the more interesting thing to consider right now is so much focus on goods that are impacted by tariffs. What's the rate of inflation in those goods? Trying to gauge the tariff impact on the inflation statistics. But what we're also starting to see is demand destruction and switching on the part of consumers. So I think we have to analyze the impact of tariffs in a parallel fashion, not just gauging what the inflation impact is. And you can do that by separating out goods and services within the goods categories of an inflation metric like CPI.

51:53Look at those that are directly impacted by tariffs, not impacted by tariffs. But there's the demand destruction side of things. So we track the weekly consumer spending data. And if you separate that into tariff impacted categories, that's where you're seeing a compression in that spending. So to be fair, when you look at the U.S. as a$30,$31 trillion economy, when you look at the value of imported – and by the way, that economy is much more services than goods oriented. and then you look at the percentage of goods that are imported, it's a trillion or two trillion out of, I know it sounds crazy to say, yeah, what's a trillion, but it's a trillion out of 30 plus trillion dollars.

52:35So the worst case scenario is it takes a quarter or half a point out of GDP, but probably doesn't tip us into a recession. Is that a fair way to describe that? Yeah, in and of itself, it probably doesn't, but there's the feedback loop that happens if company, right, labor, where if companies, because they don't have that ability to pass most of it on to consumers, in part because of the demand destruction that I'm talking about, then there's that eating and profit margins. And then does that feed into the labor market side of things? I think that's why the Fed did what it did, the risk management, the insurance cut to try to stem any weakness in the labor market.

53:14So let's talk about those cross currents since you do both markets and the economy. We've had a softening labor market, at least the past few months and then the whole, I don't know if that re-statement is precise, but it certainly makes it clear we were too optimistic about the labor market over the past four quarters. Inflation, sort of residual sticky inflation that hasn't come down to the Fed's 2 % target, we can argue about whether that really should be a 3 % target, but hold that aside. Yet at the same time we see corporate profits continue to grow and markets making new all-time highs, which that combination, expanding profits, all-time price highs, tends to be bullish historically.

54:01How do you navigate all of these positives and negatives? Well, here's one way to think about the connectivity between the market and the economy. I think it's very circular right now, or maybe chicken and egg. And what does make me harken back to the late 1990s as a bit of a comp to the current environment is not so much, is it a bubble? And there's more there there in the AI world. A lot of revenue, a lot of profits. There's actual denominator in the valuation equation, which was not the case. Not clicks and eyeballs. Right. Not clicks and eyeballs. Not every company just adding.com to the end of their name, but the wealth effect and it's chicken and egg.

54:41And what makes me think back to the late 1990s is in that 99 blow off into the peak in 2000, whether it was valuation metrics like the Buffett model, which looks at total market cap of all US stocks as a share of total GDP. Which is at all-time highs now. And way higher than it was back at the peak in 99 or 2000 at the time. Households' exposure to equities as a share of their financial assets, well at an all-time high, significantly higher. So if we remember when the market topped out in March of 2000, and then we started what was a two and a half year bear market, we ended up getting a recession declared in 2001.

55:21It was a very mild recession. It was one of the proof points, which for what I always say drives me crazy that people think of recession as traditionally or classically defined as two quarters in a row of GDP. That's never been the definition of recession. Right, 100%. NBER has been - That's a pet peeve of mine as well. It drives me crazy. And in fact, 01 with the benefit of revisions, wasn't two quarters in a row of negative GDP. Same thing in 2022, people were talking about it. The revision - The revision took out that one quarter. Plus when you have a spike in inflation, it's not that the economy is contracting, it's that we back out price increases.

55:59The economy is so hot that inflation makes it look negative. It's not a contraction, it's just a price problem. But that 01 recession was actually very mild. Began in March, I think, and ended in October. Ended in October. Short, it was mild. There was not really a financial system crisis. It wasn't a credit crunch. I think it was the weakness in the stock market caused the economy to contract because of the wealth effect at the time. I'm going to take it just a step further. I have vivid recollections of speaking to people, speaking to clients or other people's clients in 96, 97, 98, 99, who had been in the market for 15, 20 years.

56:43Hey, we want to trade up to an ISA house. Hey, we want to buy a beach house, a lake house, a vacation property. And the person said, I'm not sure if the market's going to go higher from here, but I want to pull half a million out of my account and buy real estate. It's like, hey, you're going to have that house for the next 25, 30 years. Even if the market keeps going higher, who cares? You're sitting on such profits. Why not? And so I kind of got a sense that it wasn't so much the wealth effect as people had already done the big buys before the market crash, which tends to freeze people in place.

57:22So I saw a lot of rotation out of equities just because people were sitting on, look, from 82 to 2000, the Dow gained a thousand percent. People were taking a little of the house money off the table and letting the rest ride. And then the dot-com implosion, I want to say 82, 83 percent peaked a trough on NASDAQ, on the Qs. Yeah. 57 percent on the S &P. And the Dow held up the best because it was least exposed back then. Right. Least exposed. That was before Microsoft and Intel went into the Dow. Swayed, not cap weighted. That's right. So I just think we, and again, it's a bit circular in that if and when we get another bear market, we essentially had one this year.

58:11Just missed it on the S &P at the index level. But here's another set of statistics. The average member maximum drawdown for the S &P year to date is 24%. So the average member has had a bear market. The average member within the NASDAQ's maximum drawdown is 47%. Wow. Now, you want - Cap weighted? Well, the average member, just each individual member - So not cap weighted. No, because it's individual members. Right. You just track what each member maximum drawdown was at any point and then take an average of that. But here's the maybe more interesting one. In an environment since the April 9th intraday low, we haven't had much of any kind of pullback in either the S &P or the NASDAQ.

58:57But just since that low, in an environment where the S &P hasn't even had a 2 % pullback, the average member within the S &P since the closing low on April 8th has had a 14 % maximum drawdown. And within the NASDAQ has had a 32 % maximum drawdown. So there's a lot of rotation and churn under the surface, which you don't pick up if you're only focused on the index level, which has that cap bias to it. That's amazing. So last question before I get to my favorite. we're talking about a lot of things that are in the headlines. What do you think investors are not thinking about or talking about, but perhaps should be?

59:37What topics, assets, data points are getting overlooked? There was one I thought about this morning, and it's not so much what people aren't talking about. So I'm going to answer in a different way. It's what I hear a lot of people talking about that isn't quite the right way to think about it. And that is the cash on the sidelines argument. So Zweig hated that, and I'm not a fan either. But often the specificity around that has to do with the amount of money in money market funds. Seven point something trillion? Seven trillion and change. And that that is sitting there as either, if not imminent, but ample fuel that if that money decides to repatriate from money markets into the equity market, boy, we go off to the races.

1:00:21Didn't that money mostly come from bonds? It did. You're getting such low yield and bond. I think a lot of it's sticky. My Schwab money market account last summer, so we bought a house, a beach property in February. Last summer, I was getting like 5352 in the Schwab, what is it, Snacks? Snacks? I don't even remember the symbol. I'm like, why do I need to mess around with 10 or 20 year bonds when I'm getting much better? But here's the other angle to that. If you think of$7 trillion as some massive fuel for the market, you need to look at it as a ratio relative to the total market capitalization.

1:01:01It's gone up less than the stock market has. It's only 12%. The all-time low in the history that we have for that data is 11%. To put that in context, in 08 and 09, when money was flying into money markets because it was fleeing the equity market, at the peak, money market assets relative to the size of the stock market was more than 60%. Now we're only at about 12%. So the math is such that even if all$7 trillion was to leave en masse and go into the equity market as a fuel at 12 % of total market cap versus say, you know, 63 % of total market cap in 2009. That's a very different, not to mention back to our initial point, I think a lot of that money is sticky.

1:01:51That was money that was forced out the risk spectrum into other categories within the fixed income market in order to pick up yield when there was none to be had. So I don't think we should consider that some sidelines cash that is just itching to find its way back into the riskier asset classes. Someone once debunked the cash on the sideline argument, and it might have even been Marty Zweig in winning on Wall Street, by explaining it this way. Hey, I'm going to buy a million dollars worth of stock. It means I have a million dollars worth of cash, but no stock. I buy a million of the SPY. Now I have the SPY and they have a million of cash.

1:02:31For every buyer, there's a seller. There's no cash on the sideline. It just changes hands. It's the same dollar amount. So it's been one of those things that has persisted forever. And also the more buyers than sellers. No, no, no. So you are tagging all my favorite pet peeves. There's maybe more enthusiasm on the buy side versus the enthusiasm, but there's no more buyers than sellers or vice versa for every buyer. My head trader used to say there are more buyers than sellers at this level. And now you go up to the next price level where there are a matching number of buyers and sellers and the price stabilizes.

1:03:06If a price is going up, okay, at that particular dot, at$27.55, there may be more buyers than stock for sale. But at$27.75, that's how you end up with price stability. So, yeah, more buyers than sellers. No, no, they're an equal amount of buyers and sellers. That's how the other line I love has been trade takes place where there's a disagreement about value, but an agreement on price. And that seems to really explain that. All right. I like that one. I have to get you out to catch your plane. So I only have you for a limited amount of time. Let's speed through our favorite questions, starting with tell us about your mentors who have helped shape your career.

1:03:51I'm pretty sure I know the two. Shocker. Marty Zweig. Yeah. Chuck Schwab. Okay. And in the world - By the way, not too shabby mentors, right? Not too shabby mentors. Yeah, boy, was I lucky. And I will say in the world of media, another name we've already touched on, Louis Rukeyser. One of the best pieces of advice he gave me was when I was on the show for the first time as a guest. And he was saying hello to me for the first time, welcomed me onto the show. This was off camera. And he asked me whether my parents were still alive and whether they were finance people. And I said, nope, far from it.

1:04:22He said, okay, when you come out here, and do the interview with me, get them to understand what you're talking about. And that was such a moment of, okay, get people to understand what you're talking about. That's so funny you say that. Great advice. My mom was a real estate agent, my wife is an art teacher, and it's always make them understand it. Don't clutter it up with jargon. That's right, 100%. Make it understandable. That's interesting that it was Rukhaz who said that. Let's talk about books. I mentioned Zweig's Winning on Wall Street, What are some of your favorites? What are you reading right now?

1:04:56So my favorite, so I'm not reading a book right now. I must say I don't have a lot of time. I read constantly. I drink from a fire hose of information, but it tends to be, you know, like reports and deep dive, Fed research. But my favorite book of all time, and it is market related, is Reminiscences of a Stock Operator. Absolute favorite. I tell young people to buy it all the time. It still resonates today. You substitute AI for railroads and telegraphs. Exactly. It's the same story. It's the same story. But I am a big podcast listener. So that's the longer form way, including Masters in Business, that I absorb information beyond the traditional drivers that come into my inbox literally.

1:05:45It's easy when you're traveling, if you're on a plane or a car, I just find it so easy. All right. So you told us what other podcasts are you listening to? What are you watching on Hulu or Netflix? I listen to Masters in Business. I love Grant Williams series of podcasts. I love them because they're long form and they're big picture and top down. My favorite non-investing podcast is Smartless. I just love those guys. Those guys are great. They're great. They're so fun. I'm going to tell you, I listened. I've had Michael Lewis on the podcast a dozen times. I have met and have interviewed Michael Lewis on stage at Schwab's Impact Conference.

1:06:23And the story he told, and I'm not even going to mention it, the story he told on Smartless about a family tragedy was just - It was unbelievable. And what his friend said to him or his therapist said to him, the reason why you're so exhausted after this life's tragedy is in your mind, you're rewriting the future. Without her. Without her. Right. It's crazy. And that was such a moment of wow. But yeah, that was one of the most impactful interviews I've heard. That stayed with me for a long time. In terms of what I'm watching, well, Morning Show just started back up again. Yeah, I'm looking forward to that.

1:06:59Season four. And I loved Department Q. So did I. That was - So good. It was intense. It was a little slow, but it really paid off. If you like Department Q, there's a movie, I want to say it's on Netflix, called Black Bag. That's the same sort of espionage thing. And I walked in on my wife watching Killing Eve. That was great. Which she's like - Killing Eve was great. Queen's Gambit was great. There's been a ton of stuff. We just finished The Gilded Age, which feels modern. I'm obsessed with that era in New York City. I have every book written about it. I'm just so, so that is so right up my alley.

1:07:45So we watched The Crown, but we never watched Downton Abbey. And people said, oh, you like Gilded Age and The Crown, Downton Abbey is. So that's on my, and during the pandemic, I had never seen a single episode of Mad Men. And that was mind-blowing to watch that. That felt like more like a documentary. It's fun to go back and watch some of the old shows. Absolutely. All right, our last two questions. We'll get you out of here on time. A recent college grad is interested in a career in investing or doing market strategy. What sort of advice would you give them? Well, the world you live in, and indirectly I live in on the advisor side, that's an incredible growth area in the broader realm of financial services.

1:08:27Independent RAAs, wealth management firms, even the wealth management divisions at the big wire house firms, because it's essentially a first-generation business. And so there's a lot of succession planning happening right now. And I think for young investors, that's such a great avenue to go in. More generic advice that I give young people, especially as they embark on the networking and interview part of the process, is be way more focused on being interested than being interesting. Don't go in there and say, here's all the fabulous things that I've done, especially if that's limited to an undergraduate education, but be interested, ask questions, be engaged, show the enthusiasm that way.

1:09:09You're not bringing something into the mix by virtue of what econ 208 course you took that they think, oh God, we have to hire this person because we don't know anything about that. So we're bringing, it's be interested. Really interesting. And our final question, what do you know about the world of investing today? you wish you knew back in the 1980s when you were first getting started? It seemed to be a little bit easier to analyze markets in that day using kind of traditional stuff, models. To think now about how much more of an influence there is of geopolitics and macro and how much more complicated an ecosystem, not to mention the channels of information that occur through social media.

1:09:56I kind of wish it was back to what at the time didn't feel terribly simple, but I think then was a little bit more simple and more concrete in terms of what drives markets. I think there's more psychology now with a wider band of what that means and what that represents. And it would have been interesting to kind of know that in advance, the little birdie landing on your shoulder saying, here's what, I don't know if I would believe that 40 years from that point, I'd still be doing this. But just how much more complex an ecosystem that the markets live in these days. Really interesting. Lizanne, as always, delightful.

1:10:37Thank you so much for being so generous with your time. Always really, really interesting. We have been speaking with Lizanne Saunders. She is the chief investment strategist at Schwab, helping to oversee$11 trillion in client funds. If you enjoy this conversation, well, check out any of the 564 we've done over the past 11 and a half years. You can find those at YouTube, Spotify, Bloomberg, iTunes, wherever you get your favorite podcasts. Be sure to check out my new book, How Not to Invest, The Ideas, Numbers, and Behavior That Destroy Wealth and How to Avoid Them at your favorite bookstore. Now, I would be remiss if I did not thank the crack staff that helps put these conversations together each week.

1:11:27Alexis Noriega is my video producer. Anna Luke is the podcast producer. Sage Bauman is the head of podcasts here at Bloomberg. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

1:11:48Thank you.