 We're here with Liz Ann Saunders, Senior Vice President, Chief Investment Strategist at Charles Schwad. Thank you for being here. Thanks for having me. I've been following you for years now. Don't say how many. Okay, well, okay. But you, I feel like, have been the lone female voice in this space. Yeah, why? I don't know. I feel like I have followed some pretty exceptional women, Abby Joseph Cohen, certainly paramount among them. I started in the business in the mid-1980s, and certainly at that time there were many fewer women on Wall Street. It's still clearly a more male-dominated broad industry, but I actually, I think it's always been an advantage to be a woman in this broader financial services industry, and I think even more today than has ever been the case in the past. I actually agree, because I think the tables are turning in so many different areas. Let's talk big picture, though, with the market right now. Record highs. What should investors be doing? You know, it's a tricky one, because this has been a bull market marked by just rampant skepticism and pessimism really since just about a couple of months ago. I noticed maybe not quite a 180-degree turn, but I'm not sure what the catalyst was to do it, but a couple of months ago, and I'm on the road every week at events speaking to individual investors, many of whom are our clients, and there was a noticeable shift a couple of months ago, where up until that point for this entire bull market, when I would get to a Q&A session at an event at which I was speaking, all of the questions, with almost no exceptions, were dire, negative. What's next shoe to drop? When is the world coming to an end? What's the next bubble to burst? Why aren't you worried about filling the blank? The shift occurred a couple of months ago. Again, I'm not so sure there was any specific catalyst that I can pick up, maybe just exhaustion as being pessimistic and finally coming around to, what do you know? It's a bull market. Is it tax policy maybe that's making people happy? I think that that's maybe a small component of it, but I don't know that that is specifically what's tied to the market. I think the fact that the market has had so little volatility and such persistence in its gains, but the fact that it's coming now on the basis of much stronger earnings growth and unbelievably strong global growth, all 45 OECD countries are growing, two-thirds of them are in accelerating growth. By the way, both of those things predated the election. So I've had the view for the past year that this latest move in the market, I don't want to call it just a rally. It's just an ongoing bull market, but this latest surge in the last year has much less to do with the election specifically or even the prospects for fiscal policy and more to do with the inflection points and earnings and global growth, both of which predated the election. Now inflection points are something you talk about all the time, to look for them. How do people find them? Well, it's tough because if you think about an inflection point at the bottom, and the relationship between economic inflection points in the market is an important one, largely because the economic inflection points and the market inflection points don't tend to correspond time-wise. The market tends to sniff out the economic turning point and tends to move first. But by definition, at an economic inflection point when things stop getting worse and start getting better, you think about that. That's the bottom of the V. At the bottom of the V, the data is at its worst. Think about March of 2009, when the stock market took off. That was first quarter of 2009, if we want to think in quarterly terms. Look at any number of economic statistics at that point in time. Look what was happening to payroll growth, where the unemployment rate was. Industrial production, you name it, fell in the blank. It was as awful, but the market sniffed out that it wasn't getting worse anymore and was going to start to get better. That's usually the launch point for the market. Get an investor to be enthusiastic when the economic data is as ugly as it gets. Conversely, of course, the same happens when everything is booming. When you're at that upside down V, everything feels great, which is typically when investors are most enthusiastic, but the market's going to sniff out the fact that it's not likely to get better anymore and the direction is... So then based on who, you know, you've been talking to people that are starting to get a little bit more optimistic, are we approaching an inflection point? Probably not yet. I would be more worried if the attitudinal measures of sentiment, which do suggest some excessive optimism or at least complacency, were matched by behavioral measures of investor sentiment. So if you look at any number of behavioral members, not least being something like fund flows, that enthusiasm that investors may be expressing in surveys is not anywhere near matched by what, for the most part, they've been doing with their money. So it's kind of the optimism is a mile wide, but an inch deep. And I think that's one of the reasons why we see even those attitudinal measures of sentiment move down very quickly with even a small crack in the market. It tells you that there's not a lot of stability in that optimism. Investors are very quick to say, see, it's already over. Right. So are you seeing people done already for the year? No. In fact, if anything, I think you're probably going to see some chasing into year end, not just by individual investors, but also by institutional investors. This has been a better year for active managers because correlations have crashed. And I think that's an important shift this year relative to years past where it was sort of purely... The playing field was absolutely in favor of passive overactive. Now I think the playing field is more level, which also may be why investors are feeling more enthusiastic because diversification matters again. Even their sort of active managers are performing better this year. It's not just the passive index oriented. So I think, but certainly any of those institutional investors that are behind their benchmarks or under the gun, I think you're going to see that classic kind of window dressing into your end. So then do you... I mean, does China bother you at all? No. No. One of the things that concerns me about China is I think in theory, they're doing the right thing in trying to morph their economy to be away from debt driven investment growth more toward domestic consumption. So I think that's a laudable goal, but what they prove time and again is that when there's any dip in economic growth or in the market, they resort back to their tried and true, let's just ramp up debt in order to boost investment growth and kind of give that shot in the arm to economic growth. So that troubles me a little bit, but I'm not worried about any problems in China sort of taking the entire global market system or economic system down. I worry from a geopolitics standpoint on North Korea, especially given this latest ballistic missile test that ostensibly could reach the U.S. I'm surprised that that's not had a little bit more of an impact on markets. It almost feels like we're numb to some things. Well, that's the complacency argument. I do think that that is rampant as measured by any number of things. So it's a bit troublesome. What it tells me though is that we're I think we're at risk that if there is some sort of catalyst that gives us the the long waited for two or three percent correction that it could turn into something a little bit worse by virtue of complacency. How much momentum and money has gone into these short ball low volatility strategies that I do think that there is a risk of kind of a bigger shock to the system. I don't know if it's flash crash type proportion but something that results in a pullback in the market that percentage wise goes beyond what the fundamental suggests would be appropriate. The next bear market I think is going to be a more traditional bear market that comes when it snips out the next recession and I think a recession is still a ways out. That's comforting I suppose. Does Bitcoin concern you at all this whole. I don't understand it. I really don't. And you said that because I don't either. I'm trying. I get I get conceptually the benefits of blockchain technology. I don't necessarily understand that the hype specifically around Bitcoin. You know there's lots of competitors. Ethereum for what I can understand has better infrastructure but for whatever reason Bitcoin has kind of captured the mind and the heart of investors. I don't know. What we have been saying to our investors is somewhat limited but it's at this stage it doesn't have intrinsic value. It's not backed by anything. It does appear to be a speculative investment even if it turns into the next Internet. Right. But as a result of that speculative nature to it at this stage. Sure. If you want to if you want to play it if you see it as a diversifier great but don't invest any more money than you're willing to lose. Right. Not that we think it's a lot of gambling money. It's at this stage and that's with limited knowledge of what ultimately this could represent in our world. Well you Jamie Diamond all the no one knows. No one knows. You were talking about complacency and that's often a term used with women and investing this inertia. How do we get women more involved in this because the transfer of wealth from men to women is coming and it's like trillions of dollars. Well and it's our we're already we crossed I think either this year or last year the 50 percent mark where more than 50 percent of the wealth in the United States is controlled by women now and that's a function of demographics that we we live longer. We're getting higher levels of education. There are more women in the country now than than men and I'm a single parent. So I run my house. I well I'm not a I'm a I'm a married parent but and my husband was on Wall Street for nearly 20 years but I run our financial lives. So I would hope God. I think that firms need to reflect that any any company in in our our business broader financial services. I was at the deal book conference a couple of weeks ago and Larry Fink was speaking and he used the 55 percent measure for how much of the the wallet he said the American wallet was controlled by women. That's that's a little higher than the numbers I'm aware of. It doesn't matter. Right. Still 50 percent. He said look if 55 percent of the American wall is controlled by women we as a firm better have our employee base at least somewhat consistent with that bias in in the world. And I think there is a lot of companies in the industry broadly are coming around to that realization. I think you're seeing it broader on Wall Street. I think you're seeing it at the advisor level. There's a lot more advisory firms that are women owned women run dominated by women. I think women this is a generalization but a lot of women investors like to work with women owned firms or other women. So I think the opportunities are are extraordinary right now for women in this business because you know and these are my words not yours but most advisors now are these like older white men. Yes. These firms don't have huge training programs with people coming up the ranks anymore. And like you said many of these women are going to inherit this money take it and go. So these I got to believe these firms. They have to up their succession plans right which you know Schwab is the biggest in the business of advisors that platform with us custody their assets with us. And I just got back a couple of weeks ago from our huge impact conference and one of the themes for the last several years that we are helping our advisors with is succession planning. And that involves to a great degree more so recently than any other time in the recent past gender diversity in that succession plan for sure. And that makes great business sense. That's not just done nice to say you can check the box the diversity box but it's a it's a must do. But then it's also encouraging women to come into the field. Right. I mean Wall Street's been vilified for so long. We have all these sexual harassment suits left and right every day. Right. So so there are a ton of men actually leaving unfortunately because they have to. So the opportunity is there. How do we get these women in. Well I think some of it's just education. Some of it's word of mouth. Some of it's what we do at the university level to encourage women to study these fields. I think there's also I found a misperception of the kind of background in terms of your education that is necessary to come into this field. I can't tell you how many times I sit down with a young person as recently as just two weekends ago a young woman who is a student at Duke University that I know in our town really really bright girl and she wants to come into the financial services world. And she said something that almost every young person I sit down to says which is I don't love math. I'm not good at numbers. I think there's this perception that we are just math geeks and number crunchers. Math wasn't my strong suit. If anything it if I not that I think it would have mattered in taking it in college but I feel like a degree in psychology would have served me better than economics. I think there is so much about now maybe it's just me describing the position that I have but I think the understanding of markets or working with investors understanding big picture financial planning you don't necessarily need to be a math geek. I find that interesting you say that because I think that's part of the problem with the current advisors they didn't take side classes or sociology classes right so they don't know how to relate to women and I say this generally they don't know how to relate to millennials right right so we have this whole group of people coming up the ranks someone has to service them and they are both different very young and women right yeah very so women women I find we want to do everything ourselves right yes and so many women really do want to learn how to get how to invest how to get their money in and that's where the inertia comes people speak in lingo there's this wall street lingo that it and it makes them back away how do we how do we break that and get them in the door well you know speaking personally the lingo thing is is something I think any of us that are out there whether it's you as a journalist or me as a strategist I think we have to be consistently and persistently mindful of that in a position as pseudo educators of the the outside world and you know you and I were talking before the camera started rolling about the late great lewis rukeizer and I for all intents purpose got my start in television as a pundit on his show and the very first thing he said to me when I met him was he had asked me whether my parents were still alive I said yes are they in the business no they're not financial people he said oh when you come out here in 15 minutes to do the interview with me get them to understand what you're talking about and that so resonated with me and it has been the voice inside my head for 31 years in this business and I take it to heart every time I stand up in front of a room of investors or put pen to paper or fingers to a laptop and write or record a video or sit here with you and I find that even more than three decades in this business so I would I would argue that maybe I'm at the more sophisticated end of the spectrum I'm so turned off listening to somebody whose number one goal is to sound like the smartest person yeah in the room or if I read something where three paragraphs in you can tell their goal is to have you think boy they could win a Pulitzer Prize for their pros but if if if I don't know what the topic is I'm done yeah we don't have time we don't have patience so get to the point keep it as simple as possible and make it interesting I I think one of the fascinating things about our business and I would say this about what you do as well is that the environment's always changing yeah there's no monotony at all no every day is different I think that that's fascinating but how do you so but what do you tell them you know women like I always joke that look around your laundry room at the product you're using on a day-to-day basis and why don't you own those stocks and I did it one day right you're sitting there I'm washing my kids clothes with any Clorox bleach these wearing under armor there's Nike everywhere why don't we own these stocks I mean Peter Lynch old school yep Charles Swab Swab same way like think this through is that what we do for that well yes I think that's a good start but then there has to be that that important second layer of well if it's so obvious and everybody's already had that same idea then there's the value part of the the argument but I think as a basis particularly if you as an investor want to do the individual company selection stock picking thing I think that's absolutely for some investors that's kind of you know the right the Jim Kramer motto right for some investors that's the last thing they should be doing and they should be taking a more lowercase p passive approach to investing if they don't have the time to wear with all the energy and or the interest right in in in picking individual stocks especially if what it ends up resulting in is a completely undiversified portfolio right so to say well I I know these four companies and that's going to represent my portfolio well if it's four us large cap companies that's not a diversified portfolio the good news is is that there are so many sources for information and education right now courtesy of the internet courtesy of firms like ours that make it our mission to try to educate investors it is admittedly drinking from a fire hose and it's it's an art as much of a science in knowing what to turn on and what to turn off yeah but with with a little bit of effort I think it can be done does the robo advisory world help her bother you I think no it doesn't well we're in it yeah so I think I think it helps I think it it meets not just a need it's there's this perception that it's purely there for millennials that that just started out and they don't have the kind of asset base yet that would give them access to the you know the pros right big boys I just I disagree with that I think it it fills a need that that spans the net worth spectrum it spans the age spectrum it's I think representative of a desire by many investors to take a quantitative approach to investing to try to take the emotion out which is one of the more important things when it comes to asset allocation diversification rebalancing these tried and true strategies that we all know we're supposed to adopt in our own portfolios sometimes emotions get in the way the the fee structure is quite low it's high tech not necessarily high human touch and and that fits the needs and wants of a lot of investors so I think it it can cohabitate certainly at a firm like ours it it cohabitates quite nicely within the broad you know swath of any ideas eventually you can speak to humans and talk to humans and get some help and it might even be a great way for women to start absolutely and it and if they're if they're actually staying engaged with what's happening it it's so almost a mechanical way for investors to understand markets and learn how portfolio composition works and how rebalancing and diversification works you mentioned being on Lou show you worked for Marnie's why yeah these men were mentors for you I mean were there any women along the way because you worked with some of the greatest men in the financial well if you remember the the early days of wall street week Bernadette Murphy and Mary Farrell there were that's true there were incredible women from the get-go on that that show that I had the great pleasure of meeting Barbara marson from gobelli right abby joseph cohen who although was not a panelist was I think appeared on the show possibly more than any other guest in the history of that show so it happens to be that the the three most influential people in in my 31 years in the business happened to be men because I worked for Marnie I got my start doing television with louis ruchizer and then for the last 18 years I've worked for Chuck Schwab right you know it doesn't get any better than that they happen to be men but I've had you know phenomenal female influences in this business in my life as well and do you now mentor sponsor you must yeah so there we actually Schwab has a formal mentoring program and pretty consistently I've had at least one mentee since we instituted a more formal program but I'm always willing to to chat with people at Schwab particularly new younger people starting in the business I get I give I give these interns a lot of credit I have several opportunities throughout the year to meet the interns that we have typically in our phoenix and denver offices and they're really young enthusiastic people and what I give them credit for is they're they're perfectly willing to come up and say would you mind taking a half hour if I if could we set up a call and I love it I and I always say absolutely and I think they're a little taken aback by the fact that I say absolutely I would love to to chat with you so the the informal opportunities to encourage young people about this business I'll take you know anytime I have time yeah that's pretty cool all right so before I let you go what are some of the biggest mistakes that women make in investing not not thinking they can do it sort of just handing it over in many cases to you know a husband or even if they're putting their money with a financial advisor which for many people makes a lot of sense versus trying to do it yourselves not feeling that they they have the ability to engage in in the process so I think it's that fear factor more than anything else isn't it amazing I don't know why and I I know you're from Brooklyn I'm from Garfield New Jersey we were raised tough I only know I'm Brooklyn Jersey Philly okay so I got it all going on so now Connecticut but right which is a little softer but yeah okay but so I only know tough strong women like so I don't sometimes I can't wrap my head around it why do you think it why are women held back some of it I think is a function of if you if you got married and you had kids regardless of whether you were a stay-at-home mom or you're a working mom if you were not in your career or for whatever other reason sort of engaged in finances it it it sort of gets further and further away if your husband is doing it or I don't know and and then I think as time goes on being further detached from it it's it makes women or anybody that's not involved very trepidatious about how to start in that process because it'll go again right and it is it is daunting I think you know for for you and I who've done this our whole lives it seems natural but I think for for many people it's it's not natural so but I'm guessing tons of beginner information on the site people can go check it out absolutely okay Schwab.com and one maybe not hidden secret but something a lot of people don't realize is that to plug our own firm here everything all the research we put out everything I write every video that I do and my my colleagues and other strategy rules is all on the public website you do not have to be a Schwab client you just go on Schwab.com I can get access to my own stuff without even logging in even as an employee let alone as and actually I'm going to plug you because everyone should go read the the column you wrote about Marty's what the the after he passed it it's the number one most read thing I've ever written in my career of writing yes oh the more everyone and it's called reminiscences of Marty's why again it's a take on reminiscences of a stock operator which was a book he told me to read my first week in 1986 when I joined how great is that and everyone should go read that book too if you haven't yeah it's awesome thank you so much my pleasure thanks for having me thank you