Lee Bohl: Thank you, Lou and Liz Ann thank you so much for joining us here on Schwab Live. You are Schwab’s chief market strategist. You have a wide following in the financial media. I know our viewers including myself want to know what is a typical day for you. So let’s start. When you first go into the office what do you do? And we talked before maybe office is not exactly the right word.
Liz Ann Sonders: So, right. And every day is different. In fact, by a fun way to think about what it is I do. Four years ago, when my daughter was an eighth grader – she’s now a senior in high school. They have a career day at her middle school and I went in to be one of the careers and I was told that I had to explain what I do for a living in terms that eighth graders could understand. So I went in. I basically said I read, write and talk for a living. And when I’m not travelling I’m reading and or writing and when I’m travelling I’m talking.
So it really depends on the day. I work remotely quite often. I have a home office. I have a New York City office but my office is oftentimes in an airplane, in a hotel room. But the day starts no matter where I am with just sort of digesting, going through emails, checking the inbox to make sure nothing dramatic has happened, fire up Bloomberg, go on Twitter, look quickly at the feeds that I get through various news sources, then dive into the morning papers a little bit more, Wall Street Journal, Financial Times, go on Bloomberg and look at some of that news. And then work my way back to the research that often comes via email. If it’s a publishing day, then I’ll spend most of the day writing which usually has a couple of days prior to that with prep.
I’m on with my research assistant all the time having her work on data projects, putting charts and graphics together. And then when I’m on the road getting there I spend a lot of time reading. But once I’m there I’m usually doing something like this or up on stage giving a presentation.
Lee Bohl: Now you say that you check Twitter. I know that you tweet a lot.
Liz Ann Sonders: I do.
Lee Bohl: You have any people that you like to follow or what do you look for for people that you follow on Twitter?
Liz Ann Sonders: So I tend to follow sort of legitimate sources of information, not necessarily the more bombastic folks that like to simply capture attention. I don’t follow the Kardashians. So I tend to focus on not only the traditional news outlets because it’s a nice consolidated way to get information but then many of the research providers that I really enjoy and I get research from. We are clients of, many of those are on Twitter as well. So again, it’s a nice consolidated way to get information. And I do look at those lists that say top 15 financial tweeters to follow. And some I’ll be thrilled that I clicked on that follow button and sometimes less so.
Lee Bohl: Now another question that I have. You are a member of the Schwab center for financial research and you are a chief market strategist. How does the group get together or do they get together to actually make both strategic and tactical calls? Perhaps you could just walk us through the process?
Liz Ann Sonders: Sure. So there’s a subset of what we call SCFR, Schwab Center for Financial Research which is Schwab’s asset allocation council. So that’s a group that includes Kathy Jones who was here, Randy Fredrick who was here, my colleague Jeff Clintoch, Mike Townsend. And that’s where we communicate on a daily basis through email. We’re kind of spread around the country so we’re not all in one place. So there’s day to day communications that occur through electronic channels.
But then at least on a biweekly basis we get together for 90 minutes on a conference call dedicated to not only all of us discussing the big picture top down but going specifically into our areas to talk about what we’re seeing, any potential tactical recommendation changes that we might be making. So that’s the formal forum for those discussions. And then we will meet more frequently if we’re in a tumultuous environment. We met a heck of a lot more frequently during and in the immediate aftermath of the financial crisis than we might have in a summer like this that was fairly calm.
Lee Bohl: I’m also curious. Do you ever disagree with your colleagues and how does that work?
Liz Ann Sonders: Oh sure. There have been lots of disagreements and ultimately there’s a voting process when it comes to making any meaningful tactical recommendation that goes out to the client base. So it is not my way or the highway or anybody else’s way or the highway. So it is a process of group decision making. But even the disagreements are quite collegial. There’s no fisticuffs that have broken out. Now maybe that’s because we’re all on the phone but I think we could avoid it even if we were in person too.
Lee Bohl: Now a lot of our asset allocation – in terms of an asset allocation counsel, a lot of Schwab is based on models. So how does your input – do you actually affect the way the models operate or do you have input to change how the model works. How does that –
Liz Ann Sonders: So Schwab has a number of different what we call strategic asset allocation models that are relatively static. And they – the models differ based on the risk tolerance for the investor. So the first step for somebody who wants to utilize the work that we do around the models would be to work with their financial consultant to figure out where they sit on the risk spectrum and what strategic model is appropriate. What we then do with the tactical decision making is for those investors that want to take also a tactical approach, a shorter-term approach, that’s where these tactical recommendations come in, where we will make overweight or underweight recommendations across asset classes, within an asset class at the specter level for again investors who might want to move the needle a little bit around those long term strategic allocations. So it’s a time horizon difference between the strategic and the tactical.
Lee Bohl: Now I’ve read your commentary for years and tell me if I’m wrong about this but often the titles have to do with songs. Is that a coincidence or am I reading that wrong?
Liz Ann Sonders: No.
Lee Bohl: What’s the story there?
Liz Ann Sonders: So I for as long as I’ve been writing it at Schwab which goes back to 2002, I’ve been using song titles. And I’m a rock chick so they’re almost always classic rock, new rock songs. And maybe nobody else cares about it but it’s a fun part of the exercise for me. There are times where actually a song title will inspire what I’m going to write about. More often than not, I come up with what I’m going to write about and then either a title will immediately pop into my head, boy, this is perfect. Or I might have to either search my own music library or use some websites but it’s fun. And there are a few people at Schwab because I get emails every time stuff gets published that they race to see who can come up with the band name first. And so, it’s just it’s a way to make things a little fun.
Lee Bohl: That’s interesting. Do you have a set schedule that you publish on? I mean how will our clients – I know they post it but is there a frequency that –
Liz Ann Sonders: Yes.
Lee Bohl: How does that work?
Liz Ann Sonders: So we have something called the Schwab Market Perspective which I write along with Brad Sorenson, my colleagues who does sectors. He actually takes the first crack at it and then I do some editing. And then it also has a global component which is Jeff Clintoch. So that’s more of a looking at the overall environment every other week. It’s a big picture look. Then on the off weeks, also biweekly I write my own report on usually on one particular subject. Most recently I wrote about the hurricanes and the effect on the market. I wrote more – back from that what we thought about North Korea and the impact it would have on the market.
So something with my byline is going out on a weekly basis. But much as what I mentioned the asset allocation council might meet more frequently if it’s a tumultuous market environment, if there’s major volatility going on, we might be putting stuff out on a daily basis if not more than once a day. And then we alternate and we rotate on fed days. So I will often write the commentary. Kathy writes the commentary quite often. So that’s another regular piece of writing that comes from our collective group.
Lee Bohl: Wow. We’re already out of time. I can’t believe it went so fast. Thank you so much for joining us. It was really interesting to see what you have to have. And back to you, Lou.