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Hers is Schwab's face of market expertise

Published Feb. 22, 2006

Liz Ann Sonders, chief investment strategist for Charles Schwab, is not ashamed to admit she is a talking head. Brisk and boldly conservative, Sonders has become a fairly common presence on television recently as Schwab, eager to promote its first strategist, pushes for Sonders to achieve a greater renown.

"Yeah, they are marketing me," she said, sitting behind her desk in a suite of offices in the U.S. Trust building near Times Square in New York. Sonders is dressed smartly in a leather jacket; next to her, a television is tuned silently to CNBC. "But not just as smoke and mirrors. We hope there is more behind the curtain."

As the Dow hovers near 11,000, levels last seen in 2001, individual investors surely have similar hopes. Yet many investors have felt ill-served by Wall Street strategists, who for the most part failed to forecast the bursting of the Internet bubble in 2000. The reputation of the Wall Street seer may have never been lower.

Abby Joseph Cohen, the Goldman Sachs strategist who is celebrated for her bullish prognostications, has assumed a lower profile these days. Other well-known cheerleaders like Thomas Galvin of Credit Suisse First Boston and Jeffrey Applegate of Lehman Brothers have lost their jobs.

This time around, as the market has made its move, there has been no accompanying fame accorded to strategists. Today the chief bulls, like Tobias Levkovich of Citigroup and Henry Dickson of Lehman Brothers, both of whom forecast a 10 percent return for the S&P 500, remain mostly unknown to the broader investing community.

While Sonders forecasts a 10 percent increase, her view on the market is tinged with doubt: For the record, she recommends a neutral weighting in U.S. stocks, reflecting her skepticism that the market is about to take off just because the Federal Reserve has indicated it is nearly done with raising interest rates this year.

It is a bit of an about-face for someone who, during the frothy days of the Nasdaq bull market, was an ardent advocate of some speculative technology companies that hardly merit a mention these days.

But Sonders, who was a portfolio manager for a growth-oriented mutual fund at U.S. Trust before the company merged with Schwab, has left those days behind.

Instead of plugging the likes of JDS Uniphase on television, she is striving for a higher plane, blending grave prognostications about the market's direction and investor sentiment with wonkier reflections on tax reform. And while she has been a regular on Bloomberg TV and CNBC, the public recognition that Schwab is hoping comes her way has been slow to arrive.

"I have not seen much of her," said James Cowperthwait, an institutional money manager who worked at U.S. Trust before Sonders arrived there in 1999. "I thought she had been kicked upstairs or something."

Schwab, which makes its money by catering to individual investors, cares little whether Sonders becomes an established voice among institutional investors, many of whom scorn the musings of such figures.

Still, its aggressive campaign to market Sonders is part of a broader initiative to provide intelligent market advice and recommendations to its clients and move beyond the bare-bones do-it-yourself model that has been the core of the firm's strategy for years.

In that vein, the firm has been sending out shiny media kits extolling the expertise of Sonders and its other analysts. It is an approach that stands in contrast to that of many of the larger firms on Wall Street, which, in the wake of the 2000 market meltdown and the scandal over conflicts of interest involving research and opinions, have kept their strategists on a tighter leash.

To that end, Schwab hopes that Sonders, if she is not to achieve the market-moving eclat that belonged once to Cohen, becomes, at the very least, relevant.

"How important is it to be influential? I think it is important," she said. "Are we there yet? I would like to think so, but maybe not in the eyes of others."

Sonders is eager to promote her performance record, proudly displaying a series of charts showing how her various calls have paid off for Schwab investors, assuming they followed her advice.

If her advice is not yet an overwhelming hit with the investing public, Sonders' fervent support of tax cuts has caught the eye of the Bush administration. Since becoming Schwab's public voice, she has been called to the White House with others from Wall Street to provide her market view to President Bush. She participated in the White House public forum in 2004 on the economy and was on the president's advisory panel on tax reform.

At the conference, where she was seated next to the president, she proclaimed herself to be a big believer in personal accounts for Social Security and said privatization was what the markets "absolutely want to see." Most of Wall Street has remained mute on the topic.

It was a heady moment for Sonders.

"I had more heart palpitations than under normal circumstances," she said, and while she is critical of the administration's lack of spending restraint, her support of the administration's bedrock philosophy remains firm.

"I'm a free trader. I'm a capitalist," she said. "And I believe in low taxes to stimulate economic growth. When it comes to tax policy, I am a supply-sider."