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On this episode of On The Tape Guy and Danny discuss the FTX collapse (1:00), Walmart earnings (7:30), the yield curve inversion (9:20), energy stocks vs. crude oil (23:30), an update on cannabis (26:35), and Danny’s NFL picks of the week (31:30). The co-hosts interview Terry Duffy, Chairman and CEO of CME Group, and talk about the LPGA event in Naples (35:19), stock market volatility (40:50), Terry’s take on the FTX situation (44:04), risk management (47:45), the importance of mentors (58:24), the CME-Google deal one year later (59:30), interest rates (1:03:01), the politicization of the Federal Reserve (1:06:39), Elon Musk (1:13:24), the spotlight on the commodities market (1:15:15), and the future of CME Group (1:16:45).

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Show Transcript:

Guy Adami: [00:00:00] CME Ad. [00:00:01][0.4]

Dan Nathan: [00:00:30] iConnections Ad. [00:00:31][0.3]

Guy Adami: [00:01:21] A welcome to the on the tape podcast Guy Adami here along with the very good looking my dear friend Danny Moses. I was with Danny just over the last couple of days in Florida. We were at the CME Tour championship. Lovely. By the way. We’re going to have a conversation with Terry Duffy, the CEO of CME Group. But Danny, before we start, okay, I’m going to throw out a couple of things to you, so you just stay with me, okay? Here we go. I know your anger. I know your dreams. I’ve been everything you want to be. I’m the cult of personality. That’s, of course, a lyric from the great band Living Color. And the reason I mention it, Danny, is because yet once again, the market has been taken for fools by somebody’s cult of personality. In this case, that SPF 40 guy or whatever sunscreen he uses. His thoughts on that before we get started. [00:02:17][55.6]

Danny Moses: [00:02:17] Yeah. So let me back up. So the first thing, when I got to the CME event, which was great, I was fortunate enough to play in the program yesterday, finished the same scores last year but somehow didn’t win. But Jennifer Kupcho, I wish her luck today after spending 5 hours with me. I don’t think she’ll fare well but we shall see. But seeing Terry Duffy and then immediately I had the flashback and I know you guys are going to talk about this and your interview with him of his testimony this past May in front of the House Agriculture Committee sitting next to this SBF, the Sam Bankman-Fried. And then literally I pulled, I went back and looked in. But seeing Terry with, let’s call him the adult in the room and then watching SBF And to your point, you start to wonder how people buy into things like this and this FOMO and everything and just it’s really amazing when these things unwind. So let me just tell you what, Terry, people I paid attention wrote in this committee. Now, this committee was about changing clearing rules and how FTX can get involved in the clearing process and the derivative market. So Terry said, quote, FTX, this proposal is glaringly deficient and poses significant risks to market stability and market participants. FTX proposes to implement a risk management lite clearing regime that would significantly increase market risks by potentially removing up to $170 billion of loss absorbing capital. Anyway, I point out like this is we need to start paying attention to the veterans in this industry that truly understand risk. And he had no personal agenda, I’m sure, against SBF, but that’s the point. And then just as FTX in general, Guy, over the last few days, I mean, we knew we would start to see things, but the level of fraud that existed in this company, the lack of controls and listen, there was a lot of very sophisticated private equity firms, venture capital firms that were involved. And you have to wonder, what did they see or what didn’t they see that led them to invest this? Because it just is just as simple as it seems that a Ponzi scheme. [00:04:00][102.3]

Guy Adami: [00:04:00] Well, that’s my point about cult of personality. And I’m sure Terry has thoughts on this as well. But Elizabeth Holmes from Theranos same thing. She looked the part, so people wanted to believe her. They gave her the benefit of the doubt. And that’s a powerful thing in today’s world. There are very few Porter Collins out there. There are very few Vinnie Daniels out there. There are very few Danny Moses. And what I’m saying is there are very few people that actually do the work required to understand what’s truly going on. I think Michael Burry is one of those people as well. So many people are a mile wide and an inch deep. And by the way, I’m probably one of those people as well. I don’t have nearly the rigor that you do, but obviously in this case Terry Duffy did. [00:04:42][41.7]

Danny Moses: [00:04:43] Yeah. Listen, people have that sense, it comes from experience and also you’re dealing in the people business. Terry made his career evaluating traders and their ability to pay him back, so to speak, so that that’s not lost on me on this. But what’s also really important here is there’s private companies that commit fraud and there’s public companies that commit fraud. When a public company commits fraud or you believe they’re committing fraud, it will leak out over time. Obviously you can falsify SEC statements and ten Qs in case, but what happens normally is stock prices start to go down and then people start to ask questions, even if the evidence was already kind of out there being brought forward by short sellers. In the case of FTX, obviously this had been going on for months. The only reason that it really started to be examined was because their token that FTT started to drop so much and so it would have been inevitable he was going to run out of capital. What’s amazing is how involved he was obviously in this other bill that he was trying to bring up this DC pca bill, which would have basically protected him as an exchange. That whole thing in D.C. with the pay for play and donating and things like that, there is still a lot to uncover here. But listen, it’s different when you’re public and private companies. Both can be Theranos was private, FTX was private. But then you have the Enrons in the world comes in something else we’ll talk about hopefully in the next few months. That happened too. [00:05:54][71.2]

Guy Adami: [00:05:54] But no question about it in the fallout. I don’t think we’ve seen the entire fallout from this. And this is something that I brought up with Terry. And this is going to be somewhat of a self-serving comment and subsequent question to you. But Dan gets upset at us, and rightly so, because we’re constantly crushing the Federal Reserve and central bankers in general. One of the things I put out on Twitter and I absolutely believe this and I’m curious as to your thoughts. Fraud will take place regardless, there’s always going to be people out there that try to get over on the system. What I said and what I absolutely believe, due to the largesse of our Federal Reserve and the recklessness of our Federal Reserve, it made this situation probably ten, 15, 20 times worse than it inevitably would have been. This was going to happen regardless. But the level to me was exacerbated by, again, a very overly accommodated Federal Reserve. Thoughts on that? [00:06:51][56.2]

Danny Moses: [00:06:51] Well, let’s take a step back. Let’s separate fraudsters or fraudsters. If you give them an opportunity to do it, they’re going to do it. But to your point about being able to raise the necessary capital to be able to commit that fraud, you’re right was from the policy of easy money for a very long time. That’s not just crypto, right? There’s other assets. That’s the debt that we see now. That’s the meme stocks that we see. It’s just various asset classes. When money is free, everything changes. I mean, higher rates have really caused a lot of the undoing or have exposed a lot of the things that are out there. We’re going to see a lot more than this. I mean, I can think of another company. We won’t talk about it today that has a leader that when all this shit finally unwinds, people going to look back and say, well, that was obvious because all the things you’re talking about, about SBF were already obvious, but no one either wanted to believe it. There was so much money at stake that no one wanted to really talk about it. But inevitably, fraud always comes, will always come out, but certainly in a down market. And certainly when money is being taken out of the system to your point versus being put in. [00:07:46][54.7]

Guy Adami: [00:07:47] It’s interesting. You know, obviously, we both have very strong thoughts on that. And we tried I mean, it’s just the way I feel. I’m not suggesting I’m right. And I think you would say the same thing. But Dan will say, you know, what have they done that’s so bad. And I would look at things like this anecdotally. A lot of people get hurt in this and that’s what upsets me a great deal. Retail, by the way, Dan is obviously front and center, something you’ve done an extraordinary job, I will tell you, with WalMart trading 148 or thereabouts, I mean, we’re within shouting distance of that 160 or so all time high. I mentioned WalMart. They obviously reported this week better than expected guidance was better, albeit on lowered expected guidance. But that’s fine. But WalMart’s been something you’ve been talking about for a while, obviously had a rough patch, but it seems to have found its footing, especially when you see what Target said the next day, which was an unmitigated disaster. [00:08:36][49.4]

Danny Moses: [00:08:37] Yeah, I think WalMart gets a lot of credibility here for owning up to the weaknesses they had several months ago, addressing them, guiding the street correctly under promising over delivering here in the same store sales in the quarter, I think up 8.2%. That’s obviously very strong. But take a step back at these two companies and just take a look at the picture of the consumer. So what my thesis was on WalMart wasn’t just that they would take potential market share on their e-commerce strategy from Amazon, but it was that over time they would start to get the middle and higher end consumer stepping down one and two that they had the cheapest groceries, and that if you bring people to WalMart for groceries, that will cannibalize on other people’s businesses like Target potentially. And once you’re in the store, obviously, they went through a period of time when consumers were spending the majority of their money on fuel and food. I think that’s still happening to a degree. But when you look and see that, I think that 56% of WalMart’s sales are groceries now and target is 20%. So they’ve done a good job managing their business and Target is just not drawing that consumer there. Same store sales were up 2.7%. Right. So WalMart’s buying back, I think, $20 billion worth of stock. Now, that was part of this is it’s got a dividend. [00:09:42][65.0]

Guy Adami: [00:09:43] And quickly, I’ll say this. Yes, they are. But again, you’re talking about a $400 billion company at 20 billion is a big number. But when you look at it in the context of their market cap, not nearly as important. But with that said, yes, they’re putting capital in the works. I’m sorry. Please continue. [00:09:57][13.7]

Danny Moses: [00:09:57] No, I was going to say, listen, this is goes back to buying companies, you know, they’re going to be around that aren’t overly expensive, that have cash return in the form of dividends and buybacks. Again, that’s not a thesis. You don’t want to own a company just because they’re buying back stock. But at the same time, it just shows how healthy they are. And we go back to what we’ve been talking about with single name stock picking and go and find the names. And look, it’s not a coincidence that the best performers in the S&P and in the Dow, for that matter, have been these cash flowing companies that are returning capital. It’s not because the return on capital, it’s because they have the ability to return capital. Balance sheets are safe. So just on the WalMart, I continue to think that they are the barometer and it’s not a disaster. And the consumer is still being able to manage through this stuff, even in the face of higher rates. And so we’ll see how it plays out. But I just feel like they have a very good grip on their operations. [00:10:42][44.8]

Guy Adami: [00:10:43] So keeping with our topic of living color, here’s another lyric for you. Neon Lights, A Nobel Prize. When a mirror speaks, the reflection lies. You don’t have to follow me, only you can set me free. And it’s amazing how they foreshadowed what’s going on. Again Federal Reserve. Oh, who won a Nobel Prize for economics over the last cut? Oh, that’s Ben Bernanke. He deserved it. Absolutely did. It’s incredible to me, again, that people sort of fawned over him and bow at his altar. But I’ll say this Fed’s making a lot of comments about inflation. Bullard As early as on Thursday was talking about are jobs not done? There still seems to be some problems. Our policies are not working as much as we had hoped them to work. I’m paraphrasing Danny Moses. [00:11:32][49.7]

Danny Moses: [00:11:34] Yeah so we’re sitting here last week this time and we’re watching the S&P rise 200 points right north of 5%. I think it was from the let’s call it the 3750 level to kind of the 3950 level. Since then, we went up a little bit more. We’re kind of back below that. We’re hiding out here. Right. And we talked on the show that time is at 0.2 or 0.3% difference in CPI expectations is what it is. It certainly means inflation is coming down. And let me just say again, we’re all collectively under the camp that inflation has peaked. The question is, how quickly is it going to come down? But I’m watching CME Fed fund futures again. Right. So Fed fund futures are obviously slightly more dovish than they were ever since that print last week. But they’re starting to move back towards kind of guy that terminal five, five and a quarter level again. But here’s where we are. There’s not a lot of economic data here coming out. We got the Thanksgiving week, so I took a look. So we get the October PC on December 1st and we have basically the gift into Thanksgiving are the Fed minutes. They come out next Wednesday on the 23rd. So from now to then, you’re seeing, you know, saw some retail earnings. You’ll see some things. I think we’re going to be obviously okay here in the markets, barring some geopolitical disaster that’s kind of out there. But we’re kind of in this lull period. And so I go back to fundamentals. I’m a believer that the market’s going to retrace its lows. I’m still standing by. That certainly has gone higher. I never thought we’d get a back above 4000, to be honest with you Guy on the S&P because I didn’t listen to Mike Wilson when I should’ve. But that being said, I know you just had a MRKT call and you were talking about expectations of earnings and earnings revisions and so forth, and things are just a little bit worse on the margin. So I think earnings revisions are going to continue to come down for 2023. And let’s keep in mind, two of the last seven or eight years, I got to look. Exactly. We’ve had some rough Decembers. You always want to coast in the month of December. It’s always like, all right, I don’t want to see anything bad. I just want to lock my portfolio in for the year for these professional money managers. But I have a feeling this will be a very volatile month of December. [00:13:21][107.3]

Guy Adami: [00:13:22] A long December for you Counting Crows fans out there. And the problem with the Mike Wilson thing, he did a Friday dirty to you because I think it was October 14th, if memory serves. He came out with that tactical call and we’ve been saying for a while that we thought 4000, you know, maybe we overshoot the 4100 and I think we got the 4030 or so this week in the S&P. So we’ll see it. I’m with you. I’ll say this, though, two tens and this is something, Danny, you were talking about 18 months ago. I was right with you. I have said for a while that I thought two tens would invert to the tune of 75 basis points. That would come in the form of four and a quarter percent in two years and three and a half percent in ten years. And I got to tell you something, low and behold, man, at about 65 or so basis point inverted, it’s coming to a theater in near you. And I said all the time, I’m not an economist. I have no frickin idea what it means, but I know enough to know it ain’t that good. [00:14:17][54.4]

Danny Moses: [00:14:17] Nostradamus I will say that was pretty prescient of you. And quietly, we moved here from a kind of a 30 basis point inversion to 70. I mean, look at that chart. We are 445 and 75 roughly as we sit here right now, I like to look at what is it telling us is telling us what we think is going to happen. Right, that the Fed is forced to at least maintain their hawkishness even if it speak, and maybe there is only 50 basis points less. But the results of those raises have yet to be felt in the market and in the economy in its entirety. And we’re going to see that coming in, I think when we report Q4 earnings in kind of January, February and then as companies give guidance for 23 and they is setting up what we’ve been saying for a year and a half, which is potential for stagflation. And that’s what this inversion is telling me. It’s not that we can’t survive it. And again, I’ll say this, this cycle, this economic cycle is unlike anything we will ever see again in our lifetime because we are unwinding. At the same time, the Fed’s raising rates, trying to unwind 8 to $9 trillion on a balance sheet with our debt at an all time high. A lot of geopolitical stuff that’s out there and it’s just going to be really messy. And again, know what you own. And I want to say one other thing. I just on the central bank topic here is that so it came out today quietly it’s not back page stuff that the UK when they kind of borrowed money from the BOE, they now a 157 billion U.S. dollars equivalent I think it’s £137 billion back to the Bank of England that needs to be paid through 2028. There’s a large number. So when people were oh so excited about the change in the regime and Prime Minister and all this stuff, the reality is it’s going to start to set in again and people don’t want to think about what’s coming down the pipeline, but that’s a lot of fiscal discipline that’s going to need to take place in the UK. So we might be right back to where we are. And I’ll say this when yields start to go higher because you are concerned about the ability to pay back your debts, that’s the bigger problem, especially when it happens to, you know, a top five or seven global central bank. [00:16:08][110.8]

Guy Adami: [00:16:08] You know, I’m in total accord with you, for sure. I mean, it’s again, manifesting itself right before our very eyes. I think a lot of times people see the market go higher over the course of the last couple of weeks and they incorrectly think. And again, I’m not casting aspersions here, but they think everything must be solved because the stock market’s going higher, but the problems are still there. I got to tell you something. One of the problems is manifesting itself in terms of corporate debt. And let’s just talk about U.S. consumer debt for a second, which now credit card debt and something we’ve pointed out here on on the tape for a while, it’s now north of $1,000,000,000,000. I think overall consumer debt is going up $8 trillion, a singular trillion dollars over the course of a year. And I think it’s now cumulatively when you put in credit cards, mortgages, autos, student loans, you’re probably talking about, I don’t know, $5 trillion. That’s not an insignificant number on an economy, on a $22 trillion ish economy. Number one, corporate debt. Number two, HYG has been the instrument we said to watch as we’re sitting here today. It’s probably trading 74. I think the low we saw in that was 70.50 LQD probably trading on 105. I think the low we saw in that at its trough was 98. But it’s not like these things are bouncing in a meaningful way. And again, one of the things that has said for a while, there’s no S&P put necessarily for the Fed. I think if there is, it’s much lower than we are now. The puts going to come in the form of the credit markets and it hasn’t cracked yet. However, Danny, I think you’re starting to see some signs. [00:17:40][91.5]

Danny Moses: [00:17:41] Yeah, there’s another deal that was closed on Wall Street, this Tenneco deal. And basically we’re now up to $43 billion of kind of home deal that’s sitting on banks balance sheet that needs to come out. And believe me, when there was a slight improvement in credit spreads last week, they threw out as much as they could, a couple of billion dollars, maybe went out the door as fast as Wall Street could sell off their books. So that’s not getting any better. The consumer, we’re just now feeling the realization of 4 75 basis point hikes in a row. I mean, we have been able to take a breath on what that would look like. And that goes right back into the thesis that I just mentioned about 5 minutes ago about what things are going to look like. Why is the 210 kind of inverting like this? And the consumer is stretched. And if you notice on some of these quarterly calls and it’s going to be very prevalent in Q4 reporting in the beginning of next year, people will immediately address their balance sheet, good and bad. People say, we’ve been getting a lot of questions on our balance sheet. We have 2 billion of debt. It’s not due till 2025. This is our plan for it and it’s now coming to the forefront. So that’s why I believe they’ll start to see these, quote, stock screens. And if you use a FactSet machine, it whatever you want to do to kind of find that, that to me is going to be the one of the most important screens. And Guy, the consumer is obviously stretched here and I don’t see that getting really any better here over the next several quarters. And that’s the real danger here as far as I’m concerned in the market. [00:18:55][74.0]

Guy Adami: [00:18:55] Real quick, when you say gung, I understand what you mean in terms of that. But what you’re saying is there’s things that need to be put back out in the market that are unable to and they sit on the books of these effectively these investment banks. Can you speak to that and why that’s somewhat problematic? [00:19:10][15.0]

Danny Moses: [00:19:12] Well, I mean, it’s a problem for the banks because they’ve committed capital to close some of these deals. So remember, Twitter had almost 13 billion, Citrix had 6.5. Nielsen, of which they were able to get like a small amount off their books. Last week is like six and a half billion. This Tenneco Deal’s 5.5. So what happens is they commit to fund these deals at a certain price and rate and then when their assumption of what the rate is going to be is different than what the market’s willing to give them. So let’s say they thought they would be able to finance a debt at 4%, but it’s really 8%. That 4% has to be eaten by the banks at some point where they want to hold it. This debt to maturity, which is not how these banks are set up to use that much capital, they’re going to try to get this. And eventually what will happen is if the rates don’t relent or the credit spreads do not come back in, they will be forced to sell some of these and take big write downs. And that’s not going to look good next year. And let me just say, Guy, the ability the reason M&A slows down so much in a high rate environment is is so much that it impacts every company and their way of doing business. It impacts the ability to grow through these acquisitions. And if M&A of mergers and acquisitions are not part of a theme in the stock market, that just lowers PE multiples by nature, because if you take that kind of arrow out of the quiver or whatever the thing is, is that right? Arrow out of the. [00:20:22][69.8]

Guy Adami: [00:20:22] Arrow out of the quiver. [00:20:23][0.7]

Danny Moses: [00:20:23] If that thing’s not if arrow is not available, it just hurts market prices overall, in my opinion. [00:20:28][4.3]

Guy Adami: [00:20:28] Are you a Stern fan because apparently it was like Robin Quivers that he used to do that he had a show with. Right, by the way. Yeah. Stern apparently interviewed the boss. And I think that’s coming out at a theater. And I think it came out me it came out. See, that’s an interview I’d listen to. I’m not. Oh, you should never bet you’re a stern guy growing up or no. [00:20:45][17.3]

Danny Moses: [00:20:46] Yeah, yeah. I like. I just never in my car that long listening and stuff. But yeah, it’s. He’s fine. [00:20:49][3.8]

Guy Adami: [00:20:50] You’d listen to me on the radio, though. I mean, I would entertain the shit out of you. [00:20:53][3.5]

Danny Moses: [00:20:53] About four times a week, so it’s good. [00:20:55][1.4]

Guy Adami: [00:20:56] It’s all good. Listen to your point. I mean, they become bag holders, these investment banks, you know, they made certain assumptions that are not coming to fruition and they have to make a decision, are we going to hold these things on our balance sheet or are we going to sell them at a loss? Nobody wants to sell things at a loss and they don’t want to hold them either. And that’s problematic. I think that’s why you’re bringing it up. [00:21:15][18.5]

Danny Moses: [00:21:15] I have sympathy for many things and certain things. I have zero sympathy for these banks that are holding this debt. So they knew what they were getting into that captive fee. They took the risk and now they’re paying the price. [00:21:24][9.0]

Guy Adami: [00:21:25] It wouldn’t be an on the tape podcast if we didn’t mention Tesla in some way, shape or form. And I mentioned it again, stocks probably trading about 185, I think the low is 176 or so. And we had talked about it getting down to 175 is the level that it should hold that came to fruition. I think it traded back up close to 200, but it hasn’t traded particularly well. And now there’s some rumblings again. It’s hard to really understand what Elon Musk is getting at, but succession plans, I never seen that show. Apparently that guy says the F word a lot, but I haven’t seen it. But stock is not trading all that well here. There seems to be some flies in the old Tesla ointment. Danny Moses. [00:22:06][41.3]

Danny Moses: [00:22:07] They felt like it was saved last Thursday. If you remember that low, you’re looking at what happened on last Wednesday prior to the Thursday rally, and it’s kind of fading back to that level now. So it’s underperforming, you can say the retracement in the markets here. But listen, he had a trial, another trial this week about his compensation package, how it was decided, $55 billion over that he got it and all these options. And he’s like, you know what? I think I’m just done with that. You know, this is what he’s holding under all this pressure. He’s spending all of his time trying to fix Twitter, which you won’t be able to do. Tesla shareholders that actually believe in Tesla are upset because he is spending so much time at Twitter and they’re upset that that’s taking away from Tesla. And I think this is setting up for exactly what we’ve been waiting for, I shouldn’t say we. What I’ve been waiting for for a long time, which is the time when the brand of Elon Musk himself sort of tarnished the valuation of the company. And they finally report a quarter, even if it’s somewhat in line. And people ask themselves this question, why is this a $600 billion company? And that’s really what it comes down to forget. If you think there’s fraud and there’s accounting shenanigans, forget all of that. At the end of the day, first and foremost, it’s just an expensive company that has no right to be where trading. But I think his ideas show this cult of personality title that we have today when things happen like this with SBF. And again, SBF is obviously a complete fraudster and I don’t think has any credibility at all. Whatever credibility Musk has, he has a lot of those same personality traits to a degree, pulling people around and doing what he wants, no corporate governance type thing. So again, I don’t want to compare those two. That wouldn’t even be fair to Musk. But my point is that I think that the investors are going to start asking or looking deeper into corporate management, corporate governance and things like that. And he’s not going to be on the right side of that, Musk in that regard. [00:23:44][97.3]

Guy Adami: [00:23:44] Regard, lest you think we’re all doom and gloom all the time, I will point out that as we sit here, big cap pharma stocks continue to grind higher. Merck at an all time high. Full disclosure, my wife works at Merck. She’s a clinical research scientist. Eli Lilly grinding higher. Bristol-Myers, great news out of Amgen. Biogen was some very positive news. So we’ve talked about being in the health care space for quite a long time and that’s been somewhat prescient. The other thing that has been prescient is the equities of energy companies. But I will tell you, Danny, and this is where I’m starting to get a little confused, although I do understand it to a certain point. But the commodity, crude oil is under significant pressure. As a matter of fact, I think gasoline not necessarily at the pump, but gasoline futures are actually lower than they were pre-invasion. So a lot of things in the energy commodity world are breaking down. Yet these stocks hold in there. And that’s something that Vinnie talked about. That’s something that Porter talked about. I’ve brought it up. I know you’ve brought it up. That energy can trade sideways to slightly lower. But these companies have such powerful balance sheets and are run so much better now and so much more efficiently now that the stock should go higher. And that’s manifesting itself right before our very eyes. [00:25:02][78.0]

Danny Moses: [00:25:03] Gasoline distillate fuels inventories came out a little bit higher than expected. So put some pressure there. The oil actually stockpiles were lower than expected. So let’s call those an offset. And again, I don’t trade day to day energy, but just those are the two data points that came out that you have the China potentially, again, rising COVID cases. Is it going to be a slowdown there? And then geopolitical risk, which went up because of the missile strikes in Poland and now they go back down again because it was an accident, things like that. But at the end the day, Guy, back to your point, these companies are still under owned obviously, they’re not owned by momentum investors, obviously, and they’re still very cheap, obviously. So we talked about before what level of oil or natural gas translates into real earnings deficiencies or negative growth, I should say, for these companies. And we’re still way off of where that would be occurring. And with the amount of capital, again, much more significant that Walmart capital is being returned to the form of buybacks and dividends, it’s massive. So I think you would see a certainly a large sell off in these energy names if oil did proceed to go down, let’s say, below $70 or even below 75, you would definitely see a 5 to 10%, maybe 15% pullback in the energy stocks. And believe me, every day that goes by, I think that the large money managers don’t own energy stocks yet that know that they need to wait for days when oil goes down like this and they say, damn, I still can’t get my position. And so I think that’s what’s happening, is you’re getting buyers that come in when oil comes down because they need to start building positions in these names. [00:26:29][86.0]

Guy Adami: [00:26:29] And I think you would agree with this as well. And Carter talks about this from time to time. If crude oil were to go to those levels, it’s not because things have magically gotten better. It’s just something probably pretty I hate to use the word catastrophic, but something probably pretty negative is going on not only here in the United States, but in terms of the global economy. So if crude continues to break down on the margins, people will think that’s a positive thing. At a certain point, you get to that diminishing marginal returns, and I think that’s something we’ll talk about anyway. The other thing we have to talk about now that the midterm elections are seemingly out of the way, cannabis again front and center, a space that obviously you’ve forgotten more about than I know. But give us an update on the cannabis world. [00:27:07][38.3]

Danny Moses: [00:27:08] Yeah. So the stocks are obviously starting to perform better. There’s finally been movement in Washington. There’s hope that within this lame duck session over the next few weeks that we will actually get some type of cannabis banking reform passed in the form of the SAFE Act, with an attachment of some of the things that the Hope Act is in for criminal justice reform and so forth. And something very significant happened here in the last day or two, which is the Senate approved what the House had already passed, which is a marijuana research bill, was the Medical Marijuana Cannabidiol Expansion Act. And that basically clears the way or gives cover to the FDA and the HHS to deschedule the drugs. That’s right in line, because remember, schedule one drug, the definition of a Schedule one drug, which is heroin and LSD, is that it’s deemed to have no medical benefit at all. So cannabis is in schedule one. So the whole idea is to prove that it has some medical benefit, which we know that it does, and that would pave the way for the descheduling. Now, that’s going to happen later. Obviously, that’s going to take a year to go through that process, but that’s another kind of thing you need to look at that has happened here that you can point to. The other thing I just mentioned is front and center, and we might get the Safe Banking Act passed again along with the HOPE Act as part of the omnibus appropriations bill, which needs to happen by the end of the year. So stay tuned. But a lot of things, a lot of tea leaves, if you read those things, guys are pointing to positive macro and micro things in cannabis. [00:28:25][76.8]

Guy Adami: [00:28:25] Well, yeah, the news comes out seemingly every day. Now we’ve got to get Brady back and talk about this, but all seems to be lining up in terms of the dots being connected and the dominoes falling into place for cannabis to be a very viable space in the stocks, if you look as to your point, are starting to show some signs of life here. So it’s something we’ll talk about, obviously, again, hopefully we can get Brady on. By the way, we had Cameron Dawson on last week and the feedback we’ve gotten from that has been fantastic. So at some point we need to get her back as well Danny. [00:28:55][29.4]

Danny Moses: [00:28:55] Yeah, let me just say also to wrap up the cannabis debt as of today, I mean, Brady’s kind of lifelong dream came true today. I mean, he officially launched sunburn cannabis, as you know. I was involved in that as well in terms of buying the assets from Medmen in Florida. And so stores are opening in Florida. So if you’re down in Florida, you’re in Fort Lauderdale, Palm Beach, other locations opening as well. Come see he’d be happy to see you so [00:29:14][19.2]

Guy Adami: [00:29:16] If you want to puff the Magic Dragon, you can do it with Danny and Brady. I will not be partaking. As you know, I was just in Florida, as I mentioned, by the way, you were upset and I know you because I was with you last night and you were hoping that you somehow came in second or third and you didn’t in the Pro-Am, you were defending your title and it didn’t happen for you. And you said to me, you hit about five or six, 20 foot putts. You felt great about your game, but didn’t happen. [00:29:43][26.9]

Danny Moses: [00:29:43] Yeah, it’s hard to monitor what else is going on around that course. [00:29:46][2.5]

Guy Adami: [00:29:46] What does that mean when you say hard to monitor. [00:29:48][1.7]

Danny Moses: [00:29:49] A lot of people out there. There weren’t any many officials out there as there were last year, you know, monitoring us morons that are running around the course. Two pars four eagles and 12 birdies over the course of the day. And we finished, I believe, in fourth somehow. And last year that same score won. So you tell me. [00:30:04][15.6]

Guy Adami: [00:30:04] So what you’re saying is there was some Fugazi things going on? [00:30:08][3.5]

Danny Moses: [00:30:08] No no, I can’t prove it. Nope. Don’t want to accuse, but just felt like we should have won. [00:30:11][2.7]

Guy Adami: [00:30:11] That’s okay. No, it’s fair. By the way, I’ll say this. I’m not a country music fan. It’s just not my thing. But we got a chance to meet Danny Keith Urban at a dinner on Tuesday evening, and he could not have been a nicer guy. I mean, you can sort of tell when somebody is an asshole. People typically say that when they meet me. But he was a gentleman. I thoroughly enjoyed meeting him and I thought his concert on Wednesday evening was fantastic. [00:30:37][25.7]

Danny Moses: [00:30:38] Yeah. Listen, if you were a rock star, married to Nicole Kidman, you’d walk around probably with a smile on your face all day long. So for sure. But yeah, he was nothing but a gentleman couldn’t have been cooler. And Terri went up on stage and sang last night. Actually have the video of Terry Duffy singing with her last night was really cool and you asked him a question that he thought was the most insightful question that he got in the audience from anyone. Which was you commenting again that we are all the time band is what? Who would you want to see one time? And then you asked him if Dire Straits was a big influence on him. He looked at you, goes, Mark Knopfler is my idol, you know. So anyway, so yes, we were involved there and it was a lot of fun. [00:31:10][31.9]

Guy Adami: [00:31:10] And for the record, I didn’t raise my hand to ask a question. I was sitting there at the dinner table minding my own business, and Terry’s like, I think. Guy Adami has a question. [00:31:19][8.7]

Danny Moses: [00:31:20] That’s true. You didn’t wait for the mighty disputed. [00:31:21][1.4]

Guy Adami: [00:31:22] By the way, I’m sure Terry’s listening to this. I know his folks at CME Group are listening. Don’t quit your frickin day job as CEO of CME Group because you can’t sing for shit. I mean, that was bad karaoke. I think the song he attempted to sing was Steve Miller Band’s The Joker, which is not a great song. And he did not do it justice, Danny. [00:31:44][22.0]

Danny Moses: [00:31:45] Entertaining, though. Very entertaining. How about that? [00:31:47][1.9]

Guy Adami: [00:31:47] It was a great event. We’re honored to be there. CME Group is such a wonderful partner for us and again, thanks for having us down. Before we get out of here and go to our interview with Terry Duffy, we are now have reached week. What week is this now? Is this week 11 in the NFL? I can’t even keep track. So we’ve reached week 11 in the league where they play for pay, as I like to say. I know your mom gets upset at me for saying this. I don’t want to upset your mom, so I won’t say it. But you are statistically 15 wins, 11 losses, and one draw, one tie, which, as you point out, is you’ll make money. If you do that, you’re fine. So without further ado here, Dan Nathan is not here. Your picks. And before you start, you picked the Giants against Seattle a few weeks ago, and of course, you had to put the horns on my frickin team. Only one of two games they lost. So if you do me a favor, avoid the Giants this week. Go ahead. What do you got for us? [00:32:46][58.8]

Danny Moses: [00:32:46] As you know, last week I gave out my pick of the year Tennessee Titans against Denver. They won and they covered. Wasn’t as easy as I thought, but they did. This week I have a similar I mean, I would put this is my second best pick of the year, if not the best, which are the Baltimore Ravens coming off of a bye week playing 13 against Carolina. Baltimore played on November 7th. And yes, Carolina did have some rest because they played on the 10th against Atlanta. Baker Mayfield is back behind Center for Carolina. Baltimore is coming in. Remember, Roquan Smith was traded to them three weeks ago. He played amazingly just in a little time he had to prep with the team in New Orleans, which was another big pick of mine when they were down in New Orleans laying 13. I think they’re going to destroy Carolina, love Baltimore, -13. Other two games. I like I like the Patriots playing three against the Jets. Both teams are off of a bye week. I’ll just take Belichick with an extra week to prepare for anything. I will take the Pats minus three. Jets finally have a little reality set in, I believe. And the last one is really interesting of the Eagles coming off this horrible loss to Washington, going at Indianapolis, to the Colts, laying six and a half. Jeff, Saturday, I think it was a fluke win in Las Vegas. I think Las Vegas stinks. I’ll take the Eagles minus six and a half and there is a connection there because Sirianni, who is the coach of the Eagles, is very tight with Frank Reich, and he mentioned in an interview that he wants to payback someone for. Do you think Frank Reich got wrong? So Eagles minus six and a half, Pats minus three, Baltimore -13. I don’t normally have three favorites coming my way, but those are the three this week. [00:34:12][85.2]

Guy Adami: [00:34:12] Yeah, I think the Eagles put a pasting on them. I think you’re 100% right. I mean, the Eagles are going to be pissed off coming off that loss. They did not play well. The Commanders ran the ball down their collective throat. And I think you’re right about the Jets. I mean, Jets fans have them going to the Super Bowl this year. Let’s get through the regular season first. And they don’t typically fare well in New England, by the way. I don’t think they’ve beaten the Patriots in the last 11 or so games, which spans obviously five years. So good luck for you. Jet fans and my G-men played Detroit. A lot of people think that you’re going to sort of walk right past them. I don’t think that’s the case. Detroit can score, Giants can defend. We’ll see if this game potentially could be a shootout. And the Giants have not shown a propensity. Great word, Danny, to score a lot of points. So I like what we’re doing there. I miss Dan Nathan. I know you missed Dan Nathan, but we had a lot of fun in Florida. Dan has a much deserved break, I believe in Anguilla, which is a place I can’t spell nor find on a map. But that’s neither here nor there. Danny. [00:35:12][59.7]

Danny Moses: [00:35:13] Yup and I’ll be gone next week and I’ll be back with you guys in a few weeks. So good luck to everybody out there. And so I’ll have to phone in my NFL picks to you guys separately. You can give them out next week. [00:35:22][9.1]

Guy Adami: [00:35:22] I exploit you still. You love me. I tell you one and one makes three on the cult of personality. Think about that, folks. When we come back, a conversation with Terry Duffy, CEO of CME Group. CME Ad. [00:35:39][16.4]

Dan Nathan: [00:36:23] iConnections Ad. [00:36:24][0.5]

Guy Adami: [00:37:48] FactSet Ad. Terry Duffy is chairman and CEO of CME Group, where he’s responsible for overseeing the world’s leading and most diverse derivatives marketplace. Terry has held a number of leadership positions within CME. He became a member in 1981 and has served as a board member since 1995. Terry, welcome back to On the Tape. So, Terry, I’m going to ask you a very difficult question for you to answer, but I want an honest answer to this. So I’ve known you for decades now. It’s been my honor. I consider you a very close friend. I hope you do as well. I’ve seen you with politicians. I’ve seen you with other CEOs. I’ve seen you with your coworkers. And last night, I saw you with Keith Urban on stage at an event that he had not planned to attend, but came at your request because your friends and you, too, it seemed as though you’ve known each other your entire life. So my question to you and this is a sincere one, how do you make people feel so comfortable? Your friendships span across a myriad of different verticals. Yet you’re as comfortable with a politician, a senator, as you are with Keith Urban, as you are with the guy or gal that’s helping out in terms of just cleaning up the facility afterwards. And I mean that sincerely. It’s a gift. Speak to that and don’t give me a bullshit one word answer. [00:39:09][81.1]

Terry Duffy: [00:39:10] Okay. [00:39:10][0.0]

Guy Adami: [00:39:11] Because that’s true. [00:39:11][0.4]

Terry Duffy: [00:39:12] I won’t give you a BS one word answer. But what I what I will say, Guy, is that I think I’m comfortable because of my upbringing, I had an Italian mother and Irish father and we were raised in a very middle class at best. We didn’t have a lot, but we had love and we had respect. And I treat everybody the same with love and respect. And I told my boys since the day where they’re born, the only thing that your mother and I want is love and respect. Because if you do that to us, then you’ll treat others the same way. So I think when you come from more humble beginnings, make your own bones and business. No one gave me anything. I made it all on my own. So I don’t owe anybody anything. So I don’t feel compelled that I have to be somebody other than who I am. And if that’s not good enough, I understand that. But I try just to be myself. So a guy like Keith Urban, you know, you can sense right away when you have an upbringing from the Southside of Chicago, you kind of can sense the B.S. factor in certain people and you can see who’s, you know, standing on third and thinks they hit the triple on who actually hit the triple. So it’s pretty easy to do that. And then, you know, a guy like George W Bush who’s a dear, dear friend of mine, you mentioned politicians. I mean, I talked to him once a week. We just shoot the breeze and say, how are you doing? And they’re not long conversations. It’s just you good? Yeah. Good enough. And I don’t do it because he’s a former president, United States. I do it because my friend. And so I think it’s just it’s not a gift. There’s nothing else other than being myself. And I think if more people tried just to be themselves in something they’re not, the world would be a better place. [00:40:34][82.1]

Guy Adami: [00:40:35] I agree with that. And we’ve gotten to know so many different members of CME Group extraordinarily well. And I’ll say this as well. Your people love you and I mean that sincerely. I’ve seen it a number of times now over the years. The culture of CME Group, they feel your leadership is important and they feel an affinity towards everything you’ve been building collectively. I mean, that is not the norm in corporate America today. That is absolutely the exception. And I think your answer is going to sort of mirror what you just said, but speak to the culture of CME Group and speak to why people have been there not for months, but for decades. [00:41:13][37.9]

Terry Duffy: [00:41:14] I believe, Guy, that if you’re not prepared to do something yourself, you shouldn’t ask anybody else to do it. And I’ve done that my entire career. I am not afraid to get involved in any situation or any opportunity that I think my staff needs me, whether it’s being a crisis, going back to the oh eight crisis when we were going through that, whether it’s testifying in Washington, whether it’s dealing with a collapse of a clearing firm when Jon Corzine collapsed MF Global, whether it’s the flash crash or whether it’s just all these different nuances that happened in the business world every single day, I don’t shy away from I’m involved in it and I think people respect that. And then but the only problem is sometimes you get to a point where people think you’re a bit of a micromanager and they can lean on that a little bit too much, like, well, Terry will take care of my press person and Nina knows I approve every single press release because I am very concerned about what a double meaning can be in any single word. So I look at that and, you know, I think my people understand that I am committed and I have been committed. I this is not my first day on the job. I’ve been doing this a long time. So I mean, you can say that I’m able to aggressive at times, but at the same time, I’m doing what I think is right, not only for me, the company, more importantly, but for them. And I think they recognize that. [00:42:23][69.0]

Dan Nathan: [00:42:24] Guy, Danny and I, Terry, want to thank you for having us down here again at the CME Group Tour Championship and in your support of the LPGA. It’s not just for that. And I know last year when we were down here, you spent some time talking about how important it is for you. The purses that are given out at this event are that equal to that of the men’s event. And so that is something that’s really important to you. And then the other aspect of this is just what you do for St. Judes and we talked about that last year, and it’s just an amazing thing. And throughout that program last night with Keith, you’re talking about giving back. We’re here in Naples. They just went through this devastating hurricane and you guys made the commitment. We’re coming back here to support the community and the mayor of Naples here last night. So that was all really cool. And just again, just from Guy, Danny and myself, we thank you for all the support for with RiskReversal Media and we’re going to give $10,000 this week to St. Judes again. You guys raise so much money for them you do so much. All right, now, enough of that. Enough of the platitudes, because all of that stuff is amazing and it is in the DNA of CME Group and Terry Duffy So thank you. I think the last time Guy and I sat down with you, it was late in May and we were in New York for that event with David Solomon. It was an amazing event and we talk markets. [00:43:31][66.7]

Terry Duffy: [00:43:32] One of the first events we got to go to post Covid. [00:43:33][0.8]

Dan Nathan: [00:43:34] It was amazing. And so for us, it’s kind of interesting when we think about the markets and where we are right now in 2022, I think a lot of people, even though, you know, the stock market closed higher, rates were still really low. This was the end of last year. We know that we were battling inflation. No one really knew what that meant. We were kind of coming out of this pandemic black swan event that none of us could have really predicted how it’s going to go. Here we are at the end of 2022. Rates are much higher. The stock market at one point, just a few weeks ago was much lower. We’ve probably in Guy in my careers, we probably seen more volatility in the largest number of risk assets that I can remember throughout my entire career. That’s good for CME Group. Talk to us a little bit how you’re thinking about the macro environment, how your products have been embraced by no shortage, not just institutional investors and big players, but also retail in this environment, which for the first time I think has a lot of pros scratching their head a little bit. And I’m sure it’s probably been a difficult environment for retail, too. [00:44:32][58.7]

Terry Duffy: [00:44:33] Like you gentlemen. I’ve been around a long time too. I traded inflation back in 1981 when I first became a member of CME before I got into management. So I’ve seen this before and I think there’s a lot of people in the financial services world who have never seen a downtick in the market they didn’t like, they’d never seen an interest rate above zero while they’re participating in the marketplaces. There’s a lot of volatility that they don’t know some of the inputs that they need to plug in to understand their risk management. I think that’s been a bit of a reaction, and I think that adds to the volatility in the marketplace on a daily basis that we are seeing today. So when you talk about what’s going on in this new world, when you look at when the tanks lined up on the Ukraine border, I mean, the market didn’t price that they were going to actually cross. Did people think they just put them there for fun? I mean, that people actually believe they weren’t going to cross, so they didn’t. And as soon as they crossed, the market went crazy. It’s like they showed them on TV. You knew they were going. And so there’s so many different underlying factors that go into the markets today that a lot of people just are now just starting to figure out how do we price this stuff? And they don’t know. So for CME, you know, we have a whole panoply of products that people need to manage their risk. But one of the issues that we saw, we saw interest rates go from zero a year ago when I was doing your podcast with you, you know, it’s one overnight rate that’s probably going to be close to five before this mess is over with. And it goes so hard, so fast. So the question is, people don’t believe the first 100 basis points. They don’t believe the second 100 basis points or the third because they don’t know if it’s impacted the life in them. Why is it not impacted the general population’s life? Now we are starting to see the credit card debt start to increase at record levels that we’ve never seen before. So 20 year record levels, the credit card debt has just increased by you’re seeing more and more debt accumulation going into the marketplace. And as that starts to unravel for CME, people are going to need to manage more risk. Once this new bits of information are embedded into the marketplace and people can start to figure it out. I think a lot of people got hurt by not managing the risk because they didn’t understand the risk yet. And that’s just the dynamics in the world that we live in today. [00:46:36][123.3]

Guy Adami: [00:46:36] Sometimes people have to see the risk actually manifest themselves before they then do things to sort of mitigate those risks going forward. So the environment that we have found ourselves in over the last year, I think lends itself to everything that you’ve built without question. So we’re not going to bury the lead here. Obviously, over the last few days you’ve seen what’s happened. We’ve all seen what’s happened with the FTX situation. You’re a $63 billion market cap exchange. I would submit, and I’ve said this for years, the premier exchange in the world, slow and steady, wins the race. Over the years, you’ve seen people come and go. I mean, the world is filled with charlatans and I’m choosing to use that word. Just sort of talk to us about what you’ve seen going on over the last few days. [00:47:20][43.3]

Terry Duffy: [00:47:20] You know, I’ll share with you and your viewers about my whole take on this. And when I originally found out from my side of the world what was going on when Sam Bankman-Fried and FTX were lobbying the United States government and the regulator to have an amendment put in place to take out parts of the risk management system, such as a direct model or going direct to the participants in their whole calling card was well put up $250 million as a backstop. Well, we don’t need to know what $250 million is worth. It’s not even a tick in the market today. So that was really just a smoke and mirrors joke. So I got upset and I went to the regulators and I said, listen, if you want to have a direct model, we need to write rules that are associated with direct models. I was here when we wrote the Commodity Exchange Act. A Commodity Exchange Act was written with the idea that there would be intermediaries involved in the Act. This is a complete deviation from that. So I said, you are taking on innovation at the sake of risk management. I said, This is wrong. It’s going to blow up in your faces. I’ve seen too many movies. This is bad and you cannot try to make roundhill and square pegs fit. Just because someone walks into town, sprinkles the infield with a bunch of other people’s money, obviously other people’s money, which I’m certainly hopeful every politician in the world gives this money back because it’s not theirs. It wasn’t his. It was co-mingled in this money. Obviously, what you’re reading today appears that has gone into a bunch of political donations to curry favor. So I am very concerned about this. I had a meeting with Sam Bankman-Fried for the first time in March this past year. I never met the man. He asked to meet with me at a conference and I sat down with them. I said, What is your end goal? He says, Well, I want to compete with you. I said, Great, I’m all for competition. What do you want to do? He says, Well, I want to compete with you in crypto. I said, Why would you do that? I said, I’ll, I’ll give you one better. How about if I give you my crypto franchises worth $30 million and we’ll go from there? He says, Well, what do you want? I said, You know what I want. Let me be your risk manager. I’ll clear it to make sure it’s done properly. He says, Well, you won’t deploy my model. I said, Your model is crap. Why would I deploy a model that’s going to introduce risk to the system? Of course, I’m not going to deploy your model. He turned me down flat out, turned me down, and that’s it right away. I said to him, I said, You know what? You’re a fraud. You’re an absolute fraud. You’re supposedly worth $26 billion, and you’re an altruist. I said, if you’re an altruist at 26 billion, how come theres not a $10 billion donation going to somebody right at this moment in time. How about a $15 billion donation? I said, You know what? I said, my net worth doesn’t start with any Bs. I’ll give you a 3 to 1 that I have more money than you. I said, I’ll tell you what, I’ll give you a 4 to 1 I got more money in my right pocket than your net worth. I said you’re a fraud, and I’m going to make sure that we get this out there. And that was it. So we went to Congress. I testified, and I’ve been to Congress 25 years. I’ve never seen a Washington DC like I saw that time from the regulators to the members of Congress singing hymns that I never heard before. And I got berated in a congressional hearing, but I would not back off. I said that you could lose 85 to 90% of your value overnight. And I said he will not commit to keeping this just to crypto. I said, the reason is because he wants it deployed across all asset classes. I said, That is a biblical disaster if you people allow this to happen. Well I didn’t know how right I was going to be in a short period of time. He lost 85% of his FTT tokens in literally one day. So the point being is we went through this whole thing and then I worked back with the agency and I said they wanted to approve it for just crypto. I said, Well, that would be lovely, except that would be an arbitrary decision to approve a regulatory change for one asset class. And they argued with me. They said, No, it’s not. We have the ability to do it. I said, Well, we’re going to have an argument here because I will show and so we’ll show the agency over this because we think it’s wrong. We need and I met with every agricultural producer in this country, and I explained to them exactly if their asset class went under this type of model, what could happen to their hedges at 11:00 on a Saturday night when they’re unbeknownst to what’s going on, when they’re being auto liquidated and they think their crops are hedged. I said, this is the most detrimental thing I’ve ever seen in my entire life. So I’m upset by this. But I’m a measured upset. I’m a very measured upset because nobody else was calling BS on these clowns but me. My friends at the Intercontinental Exchange are the only other exchange that said, we do not like this as well. Everybody else wanted to talk about the innovation. Everybody else. And if not, go back and look at the congressional hearing and we’ll talk about it. [00:52:10][289.6]

Guy Adami: [00:52:10] Innovation is an interesting word. So what do you attribute this to? And let me give you a couple examples. Elizabeth Holmes at Theranos her backers are legendary people. This SPF 50. What’s what’s. SB Bankman-Fried. Yeah, same thing. SBF Yeah, yeah. It’s not P, it’s not P because I don’t use that hours. You know, we don’t need. [00:52:32][21.8]

Dan Nathan: [00:52:32] Your beautiful golden skin. [00:52:33][1.0]

Guy Adami: [00:52:34] I’m half-Italian, half Sicilian. Some of his backers, legendary people. And then you hear people say, well, they must have done their due diligence, so I’m going to get involved. I mean, this is. Classic carnival barker shit. So again, how does this happen and how do you stop it from happening? I mean, you got up in front of, as you said, Congress and you told them exactly what was going to happen. Nobody listened. Why? Because people hear what they want to hear and disregard the rest. Danny Moses is not here, a great lyric from a great song, correct? [00:53:04][30.1]

Terry Duffy: [00:53:05] No. Absolutely. And carnival barker, Mr. Ponzi would be actually put to shame with something was going on with some of the scams. You don’t need to wear a three piece suit like Bernie Madoff did to steal money from people. And if you want to wear a turtleneck or if you want to wear baggy shorts and a t shirt, they’re all should be red flags for people. If you need a gimmick in order to sell your value proposition, it’s a gimmick. I just don’t understand that. I don’t know why people didn’t do their due diligence Guy. But it’s quite obvious when you have a million, 1 million creditors, I should say, that are coming after you for a whole host of money. And how many people have lost money? So you got guys like Tom Brady. You know, I don’t know what he lost. He’s he’s lost a lot here lately. And you’ve got a guy like Larry David doing commercials during the Super Bowl. How do these people put their reputations on the line, not knowing what the hell is going on with their product they are promoting? They are doing a disservice because people look up to these folks and think that they did their due diligence or at least their people did their due diligence before they would put their client out there to promote something to the public. This is and this could have went down a path that could have been a hell of a lot uglier than the path that’s going on right now. And it’s ugly today. [00:54:17][72.6]

Dan Nathan: [00:54:18] And it’s not done. I mean, you must have had a little respect for the move that this guy CZ and Binance’s did. I mean, he literally took one of his competitors out. And you know what, though? We learned this during the financial crisis. He’s next. So again, and they don’t have the regulation that you were kind of making the case for, and that could be a domino effect for all of these. And so we’ve spent some time over the last couple of years talking with you. You just mentioned the term a lot, risk management. So when I think about some of the products that you guys offer, you offer futures and options and Bitcoin and eth. And when you think about it, you are the most respected exchange on the world and you offer these products for risk management purposes, whereas you are agnostic for the reason that people want to trade in these things. But I suspect that we know a lot of institutional people who looked at Bitcoin and eth as a macro asset as they looked at a lot of the things that are traded on your exchange. So I guess my question is how is this year affected the way you think about it? Again, you are agnostic. You are providing these solutions for risk management purposes. I think obviously speculation. But when you think about futures and I don’t need to tell you the way that you can hedge, you can set stops. So how is this informed a little bit, the move that you guys made into crypto futures options in micros [00:55:30][72.3]

Terry Duffy: [00:55:31] So on the crypto, first and foremost, which is the most central point to the difference between CME and exchanges like FTX or others, we don’t participate in the market. We don’t have Alameda researchers taking the other side. The trades are taking cash from unsuspecting people and giving them tokens that they are deciding what the value of the tokens are. They get burned the tokens and make them less and make them dance. Are they marking those tokens, mark to market like I do every single minute of every single day, mark to market their mark to myth. That was the Goya. Mark to myth. [00:56:05][34.0]

Guy Adami: [00:56:05] Wait a second. Did you just make that up or did you been thinking about this? [00:56:08][3.0]

Terry Duffy: [00:56:09] No, I just made it up. [00:56:09][0.7]

Guy Adami: [00:56:09] That’s fantastic. I mean, we should mark to market. No, mark to myth. I like I mean, that’s pure. And please continue. Please use that. [00:56:17][7.6]

Dan Nathan: [00:56:21] But there’s a lot of that Terry going on right now. And you think of some of the worst affected groups in this whole Ponzi, if you think about are going to be VCs. Venture capital who just for point they were not doing the due diligence. And before we even got to the crypto stuff though, there is a lot of criticisms about how they are marketing to me if they are not marked down. There was stuff in the public markets, let’s just say a gig economy stock down 80% from its all time highs. A lot of these VCs had similar sort of investments in the private markets. They have marked down 30% from their highs. So you’re mark to myth thing that might catch on. [00:56:50][29.4]

Guy Adami: [00:56:51] I I’m going to use it I might not give you any credit. [00:56:54][3.6]

Terry Duffy: [00:56:57] I will be texting you if I don’t hear attribution of my name. So Dan, I will tell you about our crypto products when I decided to launch them in 2017. We watch crypto from 2008 from $0.08 go to whatever price value it did by the time we hit 2017, then we all saw the appreciation of 64,000 back down to 16, whatever it’s trading at today on the Bitcoin. My whole reasoning for listing it was I believe that the speculative case for crypto was going away and the use case was going to be the value proposition to eliminate friction for payments. So people making money off other people’s money. If I give you a dollar by the time we give it the Guy, there might be enough friction in there that we none of us really notice it. But there’s enough of a bip or a basis point that somebody made a little bit of money on that transaction. I thought that the blockchain technology enlisting cryptos would provide an opportunity for people to see the use case of crypto versus the speculative case of crypto. And I’ve said this over the last year or two. If they don’t start showing a use case for these products, I’m going to get rid of them because they are just nothing more than a fraud. So the use case is something that I’m very big on for all products, and if you don’t have it, then you don’t have a product. So we can speculate on anything. But the bottom line is these products need to have a use case. I think they still do. I think it’s the blockchain technology. And I know that my I wouldn’t call my friend and the congressman from California told me I didn’t know I was talking about when I was talking about blockchain and how it works. I do know what I’m talking about. Blockchain technology doesn’t need to be used with just the speculation of cryptocurrency could be used for a whole host of other things. It could be really good to eliminate friction in systems. So I think the blockchain technology is interesting, and I thought for CME to list a crypto on the blockchain with the blockchain technology would help validate and prove out the use case going forward. And that’s the reason why. [00:58:41][104.3]

Guy Adami: [00:58:41] You think about the decisions as a CEO can potentially devastate a company or could take the company to the next level. And what we’re going to talk about the Google deal in a minute, but I want to start on the other side of that ledger. Facebook was a $1 trillion company. I still call it Facebook. You can @ me, knock yourself out. It’s Facebook. Mark Zuckerberg, who has who is basically the company based on voting rights. And it matters. You know, he made a decision to take them to a different area, a different business model. That company lost almost Dan you can probably pull it up 70% or so of its value, which is a staggering number for a company that was at that size. So decisions matter. It’s Shakespeare stuff uneasy as the head that wears the crown. You wear the crown, you make decisions. You think about things like this all the time. How do you look at a Facebook situation? And this is not to cast aspersions here, but you clearly saw what happened. How do you look at that? And then how does it change some of the mechanisms at CME Group? [00:59:45][63.2]

Terry Duffy: [00:59:45] You know, it’s a really good question. You don’t have to run a tech company or Facebook to understand somebody else’s mistakes or could have seen them prior to them even happening. One of the things that I’ve always tried to make sure you talked earlier about slow and steady and what I’m a big believer, CME Group is has a vertical silo model and we have never gotten away from that because we know the model really well. It doesn’t mean we’re not in other businesses, but we’re not them in a way that would jeopardize the vertical model which got us to where we’re at today. And I think when people get away from what brought them to the Promised Land is where they normally make a mistake. So I’m not criticizing Mark Zuckerberg or anybody else, but if they wanted to go a different direction, it would seem to me that if they did it over a projected period of time versus in the day, by changing their name to the metaverse and losing 70% of its value, now they probably would have lost a ton of value anyway because of the fundamental change, but they probably wouldn’t have lost 70% so quickly. And what’s important about that, all the funds that are have exposure to Facebook that affects the other parts of their portfolio. They may need to have to liquidate other stocks because of the fund of the 70% decrease in Facebook. So there’s trickle out effects for that. So I’m a big believer at CME. I like my vertical. I look to go on the horizontal, different parts of the business, how I can get reoccurring revenue. But at the same time, never forget where you came from. [01:01:01][75.8]

Guy Adami: [01:01:01] Hubris is an awful thing. And again, I’ve never met the guy, Mark Zuckerberg, and I’m not suggesting there’s any semblance of hubris there. But what I’ll say is you have ideas, you have people that you can bounce ideas off of. You have sound boards, you have mentors, you have people that you trust speak to that. [01:01:18][17.2]

Terry Duffy: [01:01:19] You know and I think that’s critical to have a mentor and it’s critical to have people that you have confidence that you could trust and they don’t just need to be in CME. I have people all over the country that I have a great trust and faith and I can put a call on to David Solomon and just quietly say, What do you think of this idea of that? And I can put a call in to some other people that have been successful in business, whether it’s the gentleman from Virgin Atlantic. He’s been a very nice sounding board. Even though I have nothing to do with anything he’s doing. You just want to know, how did you go from records to space? How did you make that transition? So I think I’m fortunate that I have not just mentors, but relationships. Jamie Dimon is another guy. I feel very comfortable talking to Jamie about certain situations and he’s not trying to tell me what to do, he’ll help throw advice out there and you don’t have to take it. But I think if you dismiss advice, you’re wrong. I got a story long time ago in 1987 when I was trading and if I bought the market, it went down. If I sold it, it went up and I went to a dear friend of mine. I said, Steve, I can’t get out of my own way. He says, Well, you got to go talk to Freddie. I said, Freddie. I said, Freddie’s Punch-Drunk, I’m not going to go talk to Freddie. Terry’s one of the smartest guys in the business. He said, I tell you what, you’re going to go talk to Freddie for one hour and then that one hour there’ll be one minute of brilliance. And it’s up for you to determine where that one minute comes in in the hour. [01:02:32][72.2]

Dan Nathan: [01:02:33] it’s like our podcast, Same thing, guy. [01:02:33][0.2]

Terry Duffy: [01:02:33] Same exact thing. I’m still waiting to hear the one minute from Guy. [01:02:35][2.2]

Guy Adami: [01:02:37] It’s coming, it’s on its way. [01:02:37][0.4]

Terry Duffy: [01:02:38] I did the hour with Freddie. I sat there for an hour. My eyes were bleeding. I came back to my friend Steve and he goes, How did it go? I said, Steve, I got to be honest with you. I don’t think I got the one minute of brilliance. He goes, Terry, what did you say? I said, I didn’t say a thing. You told me not to talk and to listen. He goes, You got it. You became a better listening than a talker. Now don’t let the market you let the market tell what to do. You don’t tell the market what to do. [01:03:00][22.3]

Guy Adami: [01:03:00] That’s fascinating. And there’s truth to that. Two ears, one mouth without question. I think people forget that sometimes. But we mentioned heavy is ahead. Last time we did our podcast here, we were talking about the deal you struck up with Google, not an insignificant deal by any stretch of the imagination, something obviously that was long in the works a year later. Talk to me about what you’ve learned about that deal and the benefits that you’ve basically been able to capture from it. [01:03:27][26.5]

Terry Duffy: [01:03:27] Yeah, I think when you look at the Google deal, I’m very passionate about this deal, but I think a lot of people don’t understand the true value proposition yet. And why don’t they understand the true value proposition? The true value propositions is a democratized market in the cloud for everybody to participate in and the same exact access point, whatever your technology may or may not be. It’s the cloud and it’s protected and people can go in there and participate in any single market. I’m a big believer in that. I’m not saying the system, but today you got some of these data centers and if you have $1,000,000,000 in technology, it appears to you probably be faster than me to some of that stuff. I’m not a big Star Wars race guide to the bid offer. I think that’s not trading that’s just trying to capture bid offers. I believe in the risk management of the product. Google enables me to do that and I also believe their distribution is so global in nature, it’s far more reaching than anybody would ever want to imagine. So the reason I like Google so much is they’re 6% of their cloud business. That is very small compared to some of the other ones. I want to be with somebody that’s going to grow their cloud business and nobody’s in financial services. So I want to do it with them because their time and attention is devoted to me in financial services. If I go to one of the other competitors, I might not be first in line. I’m first in line right now. So I got my margin methodologies, my market data all coming into the cloud this year. By the end of the year, I will have markets in the cloud by next year, certain non latency sensitive markets. I will have that by the end of next year. But I think the real value proposition and I knew this in the beginning was 3 to 5 years out. And so it’s a very exciting time. It’s just, you know, it’s not a front page pager right now because the front page news is CMEs markets are all in the cloud. That’s that’s the news. Right. So we’re not there yet. [01:05:04][96.8]

Dan Nathan: [01:05:04] You know, it’s interesting. I mean, we follow a lot of the stuff closely, what businesses are moving to some of these advanced technologies. And one thing that I think is very clear for me at least, is that the secular shift towards the public cloud is a very new thing. And so you’re seeing enterprises who are willing to do the sort of thing that you did. You launched a ten year deal. It sounds like you think you’re just kind of scratching the surface here. [01:05:26][21.5]

Terry Duffy: [01:05:26] Year five will be the big benefit. [01:05:27][1.1]

Dan Nathan: [01:05:28] So you won’t reap the benefits let’s say you’ll start seeing that 3 to 5 years or something like that. Yeah. So makes perfect sense to us. Terry, I know we all got a lot to do down here at the CME championship. I want to go back to you mentioned when you were trading in the early eighties this inflationary environment and we know some of the most active products on your exchange are rate related. Talk to us a little bit about this. You just said there’s a lot of people in the markets who haven’t seen this, that or whatever. Listen, I’ve been in the markets for 25 years and I’m like a big mean reversion sort of guy. Everything that I’ve seen go haywire one way or another, up or down, it usually comes back here. And so, you know, when you think about where we were a year ago when we were talking about the Fed attempting to battle this 40 year high inflation expectations, we finally got the readings. Where do you think we are? We saw the CPI reading last week. We saw this PPI. We’re to start seeing jobs data where unemployment is going to start going up a little bit. We’ve seen a lot of industrial commodities come down. We’ve seen housing come down. We’ve seen shipping rates come down. And so I’m just curious, do you think we’re at the beginning of the end game of you said Fed funds could get maybe to 5%? We can’t remember last time Fed funds was 5% were the top of the cycle in I think 07. Does that makes sense? So where are we in this? Help a couple of dummies like Guy and me out a little bit. [01:06:43][74.9]

Terry Duffy: [01:06:44] First of all I’m never talking a couple of dummies. You guys are very smart individuals, but, you know, I think there’s a couple of things people are missing you’re focusing on, and rightfully so, the United States of America. We’re not the only game in town. 11.1% inflation in the UK this morning. That’s a 41 year high. We can’t just dismiss that as it doesn’t matter because it’s outside of our shores. There’s other parts of the world. We don’t even know what’s going to happen in China because no one will tell us because they’re closed up. We see what’s going on in Japan for the first time probably since you’ve been in the markets that they might move the JGB. We’re seeing intervention by the Japanese central bank into their currency. Everybody’s got different issues. So the question is we’re all trying to figure out, is a supply chain going to affect the inflation rate and are rates high enough? And as Ed, we’re all good to go, but nobody as I said earlier, there’s inputs into trades today that we maybe didn’t use 25, 30 years ago that you better apply today because they’re applicable and it comes from different parts of the world. I am seeing what I said just a moment ago with the UK and I think people are dismissing that. I think that’s wrong because we can talk about when someone sneezes, everyone catches a cold. Some are worse than others, but this is a factor to answer your question. I think the rates market was too cheap forever. Do I think it’s going to be too high forever? No. Do I think they’re going back down? Absolutely not. They can’t go do it again because if you had to raise them again after you take them down, you destroy this place the second time around. [01:08:15][90.2]

Guy Adami: [01:08:15] So here’s a hot take and I want to set this up. So indulge me for just a minute, please. Fraud will always take place there are always people are going to look to rip people off. Absolutely. I think we can agree on that. You know, one of the things that I’ve said and again, I think people that listen to this know I am not a fan of our Federal Reserve. I think among the many villains of the 21st century, central bankers are going to be at the top of the list. You don’t have to agree with that, but that’s my opinion. One of the many unintended consequences of central banks, specifically our Federal Reserve, it made people lazy. It made people complacent. There’s money washing around the system. Where am I going to throw money at? Oh, maybe I’ll throw money at this SPF 50 character. You know why? Because. Why not? So I would submit the fraud would have taken place, but not nearly to the extent if the Federal Reserve and not been so reckless. That’s the word I’m choosing to use. Terry Duffy. [01:09:16][60.8]

Terry Duffy: [01:09:16] I will give you my take on it and I’ll probably be a little bit more conservative than my friend Guy Adami. But I will say that I agree with you to an extent that they were reckless, I agree with you to an extent that they put too much money into the system. They are of the causation of inflation to the levels we’re seeing, and there’s no question about it, and there’s nobody that can refute that. So you’re right. I think the one part that you didn’t mention and there’s something I have a problem with the Federal Reserve is supposed to be an independent agency. I think the Federal Reserve has been politicized over the last ten or 15 years to a point to keep artificially low rates in order to keep people get reelected. And I think that is a problem because any time you do that, that’s no different, and I don’t want to call it a scheme, but you’re basically trying to change things that fundamentally don’t need to go the other way and they artificially kept them down. Which and the reason why we have $31 trillion in debt today. So that to me, I think the Fed’s been politicized and I want to be careful here, but I don’t know any other way to look at it than they’ve been politicized to your point. So that’s my concern with the Fed. If they truly want to go down their mandate or what they were supposed to do, we would not be sitting in the situation we’re in today. [01:10:30][74.1]

Guy Adami: [01:10:31] And I don’t want to play politics either, although I have said to you and I believe this with all my heart, your next chapter is your governor of Illinois. Your senator from Illinois. No, I’m not. Don’t laugh in me. You know I’m right. Go ahead. Tell me I’m wrong. Why am I wrong? Why couldn’t you be a public servant with all your background, with the way people react towards you, the way you involve yourself in people’s lives, the way you understand the human condition. Tell me why you couldn’t be a public servant. Answer that question. [01:10:59][28.3]

Terry Duffy: [01:11:00] Well, I can’t because I could. The question is, do I want to? So I’m not saying I can’t do it. [01:11:05][5.3]

Guy Adami: [01:11:05] So stop for a second. Do you want to you talked about giving back to society, service, all those things in that role. You could give back to a myriad of different people. Speak to that. [01:11:17][12.4]

Terry Duffy: [01:11:18] I give a lot back today by calling out people that I think could hurt the masses in finance. And I did that as I related to you and Dan with FTX, I did it in front of Congress where nobody else would had the courage to do it. So I think I did a hopefully a public service by putting myself on the line to show that this could be very detrimental. And so that to me is not too dissimilar or maybe even more powerful than what a politician could do as far as putting a stop sign in someone’s neighborhood. Or I believe I had an opportunity since so many people, we want to grow the markets. Right. Dan mentioned it earlier. We talked about retail, but we didn’t really hit on it. If you’re going to have retail participation, which you should educated people and retail, then you need someone to call bullshit on some of these other people. And sometimes you can do call bullshit better as a non-politician versus a politician. [01:12:05][47.0]

Guy Adami: [01:12:05] Fair enough, you know how I feel about you. But this is coming from a place of love. I mean, you know, I know that. And I believe that. I mean, the country needs more Terry Duffy’s. I believe that with all my heart, the politicization of the Federal Reserve candidate Trump in 2015 correctly was saying that the Federal Reserve was inflating bubbles and the stock market was all bullshit. My words, not his, but I’m paraphrasing. Doing it to support the Obama administration. I don’t know. That’s candidate Trump. President Trump. Then when he took office did a 180 on the rates are too high were too disadvantaged, all this bullshit it’s and he did. Now, listen, that’s just factual. He browbeat the Federal Reserve in October, November of 2018 inches subsequently lowering rates. The market collapsed. He was beaten on their head. Jerome Powell was new in the position. Everybody does it. How do we get past that, though? Because you can’t run on a platform of we’re screwed. I’m going to be the guy or gal that’s going to basically take our medicine because you’re not going to win an election. It’s the right way to do it. You’re not going to win an election on that. [01:13:11][65.9]

Terry Duffy: [01:13:12] No, you’re right. But that’s the reason why we’re getting the people that are running for office with the qualities that they have today. It used to be an honored profession, and you could represent people’s best interests. We have people today that have no idea. They write legislation. They don’t know what’s in it. They’re running for election. They’re not running to represent people. And I think we’re seeing the quality people who are should be in office don’t want to do it. Maybe it’s because of social media is because they don’t they want to protect their families, but the real quality people do not want to do it. My earlier comments about the Fed are based about what you just said about President Trump. That was a big part of it because he did say one thing and did a 180 and the other, which shows you right then and there how it was politicized to that whole process. So that was the reason I said what I did about the Fed. But I think we need to get quality candidates up here again and I think we need to have campaign reform. And I’m not saying as far as money goes, but I’m just saying if you want to run for office, then there are certain things that have to be off limits and we’ve got to get quality people back in these jobs. We don’t have them and that’s unfortunate, but we don’t have them. There are some, but there are less than there used to be 20 years ago. [01:14:18][65.8]

Dan Nathan: [01:14:18] So Terry, throughout your career, you’ve seen a lot of disconnects in markets again. We seem to see a lot of fraud in and around these kind of market corrections recessions, bear markets. What is your sense been, though? Do you generally see that financial institutions come out of these stronger in the sort of product innovation and the people like you who are overseeing these large exchanges or financial institutions, do they get the memo? Did they move the ball forward a little bit and kind of correct for some of the past ills? And are you optimistic that again, and I think we all agree that the stuff in and around crypto is just unfolding here. It seems like the good news this time around, it’s not the stock market, it’s not the futures. Right. Not in the markets that big institutions like us have traditionally cared about. I’m just curious, are you optimistic that we’re going to learn from this period. [01:15:01][43.2]

Terry Duffy: [01:15:02] Two schools of thought on that, Dan and I’ve never had anybody asked me that question before, so I’m going to give you a right off of my tongue. I believe that when you have situations like this, it also can lead to even behavior that’s worse than what happened before, because it gives the opportunistic people that were never in his business ideas of what they want to do for the future. So does legacy exchanges or the legacy banks come out better? I do believe that they do. They do get the memo on some of this stuff. But I do believe it also opens the door to new entrants thinking, okay, I see the mistake that that Ponzi scheme or that thing made, I’m going to do the same thing, except I’ll eliminate that and I’ll walk around and I won’t wear shorts and a baggy T-shirt she wore. I’ll wear a blazer, you know, whatever you’re going to do, I think it opens it up a little bit. So that’s why it’s really important. Guy talked about it earlier. Due diligence is so critical and we got to get over the nearsightedness and the impatient people and let them do their work before they get involved. And no one does it anymore. Everybody a [01:16:05][62.6]

Dan Nathan: [01:16:05] So let me get your take on this, because right now, I mean, Elon Musk is dominating I mean, absolutely dominating the headlines every day. And, you know, listen, I was not a fan of Donald Trump, and I don’t think listeners of our podcast will be surprised by that. But what really drove me crazy is that every morning when we woke up, I turned on my phone or whatever the headline was dictated the course of the day by that guy who had the largest megaphone on the planet, and he was using Twitter really well and social in general. So my question, a little bit of the cult personality. I think he did exactly what guy kind of alluded to with Facebook and Zuckerberg. Some people got in his ear about this Twitter thing and it’s hurting other things. So he’s running three or four companies. So a lot of stuff here. But the cult of personality, the due diligence that might or might not have been done on his Twitter deal and then social in general, because he says he’s doing this for his love of humanity. And let me tell you, the way he’s fired half the employees, the sort of stuff that’s going on on Twitter with him having the largest amount these days. He’s got the most followers of anybody trying to dictate who people are voting for, suggesting just curious, give me your take on this whole mess. [01:17:14][68.5]

Terry Duffy: [01:17:14] Well, here, I think when you spend the amount of money that Mr. Musk did, you have the right in is a private company. Now you can do what you want. I do think of it’s for the better of humanity, which I do really true. I actually believe that that’s really his goal. Now, his technique of getting there might not be acceptable to you, me or Guy, but it might be acceptable to him. And it’s his money. I think that he can do a lot of good if he gets other people involved in other businesses to help him shape what should be good and not just do it all on his own. Because to your point, he’s running Tesla, he’s running the SpaceX Company, he’s doing all these different things. And his time seems to be consumed by his hobby and that other businesses can suffer because of that. So I’m hopeful that if he truly believes that this is a different way to change the world a little bit through his social platform, that he engages in people to help him with that he’s not a one man show because then maybe he can effectuate his goal of having a better platform and then just the same existing platform with the same nonsense on it. [01:18:15][60.9]

Guy Adami: [01:18:16] It’s interesting, we talked about some of the products, obviously bond products, bond proxy products. We talked about crypto at the CME, prior to Russia’s invasion of Ukraine there was a line in the movie Wall Street, you wouldn’t know, preferred stock from livestock, which is a great line, by the way. [01:18:32][16.6]

Terry Duffy: [01:18:33] Mark to myth how about that they should have put that in the movie. [01:18:35][1.4]

Dan Nathan: [01:18:36] Wall Street 3 [01:18:36][0.3]

Guy Adami: [01:18:37] I’ll call Gekko now. But there are a lot of people that wouldn’t know of freaking soybean from whatever. And I think the invasion put a real spotlight on the commodities market. Speak to that because your world I mean, this is your worlds colliding effectively over the last nine, ten months. [01:18:52][15.7]

Terry Duffy: [01:18:53] Well, it’s a great question because people are now understanding what the bread basket means when you look down. People in Africa and others aren’t getting any food. I mean, there is parts of the world that are relying on those regions to feed their people. And when the ships are sitting at port and can’t get out because of a boots on the ground war that we haven’t seen since World War Two in Europe. And now it’s not just people shooting each other, which is horrible enough. Now you have people starving because of the results. So I think people are starting to understand how valuable a weak contract is to manage risk, but more importantly, how valuable wheat is to a staple to someone’s diet, because that might be all they have. And then when you look at the energy component of it, people might go cold in Germany and other parts of Europe because of the whole energy situation that goes on between those two nations. So there’s a big knock on effect from the human side of this that I think people are not getting unless you’re the one affected by it. Now, as a lot of people are running over to Ukraine, kissing the presidents, their celebrities, whatever, they want to go get photos with them. But to be honest with you, all we need to do is take care of the people that those nations, the relying on those nations. And I think that’s where we’re missing it to some degree. So from my business, we’re here to play a risk management role. We’re not here to play politics. But it’s really a shame about what happens when people don’t get their product. And I think people are understanding what the bread basket means today. And I guarantee if you said, what’s the bread basket you know, two years ago, they would have looked in their kitchen. [01:20:18][84.9]

Guy Adami: [01:20:19] Before we get out of here, future of this CME Group. [01:20:20][1.6]

Terry Duffy: [01:20:21] You know, Guy, I think the future of CME Group is in great shape. We’re trying to innovate new products all the time. As I said earlier, we’re really focused on our vertical and we will continue and looking at reoccurring revenue businesses. I think when you look at the sell off in markets, we had a sell off just as well. And they’re painful because we’re doing record business and things of that nature. And yet the market still sells off. As I said earlier, I think a lot of people didn’t get the hedges on that they should have had on because the market went so fast. So I think a lot of people thought we would benefit immensely, maybe too much by an interest rate movement and too much by some of this Ukrainian war where a lot of people just couldn’t hedge because the price went from A to Z overnight. So how do you hedge that? And then when interest rates went up so high, people, just as I said earlier, they didn’t believe the first couple of moves and they didn’t manage the risk the way they probably should have. And now I think we’re in a much stronger position that people understand that these factors are now in there, like we talk about for many years. Our classes will help mitigate that risk as long as you do it properly. So I like where we’re at, but you know, I’m focused on the long run with my company and so is my staff. [01:21:25][64.3]

Guy Adami: [01:21:26] Terry, we treasure our relationship with CME Group. But a far more important is we treasure our friendship with you. So thank you for everything. [01:21:33][6.8]

Terry Duffy: [01:21:34] You know, I feel the same about you and Dan, so thank you very much for being here at my event and I always enjoy being on your podcast, so God bless you both. [01:21:42][8.3]

Dan Nathan: [01:21:42] Thanks, Terry. [01:21:42][0.3]

Guy Adami: [01:21:43] Thanks once again to CME Group and I connections for sponsoring this episode of On the Tape. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we love hearing from you can also email us at on the tape at risk reversal dot com any time follow and connect with us on Twitter at on the tape pod and we’ll see you next time. [01:22:08][25.1]

Dan Nathan: [01:22:09] On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [01:22:09][0.0]




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