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On this episode of On The Tape Dan Nathan, Guy Adami and Liz Young are back with another Monday edition of On The Tape. How exactly is the market pricing in a “soft landing” and should we believe that narrative (2:00)? What are we looking for as Chipotle, Pepsi, Disney, Uber and PayPal report this week (13:00). The Animal Spirits are back, that’s not good (). After the break, Ron Biscardi, CEO and Co-Founder of iConnections joins the show to recap Global Alts 2023 in Miami.
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Show Transcript:
Dan Nathan: [00:01:45] Welcome to the Monday edition of On the Tape. I am Dan Nathan. I am joined as always with Guy Adami and today we have our co-host, Liz Young. She is what do you call her Guy? [00:01:54][9.4]
Guy Adami: [00:01:55] I call her EY from SoFi. And oddly enough, over the last now year or so that’s caught on. I mean, that is now in the lexicon of the United States financial community Dan Nathan [00:02:05][10.0]
Dan Nathan: [00:02:06] Is it Liz? I mean, just can you confirm or deny that statement [00:02:08][2.2]
Liz Young: [00:02:10] That feels like a bold blanket statement? I feel like maybe in a niche market, mostly the ones who are listening to this, it’s caught on and on Twitter, in the Twittersphere, it’s definitely caught hy guys. [00:02:19][9.7]
Guy Adami: [00:02:21] By the way, I just like the fact that I was able to use the lexicon in a sentence. Back to you Dan. [00:02:24][3.5]
Dan Nathan: [00:02:25] All right. Listen, we got we got a ton of stuff to go over here. After our conversation with Liz, we have Ron Biscardi, he is the CEO and founder of iConnections. Guy and I were down at the iConnections Global Alternatives conference last week. And we’re going to do a little recap of that because that was, as you would say, banging huh Guy? [00:02:42][17.2]
Guy Adami: [00:02:43] The kids say it was banging and it was over 3000 people at that thing at the FontaineBleau Hotel in South Beach, whereas oddly enough, EY finds herself as we speak right now. [00:02:54][10.8]
Dan Nathan: [00:02:54] Yeah, but but you know what is interesting? That and we’re going to hit this with Ron, and one of the reasons why we really think our listeners kind of like stick around for that one is that, you know, Guy, you were on stage with Mike Novogratz. You know, we did a conversation with Jim Chanos of Jim Chanos Advisors. I was on with Chamath Palihapitiya Rick Heitzmann. It was just a lot of really brilliant market minds there. And there was a lot of investors looking to deploy capital and there was a lot of, you know, allocators looking to deploy capital in those investors. So it was kind of an interesting experience. We’re going to kind of recap that. All right, guys, let’s let’s get into this because the three of us had a kind of punchy, I might say, MRKT Call on Thursday at 1:00 while the markets were still open and they were raging. This was a day after the Fed meeting. We had that all important January jobs report, which again was was hot. Liz would say somebody is wrong right here. And then this week we have tons of Fed speak. Fed Chair Powell speaking tomorrow morning, followed by a lot of governors and the sort. So so Liz, you said in your notes somebody is wrong right now. I mean guy and I think we’re a bit wrong. I mean, we went from being very right for most of 2021 and all of 2022 to being wrong for one month in the equity market that saw the S&P 500 closed up more than 9% the last time it did that in January was January 2019. It’s interesting because that was the year following the 2018 late meltdown when the S&P closed down 20% of the year. So last year we closed down 20% of the year. We also had a yield curve inversion in 2019. We have one right now to the tune of 80 bips. Talk to us about your your comment here about who’s wrong here and how can we how can we be right at some point in 2023? [00:04:34][100.6]
Liz Young: [00:04:36] Well, in finance, if you wait long enough, you’re always right at some point. Right. The broken clock thing. Also our show last Thursday, I don’t know if I’d call it punchy, unless you think funeral processions are punchy. I mean, it was all three of us just kind of parading ourselves out under the sword. But that’s just the nature of the business. So where I am going with this somebody is wrong is that there’s a lot of conflicting data, there’s a lot of conflicting market moves, and one of them has to be on the wrong side in all these different relationships. So things like the stock market is telling us that fear has left the building, but the yield curve and leading economic indicators are still saying that we have stuff to be fearful of. You’ve got the stock market versus the treasury market yield curve inversions abound everywhere. You’ve got something like this relationship between long yields being down, but cyclicals rallying, which that that’s not usually how that works. Usually if you’ve got long yields going down, it’s because people are afraid cyclicals would be falling. So one of those isn’t moving in the right direction. It’s got to change course. You’ve got things like the Fed saying we’re going to hold rates higher for longer, but the market’s saying, baloney, you’re going to cut twice before the end of the year. And then something like the Fed funds rate. Now for the second meeting in a row, Fed funds rate above the two year Treasury. Also something that the market is saying, yeah, right, It’s not going to work. You’re not going to do this. And then we’ve got the jobs market, which we’ve kind of belabored, I think to this point, something about all of those relationships is going to turn out to be wrong. It’s just a matter of who’s wrong, what’s wrong. And I know that the three of us feel a little bit wrong right now about what’s happened so far in January. But there’s a lot of other stuff going on just in the relationships of the market that smell a little fishy. There’s if you look over history, you know, when you’re heading into a plateauing rate cycle, the market does usually rally into that. So we could be on the cusp of what I would call caution capitulating, where those of us who are cautious are finally questioning it. But that might be the moment where it actually comes to fruition. [00:06:40][124.1]
Guy Adami: [00:06:41] Yeah, it’s interesting, Dan, and one of the things I say and they get a lot of pushback. I’ll say, and I’ve said it for years, price is truth and people sort of question that. And my point in saying that is the only thing you really can base decisions on off of the assumptions you’ve make is where things are trading at, right? I mean, we have an a much different conversation right now. If the S&P was trading 3400 as opposed to where it’s currently trading. So the decisions would be different at 3400 as it is here, price being the truth behind it. So the backdrop is exactly the same, but things have changed on the price front. So at these levels I look at things and as Liz mentioned, you know, I sit here watching 2s/10s back to 80 basis points. They’ll stay steadfast in this on its way to -1%. And I don’t know how it gets there. If it’s three and a half, four and a half or three and a quarter, something along those lines. But that isn’t particularly good. And again, this extraordinarily tight labor market makes their job, their job being the Federal Reserve’s job extraordinarily difficult. Again, reducing balance sheet, raising rates, market calling bullshit. But I got to tell you something. You know, I think, listen, the markets the markets are measuring stick without question in a forward looking indicator, but they’re looking at the wrong things right now. I think they think the Fed’s going to blink. I don’t think they will Dan. [00:08:06][85.6]
Liz Young: [00:08:06] We talk about this yield curve inversion all the time as a really important indicator. I want to make it clear to people, though, that if the inversion becomes more shallow for one of two reasons, that’s not exactly a good thing either. So think about if the long end rises and that makes the inversion more shallow, it likely means that inflation expectations are going up or they’re anchoring higher, which isn’t good, right? If the short end, conversely, is coming down and that’s how it the inversion gets more shallow, it likely means that were predicting rate cuts, which the Fed’s not going to cut rates unless we’re going into recession. So neither of those two drivers, even if we do have a shallow thing of this inversion, those aren’t good signals either. And if you look over history as the inversion has gotten more shallow, that’s usually right before a recession starts. [00:08:54][47.7]
Dan Nathan: [00:08:54] Yeah, so I have two points on that. Real quickly, just looking at our main man, John Butters, over there at FactSet. And so, again, got your point about valuations right. So look at this. The trailing 12 month pe ratio for the S&P 500 of 20.4 is below the five year average of 22.6 and below the ten year average of 25. Okay, that’s trailing. Okay. But here’s the one that that really kind of sticks out to me. The forward 12 month p e ratio for the S&P 18.4 is below the five year average of 18.5, but above the ten year average of 17.2. Okay. So that’s per our main man Butters over there at FactSet. And so I guess my point is, is like, what are we discounting here? Okay. Because usually right like and Guy, you made this point on many occasions here is this bear markets have not bottomed at the five year average of the forward PE or the ten year average. And that’s a huge one. And then one of our listeners, Colin, showed us a short me a tweet from Michael Kantro we know Kantro he’s a good follow on the Twitter and this is to your point Liz markets have rallied at the end of every Fed tightening cycle regardless of recession or not. It always looks like a soft landing which is why the market always prices it in. The Nasdaq rallied 40% in mid 2000 during the pivot window and I think that’s interesting and he shows a chart of that here. So again are we just in another one of these bear market rallies? Right. And you just laid out the case why a lot of people might be wrong about kind of trying to put together some of these relationships that just maybe don’t make sense for where we are in the cycle right now. [00:10:26][91.6]
Liz Young: [00:10:27] Well, and the other thing is, if we so more numbers around this, the the biggest rallies that you see in the stock market, when the yield curve is inverted, they tap out at about 20 to 25% up. Okay. So if you start at that October low and the intraday low and then move up about 20 to 25%, that gets us to a top of maybe 4350 on the S&P, which would suggest that we have more room to run from here. So the three of us are going to feel wrong if that happens for a while longer, for a couple more hundred points. I think what’s happening is that we watched the resistance line for so long, whether it was the 200 day moving average or just that downward sloping trend line and that held for a really long time, now it didn’t really hold as well. So we’re moving up to that. What’s the next resistance line? If the next resistance line is 4300 4350, that would still be down 10% from the highs of early 2022. Okay. So just think about that. Down to 10% is a garden variety correction. That’s basically what the market is pricing in which I would say that is a soft landing. The market is pricing in just any old regular year where you have a garden variety correction of 10%, that can’t be something that’s consistent with the environment we’re in. Right. Raising rates. Inflation falling, but growth also slowing. It just something’s going to give. Something’s going to break. And I still would put my money on the market breaking down. [00:11:52][85.6]
Guy Adami: [00:11:53] I agree with that 100%. And the animal spirits are back not to pick on Apple. It’s a great company. We thought it would trade down to 125. It actually got down to 125 to the penny, as Carter would say. And the bounce made a lot of sense. The subsequent move post earnings to me makes zero sense because if you really listen to what they said and pass through the numbers and then say, wait a second, this is a company that has, again, mid-single digit EPS growth, revenue growth margins absolutely are contracting. They’ve told you that. Why are you paying a premium multiple for this company? People say the balance sheet, the ecosystem, all those things, I get it. But the price action in Apple and again, to a certain extent some of these meme stocks suggests to me that people once again are throwing caution to the wind. And that to me is not necessarily a good backdrop. [00:12:43][50.4]
Dan Nathan: [00:12:44] Yeah, it’s good that you brought it back to the stock market or individual names here, Guy, because, you know, there’s some important earnings to come out this week and I think a couple of them that are interesting on the consumer front, Chipotle, we’ve heard a lot about wage pressures. Right. And especially on this sort of worker here. They announced, you know, in the face of a lot of corporate jobs being cut in tech, that they are going to hire 15,000 workers in North America. So I think that’s really interesting. It’d be interesting to see what they have to say and what their margins look like. That’s one. The other one, Liz, and I think you started out by saying that some of these defensives, the way that they’re trading, you know, in Staples in particular. So we have Pepsi this week. Guy, you made the point that last quarter I think Pepsi’s all of their revenue growth was in price. [00:13:30][46.0]
Guy Adami: [00:13:31] Organic. When you see by the way, I’m interrupting, I apologize. But when you see organic growth from companies like Kraft, General Mills, Pepsi, Coke, I mean, it’s just code for. Yeah, we basically just ratcheting up prices on you suckers and you’re willing to pay it. That’s what organic growth is in this environment. Back to you. [00:13:47][15.8]
Dan Nathan: [00:13:47] Yeah. And then another one is Disney. So this is coming on Wednesday. And you know, there was an article in the Journal there talking about the Disney Union workers, all of them. I think there’s like in America, maybe over 30,000. And, you know, I think that, you know, whatever the offer is that Disney has made for those hourly workers, the unions want a whole heck of a lot more. So that’d be interesting to hear what they have to say on that front. And then two more interesting to me, and I’d love to get your take I real quickly, because Uber, a company that still has massive losses, they’re reporting, you know, the valuation, you know, is getting stretched in an environment like this after a move like that. Another one on the flip side is PayPal going to report and again, this stock at its lows, you know, a few months ago was down 80% from its highs and the valuation actually started to look kind of reasonable here. So talk to me a little bit about the tech one’s valuation and what they might say about the reaction to their earnings, because, again, they’re probably not going to be great, but expectations are very low and the stocks are kind of just. [00:14:47][59.7]
Guy Adami: [00:14:47] That’s right. And so it’s all about how they trade posts. And so many of these stocks have gone from valuations that you could wrap your head around to valuations that are once again stretched. I mean, we’re going to talk about NVDA in a couple of weeks for sure, a stock that now has doubled since its October low. But even in Uber, which I think has gone from 21 or something to 33 seemingly on the back of nothing, a lot of again, just people trying to get in front of things. I think a lot of this move is just people trying to front run what they think is going to happen. So now we’ve gone from a sell first, ask questions later, backdrop pretty much to a large extent all through 2022 to the last month and a half, two months of, okay, we’re going to buy now, ask questions later. And listen, that’s been working for people. You know, people have bought stocks successfully. The prices have gone higher. It’s the exit strategy. Right. And to Liz’s point and she’s right, something given all the things that we talk about seemingly on a daily basis and the things we’ve talked about now for the last 14 minutes or so, under those backdrops, under those constraints, something is going to break and it’s probably in the form of the equity market. And just in terms of just getting more reasonable valuations in more reasonable multiples and potentially something in the credit market, which clearly has not shown any signs, but almost by definition, there’s got to be something looming out there, given everything that’s happened over the last now 14 months with this Federal Reserve. [00:16:16][89.2]
Liz Young: [00:16:17] Well, at first maybe it’s the expected stuff, right? We expected Bed, Bath and Beyond, something like that to have a credit event, and they did. But at some point, if it bleeds into other companies, I absolutely believe there’s going to be a bigger credit event this year. [00:16:29][11.8]
Dan Nathan: [00:16:29] Yeah, I mean, I guess that’s a pillar of the bull case right here is that corporate balance sheets were in such good shape. And the names that we want to cite, whether it be a bed, bath or a carvana, I mean, these were business models that were impaired from the beginning or in the case of Bed Bath. It was just kind of, you know, it was this long race to zero Carvana Upstart some of these other, you know, pay out, buy now, pay later. Those sorts of things. I mean, again, they were just products of the bull market. You know, I would say this, though, you know, you talk about some of these moves off the lows like, you know, a met, a Netflix, a Tesla. I mean, these were always names, you know, deemed to be, you know, a bit speculative trading at big valuations. I think those are the things that are really kind of causing, you know, like people like us to have their antennas up again. It’s forget the moves and some of these crappy names, like we know that retail investors are always going to come for those things. But one thing I think is really interesting that Microsoft, Google and Amazon in the last few days have filled in those gaps that we’ve saw from those like two, three day move after the Fed meeting. So, Liz, are you in the camp that for this rally, if it really is going to broaden out because we know that, you know, for instance, look at what’s just happened in energy over the last few days when risk on came back in the equity market, what did they sell? They sold all those things that you mentioned. They sold energy, they sold staples, they sold some industrials. So are you of the camp that if we were to see that kind of megacap tech leadership again, is that a bullish thing? Does that mean that we’re kind of that’s how we get another leg of this rally here? That’s how we get back to those August 2022 highs, or is it going to be a re rotation this some of those more cyclical sort of names? [00:18:05][95.9]
Liz Young: [00:18:06] I think it has to be a re rotation. If you look at and I’ll credit Chris Varon at strategic US for this give me this topic but look at the Qs the trade the Qs relative to the S&P equal weight. Okay. And I would preface this was saying in my outlook this year, I talked about pharma, French, you guys can Google that later and put yourselves to sleep. But I do think that those factors are coming back, which is small cap versus big cap and then value versus growth. So if you look at the equal weight S&P versus the Qs, the run that the Qs have seen in the last 30 days versus the equal weight, S&P is huge. Right? But that relationship is still very decidedly in a downward trend. So it actually looks almost perfect as far as what’s happened already. So every time the Qs have seen this big run, it’s been this beta appetite sort of muscle memory of investors wanting to believe that the Qs are what’s going to get us out of this again. And then they get freaked out every time. So I think there’s going to be another fake out between the Qs and the S&P. Equal weight are some of the more value names or the smaller names. So I don’t believe it. [00:19:10][63.6]
Dan Nathan: [00:19:10] Isn’t that kind of bearish here? I mean, if you think about this, if we want to talk about what the lag effects are of these rate increases, everyone’s focused on the fact that the Fed CME Fed watch tool is saying, okay, we’re going to be at 5% after that March meeting, but they’re still working down the balance sheet. And again, we know that like, you know, financial conditions are as easy as they’ve been in over a year. And that was one thing I know Guy had a bone to pick with Jay Powell about that, and I wonder if he addresses that a little bit. That was one of the biggest criticisms about his presser the other day is that people were like, wait a minute, you just said that they’re really tight. No, they’re not. You know, And so to me, I just that’s a bad trap. If the Mega-cap tech names did most of the heavy lifting here, and then we’re about to hit a slow patch, you know, as far as growth is concerned. And the other thing is, and this is something that’s going to work its way, I think, into investor psychology, the China reopening trade, the blue was kind of off the rose. Just look at crude, look at copper. Right. Look at some of this other stuff here. And maybe that thing is what causes, I guess, all of the people that were convinced that the first half of this year was going to be so bad for equities when it came out the second half. Maybe that’s one of the things in Q2 why things get a little rocky. [00:20:23][72.1]
Guy Adami: [00:20:23] I’ve heard so many people say on the network and just reading this, the last 6 to 9 months has been one of the most confusing periods of time they found themselves in in terms of markets, economy. And I agree with that, by the way, and not that I’m any genius, but it’s clearly got something for everybody, depending again, on your dogma or just depending on how you interpret this information and data. With that said, I think and I hate to make you know, this is going to be a really awkward analogy, but I’ll make it. You know, there’s a cumulative effect when you go through chemotherapy. You feel great for a period of time and then you start really feeling like shit as it all starts to add up. And I think that’s what we’re seeing here. I think right now the patient feels great, but there’s a cumulative effect of this Fed rate hike cycle that the market just not had felt yet. And it’s just a matter of time. It’s not going away any time soon. And by the way, even if they do nothing from here on in, there’s still 6 to 9 months of things we need to digest as an economy and as a market that we haven’t yet. We’re just starting to see layoffs in the job market were just starting to see that. We’re just starting to see some of the other indicators tick up. But we haven’t seen nowhere near the amount that I think we will see over the next period of time. That period of time being over the next few months, and I just don’t think the market has priced set in. I sort of understand it on a certain point, but on the flip side, I completely don’t understand it either. [00:21:53][89.9]
Liz Young: [00:21:54] Well, and one of the things and Dan, you made a point about Disney before in the union workers, sometimes I think we on the financial side can get really buried in the data on the charts. But if you just step back and think about this as a citizen or an employee, I mean, I bet my grandmother knows that CPI is above 6%, right? Everybody knows that inflation is high. Maybe they don’t know that wage inflation is exactly 5% or maybe I don’t know the numbers. But if you know that inflation is high and wage inflation is strong and the job market is strong, if you’re an employee, you go to your employer and say, I only get a 3% raise, right? Inflation, six and a half wage inflation is five, job market is strong. I can go get another job. So the demand maybe we don’t see it so much in straight layoffs for a while, but the demand for higher wages, whether it’s unionized workers or any kind of worker, is still there and the employee knows they have power. The longer that goes on and the longer revenue growth falls, and we know revenue growth is nowhere near as strong as it was last year. There’s going to be margin compression, there’s going to be issues with earnings. There’s going to be companies that run out of costs to cut. Right. And it’s going to come through in earnings. It’s just unfortunately, I think, taking a lot longer to come to fruition, which is this weird purgatory state that we’re stuck in. And I think my worst nightmare is that we’re stuck in this Purgatory state for the next 3 to 6 months and the market doesn’t really go anywhere. [00:23:20][85.7]
Dan Nathan: [00:23:20] I guess the point there highlighted by that jobs report, we are at unemployment levels that we have not seen since 1969. We are seeing margin compression right now. And your point Liz is that revenue growth continues to decelerate with the valuations of where we are pulling it back to Butters, of course, it’s just the harder we’re going to drop, the longer that investors perceive some sort of malaise because of what they just did ripping this market. I want to make one last point here. You talk about market structure a lot. You haven’t heard it so far. There’s this zero zero DTE days to expiration options and they are going crazy. And I saw a stat about Thursday’s option volume. It was the highest call option volume day for U.S. equities ever, over 40 million traded. Okay. And then here’s another one. This is anecdotal, but I have a good friend whose son is a junior in high school, okay, who reached out to me on Friday. He is trading zero DTE options. He has no idea what the underlying is. He’s doing it on some gambling site. Okay. And I had a conversation with him and I asked him a bunch of questions and he put $700 in his this trading account. And I said, Bro, you’re going to have more fun opening a DraftKings account than doing this because you have no idea what you’re doing. You were literally flipping a coin where the odds are much worse than a coin flip. So the animal spirits are back, the 17 year olds are back in the market trading zero DTE how can that possibly be allowed? Okay, when you think about these numbers. So that’s just from a sentiment standpoint. That statement I just made could have easily been made in January of 2021. Right? But we are here. We are and we’re making it again Guy [00:25:04][103.9]
Guy Adami: [00:25:04] Yeah, and I’ve seen people talk about this and I think that’s a possible or a, I don’t know, a part of the explanation as to why the VIX is trading where it is or why it’s as depressed it is. There are all these different phenomenon going around below the surface, and I don’t think there necessarily any capital or margin requirements around some of these things, which are basically allows people free rein in something. And to your point, they’re not equipped to do. [00:25:31][26.7]
Dan Nathan: [00:25:32] But just just I said to this kid, he bought, you know, zero days to expiration options. Okay. So he bought a meta call and he bought it because Tesla, after their earnings, kept on going up for days. And at some point in time when he decided to log on to that app, he made the decision that he thought Meta was going to go up between now and the end of the day, and he paid a premium to do that. And if he got that wrong by a penny, that’s back. Liz, I mean, like, so what is it from a sentiment standpoint? What does it mean? [00:25:59][27.9]
Liz Young: [00:26:00] Well, it’s scary. First of all, it’s risk taking with reckless abandon. You know, I mean, I’ll give individual investors some credit because I think that’s some of the criticism that the finance industry got during the meme stock craze that we were insulting to the individual investor. I think they they probably understand some of the nuts and bolts of what a zero days to expiration option is. But I don’t know that they understand how big the risk is on the downside and and how much. It’s probably addictive, right? It’s addictive like gambling because you get that instant gratification or that instant loss. And I would just say to anybody who’s listening and doing that, the feeling of a loss is twice as bad as the joy of a gain, right? That’s always going to be true. No matter how long you’ve been investing, the more you feel that loss and then you have this sort of desire to get back to even so, you almost doubled down on your risk. Right. And you have to just take a breather. Step back. That is not the way that you build wealth over time. [00:26:51][50.4]
Dan Nathan: [00:26:52] Yeah, it’s just gambling. All right, listen, hopefully we’re not doing that. Hopefully have a little bit of an edge here. Hopefully we are kind of imparting some of our many, many years of experience in helping you guys make better decisions about how you are deploying your capital in the markets. All right, Liz Young Guy Adami, thanks so much for being here. And stick around. We have Ron Biscardi of iConnections. [00:27:10][18.0]
Dan Nathan: [00:28:41] We’re here with Ron Biscardi, co-founder and CEO of iConnections. Dan and I were just at their global alt conference in South Beach. We stayed at the beautiful FountaineBleau Hotel. I will tell you, I started in the business in the late spring, early summer of 1986. I’ve been to dozens of conferences in my life. And Ron, there was an energy around this conference that I haven’t felt in quite some time. So first of all, congratulations. And second of all, talk to me about how this whole came to be and what you learned over the few days you were down there. [00:29:54][72.3]
Ron Biscardi: [00:29:55] Well Guy, Dan, thank you both for having me. I will tell you, Global Alts was 50% bigger this year than last year. I mean, this thing is absolutely on fire. We had every imaginable type of alternative strategy represented last week at the event. And yeah, it is just it has really become the place where the entire industry convenes now annually, where allocators and managers get together. They share ideas, they listen to great content and and they do a ton of meetings. [00:30:31][35.9]
Dan Nathan: [00:30:32] Yeah. So Ron, you know, obviously Guy and I were very fortunate to be on stage throughout that day on Tuesday, and it was just like kind of a murderer’s row of investors and allocators. And what I think was interesting about that experience for us is like, yeah, Guy and I through CNBC, we get the opportunity to speak to a lot of these people. I just think your audience in most of those rooms were just full with hundreds of people there. What was kind of some of the take away here when you know people go and they listen to a Marc Lasry or they listen to a Chamath or a Chanos or something like that, they hear, you know, firsthand content catered towards them, but then they go back and then they start, you know, doing their meetings or they’re chatting over a cocktail. And there was a lot of really great, I think, networking events. What was the vibe like? You know, did people feel like after such a long year in almost every risk asset market and there was a lot of underperformance by a lot of managers, but it seems like there’s a lot of capital that still needs to be deployed. I’m just curious, like what kind of what was the vibe? You know, you spent a lot of time in the green room with a lot of these guys. You spoke to a lot of people that were there. What are people thinking on the way out? [00:31:33][60.8]
Ron Biscardi: [00:31:34] 22 was a really interesting test of this event in that, you know, clearly the market had its worst year in over a decade, and yet our attendance was up dramatically. And even more shocking is the meeting count. So so the day when you guys were there was the day of content. We ran four stages simultaneously. We had some of the best speakers in the world on those stages. But then the following two days we ran get this 14,000 meetings over the next two days spread out across two hotels. I had to expand into the hotel next door because we just can’t fit everyone in for for that volume of meetings. I think what is clearly happening is the market is just shifting away from strategies that played really, really well in the zero interest rate environment and we’re really getting back to normal. And I think you heard a lot of the more prominent speakers talk about this, guys like Mike Wilson and Chamath Palihapitiya. You know, they talked about we’re now going back to markets that are more traditional and that, you know, we’re not really supposed to be at a zero interest rate level for over a decade and people are now having to adapt their portfolios back to what was, I think, just more typical. [00:32:53][79.3]
Guy Adami: [00:32:54] Think about your business, the conference centric people in person business. And obviously what we’ve all lived through over the last couple of years with COVID. I get it. But think about what’s happened over the last few months, and I know there was some apprehension from you. Ron is, oh my God FTX blew up the whole crypto thing. There really was a concern like, how is this going to work out? But to your point, easily the most successful conference that you’ve done and I would put this up against any conferences I mentioned earlier that I’ve been to or they’re out there right now. It was seamless in terms of just the logistics, which I know for a fact can be an absolute nightmare. So you and your staff and your team should be thrilled. But one of the things you mentioned, there’s a transactional aspect to this that no other conferences have a lot of these conferences, people just milling around, meeting people having cocktails. If you wind up doing business, that’s just sort of a cherry on top. But your business by definition is transactional. So speak to the some of the dollars and cents. You mention the amount of meetings, but how many deals? I’m sure you’re getting the data over a period of time, but how many deals will get done and what type of dollars are we talking about in terms of changing hands? [00:34:04][69.8]
Ron Biscardi: [00:34:05] So as a software company, we are we are not in the business of setting up any of these meetings, right? These meetings are all self created. We create the platform and then the audience goes into the system and they decide who they’re going to meet. And frankly, after the fact, you know, alternatives is a very long sales cycle kind of business. It is. You know, people don’t write checks to illiquid strategies on the spot. You know, it’s not it’s not like a mutual fund or an SMA where you can get in and out easily. So we will build some visibility, hopefully over time into the amount of activity. But what we what this event really does is give everyone a chance at that first meeting. You know, we make it easier for people to have that first meeting. And then from there, typically there will be months of back and forth and due diligence and and all kinds of activities that take place following that first meeting. But you’ll see the fruits of of an event like this really play out over the next probably two years, to be honest. But we had about 30 trillion, 30 to 40 trillion in that room represented across all the managers, all the allocators, all the service providers. So you know how much business will ultimately come out of it, I don’t know. But I think when you put 30 trillion in a room, it’s probably going to be a lot. [00:35:33][88.4]
Dan Nathan: [00:35:34] Ron, give us a sense. We know that iConnections had an event in Singapore late last year. What’s the demand like for U.S. managers demand like for, you know, allocators outside the U.S.? I mean, you know, what’s going on around the world because we know that, you know, right now, U.S. markets, U.S. risk assets have gotten expensive again, believe it or not, and they never got really cheap enough in the bear market at 2022 where I think, you know, so many investors are like, okay, this is kind of a layup, a multiyear trade. And we know that some valuations in Europe, you know, valuations in emerging markets look a bit more attractive. Give us a sense of kind of just, you know, where we are as far as the interest in finding strategies outside of the U.S.. [00:36:17][42.8]
Ron Biscardi: [00:36:17] There is huge interest in Asia, in particular in both directions. You have seen this huge migration of wealth out of mainland China, out of Hong Kong, into Singapore. I really believe in the next five years you will see Singapore rise as the financial center of Asia, where that that title, I’d say was clearly Hong Kong previously. But I think with the Chinese crackdown you have a lot of concern on the part of wealthy families as well as businesses. And most of the movement out of China in Hong Kong really is accruing to Singapore. So when we were there in November, we saw a tremendous amount of interest on the part of those families in US based managers. And of course, U.S. investors are curious about what’s happening with funds that are based in Asia. So that event that we did in partnership with salt was really successful in bringing together all of those audiences. You know, I would say in these parts of the world, in in Asia and in the Middle East, you know, we have that event coming up. It’s actually in Abu Dhabi in both of these parts of the world, I think the U.S. market doesn’t always necessarily know how to navigate it, and they don’t understand the customs as well. They’re looking for an entry point. And I think events like these give them a mechanism to come in and again, prepare in advance of the events to figure out who they’re going to meet with. And then, you know, when you’ve done a little bit of prep work with the other party in advance, when you walk in the room and you meet them, you feel like you know them a little bit and like that makes a big difference in kind of, you know, breaking the ice, if you will. So, so far, the appetite in these regions has been very, very high for both managers and allocators. [00:38:09][112.0]
Guy Adami: [00:38:10] There must go to events if you’re in our world, the Milken Conference, the Sony conference, you mentioned Salt there, a couple others out there as well. Where do you think you stack up now, given the success of, again, not only this year but last year, which under difficult circumstances was also an extraordinarily well-attended, successful event? [00:38:32][21.7]
Ron Biscardi: [00:38:32] Yeah, I think in the cap intro format, we are clearly the biggest and the best in the world. I mean, there’s really there’s really no one close to us in that particular area. You know, the big banks, Morgan Stanley, J.P. Morgan, Goldman, these groups throw very prestigious cap intro events, but they’re much smaller. You know, you’re talking 50 managers to maybe 100 managers. And by the way, these are all partners of ours. They all send clients to us. They’ve been terrific to us. But our event is really designed to capture the broadest swath of the industry that we can of all of alternatives. So this year in Miami, we had 700 managers represented across all of those meeting suites and a about a thousand allocators attended. So there’s really no where else in the world that you can attend a prearranged meeting, you know, a one on one meeting kind of event at that sort of scale. So in that category, I’d say we’re definitely the best. And I think our content, frankly, is as good as anyone. I mean, we don’t put on the same volume of content that some of those other events do. You know, those are all world class events, milk and sound, for sure. I’d love to get together with some of those guys because honestly, we could bring the one on one meeting portion to their events the same way we did with Salt and really put those on steroids. [00:39:58][85.1]
Dan Nathan: [00:39:58] We obviously said a lot of fancy investor names there, a lot of fancy, very big allocators there. But there’s also this aspirational feel to it. You know, Guy and I, because we were there for two days, we did Fast Money, you know, outside in the middle of everything, which was a lot of fun for us. But we had a lot of people come up to us, were there at the conference names that we’ve never heard of, but are doing really smart things. And they’re basically at this conference because A they’re looking to network, but they’re most importantly looking to get that first meeting, like you said, with some of these big allocators. And for us, it was really interesting to meet a lot of young investors, right? And people Guy and I remember, believe it or not, we can remember when we were young people in the business. And you know, you go to events like these to meet people and to get ideas and really kind of broaden out your horizons. Talk to us a little bit about what it means for some of these younger managers that this might be the first experience having the opportunity to meet some of these big allocators. [00:40:53][54.5]
Ron Biscardi: [00:40:54] Yeah, you’re actually touching on a really important component of the event. So as you can imagine, to throw an event of this scale is very expensive and our ticket price is not cheap. I mean, IT funds are spending tens of thousands of dollars all in when you throw in their travel, the cost of the event, all that stuff to be there. And of course the larger managers don’t really struggle at that price point. But the the smaller managers, it’s a huge percentage of their marketing budget for a year. So we intentionally have a sliding scale and try to make it easier. We’re actually going to roll out a new program this year where we may even create an even sort of lower entry point for the really small emerging managers. Think like under 50 million in aum kind of size because the allocators are asking us for it. The allocators want to see who the up and comers are. If we don’t find an entry point for them, then the event just frankly isn’t as good. So this year we’re actually going to put a group of allocators together to help give us guidance on what is the best way to create that entry point and how do we make it available to the broadest swath of emerging managers. [00:42:09][75.1]
Dan Nathan: [00:42:10] Yeah. So one of the things with our partnership we’ve really enjoyed over the last six or seven months, you know, having our off the tape segment a couple of times a month on this fine podcast here, and we’ve gotten to meet a lot of these kind of emerging managers, if you will, and some really interesting asset classes. And we hope our listeners really enjoy listening or hearing about some of these new strategies because for us, it’s like, listen, we get locked into talking about a lot of the same stuff over and over again, and it’s really important for our listeners to know that there’s just all different sorts of products and markets out there that will present opportunities for our listeners too, as they kind of bubble up. So we appreciate that relationship there too. [00:42:49][39.0]
Ron Biscardi: [00:42:49] I think it’s really been amazing. I mean, the one name that comes to mind for me is Cormac Kinny at Diamond Standard. You know, Cormac, Cormac is in essence creating a whole new asset class or I guess a commodity by making it easier or turning diamonds into a more liquid commodity, if you will. The combination, I think, of coming to our events, being on your podcast, getting access to CNBC, it’s been amazing for a group like Diamond Standard to get visibility so that larger allocators see what they’re doing and can come up to speed on it quickly. It would have taken a startup years, I think, to to navigate that same path. So I really appreciate the partnership we’ve had together. You guys have been terrific to to us that iConnections and to our attendees. So thank you for all the hard work. [00:43:40][51.6]
Guy Adami: [00:43:41] And we look forward to continuing this year. But before we get out of here, you know, what was you know, there are always highlights at these events for sure. You had the opportunity, obviously, to meet Kim Kardashian. Marc Lasry was there. Anthony Scaramucci I’m sure I’ll leave some names off, but Mark Cuban was there. But for you, what was sort of the highlight of the week? [00:43:59][17.7]
Ron Biscardi: [00:43:59] I think the highlight was the industry is in spite of how the markets did in 22, I think the industry is very strong. I think you just have a lot of movement around among the different strategies. And I mean, God, there was just so much energy and excitement there last week. I did not get the sense that that people are worried going into 23. I think they feel like, you know, I don’t know that we’ve hit a bottom. I can’t call markets, but I think there’s a lot of optimism going into 23. And, you know, the the excitement to see I mean, you you guys I don’t know if you were in Kims session, but it was absolutely packed, spilling out into the hallways. We had overflow rooms so people could watch on video. You know, I think that’s a super exciting strategy, right? You’re marrying this massive social media influencer power with capital. I think, you know, we’ll see what they end up closing on. But I think that’s going to be one of the biggest launches of 23. And then you had, you know, the more traditional guys up there, I think, talking about what a rough year 22 was, but also how the markets are already kind of navigating their way out of it. You know, I mean, Guy, you interviewed Novogratz. I thought his comments on crypto were were very realistic and interesting. But it’s like, you know what, It’s not gone. I think crypto isn’t really going anywhere. I think you’ve seen Bitcoin bounce ethereum’s bounced. Those are those are really solid technologies at their core. And I think we’re just we’re figuring out how to do this in a way. You know, we had some really rough patches obviously in 22, but, but I think the future, you know, I just think those things are here to stay. I think investors are clear on that. [00:45:49][110.2]
Dan Nathan: [00:45:50] Well, Ron, you just mentioned you’re not calling markets. That’s kind of what Guy and I get paid the big bucks to do. And I will tell you this, I mean, just to kind of put a bow on all of it, it was you know, the attendance was amazing by both the participants on all sides, the content. You know, there is another way to think about this, and it has nothing to do with you or iConnections or our partnership or anything. It’s like, Oh my God, it’s back. The exuberance is back. You know what I mean? Like, people are spending tons of money to go to go down to South Beach to be at this great event. And you were agnostic. You were just kind of you were a matchmaker here providing the technology reply the platform for all this to happen, the fact that, you know, Kim Kardashian, we got a bunch of NBA owners who were also these big, you know, it felt like we’re back. And my only question about that, after everything that we have been through over the last few years, is like maybe some of that exuberance, some of that optimism is a bit misplaced. And that’s why to me, as an investor, as a commentator, being around these sorts of events are really important. And I would say that some of the big names, I think a lot of those guys are still pretty cautious for the most part here, you know what I mean? They’ve been through these different cycles and they know how sentiment can ebb and flow. And one of the themes that Guy and I’ve been talking about on the pod over the last, let’s call it six weeks or so, it’s just amazing how the calendar turning and just I guess people just kind of feeling, you know, this this negative sentiment for so long. It really did start at some point in a lot of these asset classes that we talked about, clearly in crypto and unprofitable tech stocks and in different parts of the world. You know what I mean? It just they just got sick of being too bearish. And so, you know, a period like this, I think, is really you know, it can be illuminating and it could be also a massive head fake to is is one thing I would just say Guy. [00:47:40][109.9]
Guy Adami: [00:47:40] Dan listen I think that’s a great point. And I think that’s why, you know, our world sort of collided down there. You know, we’re looking at markets through a much different lens, obviously. You know, Ron, is that the crux of investors and people, you know, looking for capital and those types of things? It’s fascinating. And I was thrilled to be down there. I absolutely learned a lot. And I will tell you, Ron, your team, as I mentioned earlier, did a tremendous job. You should be proud of yourself and we look forward to the next one. [00:48:08][28.3]
Ron Biscardi: [00:48:09] Thank you, guys. This event went as smoothly as it did because I have the best team in the business. So thank you to the iConnections team. You guys really made it happen. And Guy and Dan, thank you again for being there and and for all the help. [00:48:09][0.0]
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