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On this episode of On The Tape Guy, Dan, and Danny discuss the changing landscape in the market (3:03), the Bloomberg Global-Aggregate Total Return Index (11:52), key themes at the Code Conference (15:17), crude oil volatility (20:41), why Danny thinks the Fed should stop hiking rates (25:22),  and Danny’s NFL picks of the week (35:23). Later, Guy and Danny interview Chris Bevilacqua of Simplebet and talk about the kickoff of the NFL season (42:30), the rapid growth potential for micro and in-play sports betting (45:51), challenges around customer acquisition costs and distribution (50:39), the outlook for legalization in more U.S. states (56:22), the value of sports as a marketing tool for casinos (1:00:40), the push towards a single screen betting experience (1:03:37), and why Danny thinks golf is the dream sport for in-play betting (1:09:36).

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Show Transcript:

Guy Adami: [00:00:28] CME Ad [00:00:28][0.0]

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

Guy Adami: [00:01:21] So there’s no particular thing that we’re tasked with here on on the tape. We’re obviously a show that focuses on markets, economies and what have you. We try to keep politics out of it to the extent that we’re successful. We do our best folks. But we would be remiss if we didn’t point out the passing of Queen Elizabeth. And it makes me think of Shakespeare. Obviously, many things do. But Henry, the fourth uneasy lies the head that wears the crown. And if you think about it, she wore that crown elegantly for 70 years, 1952. And you can say she made mistakes along the way, but she always put country first and she didn’t have any bullshit slogans to back it up. And I think it’s interesting that we think of that, which reminds me of now Robert Frost. And I want to sort of get into this because I think this speaks to what we’ve been trying to do here. Big Robert Frost fan, as you know, Danny Moses. [00:02:13][52.1]

Danny Moses: [00:02:13] Absolutely. [00:02:13][0.0]

Guy Adami: [00:02:14] Nature’s first green is gold. Her hardest hue to hold her early leaf’s flower, but only so an hour. Then leaf subsides to leaf. So Eden sank to grief. So dawn goes down. Today, nothing gold can stay. Robert Frost Now, few outsiders fans, you know it pretty well. And by the way, this is the on the tape podcast guy dummy here Danny moses Dan Nathan from parts unknown but I bring that up because nothing gold can stay and it’s true. The more things change, the more things stay the same. But things have a way of moving on. And what we’ve tried to do over the last almost two years is point out things that we’re seeing and how nothing gold can stay in the form of it times, the stock market, different things that we point out. So as we’re sitting here on this September day, Danny Moses, I go to you. What are your thoughts on some of the things that I brought forth over the last minute and a half or so? [00:03:15][60.4]

Danny Moses: [00:03:15] Well, I like to use the road less traveled. Is that another frost quote I believe. [00:03:20][4.6]

Guy Adami: [00:03:20] It truly is. [00:03:21][0.6]

Danny Moses: [00:03:21] When we think about this kind of stuff in the market, I try to think about what aren’t people thinking about right and kind of trade away from the masses. So we have a lot to talk about today. I think today I think for the next several weeks, if not months, I think it’s really a macro tape more than a micro tape until we get the next iteration of earnings, which are going to come back around here. There’s a lot of stuff going on that I want to get to today, and it’s really on the macro front, not on the micro front, but I enjoyed your Queen’s Speech. [00:03:46][25.2]

Dan Nathan: [00:03:47] I’m more into the poetry of Eddie Vedder here, and I would just say he who forgets will be destined to remember here, man. Because, Danny, you’re right here with me. I mean, I think one of the themes over the last year easily has just been one of the cross currents as it relates to the economy and how it translates into financial markets, that sort of thing. And one of the things that just keeps coming up to me and maybe you guys have some thoughts here, is that the one piece of this whole economic puzzle now how how dire you think things are right now? Is this thing about employment here? Yeah, we saw the unemployment tick up a little bit, but it’s the one thing that I think is tripping up lots of economists and lots of strategists. And I’m just curious, how do we see this thing shaking out a little bit? Because I feel like there’s two things that can happen here. If we look at all of the things that the Fed were looking to fight as it relates to their hawkish stance that they pivoted last November and have been fairly steadfast about for the all of this year, the one thing that that hasn’t budged is unemployment. [00:04:48][61.1]

Danny Moses: [00:04:49] Yeah. So if that’s the gauge, if that’s all you’re looking at, I would agree in a vacuum you wouldn’t think that things are slowing at all and they’re not slowing dramatically. Right. But we know that it’s on the cusp. So I would harp again that I think that the unemployment rate, we did see it tick up, by the way, just on the monthly number, right, to 3.7%. I think we all agreed that we had seen the lows around the three and a half percent type level. So I don’t think we’re going back down again. So I think the trend I think you get these jobless claims weekly and things like that. There’s a lot of job openings that people can get jobs. The question is, what are those jobs? And I think we’re going to start to see job losses, not necessarily the blue collar area, but in the white collar area. And those come at a real price, I think, for the economy. So I like to look down at the mix of where the job growth is. And I think it’s clear that even with the job growth, it’s growing. I don’t think it’s keeping up with all the costs. And so, yes, people may be going back to work for necessity because they have to get off the sidelines and take jobs they may otherwise would not have taken. So there’s a lot in that. I get it. But I think broadly, I think the white collar jobs are the most at risk and that has the biggest impact on the economy. [00:05:46][57.4]

Guy Adami: [00:05:47] And it speaks to a changing landscape. And there’s nothing wrong with that. And by the way, speaking of changing landscapes, we’re going to speak to Chris Bevilacqua in a little while, the founder of Simplebet. And you think about the landscape of sports betting and all the things that have changed over the last five years. He’s been on the forefront of it. That’s going to be a great conversation, but that’s not a bad thing. Change is not a bad thing that’s coming from somebody, by the way, that is reluctant to change things historically. But I understand that sometimes you have to take a step back to take two steps forward. And quite frankly, I think that’s where we are right now in terms of the markets, it’s okay that the market’s been selling off. It’s okay that I think investors are feeling some of the pain that they haven’t felt for 12 years because I think you have a better understanding of maybe investment thesis is it makes sense as opposed to just throwing darts Dan. [00:06:35][47.9]

Dan Nathan: [00:06:36] I would just say one of the themes that has been fairly consistent over the last few years, we pointed this out on many occasions is the concentration in the stock market of a handful of names. And I’ll just say, as we’re recording this Thursday afternoon of the close, you know, we had that really big rip yesterday on Wednesday, and it’s kind of a green day here today. But one thing that just sticks out like a sore thumb is Apple, Amazon, Microsoft and Google all down today. And I guess the question here, guys, is like, okay, the market’s down about 10% from those mid-August highs here. We’re still up as far as the S&P for about 10% or so. I really feel like this is we’re just back to that old theme where it’s down to these handful of stocks that is going to determine whether we kind of get back on the horse and retest those August highs or go back and test those June lows. [00:07:24][48.0]

Guy Adami: [00:07:24] It’s interesting. And I think, Dan, you would agree, though, that that’s another healthy sign for the broader market. This is going to be the last names to fall. And Carter Worth speaks about this all the time. Sort of the last rung of this is names that have basically carried the load for so long. And what I’ve always found fascinating, we’ve been doing fast money a long time. We talked to a lot of people. People will say inevitably or invariably, I’d love to buy Apple at $140. I’d love to buy Microsoft at $225. And then the stock gets there for reasons that they never could have imagined. Things that are terrifying and like, why can’t buy it here? Because X, Y and Z is going on. I guess the point that we try to make here and we try to emphasize is if you take emotion out of the equation with these things and have a plan in place before things happen, you’re much better off. So I agree with you. I think we’re starting to see some of the weakness in Microsoft, in Apple in Google and in Facebook to a certain extent, which, by the way, has not been able to get off the mat for quite some time. I think that’s actually healthy sign because I think at the other side of that, we’ll look at valuations that make a lot more sense. And in investing environment that I think is going to be a lot more level for people Danny [00:08:33][68.4]

Danny Moses: [00:08:33] I think the one thing we’re seeing I talked about this last week is De-Grossing thing going on around the street. So I think risk is basically coming down a little bit. Now, you could argue that’s very bearish. You could also argue that that means shorts come off a little bit. So what’s gross for people out there? So when you add up your longs and your shorts and basically a lot of hedge funds out there use leverage. So your gross if you’re 200%, it’s two times levered, so to speak. And if you’re running net long, let’s say you’re 130 long and 70 short, your 60 net long with a 200 gross, I think those are coming down. So when you see these kind of fits and starts and Dan, to your point quality, I think people are degrossing some of those long too they’ve been hiding and you will get moves of down 2% or down 3% like we had in the market last week. And then up too, you’ll have these gyrations. But at the end of the day, when it comes back, what are people going to buy back? Like who is the incremental net buyer for things either taking leverage? And let me just say this. Hedge funds are finally having their moment in the sun. Right moment in the sun is flat. Moment in the sun is up 5%. This is now a marketing tool, I believe, going into Q4 to protect if you’re in there to protect, to run a business, because you need to raise more money or not lose money and lose investors downward. This is what you do and this is the behavior going into year end. And again, this is why September it and especially October tend to be the most volatile months because it’s kind of year end damage control. And so that’s what I’m seeing right now. When I see these moves in the market like this, I’m trying not to read too much into them where they are. I think we’re kind of stuck in this 3640 200 range until we have a big move, which I think the next big move will be lower. But I think that’s what I think is going on here Dan. [00:10:03][90.4]

Dan Nathan: [00:10:03] Yeah, it’s interesting that you mentioned the leverage and the degrossing and it might speak to the fact and we get this question a lot like why is the VIX stuck here in the mid to low twenties here? And I think the lack of leverage and we’ve also talked about this a little bit, it seems that hedge funds have not had an easy time with this market right over the last year or so. And they came into this period, I think, fairly cautious as you think about the rally. Everyone hated that rally in the back half of June into July. And it went, man, it was a two month rally off of those lows. It was pretty fierce or so. You know, the S&P was up almost 20%. The NASDAQ was up more than that. And so it seemed that people were taking profits, hedging up, degrossing seeing, which makes for a very complicated period, because we’ve highlighted the fact that here we are at three weeks left in Q3 here. We know that estimates are coming down, you know, fairly substantially for the S&P 500. And Danny, you’ve made the point on many occasions that pretty soon no one’s going to care what Q3, S&P earnings are and how much Q4 is down because the markets will have already discounted all of that. And then what is the multiple? It’s trading on forward earnings. And I guess the point why we keep talking about inflation and Guy, you made this point so well for so long. I mean, when the Fed said that they’d like to see the inflation rate down to 4% by the end of the year. You’re like fat chance, right? It wasn’t happening. And so the point is, we just had gross margins at all time highs in the S&P 500. Yet all of these pressures, whether they be supply chain disruptions and wages and all that sort of stuff, they’re going to be sticking around. And so the idea that if all these inflationary things peaked, it doesn’t exactly mean that margins can’t come in either, because now it’s just kind of a new normal, I think, for a lot of corporate profits in a decelerating sort of environment as we head into 2023. [00:11:53][109.4]

Guy Adami: [00:11:54] Again, another healthy sign, but as Danny mentions it and he does a great job. It’s not just about stocks, it’s about what’s going on globally. You’re seeing you’re talking about deleveraging. You’re seeing it across the globe. And there’s something called the Bloomberg Global Aggregate Total Return Index. I’m sure there’s some bullshit acronym that I don’t know, but that’s something that we should discuss and that’s something you’ve talked about before. And I think it’s something you should talk about now because it’s not just stocks. We’re seeing it across a wide range of assets here. [00:12:23][29.1]

Danny Moses: [00:12:23] So that total return index is both treasuries and corporates. The thought process is if you own both, one should work when the other one doesn’t really do. Rarely do they both not work at the same time? They began tracking this in 1990. This is the first time ever that it’s been a bear market in this index. Right its down 21% from January 2021 to now, because normally you would expect if the economy slowing and corporate bonds start to underperform, you’ll run into treasuries. And this is what I keep harping on, why the 13 years of this undoing, what the Fed has done right for a long period of time, and this is part of it, things will happen that don’t feel natural, that are just some type of reversion I guess back to normalcy is kind of what we’re seeing. When you see something like that, it scares you because there’s really has been nowhere to hide in this market. Couple in the fact of what’s going on, obviously ECB goes 75 basis point today. The one thing that they did do today is they said they’re in no mood to do quantitative tightening. They’re not going to unwind their portfolio yet. I thought that was a smart move on their part. But I mean, the headline in the ECB was ECB raises interest rates 75 basis point is Europe stares at recession. I mean, like I said before, that is stagflation. That’s the definition of stagflation right there. What’s happening? So again, just to peel it back to the macro, which I think is really the theme here, take your head out of the sand and look around to what’s happening we can get more into that here. But yeah, I’m looking at other things now that have a direct impact. And let me just say great time to take your vacation if you can afford it in Europe. Great time to visit England with where the sterling is and where the euro is right now. But beyond that, who is going to be buying our goods? It’s a lot more expensive now for that huge economy to buy our stuff so [00:13:56][93.1]

Guy Adami: [00:13:56] And the rising dollar obviously is not particularly bullish for emerging markets. And I don’t want to get wonky here, but you can just look at an overlay, a chart of the US dollar against GM or something like that, and you’ll see exactly what’s going on. But quickly, I just want to mention this ECB again, that was pretty anticipated, 75 basis point hike, the largest in the history of the ECB number one. They did it against a backdrop of an economy that is I don’t want to say failing, but it is profoundly slowing. So think about the decisions they had to make. On one hand, you have a economy that’s slowing precipitously. On the other side, you have inflation that’s out of control. And they’re saying to themselves, you know what? Let the economy sort of go for a while. We got to stem the tide here and inflation. And it’s a monumental decision that I don’t think we’re making a big enough deal about because quite frankly, not to the same magnitude, Danny, but we’re facing the same exact thing here, just probably 6 to 9 months later. [00:14:49][52.9]

Danny Moses: [00:14:50] Yeah, it’s not as severe, but again, it’s not great. And just to add to that, Liz Truss, there’s been a lot of monumental things obviously that have now happened in England over the last 72 hours. Liz Truss is now the new Prime Minister and one of her first things was in the third day of office. She’s capping household energy bills at £2,500 per year. Just to put that in perspective, they’re currently running at about 2000 and they’re set to jump at 80% in October to just over 3500. And they’re going to subsidize that. That’s a basically a stimulus check going out, so to speak. So they’re going to basically fund the consumer and fund these utilities which are going out bills, and that’s going to be north of £100 billion. So that’s their own stimulus thing, adding to the debt, which is why you’re seeing where the Sterling is actually trading now. So, again, head out of the sand. Look at what’s going on. They have big repercussions globally for stuff like that that’s happening. [00:15:36][46.6]

Guy Adami: [00:15:37] Dan, you’re out at the code conference and you go out there for a myriad of different reasons because it’s cool, number one. But you also get to meet and listen to a lot of fascinating people that really are at the forefront of a lot of things. You know, you go back to the code conferences over the years and what’s come out of those conferences have been some groundbreaking ideas and some thought leaders that you really want to hear from. You know, I know you’ve heard a lot of people talking about a lot of different meetings. Just quick thoughts on what you’ve heard out there. [00:16:02][25.3]

Dan Nathan: [00:16:03] Yeah, pretty fascinating in the last 48 hours. I mean, Kara Swisher on the same stage over that time period had Andy Jassy, the CEO of Amazon, Sundar Pichai, the CEO of Google Alphabet, Tim Cook, the CEO of Apple. I mean, the list goes on and on. I mean, Pete Buttigieg was here are some of the key themes I think are really the main takeaways. A lot of these companies are obviously going into their quiet periods, so they’re not speaking about the current environment. Macro is obviously on the tip of everybody’s tongue, and I don’t think anyone suggests that it’s getting better any time soon. And again, going back to that comment I made earlier about the cross-currents, it’s about as complicated a macro situation, I think, as anybody can remember. That being said, those three CEOs that he just mentioned, they have just unparalleled monopolies, if you think about it, on their business, in the in the moats, in the cash that they have and whatever they do, whether it’s slowing hiring or whatever it is, it really is not reflective of what many of their smaller competitors will have to do in a difficult environment. [00:17:03][60.0]

Guy Adami: [00:17:04] And it’s not reflective of the economy that we find ourselves in this time last year, Danny, a year ago, 30 year rates were basically, I want to say 3% below 3%. Today, 30 year rates are the highest they’ve been since 2008, probably either side of 6%. But if you want around, it’s probably 5.89%. A staggering move in mortgage rates are probably one of the worst times for this to happen again, given the backdrop. I mean, that is a macro concern. I don’t care what anybody says, they can try to say it strictly, but it has far reaching ramifications because the money you have to spend obviously now to pay for your home is money you’re not spending elsewhere. Now, the counter to that is, well, wait a second, guy. Everybody refi their mortgage. Everybody has locked in rates, blah, blah, blah. This doesn’t affect most people. That may be true, but it has catastrophic effects, I think, for the housing market going forward. Again, we’ve seen rates at 6% before. That’s not the point. It’s the rate of change. [00:18:04][60.5]

Danny Moses: [00:18:06] For sure. And listen to a lot of jobs being lost right now. There’s a mortgage company shutting down every day. If you look in local newspapers, you’ll see it. That’s a lot of jobs that people that were making a lot of money. It’s very cyclical, right? It’ll come back at some point. I’ve said before that I think the homebuilder stocks, when we do come out of this, whenever that is maybe one of the most interesting sectors, they’re going to keep getting cheaper by the minute. But let me pull that back for a second, Guy, because you know that I take notes. You guys did study the markets, whatever. When I start to look up things to talk about on this podcast and do research, I literally go and think, All right, I’m going to go find some bullish shit to talk about. I’m going to go find something where there’s some type of green shoot to talk about. And every week I find myself searching and searching and I can’t find it. And one thing I just want to bring up again, I got to pull it back to the macro again, and I’m going to go back to Europe for a second. The Italian ten year, 4% right now the spread is 2.3%. I think right now between the German tenure in the time the last time that happened, that is the breaking point. There’s Italian elections coming up. And let me just say this. There are so many things that can fall off a cliff here, so to speak, that can trigger some massive event I believe. You’re talking about our markets. Right. And just focusing on the U.S., I then pull back. Okay, but maybe something maybe you can offset that was something positive and sorry, that was like a non sequitur coming in here and talking about Italian rates. But again, it’s something people need to pay attention to. The European banks have risk on all this stuff at the same time that they’re raising rates to slow down inflation. This is a bad situation right now. So, yes, coming back to your comment on just mortgage rates in general, it has it’s going have a massive effect. We’re already seeing it, to Dans earlier point about employment. That’s an area where you’re seeing unemployment rise for sure. [00:19:40][93.7]

Guy Adami: [00:19:41] Lael Brainard Earlier this week, we’re all focused on the housing market. That’s code for saying the housing market’s too strong. The housing market needs to come in. Listen to Jerome Powell back in June before he left the stage at one of his conferences and I’m paraphrasing, but he basically said, oh, by the way, if you’re a millennial thinking about buying a home, you may want to rethink that. So it’s clearly top of mind for them and things are working out the way they want. There’s pain associated with that. And just sort of game theory out. When you just talked about in Europe, Danny, you think about again, we don’t talk about Russia, Ukraine anymore. It’s not top of mind. Nothing’s changed, but it’s not top of mind. We are headed to the winter months there and there’s a school of thought out there that thinks, you know what, NATO’s going to acquiesce here. They’re going to say, you know what, take Ukraine, the let’s make it all go away. We need to get our power back. We need to be able to heat our homes. And you start to think about how this can sort of perpetuate itself, and that might be coming to a theater near you. Dan, one thing you’ve been spot on about, though, is energy. And I got to tell you, as we sit here, crude oil has gone from 135 down to 85 back to 100. And now here we have it on its heels again, bouncing a little on this Thursday, but clearly under pressure. Now, you would submit correctly that crude oil is telling the real story here in crude oil is doing the job for the Fed and maybe all the inflation concerns that we have or are maybe warranted. But it going away a lot faster than many of us realize. [00:21:07][86.6]

Dan Nathan: [00:21:08] Yeah, well, full disclosure, and I think regular listeners know this, I mean, I was very much in the transitory camp not going off of anything as far as data, the way I think many fine economists drive. Just at our Fed officials do, it was more gut. So at this time last year when a lot of very smart people like Danny and you were talking about how inflation was going to be rampant, it was not being measured in the right way. And some of the sort of bottlenecks that we had because of COVID and coming out of it and the potential for geopolitical dust ups was only going to make it much worse. My view was really very different. It was that as a market participant over the last 25 years, in my mind, when the narrative just shifts so far one way about one thing, it always come back. And that’s really what’s happened here. You know, Carl Quintanilla tweeted this out today, just some charts of lumber, of crude of the Baltic Dry Freight Index. I mean, all these things have crashed. So this goes back to the kind of unemployment thing is like that’s the one thing. And they get year over year the rate of change and all that sort of stuff and kind of the inputs to record margins. It’s still higher in a decelerating environment with a higher dollar, with weak Asia, with weak Europe. So I get it, I get it, I get it. And then you just throw in all the you talked about a U.S. consumer that might start to feel strapped. Right. If you think about given the mortgage rate situation here, just near 6%. So I get all that. I still feel like we are going to see disinflationary factors start to play. That is going to be a 2023 thing. And you guys will probably successfully make the argument that that’s not bullish either, because prior to the pandemic, we were worried about disinflation, right? We were worried about no growth in wages for years and years and that sort of thing. So again, I just think it all reverts a little bit here, but I don’t think that crude crashing or lumber crashing or shipping rates crashing is particularly bullish either. [00:23:04][115.3]

Danny Moses: [00:23:04] I will tell you, if you’re a soft landing person right now, you should be buying energy stocks, because if you’re a soft landing person in oil just remains above 70, 75 bucks. These stocks will be a place to be for the foreseeable future, in my opinion. So yeah, I echo. Dan, the one other thing that you maybe think about is the fact that jobs are coming back to the U.S. We talked about this in last week’s podcast. So you do have this secular shift from overseas of bringing jobs back. So to your point about how to match kind of what’s happening in the employment world, those jobs coming back, that is a secular shift. So certainly something to talk about. [00:23:35][30.3]

Dan Nathan: [00:23:35] Also a secular shift that is inflationary. I mean, when you think about all of these chip factories that are supposedly finally going to get built here with subsidized capital from our government, which is only going to push wages higher for jobs that were not being done here. That’s the one thing of all those things that we just mentioned, those inflation readings that have kind of rolled over, that might be one of the reasons why unemployment. And listen, let’s be really clear. Immigration and our policy towards immigration is one of the biggest factors about this that might also be secular. So we might be looking at maybe this renaissance. And Guy you say this all the time, careful what you wish for, reshoring and globalization and all this sort of stuff. It may cause the unwind of a 50 year trade, which some would say was a deal with the devil, with U.S. manufacturers and U.S. consumers for cheap goods made overseas. Now, we might have a whole slew of better jobs because of reshoring, but that might mean that the cost of goods and services here, from here on out are just going to be a lot higher. [00:24:37][62.1]

Guy Adami: [00:24:38] And what you speak of happened during the Nixon administration, obviously, and that was championed, as you know, we’re now have relations with China. And I totally get it. It’s somewhat revisionist history. But to your point, you know, be careful what you wish for. You might get it. Now we’re trying to get out the other side. Now, what I find really interesting, Danny, I’m curious as to your thoughts. I mean, I have a birthday coming up in December and, you know, the date you might want to throw it out there in case anybody wants to send me something happens to be the same day as Brad Pitt. [00:25:02][24.4]

Dan Nathan: [00:25:03] What was that, December 18th, 1963. Sorry to throw that out there. [00:25:06][3.6]

Guy Adami: [00:25:06] Yeah. Keith Richards, as well [00:25:08][1.3]

Dan Nathan: [00:25:09] Wait wait but Danny, Guy, looks much more Keith Richards than he does Brad Pitt at this point doesn’t he? [00:25:12][3.5]

Danny Moses: [00:25:13] No no new haircut. He looks pretty good right now. So, I mean [00:25:16][2.3]

Guy Adami: [00:25:17] I appreciate your thoughts. Why do I mention that? Because most people get those candles in their birthday cake and I’m going someplace here. And sometimes you get the wise guy or wise person that puts those candles and you blow them out. And then 30 seconds later, they reignite and then you blow it out again and it reignites. I mentioned this because there are going to be a lot of people that think maybe correctly, I don’t think so, that this Fed is navigated things well. And we talked about this earlier this week on one of our market calls where we said, you know, there’s a school of thought that thinks the Fed can come 75 point hike. They can then beyond watch the data and then potentially be on pause for the foreseeable future because the data suggest inflation’s trending their way. My point in bringing up the candles is you might think you’ve tamped down inflation or quelled it or even put it out of its misery, but it always has a way of coming back. And we’d learned that in the seventies, and to a certain extent we learned it the hard way in the eighties as well. So as unfortunate as it sounds, even though the data is working for them, Danny, they still have to keep their foot on the gas. And I think they finally figured that out. [00:26:25][67.8]

Danny Moses: [00:26:25] Candle burned out long before inflation never did. By the way, now that Elton John to the queen, I think we may have found our theme. I’m sure he’s going to be performing at that. But yeah, listen, you’re going to see trents again. Fed was so late to raise rates. It leads me to believe they’re going to be late to recognize that things are slowing down. I think they should be stopping, but that’s my personal opinion. I think this should be it. I don’t even think it should be 75 basis points in September because we can all see where the trend is going. You’re talking about mortgage rates. We know the lag impact of things like that. We’re seeing borrowing costs. We’re seeing credit spreads widen. We’re seeing junk bonds just get destroyed. So things are happening that are supposed to happen. They don’t happen right away. Is the Fed that ignorant that they don’t see it coming, that they have to? So to me, Guy, it’s a credibility issue with them at this point and they’re so excited to have credibility finally. Maybe it’s going to last another couple of weeks, but I think they’re done. I think this is it. In September, I’ll go out on a limb and say that. Dan, I know we have another bet that I probably won’t win, but I think this is it. So we’re seeing the trend. Inflation has peaked, in my opinion. You could pick a data point here and there that things maybe look inflationary, but it doesn’t take a genius to figure out that the lag impact of things that are slowing the economy are going to have an impact on inflation. [00:27:37][71.2]

Guy Adami: [00:27:37] So I’ll game it out again because that seems to be what I want to do here, let’s say that’s right. And they do put it on pause. I’ll tell you exactly what’s going to happen, that energy trade is going to be on fire because crude oil is going to go up 25, $30 over the course of a couple of weeks. And Dan Nathan, believe it or not, Danny, has a bullish thesis and gold on the back of exactly what you just described. And he actually outlined a trade that would work if this happens, if, in fact, this Fed does, for whatever reason, pause, pivot and in terms of credibility, Danny, please stop embarrassing yourself. They lost their credibility long ago. That was like Greenspan, Bernanke credibility stuff. And when Yellen came in, forget you’ve got worse than that. [00:28:17][39.6]

Dan Nathan: [00:28:18] And I think you guys are right on that whole thesis. And if they do pause, gold didn’t work when we had inflation readings at 40 year highs, but it might work when they start to basically ease because of a weakening economy. So I get that. There’s a couple of things here. It’s a heated trade. The technicals are horrible and they’re at a point where if they don’t hold and I’ll just say this in an environment we were just talking about a mid-twenties VIX, I mean GLD Vol okay, that’s the ETF that tracks the price of gold is about as cheap as you’ll find on the board. So if you want to express directional views with defined risk, I mean using options to do that and the GLD makes sense. I just want to make one other point is that back in May and June, you remember I kept on I wouldn’t shut up about the Qs and 2s, like that’s how I wanted to play for a rally here. I thought that you’d see the QQQ, you’d see those five names that make up almost 50% of the weight of that ETF. And then you have dozens of stocks that are down 70, 80% or so. I still believe that’s the way I mean, I started dollar cost averaging that in the spring and had a really good trade into the summer. I got out of it a little early, but I also think if you’re looking at some of these ETFs, that track and Guy, you’ve been talking about the TLT, that’s the iShares 20 year Treasury ETF. I express the bullish view on Treasuries with the GOVT, which is kind of across different maturities there. I think that’s kind of the trade. I would love to see stocks retest those lows, maybe break, maybe get a little jiggy there. And then also maybe there’s one more rate move. It really does look like the twos want to break out of that three and a half percent. And do what Guy? [00:29:53][95.3]

Guy Adami: [00:29:53] Party like it’s 1999 Dan [00:29:56][3.3]

Dan Nathan: [00:29:57] Well, there you go. All right. So that twos look like they want to break out and party. But I guess the other point about this is that there was a time when the twos were surging and the ten year was coming in. I mean, the ten year went from three and a half percent this summer to two and a half percent, which is crazy. So [00:30:12][15.6]

Guy Adami: [00:30:12] Oh, wait a sec. Hold on a second. What’s another word for crazy in the world we live in? Would you say volatile is crazy. Oh, where have I heard that before? I’m just saying, Danny, please. [00:30:22][9.4]

Danny Moses: [00:30:22] This is the Dan Nathan Global Aggregate Total Return index that you’re now giving out of what you want. [00:30:27][4.5]

Dan Nathan: [00:30:27] Do you like it? You like what I’m doing here? [00:30:28][1.2]

Danny Moses: [00:30:28] I do like we’re going to track it exactly right. We’re going to track it. [00:30:31][2.6]

Guy Adami: [00:30:31] I like that. [00:30:32][0.3]

Dan Nathan: [00:30:32] All right. Fair enough. I still want a retest. And I think that if they do retest those levels, the S&P 500, what is it like 3630 to the downside? I don’t think they go there and stop and that’s the point. And so, Danny, I guess if the Fed stops, you think it’s because things are just so bad economically they’re finally reaching our shores here. And that will be the wakeup call. And in that environment, stocks at these multiples have not discounted, I guess, what would be a protracted sort of global recession. And I think it’s really important to go back and remember, after the financial crisis here in the U.S., it was a rolling financial crisis across the globe. And that was one of the reasons why there were so many fits and starts with the stock market. Yeah, it was lower left to the upper right, but it was a volatile period back 12, 13, 14. And global growth concerns we’re actually like that was the boogeyman [00:31:24][51.7]

Danny Moses: [00:31:25] Again, Fed doesn’t have your back enough said global central banks don’t have your back. And I’ve said all these other times he’s had fakes of buy the debt by the debt those are gone so I don’t think it’s going to happen. And Guy. There was a Friday night dirty that came out last week. It wasn’t a big one, but it was a Friday night dirty that came out across the screen. Did you see what it was on the news of UBS? [00:31:42][16.5]

Guy Adami: [00:31:42] Well, that’s what I was just going to mention. Anecdotally, there always stories that we’re looking for, Danny, and you’re a master of finding these stories. And I didn’t realize it was a Friday night dirty. But what I’ll tell you is these wire houses over the last five years have been gobbling up these advisory firms and throwing money hand over fist at valuations. It made no sense to me, quite frankly, but seem to be, as the French say, de rigeur. Now, over the weekend, I thought it was, but it was a Friday night dirty. UBS terminated their deal with Wealthfront. That was a $1.4 billion cash deal seemingly out of nowhere. Begs the question, what does UBS see why all of a sudden? Because, quite frankly, money has not been a problem for these deals, nor have valuations. [00:32:25][42.9]

Danny Moses: [00:32:26] Well, I think when they announced that deal, it was $27 billion in assets under management and 470,000 clients that they were buying at the time. And, you know, you get a higher multiple in this business for that type of asset management, right? You for those type of assets, the premium you get paid, obviously it’s come down. But they didn’t try to readjust the price. They just walked away. So, again, not shocking, not necessarily market moving, but a sign of the times nonetheless here. [00:32:49][23.2]

Dan Nathan: [00:32:50] Well, hold on. Just to be clear, I mean, they walked away from an acquisition, but they did make a large investment in the company. So just full disclosure, I mean, it’s not like they walked away and said there’s no value to this. They did invest at a price that was very similar in which they were going to buy the whole thing. They just like, I guess probably came to the conclusion, why buy the cow when you can get the milk kind of for free ish I guess [00:33:12][22.5]

Guy Adami: [00:33:12] I heard that in a different walk of life, but probably is for a different show at a different time. Danny said a number of times it and so all this meme stock stuff goes away. You’re not going to see a bottom. Well, GameStop this week announced some partnerships seemingly out of the blue, grasping at straws. Danny and my sense is you’re taking the opportunity this bounce in GME to probably short this thing like there’s no tomorrow but again when you see things like that, to me it doesn’t speak to a bottom, it speaks to somewhere in the middle innings. [00:33:43][30.7]

Danny Moses: [00:33:43] Yeah, if you’re talking about GameStop specifically, obviously they burnt another over $100 million in cash. They got eight or 900 million left. It’s what the market cap is is outrageous. North of 10 billion relative to what their cash this year and their business with no end in sight in terms of things turning down tons of inventory. So yeah no terms were disclosed just announced some partnership with FTX. Again, the end of the dot com era was the last ditch effort. Hey, let’s just adcom. Hey, let’s just announce something that to give people hope. So listen, it’s tough to get a bar right now, obviously. So that’s why the stock is holding and I think it’s flat or up small for the day. I know it traded up last night, but again, I think that will continue its move lower and I think that’s healthy Dan. [00:34:21][37.7]

Dan Nathan: [00:34:21] When I saw the headlines on FactSet yesterday, I put it immediately in our group chat. The first headline was GameStop jumps more than 10% after results packed with FTX, and then it says GameStop forms partnership with FTX, no terms. And these are scared shorts I guess. Danny But they’re just buying first, asking questions later. Or is this the meme stock, people buying into it because they see the headlines? [00:34:44][23.3]

Danny Moses: [00:34:45] Listen, the stock’s down a lot from where it was just a couple of months ago. You know, you got the Ryan Cohen magic golden touch on this thing also. So, you know, I think it was just just a little bit of short covering and people like, okay, what’s the next catalyst to get it lower? I think the next catalyst get a lower. And let me correct myself. It’s now south of a 10 billion market cap. I believe it was 13 or 15 billion just a couple of weeks ago. But I just think it’s a short term bounce. It’ll resume its downward movement soon. Again, if you want a name like this, why do you own a name like that? There’s just no fundamental reason to own it. NFTs? Really that announcement a year ago would have been a lot more impactful. I know they’ve been talking about getting in the space and yes, they’re generating, quote, revenues from trading some of these NFTs in the marketplace out there. But come on, there’s way there’s really no business model left for this company and this thing should be sold. [00:35:27][42.0]

Guy Adami: [00:35:27] Last year you did something, Danny, that I don’t think I’ve ever seen done before. There’ve been some greats out there, Jimmy the Greek, Al Michaels, some legendary gamblers. But your NFL prognostication skills last year are the thing of legend. And as we sit here on this Thursday, there will be a game this evening. As you’re listening to this, the bills of Buffalo will have played the Rams of Los Angeles or whatever they call themselves now. So that game is in the rearview mirror. But what you did last year was epic. And I’ll tell you, both of us got on the Rams I think around week six or seven. That proved to be prescient call. But as we get into this 2022, 2023 season, Dan and Danny, after last year’s mano a mano, I want to give you both an opportunity to sort of put some games out there and maybe we can sort of hit the refresh button on this new season where they play for pay. [00:36:24][56.4]

Danny Moses: [00:36:24] I want to apologize in advance to people that didn’t listen last year. Be able to gamble. For me to follow this up this is going to be very, very difficult, but I am going to give it a shot. I got three games this week. One of them is tonight’s game, which I will tweet out and take ownership of win or lose, obviously when this podcast comes out tomorrow morning. But before Dan goes, he will see if he wants to take any side of these three picks. I’m going to give them to you now. All right. I always like shorting the Super Bowl winner, certainly early on in the season. The Bills are playing in Los Angeles and they’re laying two and a half points. Kind of scared of that line a little bit when the money line is -135. So for people out there, bet $135 to win 100 instead of betting $110 to win 100. And given the points, I’m going to take the Bills money line just so I can enjoy the game and not have to worry about those extra couple points. So Bills tonight is the one. Second one is I’m shorting Tom Brady this year. I realize that goes against what I mentioned last week about Serena Williams. Always better when she’s underdog, except that Tom Brady’s a favorite in this case going on it. I’m not sure about this Tampa Bay team, but I would take Dallas in a home night game. It’s not Mnday Night Football, but it’s Sunday Night Football. Give me Dallas plus two and a half. And lastly, you give me Bill Belichick with literally six weeks to prepare for a game. I know everyone’s excited about the Dolphins, you know, Tua looks great. They got Hill looks great. Waddle looks great. All the stuff. Horse hockey. Give me the Patriots plus three and a half points in Miami. Those are my three picks. Dan, let’s start off with a bang. What do you got? [00:37:52][87.5]

Dan Nathan: [00:37:53] Yeah, well, just to be really clear, you know, I haven’t bet on a football game probably since high school. So Danny comes on. I have no idea. He’s like this master handicapper here. He’s talking such a big game. We’re starting out the podcast right in the season here, and I just don’t like willy nilly taking the other side of this thing. I find myself in the middle of a buzzsaw here. What did you go? 27 in three or something like that. So I’m down, what, ten dimes to you, Danny? Is that what you say here? And you let me carry it into this new season here, so I’m going to pick my spots here. I think Bill Belichick put a fork in him. He’s done that team is not particularly interesting to me. So I’m going to take the Dolphins minus three and a half at home over Bill Belichick’s New England Patriots for 500. [00:38:39][46.5]

Danny Moses: [00:38:40] For 500. You got it. It’s a good start. All right. Let me just say, yes, I did pick stuff. And you were forced sometimes to take the other side just for entertainment purposes. There were several times where you would call me at 3:59 p.m., 12:59 p.m., 7:59 p.m., 4:00 pm. I say I like that you want to make sure. So sometimes I took the other side of your bets and I’m just saying it just don’t for the audience out there, just know there are some times where you like to instigate a pick ‘ll either agree or disagree with, but respectfully, always take the other side of it. [00:39:07][27.7]

Dan Nathan: [00:39:08] Oh, hold on one second. Any of those off balance sheet sort of transactions that you and I did over the course of a Sunday? First of all, I think I won most of them, to be very honest with you. [00:39:17][9.8]

Danny Moses: [00:39:17] Not true a no effing. Okay [00:39:19][1.6]

Dan Nathan: [00:39:20] Yes. And I don’t they were never really reported. Just to be very clear. [00:39:23][2.8]

Danny Moses: [00:39:23] You know what? I keep track actually have a journal. I’ll go back. That’ll be for next week’s episode, guy. You can bet on that. [00:39:28][4.3]

Guy Adami: [00:39:28] Last year the Eagles were the number one rushing team in the league. And as a lifelong Giants fan, it pains me to say this, but I think the Eagles are the sleeper Super Bowl team of the year. AJ Brown playing wide receiver for a team that’s one year older, better coached. They might be the elite team in the NFC this year, just throwing it out there and it kills me to say it will come back to this if I’m wrong, but my sense is I’m going to be correct. When we return, Chris Bevilacqua of Simple Back. [00:40:00][32.0]

Dan Nathan: [00:40:26] CME Ad. iConnections Ad. Masterworks Ad. [00:40:26][0.5]

Guy Adami: [00:42:12] Chris Bevilacqua is the co-founder and CEO of Simplebet, a micro betting and in-place software company launched in 2018. Chris is also the co-founder of Bevilacqua Helfant Ventures and a long time investor and entrepreneur in sports, media and tech. We’re thrilled to have Chris Bevilacqua back with us. Chris was here in May of 2021 and a lot has changed and I want to get into that. But this is how my ridiculous mind works, Chris. So indulge me, please, for a second. When I was of that age, when I knew every baseball players baseball card inside and out, there was a guy that played. His name was Curt Bevacqua. So Chris Bevilacqua, Curt Bevacqua, and I’m thinking about it. Back then we used to be like, what are the chances that this guy does nine here? What are the chances he strikes out? And we used to goof around. You built upon what all of us were thinking back then and now, literally, you can bet on just about any outcome known to mankind in a sporting event. So welcome back Chris to On The Tape. [00:43:17][64.4]

Chris Bevilacqua: [00:43:17] Thanks for having me back. I’m glad I got an invite back after the first time. [00:43:20][3.0]

Danny Moses: [00:43:21] Well, lots of good things have happened. [00:43:22][1.0]

Guy Adami: [00:43:22] So that’s the thing. So much has happened in the last I guess it’s what, 18 or so months and it’s amazing the speed with which it took place. So maybe you can sort of take us from the spring of 21 to where we are now. Lots taking place. [00:43:35][12.8]

Chris Bevilacqua: [00:43:37] Definitely. And it’s only accelerating. And but I do want to make one comment on the whole Kurt Bevacqua thing, because it’s kind of funny. Like years ago when I started my career, I worked at NBC Sports and I worked for Dick Ebersol and Ken Schindler. And my nickname in those days was Curtis because they used to compare me to Bevacqua because he was an on air guy for NBC at the time. To this day, when I see those guys, they call me Curtis. [00:44:01][23.9]

Guy Adami: [00:44:02] That’s so funny. [00:44:02][0.6]

Danny Moses: [00:44:03] Guys mentioned lots of happened since you had come on the macro for the sectors accelerating your micro no pun intended to the micro betting series so maybe just bring us up to speed on. [00:44:12][8.7]

Chris Bevilacqua: [00:44:12] Yeah I mean like I said in the last 18 months, I mean, this industry, as you guys know, I come at it from the media side. I wasn’t really in the sports betting industry prior to four one half years ago when I started the company. So I obviously learned a lot. And one of the things that, you know, on the products side and the way the whole entire industry works, is it every year it launches off of the fall and football season when everybody’s on vacation in August, right in their chalets and on their yachts like this is the busiest time of the year for people in the sports industry. Because if you think about it, we’ve now gone through we are now second football season and we’re all these new products and new integrations and all the things that have to happen on the customer side. In our case, you know, since we’re a B2B company, right, we’re interfacing with the players that have the direct relationship with the end user. So the FanDuel and the DraftKings and the MGMs to the world. And the last 18 months on the regulatory side, after COVID, covid was a big driver of just an acceleration of legalization on a state by state basis. So you’re now I think it’s 30, 31 jurisdictions are now approved for sports games. You’re in front of 150 160 million Americans with these new products. Right. We have the one thing on the regulatory side and the fact that now you have a far greater exposure to the customer base. You have all this product innovation going on. You’ve got a lot of competition for end users. And now we’re in that. I think the world where we’re looking at product innovation and the kind of things that we do, and prior to 18 months ago, the big product for the end users was same game parlays, right? And FanDuel were really the ones that took over that category and have used that quite nicely to get their 50% market share right. There’s 57 or so licensed operators and they’re one of 57 and they got 50 plus percent of the market share here in New York as an example. And so you’ve got everybody else fighting over for market share. And ostensibly the product side of the business has all been everybody sort of selling the same thing. But now what we’re starting to see and this is really we’re right at this point with this new season upon us where we’re in play and micros our product, which is we think the new SGP, the new same game parlay, will now move to the front and be more of what we think will be a mass market product. Just the in game in the in play, just the amount of action around that as a percentage of what people are doing across the sports betting landscape is really growing very rapidly. [00:46:48][155.7]

Danny Moses: [00:46:49] Yeah, because it looks like the majority of bets on an NFL game occur after the game starts. Right? So all that stuff is happening now. So take me through this for a second. So you’re sitting in a room with your engineers. You guys are coming up with all these ideas, but you have to have data to support whatever bet you come up with so the sportsbook doesn’t get killed. But give me an idea. When someone comes up and says, you know what, we’re going to come up now with the longest punt, or will this punt be over 47 and a half yards? Will it be a touchback? Will it be in terms of testing those out into the marketplace? What is kind of the litmus test, if you will, for a bet attracting people? How is that measured, so to speak? [00:47:23][34.6]

Chris Bevilacqua: [00:47:23] Well, I mean, I think eventually we literally create thousands of markets. In a baseball game we have a couple of thousand market. A game, right. But after you have the markets out there and they’re either surface the right way by the operator, right to the end user. Right. A lot of this is about Bet discovery and like surfacing the right bet at the right time to the right and user. Right. Like I’m an Yankee fan. I love Aaron Judge. I want to know when he’s up. So alert me when Aaron’s up so that I can see I can make my bet, right? So we’re still a little bit of ways away from the whole entire industry getting to better user interfaces, more simple user interfaces and access to the end user. But ultimately what you see happen, like in the case of baseball and football now is coming where we’re offering literally hundreds of various markets. And, you know, typically there’s a handful that rise to the top, right? You just don’t really know how any particular market is going to perform. Like you used a punt example until you actually put it out there. Like, what are what are users like? We think that micros in particular are just more of an entertainment product, right? It’s more for a casual user. It’s like when you’re watching a football game, like I’m sitting there with my son and I say, I bet you the Giants are going to throw to Saquon on a screen on this. That’s how you watch a football game where I bet Gerrit Cole is going to throw a fastball over 95 miles an hour. Like we can now enable those types of experiences. And not every single one that we come up with is ultimately going to be, but we think more like a fan as a casual Joe versus what does a punter want to do. So the way we’re going to grow the business for our partners is to bring in the casual fan that isn’t in the ecosystem yet. [00:49:02][98.5]

Guy Adami: [00:49:03] What this speaks to, Chris, and I know you know this obviously, but maybe you can speak to it a little more in depth is engagement. It’s all about engagement instead of people just watching passively. Now you’ve created an active audience that, quite frankly, doesn’t give a shit if the Yankee game last three and a half hours because they can get more action during it. [00:49:21][18.7]

Chris Bevilacqua: [00:49:22] You’re 100% correct. And like I said earlier, like I come 35 years in the sports media business. Right. And understanding ultimately sports media and any kind of media video and video consumption is based on attention. That’s what media companies are after. Thereafter okay I mean, ESPN, I paid two and a half billion dollars a year for NFL live game rights. What I want to do, I want to produce those games in a way that appeals to a a mass audience. I get a lot of people to come and watch it. I sell subscriptions and I sell advertising. Well, we now have a product, right, that encourages people to come and interact with that game. The gamification of live sports and sports betting and sports wagering is right smack in the middle of all that. So it may turn out we look four or five years out that this type of technology that we have that is proving to not only be a great in-play sports betting gaming profitable product for sportsbook operators, but it’s also proving to be, I believe and will prove out to be extremely valuable to media companies because they want people’s attention on the actual live broadcast. And the two of those things are now colliding together through technology and low latency streaming and all the interactivity that occurs when you have digital distribution. [00:50:46][84.3]

Danny Moses: [00:50:47] Let’s take one step back. So not only are you the right guy at the right time to lead this company, the sector feels like it’s finally getting to where it needs to be. You talked about the convergence of media and gambling, right. Which is a perfect fit. The sector itself, DraftKings, FanDuel, flutter. MGM feels like the day of spending to acquire customers. Right? Just endlessly. I’m like from a platform perspective, somewhat changing in content to your point is starting to matter more or how do you make it sticky? Micro betting obviously creates an allegiance, makes it sticky, but you see all these deals occurring. Penn buys the rest of Barstool Sports and all this stuff where content is kind of marrying. So you obviously had the foresight and knew where that was going. But can you talk about the industry? Because from a stock perspective, people have been hammering these names for a long time and I see names like Sportradar now coming on the scene. People that have the data are very valuable, etc. It feels like there’s a shift going on. Can you talk about just that in general without maybe mentioning company specific? [00:51:37][49.8]

Chris Bevilacqua: [00:51:37] I’m not an economist, but like on a macroeconomic level, right. There’s a lot of disruption in the market, both politically and economically. And, you know, so you have all these other factors. We’re in the middle of inflation, we’re in a recession. And a lot of that on a macroeconomic level has affected, broadly speaking, the lots of sectors of business, namely the tech sector. Right. Even the big brands in big tech companies are down pretty considerably in terms of like their market cap and stock prices. And so DraftKings and Sportradar and Genius Sports, all all companies that have more recently anyway, in the last couple of years gone public, a lot has been lost in terms of market cap over the last year or two. So much of the criticism around certainly the sports betting industry has been just the customer acquisition costs, just spending all this money to get new customers. It’s not a great business if you’re spending 900 Dollars to get new customers. And the lifetime value of that is less than that. New customers getting now. Now, I think that’s starting to shift. And my sense is that this cycle right now, you’ve got four or five. It’s like my old business, you know, the cable TV industry, right? Like if you were programing service and you didn’t have Comcast, you know, Spectrum Dish Network and you didn’t have distribution on the top five customers, then it was hard to run a business. I mean, this is no different, right? There’s still like a pretty dominant core five distributors of sports betting products that have 85% of the market share. And then you got another 50 that scramble around for the problems. So I think that what you’re going to continue to see just overall is just more consolidation, right? A streamlining of the cost structure of these businesses. I think some of the brands that have like omnichannel marketing opportunities, like like the MGM of the world. Right. Obviously have a lot of cash on their balance sheet. They’re going to do quite well. Right. And I think that with capital and, you know, and there’s some others out there like fanatics and what Rubin is trying to do right with the whole flywheel and Amazon for sports, like it’s very smart, well capitalized and it’s patient capital. I think there’s going to be a rationalization across the industry and, you know, you’re going to end up you’re going to look out five, eight years and you’re you’re looking at three or four or five big boys. [00:53:55][137.1]

Danny Moses: [00:53:55] Yeah. We were talking about on the show recently that the vice category, sports, gambling, cannabis. Right. Those are going to be tax revenue generators for states, local communities, whatever. It is what it is. And in terms of the economy, take one step back here. I guess you mentioned the beginning. There’s 31 states now and then, plus D.C., which have some form of sports gambling. People don’t realize you still don’t have California, right? It’s probably coming. Florida’s up in the air. Texas, who knows when, but it’ll probably come. I don’t think people realize. For the macro perspective, though, how large this can still grow. So maybe comment just on the regulatory front stuff that you’re seeing and so forth. [00:54:31][36.3]

Chris Bevilacqua: [00:54:31] Yeah. And I think you named obviously the three big states. You probably got them in the right order, but it still seems I mean, we’ll see what California’s got their vote coming up in November, whether one of those passes or not. Those two propositions, I believe, it seems to me inevitable, just based on the market forces and states needing more revenue, that it will happen, not a matter of if, it’s just a matter of when. So if you project out five years and you look at where we are with Tam now and where, you know, when you add that it’s certainly going upwards. And our sense is based on what we’re seeing just in terms of the popularity of betting, it’s an appealing product. And so I think it’s, you know, take your pick of where you see Tam, right? Five years out, 50, $60 billion. I’ve seen reports from all the analysts that’s all over the place, but they’re high numbers. And we think as a subset of that Tam, that in-play and micro betting is a multibillion dollar opportunity in and of itself. Right. It’s just more appealing to the casual fan I was talking about earlier. So I think you have that on the one side. And then you have like we were talking earlier about the media industry moving closer and closer to the wagering industry. And ESPN’s out there, everyone’s knows that. They’re talking about licensing their brand to be in front of a sportsbook, but they want to have a little bit of arm’s length in there. I mean, you know, they’re a big company with a lot of reach and some great marketing tools that again, will make it more accessible to the casual fan. You have all the other media companies that have lined up and partnered with gaming sportsbook companies. And so I think you’re going to see more and more of that. You’re going to see what really is going on broadly is the media industry is moving from a wholesale industry to a retail industry and it’s really driving the personalization of media. But sports, right? Ultimately, it may turn out, especially as these gaming companies are rolling out more and more products, not only sports betting products, but daily fantasy sports, casino, icasino, you have all your retail. It may turn out that sports ultimately becomes a gigantic marketing tool, ultimately to get to a icasino, because sports has not proven to be a high margin business because you’re paying fees to everybody. Right? The leagues and the data companies and all the other marketing that you have to do around it. But it obviously has huge attention. It’s like what it sports due to the cable industry 40 years ago, it built a cable industry and they built all these other businesses on top of it. So I think you’re ultimately seeing that sports could be just an incredibly valuable marketing tool to open up the world to the high margin icasino business. You know, just bringing that whole business online. And that’s where the real revenue is for the gaming companies. [00:57:11][159.7]

Guy Adami: [00:57:12] So here’s one for you. Chris and I have a bevy of questions, but I’ll ask this one first. Obviously, sports is the lens with which you look, but you think about what else you can get into, and I’m sure you’ve thought about it, but think about politics in this country and how effectively the bets people make on politics and how polls have been wrong for so long and people say why the pollsters so wrong? And I would submit the reasons why are I think people answer one way, but they pull the levers another way. I will tell you, when it comes to money, people put their money where their mouth is. So in some ways, if you were to get into politics, the data you would collect from that would be more valuable than any data, in my opinion, that’s out there right now. Can you speak to that? Is that a thought? [00:57:57][44.8]

Chris Bevilacqua: [00:57:57] One thing I always tell our team is we don’t want to be the jack of all trades and the master of none. We’ve built a really differentiated technology platform that we’re now growing. I mean, we haven’t even talked about our relationship with better. And Jake, Paul and Joey were there in the direct to consumer business and where and tech platform. And so it’s more than just offering our micro betting technology. But when you think about what our technology is, and I’ll give you a little piece of news, we recently got awarded our first patent, and in that patent it’s called a method patent with self-correcting matched state data. So what that means is that our platform automatically through the software recognizes when you have bad data input from the human being sitting in the stadium they put in, I was first in ten on the Jets 20, it should have been first and ten on the Titans 20. And when you make those kinds of errors, especially in a micro time frame, it shuts the market down. So you lose the opportunity to offer a wagering on that market where it will now we have a technology that self corrects bad data inputs and it’s actually usable beyond sports. So to go back to Guy’s question about politics, like a lot of the issue with what you were describing has to do with just bad data input because maybe it’s not bad, but well, I think you use the example that somebody is not really being honest about who their preferred politician is. Right? So you have to figure out a way and we’re a long way away from, you know, we’re concentrating on sports, but we do think that we could be in a position someday down the line where we take this technology and we use it in things like politics or we’re using things like music. Right. And other aspects of pop culture. [00:59:41][103.3]

Guy Adami: [00:59:42] No question about it. So the answer to my next question is going to be yes, and you’ve addressed it. But when you think about your company and the valuation associated with it, are you a technology company? Are you a gambling company or your media company? And the answer is all the above. And you get sort of that blended multiple that makes you, I would say, more valuable than most of the other competitors out there. [01:00:04][22.1]

Chris Bevilacqua: [01:00:04] Yeah, I think you’re hitting on a really important point, and I preach this to our team all the time. It’s like we are not a sports betting company. We are a technology company that sells our technology product to the sports betting industry. But we’re also a company that sells it to the media industry. Like if I look at the opportunity and I see the sports betting industry, let’s say it’s we look at it’s a $50 billion TAM opportunity and we’re going to look at how we get our little slice of that. But I also look at, okay, well, you’ve got this gigantic, massive sports media industry that’s a $300 billion tam, maybe even more than that when you start thinking more globally. And if we can help move the needle in terms of consumption and viewership just a little bit, what’s that worth in a business that’s arguably ten times the size of sports gambling? So I think that the opportunity as we build out our business like we’re not worried about know what’s our valuation today. And but we do think of ourselves as a technology company, first enterprise software that’s usable in many different forms. But the two primary ones we’re focused on now, right, are sports betting and media. [01:01:18][74.0]

Danny Moses: [01:01:19] So let’s take a step back, talk about the series C, which happened last fall, $30 million led by the Anti Fund, Jake Paul and his brother. You guys are doing something together with their better, better that you’re doing. You’re also getting deeper and deeper and DraftKings and so forth. Maybe talk about everything that’s going on strategically with you as we kick off this NFL football. [01:01:37][17.6]

Chris Bevilacqua: [01:01:37] Sure. Yeah. I mean, you just, you know, starting with Betr. I mean, that is a huge priority for the company. And obviously Jake and Anti Fund led our financing round but they also part of that deal was like a follow on partnership with them, a very broad commercial partnership where they are using our technology right to power the entire offering of Betr and a sports wagering product. So we’re doing essentially the front end all the way to the back and working with fans unite as the pen in the wallet. But ultimately, that’s our technology that’s powering there using in-play and micro betting as the centerpiece to the product, right? So we have a huge alignment on their success. On the other side of that, you have Betr and Jake are the media company. So they’re a media company combined with a technology platform that is moving into the sports wagering space. And we’re going to. We’ve already launched with them our free to play product. And so it’s a high priority for the company because what we’re really both trying to do is drive the acceptance and the visibility of just in play and micro betting. And Jake has a very loud microphone, right? He’s got 75 or 80 million followers that are loyal followers. I mean, as he said to me, when we’re doing the deal is like I’m going to be what Dave Portnoy is to Generation Y, I am Generation Z. He’s the voice for Generation Z. And those are all the future customers of gamification and in play and wagering. And so we have a huge opportunity, I think, to do something that’s really unique here. And that’s a, you know, like I said, a huge priority for the company. The other side of a company, it’s just our major priority is just getting distribution of our products across the customer base. And right now, yes, we have a fantastic relationship. Our partnership with DraftKings, there are about 25% market share we’re about to add. You’ll hear about this next week, the leading global sportsbook. So it’s a global deal and it’s very exciting. We’ve got a bunch of other smaller operators on Intralot, Betway, Golden Nugget. We’re very close to another large operator, which I think you’ll also hear about in the next 30 days or so. And so our primary focus not only is growing our current business with DraftKings because the product itself, like baseball we have out there right now, we’re doing high volume on baseball, high margin. It is driving real revenue. And obviously that’s good for us and our partners, including DraftKings, because the product is performing so well. And so we have now come into the market. We just started college football last weekend. We had our first ever million dollar volume of a single college football game on Monday. That was the Georgia Tech Clemson game, just one game. And there’s a lot more than we’re covering. We have a data collection and about 700 games were in the college. So we’re just now starting to drive our college football. And our NFL obviously starts tonight. [01:04:32][175.0]

Guy Adami: [01:04:33] Let’s go back to baseball for a second. I want to talk about the Yes network. But five years ago, networks were dancing around sports betting. I mean, Al Michaels is famous for his pirouettes around over and unders and and lines and football games and those types of things. But now they’ve fully embraced it. I envision a time and please correct me if I’m wrong, but you go to a Yankee game, you’re sitting in the seats, you look up at the scoreboard. It has the Simplebet lines up there. John Carlos Stanton to hit a home run in the fifth inning or those types of things. And what’s the next pitch? And is there an environment where it’s fully embraced by not only obviously your user base, but the franchises themselves? [01:05:17][43.4]

Chris Bevilacqua: [01:05:18] Oh, yeah, I think we’re already there. You just mentioned. Yes, we’ve had our deal with yes. Started with the Nets, I guess it was in February. So we only had a couple of weeks of the season in basketball, but we’ve been up pretty much all year on baseball and that’s in the Yes app. It’s a single screen experience where you’re actually watching the game in the app and our we offer the ability to bet on every single at bat as the game is going on in real time and it’s a free to play fan engagement. But the three inning contest, you win prizes and the users in there like right now looked at the dashboard this morning. The average user is betting 56 times a game. That’s real engagement. Like imagine doing that across the entire RSM ecosystem, across the entire national package on ESPN and Fox. Like what kind of viewer? Somebody is sitting there 56 times a game, so obviously they’re engaged with it and this is just version one of the product. Now, it’s not a direct deal with the Yankees, but they own the Yes network and so they’re very pleased with where we are. The other thing we did, Guy, was we did a POC back in July with AT&T, Pittsburgh, and what you’re going to start to see more and more of where they did this. Essentially a bet cast actually was the Yankees Pittsburgh game. If you remember, the Yankees were in Pittsburgh in July and it was the game. They won 16 to nothing, but they had a separate bet cast going on and it had an L bar, right. And the L bar had all these odds about what were the percentage chance of this particular outcome? And the announcers were talking about it and like, that’s what you’re going to start to see. When I mentioned earlier, like the customization, the personalization of media, the one I’m most interested in seeing, I’m sure we’re going to hear about it shortly is Sunday ticket. So Sunday ticket, when they finally do their deal, I’m sure what you’re going to see in there is some betting feed that allows for a Sunday ticket user to have like this customized watch and wager. So a single screen betting experience. We’ve got the video embedded within the actual betting experience. That’s where the whole industry is going. And then you have low latency video and so you remove any latency issues and that is the killer product. What we have on Yes is a version of that, but we deal with. Latency. But when you get into digital distribution and you can use low latency streaming video in this world of personalized media and like the leagues are very sensitive to, well, we don’t want to push gambling in front of the mass market. We only want people that want to do it. We’re going to walk before we run, and that’s where personalization comes in. [01:07:48][150.4]

Guy Adami: [01:07:48] So football, I think, is the perfect game for what you do. Just the cadence of the game lends itself. And to a certain extent that’s true in baseball. And if you think about what’s been happening in baseball, the big push to speed up the game, there’s going to be a push to slow down the game again, if you think about it, to give people time to make those between pitches betts. Is that something you think? Is that even something that’s discussed or my out of my mind? [01:08:15][26.2]

Chris Bevilacqua: [01:08:16] No, latency is an issue if you’re in a single screen, even a second screen experience. But now we have these matchday data products like we have a new product coming out called the Visualizer, which is essentially an animated version of what’s going on on the field. So in other words, you don’t need to be watching the screen. You can just be looking at your phone where you’re betting. You’ve seen the ESPN box score type thing where you can see the pitch coming in like those kinds of products will remove some of the latency issues, but it’s when the video gets to that same level where you can put it on one which the technology already exists is just a bunch of rights issues, which is why I say Sunday ticket is going to be like a real game changer when that stuff comes out. But, you know, listen, in baseball, every pitch is about 20 to 23 seconds. So we get our data from the stadium in under a second and then what we do is all under a half a second. So we’re about a second and a half behind what happens. So there really is essentially no latency. So what ends up happening is you’ve got essentially 20 seconds. If every pitch, every 23 seconds, let’s say it’s 2 seconds, you got 20 seconds to make a bet. That’s a pretty good user experience. Like I think Derrick Cole’s going to throw a fastball over 95 and a half miles an hour on this next pitch. I’ll bet you that. We can enable that. So the cadence of baseball, I think, based on our product, is probably the most attractive and NFL obviously has a much wider audience and it’s a national sport. And so there are 30 seconds between each play. A lot of people we see are making multiple bets on one play. Okay, I bet this is going to be a runner a pass, but now we’re offering player micros this season. So is this pass going to go to Saquon on the next or is it going to go to Slaten? Like you can make those bets on the same play in the same window. [01:10:00][104.4]

Danny Moses: [01:10:01] It’s interesting, the whole media convergence gambling, right? So I have Hulu and there’s a lot of latency, 25, 30 seconds. So if I have a gambling app open and I’m watching a game, I already know what’s going to happen before it hits the TV. That’s a problem for Hulu. It’s a problem for people that want to speed it up. And then I remember eight or ten years ago, maybe even longer, some going on in Europe. For a while there was a live tennis match in Australia. It was the other way latency. There was people making bets in the stadium in Australia. They were ahead by 20 seconds of what. So we’ve come full circle to the other way. But the sport I want to focus on, which I know we’ve talked about in the past off air is golf. And I know that you don’t have the data feed for that. It’s a very expensive database. I wonder if I could take one of your people with me for a weekend into my club and start making up and down bets out of the bunker. Gets my friends at 200 to 1 too, because that stuff goes on all the time. Joking, of course, but that stuff goes on all the time. But golf to me, is there any chance you guys can get into golf or is it just locked up by IMG and a couple of these other people that kind of own the data? [01:10:59][58.4]

Chris Bevilacqua: [01:11:00] Yeah. No, I that’s a good question. When we first built our products, right, we were focused on the U.S. market with U.S. sports. And so not surprisingly, we ended up with the five sports that we have. Right, which is NFL college football, NBA college basketball, Major League Baseball. That’s 90% of the handle. We could add golf and tennis and auto racing and cricket and all these other sports. And we wouldn’t even add up the other 10%. Right. So we tried to hunt the whales with our initial set of products. As we look out, as I mentioned, we have global distributors coming. We’re going to now want to start to move into more globally based sports, like tennis and like golf and like cricket. Obviously, soccer is big, but probably a tougher nut to crack because of our focus on micro. Soccer’s just not the type of sport that lends itself to that, but we think we have some interesting ideas around that. But on the golf front, to build any of these product, you need a vast amount of historical data, and then you need the low latency, high quality, very accurate, low latency in play, official data stream. In the case of golf, yeah, that’s IMG. And IMG believes that they’re going to build these products, you know, which is what everybody said when we started four years ago and nobody did it. So we went out and did it. Now we have good relationships with the data companies because when they go to the sportsbook operators, their deal is they get a percentage of the air well, they get a lot bigger percentage of GGR for in-play than they do for their traditional markets, the core markets. So like we’re the in play guys. So if our product gets broadly distributed, that’s great for the data companies because they get a higher percentage of the revenue from the sportsbooks. And so that’s sort of the same argument that we would make to IMG or others that have data to sports that we don’t currently have. [01:12:42][102.5]

Danny Moses: [01:12:43] Yeah, I would just say that on the golf, you can see how the technology, when you’re watching the actual round of golf going on is going to marry the gambling, the exact distance on a putt, whether approaches are how many greens they’re hitting all this up to me. It’s a dream from a gambling respect because the last four and a half hours, during the course of a day, you’re watching on TV, you got time between bets. So it’s just something I would love to totally. [01:13:03][20.6]

Chris Bevilacqua: [01:13:04] I mean, there’s roughly, what, 10,000 shots, you know, in a golf, right? Right. Exactly. And then there’s like multiple dozens of markets you can put on every shot. So that’s just a lot of opportunity. It’s ripe for innovation. [01:13:14][9.8]

Guy Adami: [01:13:15] Chris, it has been fascinating having you back with us. Thanks for your time. Again, the trajectory over the last 18 months has been astonishing. The crazy thing is you probably haven’t even started your growth phase yet. I mean, that’s probably ahead of you. So congratulations on what you’ve done. But more importantly, congratulations on what’s to come. [01:13:32][17.6]

Chris Bevilacqua: [01:13:33] I appreciate it. Thanks, guys. [01:13:34][1.1]

Danny Moses: [01:13:34] I can’t wait for the next update. [01:13:35][0.9]

Chris Bevilacqua: [01:13:36] Right. We’ll do it sooner than 18 months. [01:13:37][1.6]

Danny Moses: [01:13:38] I’ll make a bet on it. All right. Thanks, Chris. Thanks for coming on. [01:13:40][2.4]

Guy Adami: [01:13:41] 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. [01:14:05][23.5]

Dan Nathan: [01:14:06] 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. [01:14:06][0.0]


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