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On this episode of On The Tape Guy, Dan, and Danny discuss Danny attending Serena Williams’s US Open upset amid a sea of Wall Street “bro vests” (2:03), if September will be even uglier for the markets after a difficult August (5:24), warning signals from $HYG, $LQD, and the corporate bond market (12:36), the tumble in oil and gas prices (20:37), the impact of the surging U.S. dollar (26:20), the questionable health of U.S. consumers (34:25), and Danny’s ROTT on why Enron & Tesla could end up having similar fates (40:40). Later, Dan & Guy speak with FactSet CEO Phil Snow about the evolution of the financial data industry (51:44) FactSet’s growth strategy and biggest opportunities to expand its business (55:06), how it’s adapting to hybrid working (1:02:27), the war for talent (1:10:58), and how Phil is managing the challenging macro environment for businesses (1:13:04).
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Show Transcript:
Guy Adami: [00:00:28] CME Ad. [00:00:28][0.0]
Dan Nathan: [00:01:19] iConnections Ad. [00:01:19][0.0]
Guy Adami: [00:01:21] As I’ve mentioned a number of times, I started my career in May of 1986 at Drexel Burnham Lambert, 60 Broad Street, Lower Manhattan. One of the first terms I learned was something called cash and carry. That Danny Moses, as you know, is when you walk into a wholesaler, you give them cash, they give you goods and you walk out cash and carry. Why do I mention that? Because I feel vindicated. Vindicated? Neel Kashkari, the Fed governor from the wonderful state of Minnesota. The hubris of that man knows no boundaries. And as inflation was running rampant, he would come on and on and on and talk about transitory and how we got this under control. Let me read what he said after our on the tape podcast. By the way, you are listened to on the tape podcast. Dan Nathan, Danny Moses, by the way. Dan, we’re going to be joined by Phil Snow, the CEO of FactSet. Love that. Can’t wait. [00:02:23][61.9]
Dan Nathan: [00:02:23] Fine sponsor of our market calls. [00:02:26][3.2]
Guy Adami: [00:02:26] Fine sponsor of our market calls, which, by the way, Monday through Thursday, 1:00 Eastern Time. I’m sure the fans know that. But I digress for a second, just let me mention this. This was what came out of Neel Kashkari mouth last week, I’m quoting. I was actually happy to see how Chair Powell Jackson Hole speech was received. People now understand the seriousness of our commitment to getting inflation back down to 2%, quote, quote, unquote. Neel Kashkari. Johnson Huge. Johnson How are you Danny Moses? [00:03:05][38.6]
Danny Moses: [00:03:05] September morn made it. We’re in September. It feels great. [00:03:09][4.3]
Dan Nathan: [00:03:10] That wake me up on September ends. [00:03:11][1.3]
Danny Moses: [00:03:11] Doesn’t it? Doesn’t it feel great? [00:03:12][1.0]
Guy Adami: [00:03:12] I love Green Day. That’s my favorite album. American Idiot is one of the top five albums in the history of Rock. [00:03:18][5.8]
Dan Nathan: [00:03:19] I agree with that. [00:03:19][0.6]
Danny Moses: [00:03:19] All right. I got to start with this last night in Queens, Ode to Vince and Daniel here. Right. I know your nightmare probably. Guy. Whatever. What’s that? U.S. Open. Hold on. Okay. I’m sorry. U.S. Open across the way, literally. [00:03:30][10.4]
Guy Adami: [00:03:31] Shea Stadium. Love it. [00:03:32][0.9]
Danny Moses: [00:03:32] Citi Field. DeGrom is pitching, but Serena Williams is playing. My buddy Rosie takes me to the match last night and I’m a huge Serena fan. I have been for years. Love her, get an opportunity to see your play. You got Tiger Woods right there. Right there. So, okay. He was great. So intense focus. It was amazing night not a mass to be seen maybe want it over. Right so now for the first time I really felt last night people walking into Citi Field, people walking on, it felt normal again, right. To be in New York in the fall. And you know what else came out? The Wall Street douche bag vest. Oh, it was just cold enough to wear those vest. You know those vests I’m talking about. [00:04:05][33.0]
Guy Adami: [00:04:05] The bro vests. [00:04:07][1.8]
Dan Nathan: [00:04:08] The bro vest. [00:04:08][0.1]
Danny Moses: [00:04:08] There were like there were like I would not a ton, but enough to know they couldn’t wait to bring out the vest. [00:04:12][3.3]
Dan Nathan: [00:04:12] The movie guy that never seen the big short. Weren’t you? [00:04:15][2.8]
Danny Moses: [00:04:15] And you don’t wear that. [00:04:16][0.6]
Dan Nathan: [00:04:16] No. You guys were. [00:04:17][0.8]
Danny Moses: [00:04:17] Never. They did. They miscast. I’m not tonight. [00:04:19][2.1]
Guy Adami: [00:04:20] Can I Just do a PSA and I never watched it before. I want you to continue. If you are a young man between the ages of 18 and let’s say 35, if you work in our industry and if you’re one of those jackasses that’s walking around with one of those vest, I want you to reconsider every decision you ever made in your life anyway. Please continue Danny. [00:04:41][21.3]
Danny Moses: [00:04:42] So I started my gambling year off last night, so I’m on my way there. I’m like, You know what? I love Serena. I’m going to better. There are certain rules in gambling. When Serena Williams is an underdog, you better. It doesn’t mean you’re going to win, but it’s always a great bet. So I started thinking in my life whenever I made bets like that. 1998 Finals Bulls Jazz after game one. When the Bulls lost, Michael Jordan was an underdog. Wasn’t a lot, I think I bet 52 and $70 right now. So you always take Tiger Woods whenever he’s co-leading or leading, going to the fourth round of a golf tournament, you take him. Let me just give you these numbers. And when Tom Brady is an underdog, you take him. These are the gambling rules that you can put away. And I have to go with the stats, but these are rules. Hold on. Brady is an underdog, is 37 and 23 straight up. That’s in 60 games against the spread. He’s 41, 17 and two as an underdog. All right. Let me give you this. Tiger Woods, when he holds a lead or a share of the lead after round three, this was 2013. So he’s got 53 and four. And to the certain bets that you just make in life and if you do it so anyway so my gambling on next week we’re going to have Chris Bevilacqua on from simple bet and we’re going to start giving our previews and our picks. I’m fired up. I’m in the winners column. [00:05:52][70.2]
Dan Nathan: [00:05:52] I’m less fired up. All right. Let’s talk about this market here. So Guy Adami and I were on a call 1230. We do fast money calls. This is Thursday. We’re talking about. Okay, how’s the market setting up for our 5 p.m. show guy, Adami he’s nostradami. That’s what the kids call that. [00:06:08][15.5]
Guy Adami: [00:06:08] The kids. [00:06:08][0.1]
Dan Nathan: [00:06:09] He goes, if there was ever a day for this market to turn around, it was going to be today. And he gave a couple of reasons that I just got on and I just said, not happening. [00:06:16][7.6]
Guy Adami: [00:06:17] You @ me. [00:06:18][0.6]
Dan Nathan: [00:06:18] I did. I @ you. But I Earl and I just. Ed, given what’s going on in the cemetery to talk about that, given what’s going on in some of these, like SAS and software names, the devastation we’re seeing. The only way it can happen is if Apple and Microsoft lead the way and then maybe some, you know, the continued relative strength out of the banks. Well, that’s what’s happening. We’re into the close here on Thursday afternoon and we have a basically an unchanged market Apple doing that. So guy I mean, why were you thinking was it new money, new month, all that sort of stuff? We had a really bad month in August. [00:06:47][29.6]
Guy Adami: [00:06:48] No August was well, I think things shook out the way we thought they would. August was a difficult month, but it makes sense in terms of all the things we’ve been talking about. Why did I think the market would reverse today being Thursday? And again, I happen to think it’s probably be somewhat short lived. But the reason being just on a technical basis, the move that we saw from the June low to the recent high in the S&P, north of 4300 in the middle of August, this move to this 3950 ish level, which is effectively where we are, you know, I love my 50% retracement. It’s a 50% retracement. So it makes sense to pause here and maybe we will see a bounce early next week in a holiday shortened week. All that being said, don’t confuse the issue. The way Danny confused the issue last week, when EY from SoFi was here and he lost his mind like it was like an alien abduction. I don’t know what happened to you. I’m bullish. I’m finally you came to your senses mid podcast but I just want to be on record as saying I still think lower. I just think in the interim we could see a little bit of a bounce here. [00:07:55][66.8]
Danny Moses: [00:07:55] I listen going into August. I said August is going to be extremely volatile like we’ve seen in the previous decade. Various times we had almost a 10% drawdown at one point today from August 16th. Right. Dan, according to FactSet over there to today, at one point. [00:08:07][11.2]
Dan Nathan: [00:08:07] Or so, yes, it was 43, 25 to 3903. Right. [00:08:11][4.1]
Danny Moses: [00:08:11] That’s a big move, right? I mean, that’s so guy, to your point, new month, here’s what’s interesting, right? Rates are, by the way, it’s not just rates in the U.S. or that it is in Europe. It’s global. I mean, it’s rates are moving higher. So you think we have issues, knee jerk reaction to rates are moving higher. I’ve said all along, don’t confuse us with bullishness guy. If you can adapt to higher rates over a period of time, it’s a much, much healthier signal to the the economy is still growing. That’s what I’m it’s an indication of that now if we get towards 4% on the ten year we’re effed, if you go back and look historically when it’s gotten there, it’s been a big, big problem. Right. We are now reaching the levels we saw in June 2022, just a few months back on the ten year, three and a half. If you go back to 2011, I think it’s the last time we saw 4% on the ten year according to your FactSet machine Dan. [00:08:56][44.2]
Dan Nathan: [00:08:56] It is. I mean, they got what, three and a quarter back in 2018. What did the stock market do, guy, when when we hit that level? [00:09:01][5.2]
Guy Adami: [00:09:01] Well, if you people that enjoy history, remember that was the early days of this Fed chair, Jerome Powell. I think he was in office for a few months and he came out and said quite I would say, just in a glib way, we’re going to raise rates and we’re on autopilot in terms of reducing our balance sheet. And I had the pompoms out. I’m like, this is the first Fed chair that I can wrap my head around since Paul Volcker. The market proceeded to go down. Dan, since you asked 19.9% from Halloween boo. And so Christmas Eve and then the Trump administration browbeat him into submission, as did the market, and he reversed course. From that point on I have not been a fan. And you know what’s funny about that since you brought it up, Dan? I bet you if J.P. were here today, he’d be. What? You know what? Gee, Swizzle, you’re right. I succumb to the pressure. I admire you for pointing it out. Sorry. Thank you. [00:09:58][56.6]
Danny Moses: [00:09:59] The thing about behavioral finance is you try to overthink things and try to predict what’s going to happen based upon rate. This has just been a simple man’s market. If you approach it in a way that was just obvious, you’re making money right now. What do I mean? Bed, Bath and Beyond is going to give an investor update, which they did. Nobody could wait. Stock traded up to 15 ahead of our strategic announcement which are going to happen. Meanwhile the debt to 19 centers three terms of debt 19/10 2429. If you like the company, buy the debt because you know you’ll make a lot more money. Point is, it comes around, it goes in stock go straight down. That’s an obvious trade. Where are the professional investors? All these meme stock traders got what they wanted. They got rid of the short sellers, right? You got rid of what have we always said? Those are the natural buyers of some of these stocks. Yes, it’s so hard to borrow, but I’m not bullish, guy. I’m hopeful we’re cleaning things up. Here’s why. We are exactly. If feels this week felt so much like 2000 more than it has in any point to me in the last year that we’ve been that we’ve been talking about comparing 2000 because the bad names are going look at the rally today, the rally back in the market. A lot of those names aren’t coming back is what that’s what I keep saying. That’s what you want to see. In the end. I’m not going to go in meme stocks again, but this is how I use these things to tell. AMC an eight combined is now below 14. Back to something that’s a disaster. GameStop is going to report earnings next week. They’re gone. That’s what’s going to get drilled right in this bed, Bath and Beyond Ridiculousness. Where’s the S.E.C. for Ryan Cohen? I have no idea. Every day. You know, you got Gensler putting out some look what I’ve done. Look at my strategic plan for five years. Help people now. It’s ridiculous. [00:11:26][87.4]
Dan Nathan: [00:11:27] Well, it’s interesting. You know, we had Jeff Richard from GGV Capital on okay computer dropped Wednesday guy and I’ve had numerous conversations with Jeff over the last year or so he’s been on on the tape and okay computer a couple of times and it’s interesting, you know, he’s a very long duration private tech market investor. So he’s a VC, but he also has a tremendous command, I believe, over what’s going on in the public tech markets. And he and I were talking about some of the performance of some of these groups that have been hardest hit. We were talking about the IPO market. He had tweeted this earlier in the week, the number one IPO performer in the last five years, MongoDB, a $1.2 billion market cap at IPO up almost 1400 percent since 2017 when it IPO. And I think it’s really interesting and we were just talking about the performance of some of these kind of very high valuation names of late. Well, interesting today on Thursday, MongoDB is down 25%. Okta is down 35%. These are great companies. I don’t think that their deceleration that they just guided to is like on them. You know, Wall Street analysts get ahead of themselves. Investors get comfortable with valuations. They’re willing to pay for growth. But I think these are really important names. To your point, Danny, what you’re saying is I wouldn’t put this in a crap category. I’d put this in the really extended valuation category where investors lost their minds a bit about what they were willing to pay. And, you know, we’ve seen this now for 18, 19 months or so. The deceleration in some of the post-pandemic trends has been the thing that’s basically deflated large parts of the market and crypto and SPACs and meme and all that stuff. [00:12:59][92.1]
Danny Moses: [00:12:59] For those people out there that can run stock screens. I talked about this before or debt screens, I should say. Anything trading below $0.90 on the dollar in terms of somebody’s debt should be a red flag, massive red flag. We have gone through the greatest credit period in the history that we will see in our lifetimes. You cannot convince me otherwise the last 13 years. And that’s the part I keep harping on this burn back through the atmosphere or whatever you want to call it. We had it so good for so long. Not just investors, but consumers. Guess what? It’s over. Not saying that things are going to be horrible. I’m saying it’s a readjustment and that means corporations have to readjust their balance sheet. So in these plans that they had that they gave analysts, oh, are 2024, 25 were based upon either rates staying where they were for themselves run that screen and if you own any of those companies that trade below $0.90 honestly do either buy the debt if you truly like the company or sell the stock. Because I think that’s going to be the theme we’re going to see go into the fourth quarter next year. [00:13:53][53.7]
Guy Adami: [00:13:53] There’s a great scene in Moonraker, if you recall. [00:13:56][3.1]
Danny Moses: [00:13:57] James Bond. Roger Moore. [00:13:59][1.6]
Guy Adami: [00:13:59] Yes. Yes. Roger Moore was buying towards the end of the movie. You just mentioned reentry. They made a joke about what is he doing? He’s attempting reentry. I encourage [00:14:08][8.9]
Danny Moses: [00:14:08] Interest to find a title. [00:14:10][1.9]
Guy Adami: [00:14:10] No, no, I’m just saying. Yeah, yeah. And what you better hope happens here in terms of that reentry is those heat shields that are built to withstand the heat and help the spaceship come back down to earth, hold up. And the heat shields right now, Danny, are in the form of the HYG, which I pointed out a number of times. Yeah. See what I do? It’s amazing. [00:14:32][21.9]
Danny Moses: [00:14:32] We don’t need our factset computer [00:14:33][0.9]
Guy Adami: [00:14:34] I mean, it’s incredible. It’s all me. It’s all in my head up there. Now, the h y g bottom down around 71 and a half, 72 at a subsequent bounce to 80, as everybody seemed to think incorrectly that this Federal Reserve is going to pivot ports, whatever p word you want to throw out there. Now it’s back on its rear end, approaching those levels. I will tell you, and I think you would agree, Danny Moses, that credit is something we haven’t talked about nearly enough, and that’s coming to an AMC theater near you [00:15:03][28.8]
Dan Nathan: [00:15:03] So really clearly the HYG is the ETF that tracks this this high yield. Okay. So so, Danny, have we seen cracks in high yield other than just some of these indices of these bonds have have been they literally look like the chart of the S&P this year, don’t they? I mean [00:15:17][13.6]
Danny Moses: [00:15:18] Well, first of all, fixed income ETFs by definition I think are mistake you daily liquidity or hourly liquidity for something that has terms of ten, 20, 30 years makes no sense. You have to actually go into the HYG, look at all the components of it. And what you’ll notice is you’ll have ten or 20 really good names, right? Names that are, you know, trading 95, $0.98, maybe even higher. Right. And then you have all this shit, they can’t sell that stuff. So that’s just going to be you can’t move that. So now with flows going in and out of the HYG, you sell what you can and what you can is going to be some of the better stuff that’s going to be out there. I’m saying in general, looking at companies balance sheets, understanding where their debt is, trading, whatever machine you want to go look down on, I realize some people don’t have access to it can’t be that hard to find. Look it up and find it because it’s just again, I actually think the age of HYG can create actually a misperception in the market. [00:16:06][48.3]
Guy Adami: [00:16:06] I agree with that. The other thing I think you want to look at, if you’re so inclined, is the LQD, that is the iShares I box s investment grade corporate bond ETF, which as I look at it now trading at levels we haven’t seen Dan Nathan in the last 11 years. [00:16:24][18.0]
Dan Nathan: [00:16:26] You know it’s funny all this ishares this conversation because there are also HYG. Give us interest, give us a ring here. You guys could be a great sponsor. All right, Dana, you said one of the things that you thought were most interesting, the price action this week that reminded you most of the 2000 sort of action was just what happened in meme stocks and i know GameStop reports. Next next week should be great. Yeah. Another Ryan Cohen name. Let’s see how that thing go. Two things that happened. I just mentioned, you know, the Okta and the MongoDB. And I think this is significant because I think, you know, we’re seeing a valuation unwind guy you and I were talking about this a little earlier. These were stocks that were trading 25, 30 times sales basically, you know, very near their revenue growth. [00:17:04][38.3]
Guy Adami: [00:17:04] But great companies, I think people and I know you would say that I’m jumping a little here, but I want to make sure to amplify this. These are real companies with real revenues. The problem is the stock’s got way ahead of themselves and nothing the management team could do about that. But here we are now. [00:17:22][17.9]
Dan Nathan: [00:17:23] I think we’ll look back and we’ll say this was kind of the beginning of the end for the 15 plus multiple of sales for companies like that. Okay. The other one, I think this is really important is Nvidia. And this is, again, a company with a great management, great products. They’ve been gaining share against people that have been in the space for decades, that sort of thing. The stock was off to the races last year. It’s down about 60% on the year. Right now, it’s down at its lows today was down 11% on an export ban of chips to China. I think this is really important for a space that meant to be very cyclical. But here’s a stock Nvidia in particular that a year ago was going to be the next trillion dollar market cap company was trading at 25 times sales. Now it trades about 12 and a half times sales for a semiconductor company that’s still really expensive here. [00:18:11][48.2]
Danny Moses: [00:18:11] Yeah. Dan, people looking for an excuse to sell stocks now versus an excuse to buy who is the incremental buyer of anything? What was amazing during the drawdown these last few months before we had the spike back up in August was the amount of inflows that were still happening. A lot of ETFs were still getting inflows. You know, the queen was still getting inflows and so forth. Who is teh increamental those levels doesn’t mean it’s a bad company, just needs to be reset. So the point is you don’t need to own those companies because they’re not going up right now and in this type of environment. So you bring up a really good point. I just think that’s what they’re looking for is now every data point. I’ll tell you this, drop my son off at school last week showed me an app. He’s a sophomore At Wisconsin. [00:18:45][33.3]
Guy Adami: [00:18:45] Whiskey, by the way, enough to get off the rails here, which is my wants to do. How is their squad going to look this year? The University of Wisconsin, typically age. [00:18:54][9.5]
Danny Moses: [00:18:55] 7-5, 8-4 whatever. [00:18:55][0.1]
Guy Adami: [00:18:56] offensive line, university. [00:18:57][1.3]
Danny Moses: [00:18:59] Whatever. But let me try it. [00:19:00][1.0]
Guy Adami: [00:19:00] I’m sorry, did I say, see, I can so easily get him off his game. [00:19:03][3.0]
Danny Moses: [00:19:04] He says, Can I show you? I said, Sure, what is it? He goes, Just an app I made some money caddyying this summer and I put some money into the into the market. I go, what kind of I don’t know what he open? I look there’s three things that he owns two of my I’ve never even seen before his probably $80 in each hundred dollars in each. And then I go upstart upst. I go, So, Charlie, let me ask you a question. Are you long these? He says. He’s like, yeah, I bought it. I go, you don’t listen to the podcast, right? He goes, and I haven’t got around to it. I go, How did you find that stock? He goes, I was searching the Internet. It says some like most exciting stocks or something like that. I go, So, I mean, talk about a sign that you want to I mean, I love my kid I don’t what tree he came out of but you know he does look like me a little bit. [00:19:49][45.2]
Guy Adami: [00:19:49] You know what’s interesting. I know you want to listen. I think that’s a great story. You know, in The Wizard of Oz, which, by the way, it was like this week in 1939 that the movie came out. If you’re called Dan, I know you know this. The scarecrow was apparently the person that didn’t have a brain. Yeah, but when they went and they found themselves in that forest with all the trees, the apple trees, the way they got the apples is for the scarecrow to make fun of him. He had the idea that if I say your apples are no good, he knew intuitively that the trees would get pissed off and they would throw the apples at Dorothy. And so we actually had a brain. This is my point. As do you, Danny. [00:20:24][35.0]
Dan Nathan: [00:20:25] How confused was young Guy Adami sitting in that movie theater. And then they kind of midway through. [00:20:30][5.1]
Guy Adami: [00:20:30] When they went to color. [00:20:31][0.5]
Dan Nathan: [00:20:31] When they went to color. When it went to color because you’d never seen that before. What was that like? [00:20:34][2.7]
Guy Adami: [00:20:34] that was a mind. You know, I won’t use the word, but you can understand what I mean. I was a young person back then. I was probably 14 or 15, but it was something none of us had ever seen before anyway. Danny, please. [00:20:44][9.8]
Danny Moses: [00:20:44] So there’s a Wizard of Oz, Pink Floyd thing. You guys are aware of it. And by. [00:20:48][4.2]
Guy Adami: [00:20:49] The way, urban legend. [00:20:49][0.5]
Dan Nathan: [00:20:50] Urban legend, not urban. [00:20:51][1.1]
Danny Moses: [00:20:51] Legend. And I wasn’t even I was under the influence of anything when I did this. Okay. The third war of the MGM line in The Wizard of Oz, when that’s when. [00:20:58][7.4]
Guy Adami: [00:20:59] You start, you start. [00:20:59][0.8]
Danny Moses: [00:21:00] The dark side of the moon. I don’t care what Roger Waters or anyone says, they did that. And it’s just crazy. And I’ll tell you, it’s crazy when the song Money Comes On, that’s when it goes to color, right? You know, the whole thing when the monkeys are flying crazy, the Dorothy’s spinning up in the tornado. Run, run, run. It’s nuts. If you guys haven’t done that out there, I suggest you visit your nearest dispensary, go read the thing and do it. It’s unbelievable. [00:21:18][18.2]
Guy Adami: [00:21:18] But you have to start. Dark side of the moon and on the third roar. Know about? Of course. Come on. I mean, I was born at night. I wasn’t born last night. [00:21:26][8.0]
Dan Nathan: [00:21:27] Anyway, my favorite song on Dark Side of the Moon really quickly. [00:21:29][2.0]
Guy Adami: [00:21:31] Shine on you crazy diamond. It’s not even on the album, though. That’s the only Pink Floyd song. Literally, the only one I like. That’s the only Pink Floyd. Then we got this whole bit. All right. No, we’re not cutting anything. [00:21:44][13.1]
Guy Adami: [00:21:44] This is important stuff anyway. Danny, please continue. No. The fact that your son Googles exciting stocks and that can’t even understand that to me, that is clearly he’s not in the. That’s a message, though, as we leave Kansas and get it back to the real world. Energy is a story. It’s a story. I don’t I know. Listen, I understand that crude oil has gotten whacked, by the way, Dan Nathan, that’s a great call by you’ve been all over this crude has gotten whacked. Gasoline prices have come down every day for the last 55 or 60 days. But as I will tell you, and as Danny Moses knows what’s about to happen in Europe, what’s taking place right before our very eyes, I’ll use the word cataclysmic. It might sound hyperbolic, but it’s not, because that’s what’s happening. And the trickle down effects from that, Danny, are going to be huge. [00:22:30][45.8]
Danny Moses: [00:22:31] Yeah. I mean, so we’re exporting the most that we can. Now, the United States, which I think is 11% we can send out to Europe and Asia of LNG right out there, because to meet the demand since Putin’s playing around obviously with all their supply over there now it wasn’t just Germany now it’s not just Germany. It’s everywhere. The consumers getting destroyed in Europe, their bills are up tenfold from where they are. What’s interesting is because we’re shipping out so much, right? Because we still are under producing what we should. Our levels are now at historically low. If there’s a hurricane, God forbid, that comes. If it’s a very cold winter, God forbid it comes, it’s going to hit the U.S. consumer. So we’re on shaky ground. So what I think is happening on top of like just a demand destruction is if people believe that rationing will start to occur in Europe and they’re going to tell companies, you know, industrials, they can’t oil would come down from that. Right. You would obviously come down in anticipation of something like that. So that’s a whole nother macro issue. Trying to predict where oil is going and why it’s going there is just as hard as trying to trade this market. And I’ll just say that in general, the market’s a serpent right now. It’s really finding out whatever you read and you may have a great trade. If you don’t have long duration to stay in your trade with conviction, you’re going to lose money. [00:23:34][63.0]
Dan Nathan: [00:23:34] Back to this one. So are we saying that we’re starting to see demand destruction? Is that by just like weaker global growth? [00:23:40][6.4]
Guy Adami: [00:23:41] What’s interesting is no, we’re not actually. What’s I mean, I think people are anticipating demand destruction. And I totally get that. And you’ve been spot on, Dan, in terms of your thesis is going to be, but the statistics up till now don’t back that up. The price is lower in anticipation, but we’re still at pre-COVID levels for demand. Now, you’ll say that’s going to give up the ghost at some point. You’re probably going to be right. But we haven’t seen it yet, which is fascinating. [00:24:08][27.6]
Dan Nathan: [00:24:09] Yeah, no, it’s it’s interesting you mentioned the levels here because there were a lot of naysayers when crude was, you know, 85 bucks last fall. And then the Biden administration tapped the Strategic Petroleum Reserve. Crude went down to what I think the low sixties from the mid eighties. And then we kind of had this steady rise into Russia’s invasion of Ukraine. And then things went absolutely ballistic, went from 90 to 130 in a straight line, right as kind of tanks were rolling in Ukraine here, you know, came off of that. We had this move over the summer as I think there was anticipation of summer driving, all that sort of stuff. So here we are. We’re right back at $87. We’re at that really important like technical level here. And if you’re talking about who’s anticipating what it really feels like, crude traders are anticipating less demand, especially as we go into a season where it appears the world needs more energy to heat homes. [00:25:02][52.7]
Danny Moses: [00:25:02] That I agree with. And China, I think, is the other backdrop here. They’re still doing COVID lockdown things, right? Things are slowing there. Right. We know what’s happening, the real estate market there. So I think people are anticipating that where some of the demand destruction could come from. [00:25:15][12.7]
Dan Nathan: [00:25:15] Yeah, if we had Carter Braxton Wirth here, you remember back in April of 2020 when crude went negative, right? So we had what was the negative print? It got it. [00:25:22][6.8]
Guy Adami: [00:25:22] Went down to $39, I think at its lowest print. People said, oh, my God, look at this. We figured out our and what happened there. And I don’t want to get too in the weeds here, but effectively it was cheaper to sell front month crude at a negative price than it was to try to find a place to store because it was so strong. [00:25:41][18.2]
Dan Nathan: [00:25:41] So I’m trying to kind of bookend this a little bit. So now you think about all the demand for energy products. You have Elon Musk saying we need to increase output of fossil fuels. Okay, that happened this week. And I just want to draw a line from when we got through that negative print in April of 2020 and draw a line from May and attach it on your chart. Okay. To the lows last fall to where we are right now. This is a massive long term support trend line here. And I’m just thinking, we break this thing. You could see crude back towards those lows of late last year in the low sixties. [00:26:16][34.7]
Guy Adami: [00:26:16] I agree with that. And I don’t want to get off the china story yet. And I’m not one of these. I don’t even know what it means to have a tinfoil hat. I hear that it sounds. Do you have ever seen anybody with it? Maybe those guys in Devo had tinfoil. [00:26:27][11.2]
Dan Nathan: [00:26:28] This is the part of the show where we do like Dad. Joke after Dad joke. [00:26:31][2.7]
Guy Adami: [00:26:31] No, no, no, no. This is not a dad show. This. I actually have a point here. Yeah. Now, conspiracy theories aside, I happen to think, and I know Danny agrees with me on this one. These china lockdowns are to screw up the global economy, because I happen to believe the Chinese are willing to lose battle after battle to win the war. And if they could screw up the global economy, and if they’re willing to again lose battles to win war, they will emerge victorious. Am I out of my mind? Yes, I know I’m out of my mind. But when it comes to this, Danny Moses. Am I out of my mind? [00:27:01][30.6]
Danny Moses: [00:27:02] I think I think in general, they’re always playing the long game. Yes. They’re in 100 year trades. Yes. In four minute trade. Yes. But how we. [00:27:07][5.8]
Guy Adami: [00:27:08] So how can you defeat that enemy if your timeframe is 5 minutes and there’s this 50 years, the answer is you can’t. Anyway, back to you. [00:27:15][7.1]
Danny Moses: [00:27:15] Made in the USA, which I want to get into in a few minutes in terms. [00:27:18][2.6]
Dan Nathan: [00:27:18] It’s just pretty fascinating, though, in a world that’s moved on from this pandemic I mean, the fact that they’re locking down cities in September of 2022, you know what I mean? On the caseloads that they have of 20 million people locking. It seems ludicrous. Going back to crude for 1 second though. So I just talked about that long term trend line. Okay. Here’s another line that’s gone parabolic and that’s the U.S. dollar, the Dixie OC. And the last time the Dixie started to rally in a meaningful way. Okay, was back in 13, 14, 15 when we were ending XRP and in QE, all that sort of stuff. The dollar took off, rates were taking off, right? Remember the taper tantrum that the ten year got to 3% and equities went crazy. They sold off 10% or so. So think about the relationship between the dollar and crude. And then if you throw in the weakness in Europe as one of the reasons for the strength of the dollar versus the euro, but it’s also one of the reasons for the weakness in oil. You have a situation where that is setting up for a global recessionary sort of environment if the dollar is going to do what it’s doing to the globe. Right. And then crude is doing that. So I think that I think there’s something here that’s going on here. [00:28:29][70.8]
Danny Moses: [00:28:29] The pieces of the puzzle are starting to come together. Right. So you’re starting to see it now. What does that what’s a puzzle look like? The jigsaw is coming together. And I’ll tell you this, what’s so fascinating to me is energy still underway. And it will be throughout throughout this cycle. Right. Because people will go, I knew it. I shouldn’t have gone in there. These stocks at 85, at 80, at $75 oil, these stocks are still cheap. I’m not saying go out and run by energy, but it’s amazing. Kind of last in first, out last. And I knew it. You see that all those iterations going on right in oil. But I think in general, Dan, your point, which I think is a really good one, the pieces are starting to fall in line in what is an inverted yield curve. You can ignore it for a long period of time, but it’s telling you all this stuff is telling you something. [00:29:07][37.8]
Guy Adami: [00:29:07] And since we’re on the currency bandwagon here, Dan, I want to take you back seven years, almost to the day, if you will, if you want to go back in time with me. Dan, what happened in August of 2015? Let’s see if you remember. [00:29:20][12.8]
Dan Nathan: [00:29:21] So the Chinese, they devalued the yuan. [00:29:23][2.3]
Guy Adami: [00:29:24] They did, if you recall. Clearly you do because you just said it. And remember what subsequently happened to our equity markets almost? [00:29:30][6.3]
Dan Nathan: [00:29:30] Well, first of all, we were careening lower, but almost every risk asset on the planet started going haywire. If you think back to that period of time. And, you know, Danny, you were like harkening back to the the 2000s, the early 2000s during the post dot com malaise, if you will. I mean, you don’t have to go far to think about in that period after the financial crisis. It was a rolling financial crisis. It started here. It went through Europe for years. China was always still rebounding boom and bust. Right. You remember what? Remember the Shanghai well, maybe Nick can throw this in the show notes a chart of the Shanghai Composite. Remember what it did in 2015? It like doubled and then maybe doubled again and then it crashed, you know what I mean? So again, I just really feel like we’re seeing a lot of that sort of price action. And why are we seeing this? Because finally into Guy’s point, Fed Chair Powell tried to do it in 18, but it was a 20% selloff in the U.S. stock market. And then some global growth fears got him off track. And then now it’s the first time where they’re actually meaningfully raising and speaking hawkish to a point where, Danny, you’re losing your bet this year. Like I’m. [00:30:39][68.2]
Danny Moses: [00:30:39] But it’s I’ll. [00:30:39][0.5]
Dan Nathan: [00:30:40] Let you out for 45000. [00:30:40][0.6]
Danny Moses: [00:30:41] I love I love that you’re challenging me againand this football season starts keep quiet. I don’t think I’m necessarily dead yet. [00:30:46][5.1]
Dan Nathan: [00:30:47] You heard. You heard Mr. Right? Yeah, I can hear any bias there. They have no bet on rate cuts next year. [00:30:53][6.5]
Danny Moses: [00:30:53] Oh, and they’re always so guy the Fed they’re always so. [00:30:56][2.3]
Dan Nathan: [00:30:56] Okay, my point yeah. My point is, is that for the first time in a long time, investors believe that the Fed is going to stick. Yeah. To battling inflation and raising. [00:31:05][9.0]
Guy Adami: [00:31:05] Well I what I actually think that I’m actually being I wonder if any of those guys and gals listen to this podcast because the way they’re talking now leads me to believe that maybe they did get religion in the form of the on the tape podcast. And the reason by the way, that I’m. In August of 2015 when the Chinese devalued is because the markets went nuts. Now they’re trying to hold up their currency and on its own it’s getting to that magic level of seven. Seven is your line in the sand. You see it through seven. That’s the yuan. Ladies and gentlemen. And I got to tell you something. I don’t know who Katie is. I say it all the time, but she better bar the frickin door because things tend to get a little nuts anyway. Back to you, Danny Moses. [00:31:43][37.8]
Danny Moses: [00:31:44] All right, so I was talking to a friend of mine from college. Chaz Grossman. [00:31:46][2.2]
Guy Adami: [00:31:46] Chaz. [00:31:46][0.0]
Danny Moses: [00:31:47] He runs $130 million. You actually met him down at the golf tournament down in Naples last year? [00:31:52][4.8]
Guy Adami: [00:31:52] I remember. Okay. I remember those guys. It’s a. [00:31:54][2.4]
Danny Moses: [00:31:56] CME invitational . [00:31:56][0.0]
Dan Nathan: [00:31:58] Coming up. [00:31:58][0.0]
Danny Moses: [00:31:59] Yeah. So he runs up north 130 140 million in sales. He makes protective gear. So just think of like auto industry, steel industry, utilities, whatever. And he listen to our podcast, obviously, because he loves it, he loves you guys and he sends me a text, it goes dirty, which is his nickname for me. He won’t go into that. Your last couple of podcasts have been great, although you are more bearish than ever. I hear you and agree with you on most points, but I’d like to add a data point. We service a lot of different industries in our business is strong across the board. It doesn’t totally make sense to me either, but I think U.S. manufacturing infrastructure slash electric utilities are doing well because of this reshoring push that started with the pandemic. U.S. manufacturers and servicers spent years and years downsizing, and now they are basically sold out and everyone just continues to raise prices with barely any threat from imports. We just raised prices again and still no pushback like you would expect when the economy slows. Like I said, I agree with you on the ridiculousness amount of debt floating around and a crash seems imminent. The only thing I would say is it might take a while to trickle down to U.S. manufacturing, electrical contractors, etc. No drop in demand at all and everyone still has pricing power. My $0.02. I think those are the things that people are wrestling with in terms of understanding and that dynamic from China. That’s inflationary. Guy Right. And so those things are happening. If you want to push those prices onto people down the line, it will catch up with them. It will back up eventually. [00:33:18][78.9]
Guy Adami: [00:33:18] So there’s always a flip side to a coin. So you anecdotal. I’m going to anecdotal your ass, baby, if I may, please. So I got an email today. Today being Thursday 1:59 p.m.. This is from enterprise car sales attention guy like they called me they know my name we’ve reduced prices on many of our vehicles saying car sales now I loved Lou Manheim in Wall Street he was fantastic and. [00:33:42][24.2]
Danny Moses: [00:33:43] Shares in the abyss. [00:33:43][0.4]
Guy Adami: [00:33:44] Things directly but the Manheim index which is something that you follow religiously it’s it’s the other side of that coin so you’re going to start to see a crash, I think, in the whole used car. Now, I don’t know again what any of this means, but none of it’s good. None of it’s good. Now, you could say it’s helping if I get it, but that’s the other side of this mountain. What’s happening in this? Just again, anecdotally in the used car market. [00:34:08][24.1]
Danny Moses: [00:34:08] Finance rates are up, right? So, yes, so that’s it all has. This is why. Yes, this is how things work. This is how cycles work. Right? Yeah. [00:34:15][6.7]
Dan Nathan: [00:34:15] But you guys have seen all the math like. Right. And we’re not supposed to have a whole heck of a lot of math. [00:34:19][4.1]
Guy Adami: [00:34:19] You know, I was good at the math guy. [00:34:21][2.0]
Dan Nathan: [00:34:22] But you’ve seen, you know, like with rates where they are, where the mortgage rates are just rates for buying a car. That’s that whatever. I mean, that’s just like literally chopping into disposable income that people have. I think the other point about the dollar here is that any guidance that companies gave for Q3, right, or for the balance of the year, the dollar is higher now if you’re a U.S. multinational. Right. And so you have this wage pressure, you have all these inputs as it relates to energy and shipping and all that sort of stuff, and then you have a higher dollar. And so ultimately and this goes back to Microsoft with a couple of weeks left in their calendar, Q2 when they preannounced because of the dollar, it almost feels like Q3 earnings when we start to get in mid to late October are going to be the thing that finally causes S&P earnings to come down in meaningfully because these companies have been trying to kind of pass through these cost increases of these price increases to consumers or to enterprises that they serve. But like that can only go for so long. [00:35:19][56.9]
Guy Adami: [00:35:20] Danny Moses gave us an anecdotal he read Grossi what you guys call them growing up. Jazz. Jazz, yeah. Cello. That jazz. Yes. That’s a good name. [00:35:28][8.0]
Danny Moses: [00:35:28] I did highlight he blocked for OJ McDuffie in high school and stops Yeah he was his fullback anyway. [00:35:33][4.6]
Guy Adami: [00:35:33] OJ McDuffie from Penn State. [00:35:35][1.8]
Danny Moses: [00:35:35] Yes. That ended up going to Miami definitely lions. Yeah. Anyway good by God gave me anyway. [00:35:40][4.9]
Guy Adami: [00:35:41] Yeah. Then I anecdotal to him back without you even realizing it Dan Nathan, you have an anecdotal as well. It comes in the form of interactive brokers. Now I want you to sort of throw it out there because this speaks to what I’ve been saying for a while. This whole consumer balance sheet is all great and all the state of the US consumer, horse hockey, horse hockey. So please tell me what you’re seeing and I’ll explain to you. [00:36:07][26.3]
Dan Nathan: [00:36:07] What I think. It’s all because I saw the headline come across my machine. Okay. It was that interactive brokers August ending client equity down 15%. No idea. Again, we’re not trying to do a whole heck of a lot of math. Fewer people. I have no idea what that calculation is. But if you think about it, if it’s as simple as either losses of client assets because they’ve been exposed to, you know, the stock market or whatever else part of it or taking money out because bingo, they need to figure out a bingo, a mortgage or a car loan or this and that, whatever. But I was saying purely anecdotally, again, it’s like put that together with what we’re seeing in the housing market. Okay? Houses are not liquid assets, but people feel wealthy when they keep reading about their Zillow score or this that or whatever their neighbor selling their house for this, that or whatever. That compounding negative wealth effect of all of this happening is the thing I think that ultimately weighs on the consumer, you know, as we get into Q4. [00:37:00][52.7]
Guy Adami: [00:37:00] Yeah, and we mentioned it last week, but it’s worth mentioning again, 20 million households, not people, 20 million households in the United States are having difficulties paying their utility bill. That ain’t getting better anytime soon. And it’s not all doom and gloom. We’re just trying to put [00:37:16][15.7]
Dan Nathan: [00:37:16] Let;s Bring it back to the stock market for a second. [00:37:18][1.5]
Guy Adami: [00:37:18] Here. Well, that is part of the stock market mosaic. [00:37:20][1.8]
Dan Nathan: [00:37:21] No, I understand that. So here we are. We have an S&P that’s down 17% on the year. We have a NASDAQ 100. That’s down 25%. I think the S&P has lows was down 24% mid-June. The NASDAQ was down nearly 35%. The average bear market in a recession in the S&P is about 35%. This year in 2022, the S&P 500 has had four declines from relative highs of greater than 10%, averaging about 13%. So here we are. The S&P is down only 10% from those mid August levels here. So I guess the point is, let’s cut as of say, we’re in the last month of Q3 earnings season in Q2 was not bad as people thought. Okay, the market crescendoed lower into mid-June. We had that Fed meeting. For whatever reason, a lot of investors just decided that the Fed was going to pivot. Danny was making ill fated bets about that in 2022. Okay, so here we are now. So, so is this the quarter? And we actually had John Butters earnings in sub butters on the market call. He was saying that so far analysts have cut S&P earnings estimates 5.4% two months into Q3 for the quarter, which is above the five, ten and 15 year averages. So the point is analysts are starting to get in front of this. Okay. So do we have this sort of thing where the market investors realize that S&P earnings, which we have been saying all year long, are way too high given the environment we’re in. And that’s the thing that blasts us through the June lows. [00:38:55][94.1]
Danny Moses: [00:38:55] Here’s the thing. Things will shift to 2023, correct. And that will actually be worse, right, when you start to trade off for multiples. And the reason is, I just said earlier in the podcast, it’s 13 years of incredible times, right? It’s over. Right. So the readjustment rate. So PEs are too high for the market. Yes. A 3 to 4% change in earnings down. What does that coincide with a 3 to 4% drop in the S&P? No, it’s probably should be a lot more because this isn’t a quick cycle. This is a secular shift, I think, in how companies are going to have to readjust to access to capital. It’s happening left and right. And then the lag effect of what the housing market and Mike Cantro does a great job. He has a great piece on this. You follow him on. [00:39:34][39.0]
Dan Nathan: [00:39:35] Know we’re going to we’re going to have him on the pod. [00:39:36][1.1]
Danny Moses: [00:39:37] Great job the whole the housing market. You know, we talked about builders where those stocks have gone for what they’ve been down in the dumps all year. It’s a precursor for what’s going to happen in the economy. Because to your point, Dan, everything is kind of interlocked together. And so those lag effects are happening now. So the housing market coming down, it takes a while for that to build its way into the economy. So those things are all on the comedown. I don’t mean to be extremely bearish, but it’s about time people started cutting and it’s just not going to be a one time cut. It’s going to go on for several quarters and into 2020. [00:40:05][27.4]
Dan Nathan: [00:40:05] Guy And I’ve mentioned this on many occasions, you know, fast money, it’s more sound by the right. It’s felt very orderly this year. Guy and I just mentioned there’s been four declines of like 10% in short periods of time or more here. Right. And those periods don’t feel particularly orderly. But I guess the thing that you guys we all recall the bear market from the highs in March of 2000 to the lows in October of 2002, from the highs in November of 2007 to the lows in March, April of 2009. They felt excruciating because they were long. So really, if you think about the S&P 500 made an all time high on January 2nd of this year. It’s September 2nd as you’re listening to this right now. So, you know, does it feel horrible? Oh, the S&P is only down 17%. It was up almost 2x that, you know, last year with dividends and everything like that. So at the end of the day, I guess what I’m saying is, have we had the time equal to pain relative to the by the dip? Is that a calculation? Does that make any sense? [00:41:06][60.8]
Danny Moses: [00:41:06] TIME Why are you punish me. Go ahead. Is that. [00:41:10][3.9]
Guy Adami: [00:41:10] Pink Floyd? [00:41:11][0.2]
Danny Moses: [00:41:11] Now that’s Hootie and the Blowfish who fee. [00:41:13][1.8]
Guy Adami: [00:41:13] Hootie and the Blowfish [00:41:13][0.0]
Dan Nathan: [00:41:16] Hootie and the Blowfish. I think they’re really cool. Yeah. And July 21st, 1995, I saw them at the Greek Theater in Berkeley, California. [00:41:23][7.9]
Danny Moses: [00:41:24] That is cool. [00:41:25][0.3]
Dan Nathan: [00:41:25] Is it weird that I remember the day. [00:41:26][1.0]
Danny Moses: [00:41:27] July 21st, 1990, the wall at the wall for me in Berlin. Go ahead. Yeah, yeah. [00:41:30][3.6]
Guy Adami: [00:41:30] No. My 785 Spotify playlist, Hootie and the Blowfish does not appear. [00:41:36][5.7]
Danny Moses: [00:41:36] I Don’t Care. [00:41:37][0.2]
Guy Adami: [00:41:37] By the way, the song that would be appropriate for this conversation is, I think, one of the top five Rolling Stones songs of all time when the great Brian Jones was still alive, though, of course, B time is on my side. I encourage you friends to go to Blockbuster Tower Records and maybe buy that album and listen to it before our conversation with CEO of FactSet, Phil Snow. Dan Nathan We do something here on the on the tape podcast that people have come to sort of I think a lot of people might just fast forward right to it. I have no idea. You shouldn’t do that. You should listen to the clip. [00:42:05][28.1]
Dan Nathan: [00:42:05] It and we put it on the on the Twitter we clip it, we take Danny’s rock. Dannys rip off the tape [00:42:09][3.9]
Guy Adami: [00:42:10] That’s what we call it. So without further ado. The floor is yours [00:42:13][2.6]
Danny Moses: [00:42:14] this is this is this is another kind of anecdote kind of what I’m seeing out there. So I remember back in 2000 because I’ve been thinking a lot about 2000 and comparing it to Enron, it didn’t really crack until way after the if, you know, when the market actually started cracking, when it made size. Enron soon came out soon after that. But it was a while and it was a a name that people hid in because they wanted to believe everything that Enron was telling you. They wanted to believe the numbers. They wanted to believe that these guys were reinventing the wheel. Turns out there’s a lot of accounting tricks going on and no gains or capital. Yeah, a lot of Fugazi. So you look at the chart, it waited. So I’m thinking I put that tweet out a couple of weeks ago. Like, if this was a game of chess, first they’re are going to come for, you know, AMC, then they’re going to come for Bed, Bath Beyond, and then they’re going to take the pawns. And then they get the rook and bishop and they’re going to get the queen, Cathie Wood, and then they’ll eventually come for the king. What is it going to take to get to the king? So this is more of a behavioral finance aspect. So I looked back. So Enron was named America’s most innovative company by Fortune for six consecutive years, from 1996 to 2001. What did they do in 1999? They created Enron Online, which was a cool thing to do at the time because you could grow. That was electronic trading for commodities. And then who was their auditor, Arthur Andersen, who was complicit in everything that they were doing. But here’s what’s funny, guy. You’re going to love this. Do you know what ended up taking Enron down? Actually, we tried to redefine Blockbuster. [00:43:29][75.2]
Guy Adami: [00:43:30] Stop it [00:43:31][0.5]
Danny Moses: [00:43:31] Blockbuster. So when they signed a deal with Blockbuster, Enron partnered with Blockbuster in July 2000 for VOD, video on demand using broadband. Now, why do I bring that up? Because it made the stuff they wanted to keep coming up with things that would be innovative. And yes, that will take years and years. Right. We know where video on demand has come and it’s matured and it’s been great. That’s like to me, like full self-driving a little bit in terms of like just come up with things that can people believe in and buy into something where eventually, you know, they’re going. Basically realize it’s all bullshit. So what happens is the SEC charges Arthur Andersen, you know, for all the stuff going on, it turns out it was all smoke and mirrors. They kept reinventing these new products, ideas that didn’t come yet or weren’t represented or accounted for correctly on the balance sheet. So I’m not going to directly compare Enron to tests of what I am going to compare. Oh. [00:44:16][45.2]
Guy Adami: [00:44:16] I was waiting for that. It came within the 41 minute mark here we are [00:44:19][2.3]
Danny Moses: [00:44:21] Because who was the biggest short on Enron? It was Jim Chanos, right? He doesn’t do. [00:44:25][3.5]
Guy Adami: [00:44:25] I didn’t know that [00:44:26][0.3]
Danny Moses: [00:44:26] Yeah, that was his that was his thing. Right. And we’ve had Bethany McLean on this podcast before that. She wrote the book Smartest Guys in the Room. This document, all I’m saying is it was a culture type following. And eventually what took it to crack was blockbuster video on demand. Like, that’s not going to work. Right? And then so they had all these off balance sheet items anyway. So I’m not comparing the two businesses. What I am comparing is innovative company always on the come numbers or in the future. And eventually people lost patience and came after them. And we’ll see what happens. And it reminded me last thing I looked. So Pricewaterhouse is the auditor for Tesla. They’re also the order for Jp morgan. You remember a year ago Matt Levine wrote that piece about Jp morgan, says that Tesla owes them $162 million for warrants that were related to issue of debt back. Where is that like? So my point is that it says that the auditors conflicted because they have two different pricing mechanisms, one for their client and one for the bank. I’ll go with the one for the bank. That’s going to be correct anyway. Not so much a ROTT. But I just thinking about what names haven’t cracked yet that they may come for. It made me realize when Enron came later. [00:45:23][57.8]
Guy Adami: [00:45:24] Tesla is not traded. Well, since the split. I know we all know this just worth pointing out. So your TSL A Q or whatever that thing is, is working well, by the way, there are 24 initial moves in a game of chess. I can illustrate how that happens, but proper decorum prohibits me at this time. I know Dan is rolling his eyes. That’s number two. Number three. Great job by you, Danny Moses. It wasn’t a full ROTT, but it was sort of a it was a want people. [00:45:50][26.4]
Danny Moses: [00:45:50] Think right out of the box. [00:45:52][1.7]
Guy Adami: [00:45:53] This is the last week we have before the league where they play for pay starts. So I want you to get your handicapping hat on then. Nathan, this season I hope you win a game. There are 17 weeks. [00:46:04][11.6]
Danny Moses: [00:46:05] Let’s be very clear here. Danny started doing this. I just started glibly taking the other side of it, and he went on a 27-3 run. Unless something like that, you motivate me. I literally would come in here and he’d have three picks him, like I’ll take the other. I didn’t even know the lines. [00:46:19][14.4]
Guy Adami: [00:46:20] So I’m saying it’s a life lesson. Don’t take the other side and twist your arms. Don’t fight a land war in Asia. [00:46:25][5.1]
Danny Moses: [00:46:25] Well, here’s the other one. If you want to make this, bring it back to the markets. And again, I go back to how we started this podcast, and so we’re coming into the close on Thursday afternoon. So you guys are going to know what happened. By the time we get there, the markets were down and it looked pretty ugly at the lows today, the fourth or fifth consecutive day lower since Jackson Hole speech last Friday here. And so you don’t want to get caught in a land war in Asia and you also don’t want to press shorts into a market that’s down five days in a row where basically you’ve had all this time to digest all this stuff. You’re starting to see the sort of moves that two year breaking out above that three and a half percent. You see the 210 spread narrowing because the ten, for some reason already got on its horse. You know, where everybody is bearish, right? Like like like it’s just really hard to fight. And I think to your point about your buddy who calls you dirty, which I love, the dirty, dangerous chazz chazz chazz. I mean, again, you sounded really bearish on last week’s pod. Okay. But we’re a week later and the market’s down, what, five, 6%? And some of these things have absolutely been decimated. Your Best Buy has been cut in half. [00:47:28][62.8]
Danny Moses: [00:47:28] Right. Bed, Bath and beyond, whatever. Yeah. Okay. Yeah, it’s because. [00:47:31][2.6]
Danny Moses: [00:47:31] Blood Bath and Beyond Blood Bath. Yeah, but my point is, you’re starting to see some of that stuff, so it doesn’t mean you start pressing the hell out of stuff. [00:47:37][5.8]
Danny Moses: [00:47:38] No. Let me ask you guys the questions, because when this comes out, the jobs number will have will be coming out right now. Don’t even know what people want to see. I think it’s whatever it is is going to now be interpreted bad versus good. Yeah. So the mindset, how. [00:47:49][11.3]
Danny Moses: [00:47:49] Should data and the market sold off on decent data over the last year. [00:47:52][3.4]
Danny Moses: [00:47:52] So the expectations of 300,000, right. So I could tell you 400. That’s bad. 200. What it is. [00:47:58][5.5]
Danny Moses: [00:47:58] I think we can all agree with the unemployment rate at three and a half percent, which is back to the pre-pandemic lows, which were 40 year lows. If the unemployment rate ticks up to 4%. Okay. And then goes to 5%, you heard what some of these Fed guys were saying. They could see it north of 5%. That’s how they get the inflation battle done. That would be devastating for the economy. And I just don’t think that’s going to be good for this. [00:48:22][24.0]
Danny Moses: [00:48:22] Talk about time. You don’t want it to get to 5%. That will be a painful move but I think your point in and guys favorite band one direction obviously you guys love them though unemployment only has one direction to go which is higher. Right. You can’t I mean, could it go to 3.4, I guess maybe, which, you know, would make the Fed go even more, but it has one direction to go. So again, it then ended with this. All the pieces to the puzzle are starting to come into play, right? [00:48:44][22.2]
Danny Moses: [00:48:45] Yeah. But see the picture. Any time you’ve ever seen a meaningful lift in unemployment, the Fed has not been tightening policy. I mean, I think that’s the point that people thought. [00:48:54][9.4]
Danny Moses: [00:48:55] But Dan, let me counter for a second. And they’re wrong about everything. Their forecast there, they’re forecasting 4 to 4.2%, I think, next year. That is within their expectations. To your point that you’re making five is a whole nother discussion. 36 37 38 39. Right. People will be have poster boards out in the streets in front of the Fed. Look, look, it’s 3.8, you know, low 3.8 is still. Yes. The directions bad but it’s not so I don’t know. But it’s the it’s the direction of where this is going to go. I totally agree with you, but it’s within expectations of what. [00:49:23][28.1]
Danny Moses: [00:49:23] Let me tell you one other thing. So we’ve been talking about a lot of layoffs in the tech space. It started in private tech, but then we saw it kind of move into some of the biggest names, kind of at least slow hiring or starting to cut off. This week we saw snap cutting 20% of their workforce. So one of the things that I keep talking to VCs is that people, tech workers who’ve been laid off have not had a hard time finding new jobs. Well, that’s about to change, because if you have these en masse job cuts and then they start seeping into other parts of the economy, that’s when you start seeing some of these kind of higher wage earners not being able to fill those jobs. And that’s where you see a lot of this disposable income just kind of go woosh. [00:50:01][37.3]
Danny Moses: [00:50:01] Then the last thing which we get out of here that we should mention is Goldman Sachs is now going back to get your ass in the office. There’s no more remote. Why would you do something like that? Because they want to be ready, I think, to start to have an excuse to kind of downsize, maybe. I mean, that could be could be wrong on that. But to me, that means like, all right, it’s time to perform. [00:50:16][15.4]
Danny Moses: [00:50:17] Imagine when all of these people who basically been playing world for the last year or so, like half their day, get back in the office and have to make themselves look busy again. [00:50:26][9.2]
Danny Moses: [00:50:26] Five letter word f i already. Is that what you’re saying anyway? But I don’t know. Hopefully doesn’t get that bad. But anyway, I take us out of here. [00:50:33][6.8]
Guy Adami: [00:50:33] If you’re spending half your day playing wordle all you went to the wrong university. My sense is maybe you attended Syracuse, for example, or of fine institution like that. I’m kidding. It’s a joke. When we return, a conversation with Phil Snow, the CEO of FactSet. [00:50:50][16.4]
Danny Moses: [00:51:16] CME ad. iConnections ad. Masterworks ad. [00:52:59][102.9]
Guy Adami: [00:53:03] Bill Snow is the chief executive officer of FactSet, serving in that role since 2015. Phil began his career at FactSet back in 1996, climbing the ranks in various leadership roles over the years before he became CEO. So everyone’s heard of Carl Icahn. You’re setting this up. Why are you bringing up Carl Icahn on this interview? And I’m like, because what’s interesting is that I actually do my research, Stan, on the list of companies, Icahn Enterprises is a $16.7 billion company. FactSet is a $16.7 billion company. And it’s one of those companies that if you’re outside of our industry, you’ve probably never heard of. So, Phil, welcome to On the tape. And let’s talk about FactSet, but more importantly, let’s talk about your journey because you’ve been with the company for decades. [00:53:54][51.2]
Phil Snow: [00:53:55] Yeah, I started it with FactSet in 96 and was just a very fortunate to stumble across as I was looking for work after business school and back then we were probably 120 people, maybe crossed 50 million in revenues and I sort of learned I was 32 at the time. I learned that you sort of I liked technology. I’d got an interest in finance. I liked kind of client service type stuff and joined this company. My plan originally was just to stay two years and go get a job on the buy side or the sell side as a biotech analyst. But it clearly didn’t work out that way for lots of good reasons. [00:54:28][32.9]
Danny Moses: [00:54:28] It’s funny, Phil, you mentioned your journey started in 96 with FactSet. Mine started in 1997. It was the first financial data system that that I had. I just joined a hedge fund at that point. And it’s funny because I spent a lot of time figuring out this product here. And one of the things as a user now, more than two decades later, you recognize that there’s just so much there. Right. Let’s talk a little bit about the product roadmap, what you saw in the business. You obviously have had a lot of different roles over the last call it, 25 years or so. But this has been a business that’s been moving forward recently. You guys just made your largest acquisition to date. Talk to us a little bit about how the product has evolved, how the industry has evolved, because when you were on Fast Money with us earlier in the spring, you talked about a TAM, a total addressable market for your services. Over $30 billion. [00:55:21][52.9]
Phil Snow: [00:55:22] Yeah, maybe I’ll take a little trip down memory lane. I mean, I think what’s been brilliant about FactSet has been its business model and it hasn’t really changed over those four decades. So the founders of the company set up a platform company. At the time we were hosted in mainframes with really sort of all you can eat, compute and very good software on top of third party content and then very high touch level of service. So I think the company has its roots in data and technology and we’ve been through, I’d say, four or five iterations of being a platform company since then, but we’ve kind of stuck to our knitting and I think the subscription model and sort of how we work with our clients, it’s really served us well over the last 40 years. I mean, when we started out Dan, we were really just focused on equity and it was sort of historical looking, really good product for fundamental analysts, very good product for quants. But as the industry’s evolved, we’ve clearly evolved ourselves. We’re truly multi asset class now. We got more into fixed income and now we’re making a move into sort of private equity. We introduced a real time use service, all of these things that investment professionals need, but we kind of stuck to our roots as being a platform company and the integration of content being really what makes FactSet the most valuable thing is that catalog of data, whether it’s third party, our own data or our client data, that is the basis of everything we do. [00:56:46][83.7]
Guy Adami: [00:56:46] What I find remarkable is 90% retention rate on a customer base, approaching 200,000. It’s probably somewhere between 170,000 and 200,000 people. That’s pretty remarkable. I think you’re in 20 countries speak to that number, that 90%, because I got to believe that is not industry standard. [00:57:06][19.8]
Phil Snow: [00:57:07] Guy we’re a really sticky product. I think when people at ten start in the nineties using it right, they sort of fall in love with the product. And what we have is indispensable for financial professionals. So it’s well, I won’t say we’re recession proof, but we have the type of service that people are going to need no matter what the economy is. And once we get into a firm, we’re very, very good at cross-selling our products because we’ve developed all these other services over time. We’ve been able to stay in pretty much every large asset manager there is globally and continue to grow our business by just selling the more stuff. [00:57:40][33.4]
Danny Moses: [00:57:41] Yeah, you mentioned when you were on with us again back in fast money, the whole concept of land and expand and I think that’s what you’re kind of talking about. So you’re talking about three core businesses here, the workstation. That’s something that I obviously am very familiar with and Guy and myself. And again, we stare at it all day long and we do use the increased data sets in the research capabilities and all the estimates. And obviously, I think, you know, our relationship with you guys as it relates to sponsor of market call and we get to speak with some of your experts like John Butters and talk about his earnings insight. I think that’s what you’re talking about on the content front. So the workstation to a lot of our listeners, especially professionals, is very in tune with talk to us about, let’s say, the portfolio analytics or your API business. And that I think, you know, data management has become a huge focus of yours going forward. [00:58:30][49.0]
Phil Snow: [00:58:30] So we’re experts at managing data and a lot of what drove our growth, it sort of happened when I joined the company that I was sort of fortunate that we just started to release our portfolio analytics product. But a lot of our growth in the early 2000 was driven by pretty much every asset manager of any size uploading their holdings into FactSet. And so we have I think probably the most complete set of data there in the industry. And as we become more multiasset class and created sort of more solutions for risk performance reporting portfolio attribution, now we’re in trading. It really all started with portfolio attribution, but we’ve been able to on the buy side, particularly branch out and cover the vast majority of the workflow. Now for the buy side. And that’s, you know, the buy side has been under a lot of cost pressure. You know, that’s obvious, right, with the shift from active to passive. So they need efficient solutions to win in the marketplace essentially. [00:59:25][55.2]
Guy Adami: [00:59:26] Let’s talk about culture, because there’s definitely a esprit de corps there at FactSet, without question. You can just see it from the people that we have met. People feel part of something and they’re proud of where they work. They’re proud of factset they’re proud of what you’re doing. They’re proud of your vision. Can you speak to that? Because, you know, you reach a certain level. I mean, 10,000 people is not an insignificant amount of people to maintain a culture. How do you do that? [00:59:50][23.6]
Phil Snow: [00:59:50] I think a lot of it has to do with who we hire and our business model. But we hire a lot of really smart people, either in client service or engineering and other roles have evolved over time, but I think we all take a lot of pride in the product itself. So part of the secret sauce at FactSet is everybody really, I think, taking an interest in what our clients do and what our product does for them. And I think that sort of innate understanding allows us to build these really great relationships with people like, you, across different industries and sort of build that level of trust. And it is a collegial place. I’ve stayed here because of the people and the clients I work with. That’s really I love the product, but I get a lot of enjoyment out of who I work with on a daily basis. And I think that we were just very fortunate in that’s how the founders essentially conducted themselves and we’ve been able to keep it going. And you mentioned we’re in 20 countries, guy like it doesn’t matter if I’m in India or if I’m Japan, if I’m in Bulgaria, I feel that same facts at culture everywhere I go, which is a really cool feeling. [01:00:53][63.1]
Guy Adami: [01:00:54] It is a really cool feeling. But you know, I talked about 10,000 people, 20 countries, 170. So thousand customers. That number seems to grow. It does grow every year. I mean, the country number might be somewhat flat. How do you plan on growth strategy, I guess is my question in a nutshell. [01:01:09][15.8]
Phil Snow: [01:01:10] Yes. So we’ve done a very good job, particularly in the last year or two, of raising the growth of the buy side. So our biggest segment is institutional asset management. That’s probably been under the most cost pressure. And we’ve now been you know, we’ve been very successful in banking recently and these other client types that we’re going after now, private equity, venture capital funds, getting more into corporations. We’ve done very well within the wealth, very well in the wealth space. That’s a big greenfield opportunity for us. I think our growth strategy really is just really focused by firm type and think about like all of the data solutions and service that we can provide to clients. How do we tailor it for each of those firm types? And we’ve done that to some regard over our history, but we’ve really had a hyperfocus on that recently. I would say the other key to our growth has been the latest version of the platform. So you’re both very familiar with the workstation, but I think the world is moving in new ways. So we’ve now released programmatic access to the platform. So you can code in Python, you can go into you know, you can work in Jupyter Notebooks, you can really take our data and our APIs and our analytics in any way, shape or form. I think of it sort of like the Lego pieces before everything we built was very custom and it was hard to sort of unbundle that. But now that we’ve been able to go through that and make everything more standardized, there’s a lot more ways to kind of sell what we already have on the shelf. So that that’s a big piece of it. And I would say the last leg really is just making sure that that experience for each user is hyper personalized. So instead of you having to configure everything yourselves to exactly how you want to see it, we want to be able to lead you to things that we think you might want to look at without you having to search for them. So that’s there’s still a lot of work to do there, but I think that’s what everyone expects now in their daily lives with whatever. [01:03:00][110.2]
Danny Moses: [01:03:01] Yeah. So you mentioned the cost pressures on the buy side. And again, a lot of that tends to be a little cyclical, but you see this new opportunity in the wealth management space. Talk to us a little bit about that because Guy and I actually interact with a lot of people in that space. Those wealth managers are always looking for edge, right? And to think that they were using products that maybe their the organization that they’re affiliated with, they’re just kind of dialing it in and they’re trying to go for the lowest cost provider. What what do you think the value add is as you kind of go deeper into that space. [01:03:32][30.6]
Phil Snow: [01:03:32] Inn terms of who, you know, we’re here, we’re targeting we’re targeting, you know, a lot of the wealth advisors at the larger farms as well as family offices and beginning to get more into the areas. But I think what we can provide is, you know, we can make the wealth advisor look like a genius basically by taking everything that we’re seeing going on in the market, everything we see going on with the portfolios, and we can help organize that. We have something called Advisor Dashboard Now, which sits on all of our other stuff and it sort of suggests to the advisor sort of, okay, here are the ten individuals or families we think that you should be contacting for this reason. So that’s sort of this idea of next best action, as important as we could have always gone out. I mean, we had product for the wealth space, but we didn’t have the scale to address it before. So a lot of the growth you’ve seen in our firms as well as users has been because we have a web based product now and because we’re able to scale the product and do it efficiently. [01:04:28][56.0]
Guy Adami: [01:04:29] This seems like an extraordinarily important initiative, like one of those things that comes along every five or ten years that you really sort of wrap your head around, wrap your arms around and push forward. I mean, am I off base here or my spot on? [01:04:42][13.0]
Phil Snow: [01:04:42] Right. So it’s a great opportunity for us. I mean, I think the wealth space and we’re in actually a pretty narrow sliver of the wealth market. So similar to what I talked about with institutional asset management and owning more of the work flow. And I think we see that opportunity for us in the wealth space. So that’s something we’re very focused on in terms of how we do things that are naturally adjacent to what we already have. [01:05:02][20.0]
Danny Moses: [01:05:02] Going back to your start, so you started at FactSet at a time where, you know, we use terms like the buy side, you know, the firm that I started with in 1997, I remember the founder of that firm doing high fives when we just crossed $600 Million in Management. That firm now manages tens of billions of dollars. I would say, just to put that in context, the explosion of the business and you’ve also managed this company. We’ve grown it through these booms and bust cycles. You know, I mean, really, if you think of the boom into the dot and the long bust there and again, I’m sure there was a lot of pressure on your business, on your margins in the early 2000s. And then you had another big run up, different asset class this time. But again, large recession, deep stock market, depression or correction, if you will. And then here we are. Now, this one feels a little different. You know, the 2020 period, a black swan event, no one saw it coming. But what was interesting about this one is never, you know, were people more reliant on their technology tools, if you think about it, over the last couple of years. So how have you guys thought about your business in the context of a kind of hybrid workforce going forward? Because I’ll tell you, I worked on a trading desk on a bank, and the idea that any trader could be sitting at home in their apartment or their house up in the country and trading securities for a client was not something that ever was even conceivable for a whole host of other reasons. Now it seems to be it’s going to be part of the norm going forward. [01:06:33][90.1]
Phil Snow: [01:06:33] It is going to be part of the norm. I’m very pleased with how we performed over the last two years and a little surprised, frankly, by how quickly we were able to transition and very encouraged by that our clients also. So we’re very fortunate in ourselves and our clients were able to adapt in this way. But I do think it’s helped us be more efficient and I do think that it’s helped us. There have been clear pressures on the talent just because of all the hiring that’s been going on and people competing for talent. But I think in the end it’s going to be a good thing that there are more places we can hire talent for FactSet and we can construct teams in new ways so that teams aren’t going to be tied to geography anymore. They’re going to be tied to what they’re able to do. You could almost gamify putting together a team in terms of the, you know, the attributes of the particular people that you need. And our employees are, I think, very, very excited, I think, by sort of the new balance they have. You know, I’ve told people I want to see people in the office up to two days a week. That’s hybrid. But we’re not being real strict about enforcing it yet because I don’t think any of us really know yet exactly what the right answer is. So I see stuff in the news now about firms that are like requiring people to come in and the rebellion that’s happening. [01:07:45][71.8]
Danny Moses: [01:07:45] Well, Guy has been trying to quiet quit from being my podcast partner now for a few months and I’m really at wit’s end about it, guys. So we’ve got to figure that out. And, you know, and I did something that guy would I would normally Phil remind me that that two part questions. Work well in podcasting, and I did that to you. So I started out by saying that, you know, the fun that I worked at, it was 600 million and now it’s tens of billions. I’m no longer they’re there. So they have all done really well. But talk to us a little bit about like, you know, your vision. Back then, you were probably primarily focused on large institutional firms. But this explosion of the buy side that we’ve saw, you know, multi Strat funds, you’re seeing it in private equity, you’re seeing it in VC now, you know, discuss a little bit about how are those complementary sort of businesses, you know what I mean? Over time. I’m just curious how you guys think about that DC data set versus a public markets data set and how you kind of sell services into those end markets. [01:08:45][60.2]
Phil Snow: [01:08:46] We’re having great success and, you know, private equity and venture capital, but it’s a it’s a very small part of our business today, but it’s one of the fastest growing pieces. So we’re investing quite heavily in data there and working on partnerships to sort of build up the data we need to tie it together and create the analytics. So I think there’s a ton of runway there, but there’s no doubt that to be successful you’ve got to be a multi asset class product now and you’ve got to be able to serve those large institutions that have the efficiency to do everything. And then you’ve got to be able to serve the boutique firms that are sort of really great at getting Alpha in one particular area. The interesting part of the bell curve is the middle of right. So those managers that don’t have the scale that are trying to do like two or three things, we can help them too. But I think that’s the part of the industry that I look at and think about being under real pressure. And that’s why you’re seeing, I think, some of the consolidation that we’ve seen. [01:09:39][52.9]
Guy Adami: [01:09:39] What I think is important is, is knowing what you’re good at, more important is knowing what you’re not. And for me, that’s a laundry list. But I bring that up in the context of and I know you probably have conversations internally, retail, there’s always going to be the conversation. Should we go down that route? You’ve decided not to, but I’m just curious as to the thought process around it, because it’s probably the right strategy. [01:10:02][22.2]
Phil Snow: [01:10:02] I wouldn’t rule it out like somewhere way down the road, but we’re not focused on it and I think that’s probably a different model. We need even more scale, but as we transform our platform, I don’t think that that’s impossible to think about. It just seems like a natural progression from where we are today, but it’s certainly not, you know, we’re not thinking like Robinhood type stuff. [01:10:26][23.3]
Danny Moses: [01:10:27] Yeah. No, I mean, you know, it’s a good point. And I actually remember when I first met you, Phil, a couple of years ago, I saw you speak in an industry conference. And I think I asked you that question at the time. And you gave you know, at the time, I think in 2021, there was just mania is going around around SPACs, around crypto. And I guess at the end of the day you can still use a FactSet system or workstation, the content that’s created to help you evaluate those. And what was going on at the time is that institutions were very much focused on those products that were primarily, in my opinion, being driven by retail interest. But it doesn’t mean that it’s a good business line to go down. And you could just look at all the crypto stuff that was very retail focused, I think, over the last couple of years. Or you just mentioned Robinhood. I mean, listen, you know, here’s a platform that was supposed to democratize access to financial markets. So I guess the point is there’s plenty of pitfalls chasing the shiny object, too, at each different cycle. [01:11:23][56.5]
Phil Snow: [01:11:24] Yeah, there’s so much I mean, that 30 billion that you mentioned guy in terms of market share, right. There’s still so much wood for us to shop there. It just seems from a risk reward standpoint that that’s the best thing for us to focus on in the short term. [01:11:35][11.3]
Guy Adami: [01:11:36] It’s interesting, you know, I know internally have a lot of conversations about things. Growth is obviously important, but media is something that you were, I don’t want to say reluctant to do. That’s not the right word. But is this not something you really focused on? Do you think it’s important not only to have a good story, which you clearly do, but be able to tell a good story, which I think it’s something you’re clearly, I think, embracing now? [01:12:00][24.1]
Phil Snow: [01:12:00] Yeah, that is importance. I do think that we are not a well understood story, particularly outside of people that have not used our product. And I do think there’s a great opportunity there for us to show or talk about how we’re different than the main competitors in our space. So we have not spent a large percentage of our revenues on marketing our brand. That’s been not a priority for the company. But I think now at the scale that we’re at and what we’ve been able to do in terms of our strategy and the investment we’ve made, I think we’re kind of at the cusp of something interesting, and I would like to figure that out. So maybe I’ll turn it around and ask you, like if you were if you were me, like, you know, what do you think? And you know our space well, you know who the competitors are and who our clients are. What what do you think would resonate? It’ll be worth the investment. [01:12:48][48.0]
Guy Adami: [01:12:49] No, I think that’s a listen. I’m glad you asked that question. I’m glad this is a conversation because something I’ve said and I’m not suggesting I’m right, but I brought it up a number of times, I think ten or 15 years ago. I don’t think it necessarily mattered. I think the. Worlds change extraordinarily quickly. And I would submit, I think one of the reasons a company like JPMorgan gets the premium valuation that they get is because Jamie Dimon is able to tell the story in an intelligent way that people can synthesize and understand. And I do think there’s a value in that. And I think it manifests itself in your valuation and in your market cap and in all those different things. So I think as much as it shouldn’t necessarily be important, I think it is important to be able to get out there, have your face, your face becomes associated with the brand. People get to know that. And over time I think you’re rewarded for it. And again, that’s my opinion, not suggesting I’m right, but just anecdotally, that’s what I’ve sort of seen. Phil. [01:13:45][56.3]
Phil Snow: [01:13:46] That’s helpful. [01:13:46][0.2]
Danny Moses: [01:13:47] Yeah. No, and I would add that it’s interesting when you come on CNBC, a lot of viewers are going to be very familiar with your products. They hear people like Guy and me say the FactSet estimate here or, you know, I’m looking at street accounts here or, you know, like, you know, so so again, I mean, I think that that audience is very familiar with it. I think the flip side of that is that, you know, retail, which we just talked about, they’re looking for great stories to invest in. Right. Things that they can come across by their own right. And I think being able to articulate what you do and how it’s unique is really important. And I know that you came on with us and you got to ask this question about your premium valuation. Will oftentimes in China I mean times gave you said this Starbucks deserves this premium valuation because of this it’s just a foregone conclusion. Great management, great product, great market share, great growth perspective. And so lean into that sometimes is kind of what we would say. Tell the story. Let people who don’t use your products understand why it is a dominant platform within your industry. [01:14:49][61.6]
Phil Snow: [01:14:49] Yeah. One of the other things that I think makes it even more important now is the war out there for talent or the competition for talent. So people want to work at companies they believe in, right, or they feel good about. And that might be more true now than it was ten or 20 years ago. [01:15:04][14.2]
Guy Adami: [01:15:04] Well, let’s talk about that. I’m curious as to how you do recruit you recruiting on college campuses. Are you looking for people that have established themselves? I mean, I’m sure it’s some amalgam of those things. And I know diversity, equity and inclusion is really important. On your website, there’s a space that talks about exactly that, but you can talk about how you’re finding that talent because to your point, it is becoming more and more difficult to find the best talent. [01:15:27][23.6]
Phil Snow: [01:15:28] Yeah, we’re looking in new places. I mean, historically it was just out really right out of school from a certain set of universities. And as we’ve gotten bigger, like you have to hire in laterally for different roles. You know, something really interesting we’re doing now is really not requiring four year degrees for a lot of our jobs. And thinking about like, how can we get a diverse pipeline of talent from community colleges, for example? So we’re working closely with Norwalk Community College in Connecticut. We just did a pilot with two engineers that don’t have four years degrees that came in. They both did brilliantly, and one of them is going to come back, you know, for an internship. And we hope that he ends up working for us as an engineer. But companies are going to have to start thinking this way. And particularly if you want to develop a diverse pipeline of talent, I think you have to start thinking about community colleges. You have to start thinking about high schools. I mean, we’re even considering that, but you’ve got to build it up over time. So we’ve got a lot of irons in the fire there and I think a lot of them are going to pay off. [01:16:26][58.6]
Danny Moses: [01:16:27] So Phil, we’d be remiss to have a CEO of a company of your size on our podcast and not kind of ask some some questions about the macro environment in general. What are some of the things that kind of keep you up at night as a steward of the of the brand of all of these employees that you have, of all these customers that you guys wake up every day and know that you have to do a great job for, you know, in this environment. Again, we know that we just got through this kind of, you know, two and a half year period, which again, was a bit of a black swan, but kind of managing it on the way out. It seems like in Guy and I say this, I feel like every day it’s about as confusing of a macro environment that we can remember in our careers and mine. And 25 years, guys, about 45 years, talk to us a little bit about what kind of keeps you up at night and as a CEO of FactSet, well. [01:17:16][49.1]
Phil Snow: [01:17:17] There’s only so much I can control. The management team can. And we we know we’re confident that we can manage through big corrections in the market. We did it when the dot com bubble burst and we did it when the financial crisis hit, you know, a little over ten years ago. And I think we’re even better positioned today, if anything like that happened. It doesn’t feel as bad to me, at least for our business or our clients this time as it did back then. I don’t you know, maybe it ends up being that way, but I think our business model and you know how we work, you know, I’m confident we’ll be able to manage through it the majority of our costs of people. And, you know, we can always it doesn’t mean we have to have layoffs, but we can definitely modulate our hiring based on how things are going on in the. The market. So I try not to get too distracted by that honestly, and just work on what’s in front of us. [01:18:07][49.9]
Guy Adami: [01:18:07] So I would submit and again, I’m first of all, Dan said 45 years just so we understand each other felt that would meant I started working on I was 13 years old, which I did, by the way, out of necessity, but not in our industry, number one. So let’s just clarify, what. [01:18:21][13.8]
Phil Snow: [01:18:21] Was your first job Guy?. [01:18:22][0.7]
Guy Adami: [01:18:22] I’ll tell you what, my first job, I worked at Carvel. I mean, not the boy that complete. You know what idea? But I completely digress. But I would submit that as volatility goes up as measured by the VIX. My sense is your engagement probably goes up and you probably see that anecdotally in some of the metrics you use. Can you speak to that? [01:18:42][20.0]
Phil Snow: [01:18:43] Yeah, it certainly does. So it’s a good disruption is a good time for active management. And even though we, you know, we’ve we’ve been able to kind of solve for the shift to passive it’s certainly our product is very is very geared towards active managers so it doesn’t hurt us if budgets get really kind of slashed, obviously that’s going to have some sort of an effect. But I always took the approach as a salesperson of going into my client during a period like this and being proactive and saying, Listen, I know you’re under pressure, let’s sit down, be more open about what you’re dealing with. And we can we can create a win win here. So if you’re willing to kind of open your books and show me what other stuff you’re getting, I can tell you how FactSet can solve problems for you. So very often periods like this force force firms into making tough decisions or things that if times were good, they wouldn’t need to do so that that’s worked well for us. [01:19:35][52.8]
Guy Adami: [01:19:36] Well, we started this by talking about how, you know, how long you’ve been with the company. And my sense is and please correct me if I’m wrong, but you seem about as excited today as you probably were when you started. So that speaks to somebody that really has a vision for the company is not going anywhere any time soon. Can you talk about that quickly? [01:19:54][17.8]
Phil Snow: [01:19:54] Yeah, I’m so happy. You know, like two or three years ago, we made a tough decision. We took our margins back. You know, it affected our earnings growth, which had been, you know, we’d had quarters and quarters of 10% growth. But I just felt like we had to make a big enough bet on our own digital transformation to get our top line growth back up again. And, you know, as of the end of last quarter, we were growing, I think around 10% organic growth. So that was material acceleration from even 12 months ago. So I think there’s a great level of excitement about the company, about the product we have, the amount of stuff our salespeople have to go out there to market a lot of pride in our culture and how we’ve been able to navigate the last few years. So we have a lot to be proud of and excited about as a company. And I think we’re in we’re in a great position moving forward. So that’s certainly a good feeling. And on top of that, I feel like I’ve got an excellent management team. So a team, you know, that really works well together. We’re not siloed, it’s not a particularly political organization, so it’s just fun to come to work every day, no question. [01:20:53][59.4]
Guy Adami: [01:20:54] And I will say on behalf of Dan and myself with thrilled with the partnership we have with fact that we we are indebted to you for having the trust in us to be stewards of your brand because we feel as if we are. So. Phil, thank you for joining us here on the tape any time. [01:21:09][15.6]
Phil Snow: [01:21:10] Thank you. Thanks, Guy. Thanks, Dan. [01:21:11][1.2]
Guy Adami: [01:21:12] 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. [01:21:36][23.5]
Dan Nathan: [01:21:37] 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. [01:21:37][0.0]
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