September Morn and a Conversation with FactSet CEO Phil Snow

Bullish Studio

Episode Description: Guy, Dan, and Danny discuss Danny attending Serena Williams’s US Open upset amid a sea of Wall Street “bro vests” (3:03), if September will be even uglier for the markets after a difficult August (6:24), warning signals from $HYG, $LQD, and the corporate bond market (13:36), the tumble in oil and gas prices (21:37), the impact of the surging U.S. dollar (27:20), the questionable health of U.S. consumers (35:25), and Danny’s ROTT on why Enron & Tesla could end up having similar fates (41:40). Later, Dan & Guy speak with FactSet CEO Phil Snow about the evolution of the financial data industry (54:14) FactSet’s growth strategy and biggest opportunities to expand its business (55:06), how it’s adapting to hybrid working (1:04:57), the war for talent (1:13:28), and how Phil is managing the challenging macro environment for businesses (1:15:34).

Transcript

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00:01:20 As I've mentioned a number of times,

00:01:23 I started my career in May of 1986

00:01:26 at Drexel Burnham Lambert,

00:01:29 60 Broad Street, Lower Manhattan.

00:01:31 One of the first terms I learned

00:01:34 was something called cash and carry.

00:01:37 That, Danny Moses, as you know,

00:01:38 is when you walk into a wholesaler,

00:01:41 you give them cash, they give you goods,

00:01:44 and you walk out cash and carry.

00:01:46 Why do I mention that?

00:01:48 Because I feel vindicated, vindicated.

00:01:52 Neil Cash Carry, the Fed governor

00:01:55 from the wonderful state of Minnesota,

00:01:57 the hubris of that man knows no boundaries.

00:02:01 And as inflation was running rampant,

00:02:03 he would come on and on and on

00:02:05 and talk about transitory and how we got this under control.

00:02:08 Let me read what he said after our "On the Tape" podcast.

00:02:13 By the way, you are listening to "On the Tape" podcast.

00:02:16 Dan Nathan, Danny Moses.

00:02:17 By the way, Dan, we're gonna be joined by Phil Snow,

00:02:21 the CEO of Faxet.

00:02:23 Love that.

00:02:24 Can't wait.

00:02:25 - Fine sponsor of our market calls.

00:02:27 - Fine sponsor of our market calls,

00:02:29 which by the way, Monday through Thursday,

00:02:31 one o'clock Eastern time.

00:02:33 I'm sure the fans know that.

00:02:34 But I digress for a second.

00:02:36 Just let me mention this.

00:02:37 This was what came out of Neil Cash Carry's mouth last week.

00:02:42 I'm quoting.

00:02:44 "I was actually happy to see

00:02:47 "how Chair Powell's Jackson Hole speech was received.

00:02:51 "People now understand the seriousness of our commitment

00:02:55 "to getting inflation back down to 2%."

00:02:58 Quote, quote, end quote.

00:03:00 Neil Cash Carry, Johnson, huge Johnson.

00:03:05 How are you, Danny Moses?

00:03:06 - September morn.

00:03:08 - We made it.

00:03:09 We're in September.

00:03:10 It feels great, doesn't it?

00:03:11 - Wake me up when September ends.

00:03:12 - Doesn't it feel great?

00:03:13 - I love "Green Day."

00:03:14 That's my favorite album.

00:03:15 "American Idiot" is one of the top five albums

00:03:18 in the history of rock and roll.

00:03:19 - I agree with that.

00:03:20 All right, I gotta start with this.

00:03:21 Last night in Queens, oh, DaVincent Daniel here, right?

00:03:24 I know, you're a "Nightmare" probably guy, whatever.

00:03:26 - What's that?

00:03:27 - US Open, hold on.

00:03:28 - Okay, I'm sorry.

00:03:28 - US Open, across the way, literally--

00:03:31 - Shea Stadium, love it.

00:03:32 - City Field, DeGrom is pitching,

00:03:35 but Serena Williams is playing.

00:03:36 - Sure she is.

00:03:37 - My buddy Rosie takes me to the match last night,

00:03:39 and I'm a huge Serena fan.

00:03:40 I have been for years.

00:03:41 Love her.

00:03:42 Get an opportunity to see her play.

00:03:43 You got Tiger Woods right there.

00:03:46 - Saw it.

00:03:46 - Okay, he was great.

00:03:47 So intense focus.

00:03:48 It was an amazing night.

00:03:49 Not a mask to be seen.

00:03:51 Maybe one.

00:03:52 It's over, right?

00:03:53 That was the first time I really felt last night,

00:03:55 people walking into City Field, people walking on,

00:03:57 it felt normal again, right,

00:03:58 to be in New York in the fall.

00:03:59 And you know what else came out?

00:04:00 The Wall Street douchebag vests.

00:04:03 It was just cold enough to wear those vests.

00:04:05 You know those vests I'm talking about?

00:04:06 - I can't, the bro vests.

00:04:09 - They were like, I would count not a ton,

00:04:11 but enough to know they couldn't wait to bring out--

00:04:13 - Wait, wait, but in the movie,

00:04:13 the guy has never seen the big short.

00:04:15 Weren't you and your whole team--

00:04:16 - I don't wear vests, nope.

00:04:17 - Yes, you guys were.

00:04:18 - Never.

00:04:18 If they did, they miscast.

00:04:19 I'm not--

00:04:20 - Can I just do a PSA?

00:04:21 And I want you to, hold on, before you,

00:04:24 I want you to continue.

00:04:25 If you are a young man between the ages of 18

00:04:29 and let's say 35, if you work in our industry,

00:04:33 and if you're one of those jackasses

00:04:35 that's walking around with one of those vests,

00:04:37 I want you to reconsider every decision

00:04:39 you ever made in your life.

00:04:41 Anyway, please continue, Danny.

00:04:42 - So I started my gambling year off last night.

00:04:45 So I'm on my way there, I'm like, you know what?

00:04:46 I love Serena, I'm gonna bet her.

00:04:48 There's certain rules in gambling.

00:04:49 When Serena Williams is an underdog, you better.

00:04:52 Doesn't mean you're gonna win,

00:04:53 but it's always a great bet.

00:04:54 So then I started thinking in my life,

00:04:55 when have I made bets like that?

00:04:57 1998 finals, Bulls-Jazz, after game one,

00:05:02 when the Bulls lost, Michael Jordan was an underdog.

00:05:05 Wasn't a lot, I think I bet 50 to win $70.

00:05:08 So you always take, Tiger Woods,

00:05:09 whenever he's co-leading or leading,

00:05:11 going into the fourth round of a golf tournament,

00:05:13 you take him.

00:05:14 Let me just give you these numbers.

00:05:15 And when Tom Brady is an underdog, you take him.

00:05:17 These are the gambling rules that you can put away.

00:05:19 And I have to go with these stats.

00:05:20 - I like that, rules.

00:05:21 - But these are rules, hold on.

00:05:22 Brady as an underdog is 37 and 23 straight up, okay?

00:05:26 That's in 60 games.

00:05:27 Against this, Brady's 41, 17, and two as an underdog.

00:05:30 All right?

00:05:31 Let me give you this.

00:05:32 Tiger Woods, when he holds a lead or a share of the lead

00:05:35 after round three, this was through 2013,

00:05:37 so it was good, 53 and four.

00:05:40 - Ridiculous. - Okay, and 41 and two.

00:05:41 There's certain bets that you just make in life.

00:05:44 And if you do it, so anyway, started my gambling.

00:05:46 Next week, we're gonna have Chris Bevilacqua

00:05:48 on from Symbol Bet, and we're gonna start giving

00:05:49 our previews and our picks.

00:05:50 I'm fired up.

00:05:51 I'm in the winner's column, Dan.

00:05:52 - I'm less fired up.

00:05:53 All right, let's talk about this market here.

00:05:55 So, Gaidami and I were on a call, 1230.

00:05:58 We do fast money calls.

00:05:59 This is Thursday.

00:06:00 We're talking about, okay, how's the market setting up

00:06:03 for our 5 p.m. show?

00:06:05 Gaidami said, no Stradami.

00:06:07 That's what the kids call it.

00:06:08 - Yeah, that's the kids.

00:06:09 - He goes, if there was ever a day for this market

00:06:12 to turn around, it was gonna be today.

00:06:14 And he gave a couple of reasons.

00:06:15 I just got on and I just said, not happening.

00:06:17 - You added me.

00:06:18 - I did, I added you, but in IRL.

00:06:20 And I just said, given what's going on in the semis,

00:06:23 we're gonna talk about that.

00:06:23 Given what's going on in some of these,

00:06:25 like SaaS and software names, the devastation we're seeing,

00:06:28 the only way it can happen is if Apple and Microsoft

00:06:31 lead the way, and then maybe some, you know,

00:06:34 the continued relative strength out of the banks.

00:06:35 Well, that's what's happening.

00:06:36 We're into the close here on Thursday afternoon,

00:06:39 and we have basically an unchanged market,

00:06:41 Apple doing that.

00:06:42 So, Gaidami, why were you thinking,

00:06:44 was it new money, new month, all that sort of stuff?

00:06:46 We had a really bad month in August.

00:06:48 - No, August was, well, I think things shook out

00:06:51 the way we thought they would.

00:06:53 August was a difficult month, but it makes sense

00:06:56 in terms of all the things we've been talking about.

00:06:59 Why did I think the market would reverse today

00:07:01 being Thursday?

00:07:02 And again, I happen to think it's probably

00:07:04 gonna be somewhat short-lived, but the reason being,

00:07:06 just on a technical basis, the move that we saw

00:07:09 from the June low to the recent high in the S&P

00:07:12 north of 4,300 in the middle of August,

00:07:15 this move to this 39.50-ish level,

00:07:18 which is effectively where we are,

00:07:20 you know I love my 50% retracements.

00:07:22 It's a 50% retracement, so it makes sense to pause here.

00:07:27 And maybe we'll see a bounce early next week

00:07:30 in a holiday-shortened week.

00:07:32 All that being said, don't confuse the issue

00:07:34 the way Danny confused the issue last week

00:07:37 when EY was so-fi was here, and he lost his mind.

00:07:40 Like, it was like an alien abduction.

00:07:43 I don't know what happened to you.

00:07:44 I'm bullish, I'm the, finally you came to your senses

00:07:47 mid-podcast, but I just wanna be on record as saying

00:07:51 I still think lower, I just think in the interim

00:07:54 we could see a little bit of a bounce here.

00:07:56 - All right, listen, going into August,

00:07:57 I said August is gonna be extremely volatile,

00:07:59 like we've seen in the previous decade, various times.

00:08:01 We had almost a 10% drawdown at one point today

00:08:03 from August 16th, right Dan, according to facts

00:08:05 that are over there, to today at one point, or yesterday.

00:08:07 - So it was 43.25 to 39.03 at the lowest today.

00:08:11 - Right, that's a big move, right?

00:08:13 I mean, that's large, and so Guy, to your point,

00:08:15 new month, here's what's interesting, right?

00:08:16 Rates are, by the way, it's not just rates in the US,

00:08:18 hold on, it is in Europe, it's global,

00:08:20 I mean, rates are moving higher.

00:08:22 So you think we have issues, knee-jerk reaction

00:08:25 to rates are moving higher.

00:08:26 I've said all along, don't confuse us with bullishness, Guy.

00:08:29 If you can adapt to higher rates over a period of time,

00:08:31 it's a much healthier signal

00:08:34 to the economy is still growing.

00:08:35 That's what I'm, it's an indication of that.

00:08:37 Now, if we get towards 4% on the 10 year, we're F'd.

00:08:40 If you go back and look historically,

00:08:42 when it's gotten there, it's been a big, big problem, right?

00:08:44 We are now reaching the levels we saw in June 2022,

00:08:47 just a few months back on the 10 year, 3.5.

00:08:50 If you go back to 2011, I think it's the last time

00:08:53 we saw 4% on the 10 year, according to your facts

00:08:56 that machine, Dan.

00:08:56 - It is, I mean, we got what, 3.25 back in 2018.

00:08:59 What did the stock market do, Guy, when we hit that level?

00:09:01 - Well, a few people that enjoy history remember,

00:09:04 that was the early days of this Fed chair, Jerome Powell.

00:09:07 I think he was in office for a few months

00:09:09 and he came out and said quite,

00:09:11 I would say just in a glib way,

00:09:14 "We're gonna raise rates and run autopilot

00:09:16 in terms of reducing our balance sheet."

00:09:18 And I had the pom-poms out.

00:09:21 I'm like, this is the first Fed chair

00:09:23 that I can wrap my head around since Paul Volcker.

00:09:27 The market proceeded to go down, Dan, since you asked.

00:09:30 19.9% from Halloween, boo, until Christmas Eve.

00:09:35 And then the Trump administration browbeat him

00:09:39 into submission, as did the market, and he reversed course.

00:09:43 From that point on, I have not been a fan.

00:09:45 And you know what's funny about that,

00:09:47 since you brought it up, Dan?

00:09:49 I bet you if JP were here today, he'd be what,

00:09:52 you know what, G Swizzle?

00:09:53 You're right, I succumb to the pressure.

00:09:55 I admire you for pointing it out.

00:09:58 Sorry, thank you.

00:09:59 The thing about behavioral finance is

00:10:01 you try to overthink things and try to predict

00:10:03 what's gonna happen based upon, right?

00:10:05 This has just been a simple man's market.

00:10:06 If you approach it in a way that was just obvious,

00:10:08 you're making money right now.

00:10:09 What do I mean?

00:10:10 Bed, bath, and beyond's gonna give an investor update,

00:10:12 which they did.

00:10:13 Nobody could wait.

00:10:14 Stock traded up to 15 ahead of our strategic announcement,

00:10:17 which are gonna happen.

00:10:18 Meanwhile, the debt's at 19 cents.

00:10:19 There's three terms of debt, 19 cents, 24, 29.

00:10:22 If you like the company, buy the debt,

00:10:24 'cause you'll make a lot more money.

00:10:25 Point is, it comes around,

00:10:27 it goes in stock, goes straight down.

00:10:28 That's an obvious trade.

00:10:29 Where are the professional investors?

00:10:32 All these meme stock traders got what they wanted.

00:10:34 They got rid of the short sellers, right?

00:10:35 You got rid of, what have we always said?

00:10:36 Those are the natural buyers of some of these stocks.

00:10:39 Yes, they're still hard to borrow,

00:10:40 but I'm not a bullish guy.

00:10:42 I'm hopeful we're cleaning things up.

00:10:44 Here's why.

00:10:45 We are exactly, it feels, this week felt so much like 2000,

00:10:49 more than it has at any point to me in the last year

00:10:52 that we've been talking about comparing 2000,

00:10:55 because the bad names are going,

00:10:56 look at the rally today, the rally back in the market.

00:10:59 A lot of those names aren't coming back as much.

00:11:00 That's what I keep saying, that's what you want to see.

00:11:02 And Dan, I'm not going to go on meme stocks again,

00:11:04 but this is how I use these things to tell.

00:11:07 AMC and APE combined is now below 14 bucks or something.

00:11:10 That's a disaster.

00:11:11 GameStop's going to report earnings next week.

00:11:12 They're gone.

00:11:13 That stock's going to get drilled, right?

00:11:14 And this Bed Bath & Beyond ridiculousness,

00:11:16 where's the SEC for Ryan Cohen?

00:11:18 I have no idea.

00:11:19 Every day, you know, you got Gensler putting out some,

00:11:22 look what I've done.

00:11:23 Look at my strategic plan for five years.

00:11:24 Help people now.

00:11:26 It's ridiculous.

00:11:27 - What's interesting, you know,

00:11:28 we had Jeff Richard from GGV Capital

00:11:30 on OK Computer dropped Wednesday.

00:11:32 Guy and I have had numerous conversations with Jeff

00:11:34 over the last year, so he's been on the tape

00:11:36 and OK Computer a couple times.

00:11:37 And it's interesting, you know,

00:11:38 he's a very long duration private tech market investor.

00:11:43 So he's a VC, but he also has a tremendous command,

00:11:46 I believe, over what's going on in the public tech markets.

00:11:49 And he and I were talking about some of the performance

00:11:51 of some of these groups that have been hardest hits.

00:11:53 We were talking about the IPO market.

00:11:55 He had tweeted this earlier in the week.

00:11:57 The number one IPO performer in the last five years,

00:11:59 MongoDB, a $1.2 billion market cap at IPO,

00:12:03 up almost 1,400% since 2017, when it IPO.

00:12:08 And I think it's really interesting,

00:12:09 and we were just talking about the performance

00:12:10 of some of these kind of very high valuation names of late.

00:12:14 Well, interesting today on Thursday, MongoDB is down 25%.

00:12:18 Okta is down 35%.

00:12:20 These are great companies.

00:12:22 I don't think that their deceleration

00:12:24 that they just guided to is like on them.

00:12:27 You know, Wall Street analysts get ahead of themselves.

00:12:30 Investors get comfortable with valuations

00:12:32 they're willing to pay for growth.

00:12:33 But I think these are really important names.

00:12:35 To your point, Danny, what you're saying is,

00:12:37 I wouldn't put this in the crap category.

00:12:38 I'd put this in the really extended valuation category

00:12:42 where investors lost their minds a bit

00:12:44 about what they were willing to pay.

00:12:46 And, you know, we've seen this now for 18, 19 months or so.

00:12:49 The deceleration in some of the post-pandemic trends

00:12:53 has been the thing that's basically deflated

00:12:56 large parts of the market and crypto and SPACs

00:12:58 and Meme and all that stuff.

00:12:59 - For those people out there that can run stock screens,

00:13:01 I talked about this before, or debt screens, I should say.

00:13:05 Anything trading below 90 cents on the dollar

00:13:07 in terms of somebody's debt should be a red flag,

00:13:11 massive red flag.

00:13:12 We have gone through the greatest credit period

00:13:15 in the history that we will see in our lifetimes.

00:13:17 You cannot convince me otherwise that the last 13 years,

00:13:20 and that's the part I keep harping on,

00:13:21 this burn back through the atmosphere

00:13:23 or whatever you want to call it,

00:13:24 we had it so good for so long,

00:13:26 not just investors, but consumers.

00:13:28 Guess what? It's over.

00:13:29 I'm not saying that things are going to be horrible.

00:13:31 I'm saying it's a readjustment.

00:13:32 And that means corporations have to readjust

00:13:34 their balance sheet.

00:13:35 So any of these plans that they had that they gave analysts,

00:13:37 oh, are 2,024, 2,025, were based upon either rates

00:13:41 staying where they were for themselves.

00:13:42 Run that screen.

00:13:44 And if you own any of those companies

00:13:45 that trade below 90 cents, honestly,

00:13:47 do either buy the debt if you truly like the company

00:13:49 or sell the stock,

00:13:50 because I think that's going to be the theme

00:13:52 we're going to see going into the fourth quarter next year.

00:13:53 - There's a great scene in "Moonraker," if you recall.

00:13:57 - James Bond? - Yes, James Bond.

00:13:58 - Roger Moore, Roger Moore?

00:14:00 - Yes, Roger Moore. - Yes, see?

00:14:01 - Worse Bond.

00:14:02 - And towards the end of the movie,

00:14:03 you just mentioned re-entry.

00:14:05 They made a joke about what is he doing?

00:14:07 He's attempting re-entry.

00:14:08 I encourage the folks-- - Interesting.

00:14:09 It might have a title.

00:14:11 - No, I'm just saying. - Yeah, yeah.

00:14:12 - And what you better hope happens here

00:14:15 in terms of that re-entry is those heat shields

00:14:18 that are built to withstand the heat

00:14:21 and help the spaceship come back down to Earth hold up.

00:14:25 And the heat shields right now, Danny,

00:14:27 are in the form of the HYG,

00:14:29 which I've pointed out a number of times.

00:14:31 See how, see what I do? - That was amazing.

00:14:32 - It's amazing, isn't it? - We don't need

00:14:33 Artifacts at computer like Dan has.

00:14:34 - I mean, it's incredible.

00:14:35 It's all in my head. - All up there.

00:14:37 - Now, the HYG, bottom down around 71 1/2, 72,

00:14:41 had a subsequent bounce to 80,

00:14:43 as everybody seemed to think incorrectly

00:14:46 that this Federal Reserve was going to pivot, pause,

00:14:48 whatever P word you want to throw out there.

00:14:50 Now it's back on its rear end, approaching those levels.

00:14:53 I will tell you, and I think you would agree, Danny Moses,

00:14:56 that credit is something we haven't talked about

00:14:59 nearly enough, and that's coming to an AMC theater near you.

00:15:03 - Nice. - So really clearly,

00:15:05 the HYG is the ETF that tracks this high yield, okay?

00:15:09 So Danny, have we seen cracks in high yield

00:15:11 other than just some of these indices of these bonds?

00:15:14 They literally look like the chart of the S&P this year,

00:15:17 don't they?

00:15:17 - Yeah, well, first of all, fixed income ETFs,

00:15:21 by definition, I think are a mistake.

00:15:22 Daily liquidity or hourly liquidity for something

00:15:24 that has terms of 10, 20, 30 years makes no sense.

00:15:27 You have to actually go into the HYG,

00:15:29 look at all the components of it,

00:15:31 and what you'll notice is you'll have 10 or 20

00:15:33 really good names, right?

00:15:35 Names that are trading 95, 98 cents, maybe even higher,

00:15:38 right, and then you have all this shit.

00:15:40 They can't sell that stuff, so that's just gonna do,

00:15:42 you can't move that.

00:15:43 So now with flows going in and out of the HYG,

00:15:46 you sell what you can.

00:15:47 And what you can is gonna be some of the better stuff

00:15:49 that's gonna be out there.

00:15:50 I'm saying in general, looking at companies' balance sheets,

00:15:53 understanding where their debt is trading,

00:15:55 whatever machine you wanna go look down on.

00:15:56 I realize some people don't have access to it.

00:15:58 Can't be that hard to find.

00:16:00 Look it up and find it, because it's just, again,

00:16:02 I actually think the HYG can create, actually,

00:16:05 a misperception in the market.

00:16:06 - I agree with that.

00:16:07 The other thing I think you want to look at,

00:16:09 if you're so inclined, is the LQD,

00:16:13 that is the iShares, iBox, S investment grade,

00:16:16 corporate bond ETF, which as I look at it now,

00:16:20 is trading at levels we haven't seen, Dan Nathan,

00:16:22 in the last 11 years.

00:16:24 - You know what's funny?

00:16:25 - 11 years. - All this iShares

00:16:27 conversation, 'cause they're also HYG,

00:16:29 hey, give us a ring here.

00:16:31 You guys could be a great sponsor.

00:16:32 All right, Danny, you said one of the things

00:16:34 that you thought were most interesting,

00:16:36 the price action this week that reminded you

00:16:38 most of the 2000 sort of action,

00:16:39 was just what happened in meme stocks.

00:16:41 I know that GameStop reports next week.

00:16:44 - Should be great.

00:16:45 - Another Ryan Cohen name, let's see how that thing acts.

00:16:48 Two things that happened, I just mentioned

00:16:50 the Okta and the MongoDB, and I think this is significant

00:16:53 because I think we're seeing a valuation unwind.

00:16:57 Guy, you and I were talking about this a little earlier.

00:16:59 These were stocks that were trading 25, 30 times sales,

00:17:02 basically very near their revenue growth rate.

00:17:05 - But great companies.

00:17:06 Now I think people, and I know you would say

00:17:08 that I'm jumping you a little here,

00:17:09 but I want to make sure to amplify this.

00:17:12 These are real companies with real revenues.

00:17:15 The problem is the stocks got way ahead of themselves

00:17:19 and nothing the management team could do about that,

00:17:22 but here we are now.

00:17:23 - I think we'll look back and we'll say

00:17:25 this was kind of the beginning of the end

00:17:26 for the 15 plus multiple sales for companies like that.

00:17:30 Okay, the other one, I think this is really important,

00:17:32 is Nvidia, and this is again,

00:17:33 a company with a great management, great products.

00:17:36 They've been gaining share against people

00:17:38 that have been in the space for decades, that sort of thing.

00:17:40 The stock was off to the races last year.

00:17:43 It's down about 60% on the year right now.

00:17:46 It's down, at its lowest today,

00:17:48 it was down 11% on an export ban of chips to China.

00:17:52 I think this is really important for a space

00:17:55 that meant to be very cyclical,

00:17:56 but here's a stock, Nvidia in particular,

00:17:58 that a year ago was going to be

00:18:00 the next trillion dollar market cap company.

00:18:03 It was trading at 25 times sales.

00:18:05 Now it trades about 12 and a half times sales.

00:18:07 For a semiconductor company,

00:18:08 that's still really expensive here.

00:18:12 - Yeah, Dan, people are looking for an excuse

00:18:13 to sell stocks now versus an excuse to buy.

00:18:16 Who is the incremental buyer of anything?

00:18:17 What was amazing during the drawdown

00:18:19 these last few months before we had the spike

00:18:21 back up in August was the amount of inflows

00:18:22 that were still happening.

00:18:23 A lot of ETFs were still getting inflows.

00:18:25 You know, the queen was still getting inflows and so forth.

00:18:27 Who is the incremental buyer at those levels?

00:18:29 It doesn't mean it's a bad company,

00:18:30 just needs to be reset.

00:18:32 So the point is, you don't need to own those companies

00:18:34 because they're not going up right now

00:18:36 in this type of environment.

00:18:37 So you bring up a really good point.

00:18:38 I just think that's what they're looking for,

00:18:40 is now every data point.

00:18:41 I'll tell you this, dropped my son off at school last week,

00:18:44 showed me an app, he's a sophomore at Wisconsin.

00:18:46 - Whiskey.

00:18:47 By the way, not to get off the Brails here,

00:18:49 which is my wants to do,

00:18:51 how is their squad gonna look this year?

00:18:53 The University of Wisconsin.

00:18:54 Typically a big 10 power. - Seven, five, eight, and four.

00:18:56 Whatever.

00:18:57 - Offensive line, university.

00:18:59 - Whatever, but let me tell you this.

00:19:00 - I'm sorry, Dan.

00:19:01 See, I can so easily get him off his game.

00:19:04 - He says, "Can I show you something?"

00:19:05 I said, "Sure, what is it?"

00:19:06 He goes, "Just an app.

00:19:07 "I made some money caddying this summer

00:19:08 "and I put some money into the market."

00:19:11 I go, "What kind of, I don't even know what he opened."

00:19:13 I look, there's three things that he owns.

00:19:14 Two of them I've never even seen before.

00:19:16 He has probably like $80 in each, $100 in each.

00:19:18 And I go, "Upstart, UPST."

00:19:20 I go, "So Charlie, let me ask you a question.

00:19:22 "Is this a long, are you long?"

00:19:24 And I'm sorry.

00:19:25 - He's just trolling you.

00:19:25 He's like, he's trolling you.

00:19:26 - He's like, "Yeah, I bought it."

00:19:27 I go, "You don't listen to the podcast, right?"

00:19:29 He goes, "I haven't gotten around to it."

00:19:31 I go, "Hold on." - He said, "What podcast?"

00:19:32 - I go, "How did you find that stock?"

00:19:34 He goes, "I was searching the internet.

00:19:36 "It says something like most exciting stocks

00:19:38 "or something like that."

00:19:39 I go, "So, I mean, talk about a sign that you wanna,

00:19:42 "I mean, I love my kid, but talk about a sign."

00:19:44 - Apple doesn't fall far from the--

00:19:45 - Well, the apple, I don't know what tree he came out of,

00:19:48 but he does look like me a little bit.

00:19:49 But anyway-- - You know what's interesting?

00:19:50 I know you wanna, listen, I think that's a great story.

00:19:52 You know, in "The Wizard of Oz," which by the way,

00:19:54 it was like this week in 1939 that the movie came out.

00:19:58 If you recall, Dan, I know you know this,

00:19:59 the scarecrow was apparently the person

00:20:01 that didn't have a brain.

00:20:03 But when they went and they found themselves

00:20:05 in that forest with all the trees, the apple trees,

00:20:08 the way they got the apples is for the scarecrow

00:20:10 to make fun of him.

00:20:11 He had the idea that if I say your apples are no good,

00:20:15 he knew intuitively that the trees would get pissed off

00:20:18 and they would throw the apples at Dorothy, the tin man.

00:20:20 - So how confused-- - So he actually had a brain,

00:20:23 is my point, as do you, Danny.

00:20:25 - How confused was young Guy Adami sitting

00:20:27 in that movie theater and then like kind of midway

00:20:30 through this movie? - When it went to color.

00:20:32 - When it went to color, 'cause you'd never seen

00:20:33 that before, what was that like?

00:20:35 - That was a mind, I won't use the word,

00:20:37 but you can understand what, I mean,

00:20:38 I was a young person back then.

00:20:40 I was probably 14 or 15, but it was something

00:20:42 none of us had ever seen before.

00:20:43 Anyway, Danny, please.

00:20:44 - So there's a Wizard of Oz, Pink Floyd thing,

00:20:48 you guys are aware of it?

00:20:49 And by the way-- - Urban legend, urban legend!

00:20:51 - It's not urban legend. - Urban legend!

00:20:52 - And I wasn't even, I wasn't under influence

00:20:54 of anything when I did this, okay?

00:20:56 The third roar of the MGM lion and the Wizard of Oz

00:20:58 when it's opening. - That's when you start.

00:20:59 - You start the dark side of the moon.

00:21:01 I don't care what Roger Waters or anyone says,

00:21:03 they did that, and it's just crazy.

00:21:05 And I'll tell you what, when the song "Money" comes on,

00:21:07 that's when it goes to color, right?

00:21:08 You know the whole thing, when the monkeys are flying,

00:21:10 it's crazy, the Dorothy's spinning up in the tornado,

00:21:12 run, run, run, it's nuts.

00:21:14 If you guys haven't done that out there,

00:21:15 I suggest you visit your nearest dispensary,

00:21:17 go around the thing and do it, it's unbelievable.

00:21:19 - But you have to start dark side of the moon

00:21:21 on the third roar. - So you know about this.

00:21:24 - Of course, come on.

00:21:24 - I mean, I was born at night, I wasn't born last night.

00:21:27 All right, favorite song on dark side of the moon,

00:21:29 real quickly.

00:21:31 - "Shine on you crazy diamond."

00:21:33 No? - "Eclipse."

00:21:34 - You're wrong. - Yeah, it's not.

00:21:35 - It's not even on the album? - No.

00:21:36 - That's the only Pink Floyd song,

00:21:38 literally the only one I like.

00:21:39 That's the only Pink Floyd song worth listening to.

00:21:41 - Then we can cut this a whole bit, all right?

00:21:43 - No, we're not cutting anything, this is important stuff.

00:21:46 Anyway, Danny, please continue.

00:21:47 No, the fact that your son Googles exciting stocks

00:21:51 and that comes up, that to me, that is--

00:21:53 - Clearly he's not in the business school.

00:21:54 - That's a message, though, as we leave Kansas

00:21:57 and get it back to the real world, energy is a story.

00:22:00 It's a, I don't care, I know, listen,

00:22:02 I understand that crude oil has gotten whacked.

00:22:05 By the way, Dan Nathan, that's a great call by you,

00:22:08 you've been all over this.

00:22:09 Crude has gotten whacked, gasoline prices have come down

00:22:11 every day for the last 55 or 60 days,

00:22:14 but as I will tell you, and as Danny Moses knows,

00:22:17 what's about to happen in Europe,

00:22:19 what's taking place right before our very eyes,

00:22:21 I'll use the word cataclysmic, it might sound hyperbolic,

00:22:25 but it's not because that's what's happening.

00:22:27 And the trickle-down effects from that, Danny,

00:22:29 are gonna be huge.

00:22:31 - Yeah, I mean, so we're exporting the most that we can

00:22:33 out of the United States, which I think is 11%

00:22:36 we can send out to Europe and Asia, of LNG, right,

00:22:38 out there, because to meet the demand,

00:22:40 since Putin's playing around, obviously,

00:22:41 with all their supply over there, now it's not just Germany,

00:22:45 it's everywhere.

00:22:46 The consumer's getting destroyed in Europe,

00:22:47 their bills are up tenfold from where they are.

00:22:49 What's interesting is because we're shipping out so much,

00:22:51 right, because we still are underproducing what we should,

00:22:54 our levels are now historically low.

00:22:56 If there's a hurricane, God forbid, that comes,

00:22:58 if it's a very cold winter, God forbid it comes,

00:23:00 it's gonna hit the US consumer, so we're on shaky ground.

00:23:02 So what I think is happening, on top of just

00:23:05 a demand destruction, is if people believe

00:23:07 that rationing will start to occur in Europe,

00:23:09 and they're gonna tell companies, industrials,

00:23:11 they can't, oil would come down from that, right?

00:23:13 You would obviously come down in anticipation

00:23:16 of something like that.

00:23:16 So that's a whole 'nother macro issue.

00:23:18 Trying to predict where oil is going

00:23:21 and why it's going there is just as hard

00:23:23 as trying to trade this market.

00:23:24 And I'll just say that, in general,

00:23:26 the market's a serpent right now.

00:23:27 It's literally finding out whatever you're in.

00:23:29 And you may have a great trade,

00:23:30 if you don't have long duration to stay in your trade

00:23:32 with conviction, you're gonna lose money.

00:23:34 - Back to this one, so are we saying

00:23:36 that we're starting to see demand destruction?

00:23:38 Is that by just weaker global growth?

00:23:41 - Well, what's interesting is, no, we're not, actually.

00:23:45 I mean, I think people are anticipating demand destruction.

00:23:48 And I totally get that, and you've been spot on, Dan,

00:23:51 in terms of your thesis, there's gonna be.

00:23:53 But the statistics, until now, don't back that up.

00:23:57 The price is lower in anticipation,

00:23:59 but we're still at pre-COVID levels for demand.

00:24:03 Now, you'll say, that's gonna give up the ghost

00:24:05 at some point, you're probably gonna be right.

00:24:07 But we haven't seen it yet, which is fascinating.

00:24:09 - Yeah, no, it's just interesting you mentioned

00:24:11 the levels here, because there were a lot of naysayers

00:24:13 when crude was 85 bucks last fall.

00:24:16 And then, by demonstration,

00:24:18 tapped the Strategic Petroleum Reserve.

00:24:20 Crude went down to, what, I think the low 60s

00:24:22 from the mid 80s, and then we kinda had this steady rise

00:24:26 into Russia's invasion of Ukraine.

00:24:29 And then things went absolutely ballistic,

00:24:32 went from 90 to 130 in a straight line,

00:24:34 right as tanks were rolling in Ukraine here.

00:24:38 Came off of that, we had this move over the summer,

00:24:41 as I think there was anticipation of summer driving,

00:24:43 all this sort of stuff.

00:24:44 So here we are, we're right back at $87.

00:24:47 We're at that really important technical level here.

00:24:51 And if you're talking about who's anticipating what,

00:24:53 it really feels like crude traders

00:24:54 are anticipating less demand,

00:24:57 especially as we go into a season

00:24:59 where it appears the world needs more energy to heat homes.

00:25:03 - That I agree with, and China, I think,

00:25:04 is the other backdrop here.

00:25:06 They're still doing COVID lockdown things, right?

00:25:08 Things are slowing there, right?

00:25:09 We know what's happening in the real estate market there.

00:25:11 So I think people are anticipating

00:25:13 that where some of the demand destruction could come from.

00:25:15 - Yeah, if we had Carter Braxton Worth here,

00:25:17 you remember back in April of 2020

00:25:19 when crude went negative, right?

00:25:20 So we had, what was the negative print?

00:25:22 It got as low as negative $20.

00:25:23 - It was minus $39, I think, at its lowest print.

00:25:26 And people said, "Oh my God, look at this.

00:25:28 "We figured out our end."

00:25:29 What happened there,

00:25:30 and I don't wanna get too in the weeds here,

00:25:32 but effectively it was cheaper to sell front month crude

00:25:36 at a negative price than it was to try to find a place

00:25:39 to store it, 'cause there was no storage.

00:25:41 - So I'm trying to kind of bookend this a little bit.

00:25:43 So now you think about all the demand for energy products.

00:25:46 You have Elon Musk saying,

00:25:47 "We need to increase output of fossil fuels."

00:25:50 Okay, that happened this week.

00:25:52 And I just wanna draw a line

00:25:54 from when we got through that negative print

00:25:57 in April of 2020, and draw a line from May,

00:26:01 and attach it on your chart, okay,

00:26:02 to the lows last fall to where we are right now.

00:26:06 This is a massive long-term support trend line here.

00:26:10 And I'm just thinking, if we break this thing,

00:26:12 you could see crude back towards those lows

00:26:14 of late last year in the low 60s.

00:26:17 - I agree with that.

00:26:17 And I don't wanna get off the China story yet.

00:26:20 And I'm not one of these,

00:26:21 I don't even know what it means to have a tinfoil hat.

00:26:23 I hear that, it sounds,

00:26:24 do you ever seen anybody with it?

00:26:26 Maybe those guys in Devo had tinfoil hats.

00:26:28 - So this is the part of the show

00:26:29 where we do like dad joke after dad joke after dad joke.

00:26:31 - No, no, no, no, this is not a dad joke.

00:26:33 I actually have a point here.

00:26:35 Now, conspiracy theories aside,

00:26:37 I happen to think,

00:26:38 and I know Danny agrees with me on this one,

00:26:40 these China lockdowns are to screw up the global economy.

00:26:44 Because I happen to believe the Chinese

00:26:46 are willing to lose battle after battle to win the war.

00:26:49 And if they could screw up the global economy,

00:26:52 and if they're willing to, again,

00:26:54 lose battles to win war, they will emerge victorious.

00:26:57 Am I out of my mind?

00:26:58 Yes, I know I'm out of my mind.

00:26:59 But when it comes to this, Danny Moses,

00:27:01 am I out of my mind?

00:27:02 - No, I think in general,

00:27:03 they're always playing the long game.

00:27:04 - Yes.

00:27:05 - They're in hundred year trade.

00:27:06 - Yes.

00:27:07 - They're in four minute trade.

00:27:08 - Yes.

00:27:08 - How are we gonna go?

00:27:09 - So how can you defeat that enemy

00:27:11 if your timeframe is five minutes and theirs is 50 years?

00:27:13 The answer is you can't.

00:27:14 Anyway, back to you.

00:27:15 - Made in the USA,

00:27:16 which I wanna get into in a few minutes.

00:27:18 It's just pretty fascinating though,

00:27:20 in a world that's moved on from this pandemic.

00:27:23 I mean, the fact that they're locking down cities

00:27:25 in September of 2022, you know what I mean?

00:27:28 On the caseloads that they have of 20 million people,

00:27:32 it seems ludicrous.

00:27:34 Going back to crude for one second though.

00:27:35 So I just talked about that long-term trend line, okay?

00:27:38 Here's another line that's gone parabolic,

00:27:41 and that's the US dollar, the Dixie, okay?

00:27:43 And the last time the Dixie started to rally

00:27:46 in a meaningful way, okay, was back in '13, '14, '15,

00:27:51 when we were ending ZURP, ending QE,

00:27:53 all that sort of stuff, the dollar took off,

00:27:55 rates were taking off, right?

00:27:57 Remember the taper tantrum that the 10-year got to 3%

00:28:00 and equities went crazy, they sold up 10% or so.

00:28:03 So think about the relationship

00:28:04 between the dollar and crude.

00:28:06 And then if you throw in the weakness in Europe

00:28:09 is one of the reasons for the strength of the dollar

00:28:11 versus the euro, but it's also one of the reasons

00:28:13 for the weakness in oil.

00:28:15 You have a situation where that is setting up

00:28:18 for a global recessionary sort of environment

00:28:22 if the dollar is gonna do what it's doing to the globe,

00:28:25 right, and then crude is doing that.

00:28:26 So I think there's something here that's going on here.

00:28:29 - The pieces of the puzzle

00:28:31 are starting to come together, right?

00:28:32 So you're starting to see it now.

00:28:33 What does that puzzle look like?

00:28:35 The jigsaw's coming together.

00:28:36 And I'll tell you this, what's so fascinating to me

00:28:38 is energy's still underwrown,

00:28:40 it will be throughout this cycle, right?

00:28:42 'Cause people will, "I knew it!

00:28:43 "I shouldn't have gone in there."

00:28:44 These stocks at 85, at 80, at $75 oil,

00:28:48 these stocks are still cheap.

00:28:49 I'm not saying go out and run by energy,

00:28:51 but it's amazing, kind of last in, first out.

00:28:53 Last in, I knew it.

00:28:54 You see all those iterations going on, right, in oil.

00:28:56 But I think in general, Dan, to your point,

00:28:59 which I think is a really good one,

00:29:00 the pieces are starting to fall in line.

00:29:02 And what an inverted yield curve.

00:29:03 You can ignore it for a long period of time,

00:29:05 but all this stuff is telling you something.

00:29:07 - And since we're on the currency bandwagon here, Dan,

00:29:11 I wanna take you back seven years,

00:29:13 almost to the day, if you will.

00:29:15 If you wanna go back in time with me, Dan,

00:29:17 what happened in August of 2015?

00:29:20 Let's see if you remember.

00:29:21 - So the Chinese, they devalued the yuan.

00:29:24 - They did, if you recall.

00:29:25 Clearly you do, because you just said it.

00:29:27 And remember what subsequently happened

00:29:29 to our equity market.

00:29:31 - Well, first of all, we were careening lower,

00:29:32 but almost every risk asset on the planet

00:29:35 started going haywire,

00:29:37 if you think back to that period of time.

00:29:38 And, you know, Dan, you were hearkening back

00:29:41 to the 2000s, the early 2000s,

00:29:44 during the post dot com malaise, if you will.

00:29:47 I mean, you don't have to go far to think about,

00:29:50 in that period after the financial crisis,

00:29:53 it was a rolling financial crisis.

00:29:55 It started here, it went through Europe for years.

00:29:58 China was always still rebounding, boom and bust, right?

00:30:02 You remember the Shanghai,

00:30:03 well, maybe Nick will throw this in the show notes,

00:30:05 a chart of the Shanghai composite.

00:30:07 Remember what it did in 2015?

00:30:09 It like doubled and then maybe doubled again,

00:30:11 and then it crashed, you know what I mean?

00:30:13 So again, I just really feel like we're seeing

00:30:15 a lot of that sort of price action.

00:30:17 And why are we seeing this?

00:30:19 Because finally, and to Guy's point,

00:30:21 Fed share pal tried to do it in '18,

00:30:23 but it was a 20% sell off in the US stock market.

00:30:27 And then some global growth fears got them off track.

00:30:30 And then now it's the first time

00:30:32 where they're actually meaningfully raising

00:30:34 and speaking hawkish to a point where,

00:30:36 Danny, you're losing your bet this year.

00:30:38 Like you, right?

00:30:39 - But it's--

00:30:40 - I'll let you out for $4,500 right now.

00:30:42 - I love that you're challenging me and Gail,

00:30:44 and the football season starts, keep going.

00:30:45 I don't think I'm necessarily dead yet on that.

00:30:47 - You heard Mester, right?

00:30:49 - Yeah, I can hear anybody.

00:30:50 - And yesterday saying,

00:30:51 "Don't bet on rate cuts next year."

00:30:53 - Oh, and they're always so, Guy, the Fed,

00:30:55 they're always so good at their forecast.

00:30:56 - Okay, but my point is, is that for the first time

00:30:59 in a long time, investors believe that the Fed

00:31:02 is gonna stick to battling infatiation and raising.

00:31:05 - Well, I actually, I'm saying this,

00:31:07 I'm actually being, I wonder if any of those guys

00:31:10 and gals listen to this podcast,

00:31:11 because the way they're talking now leads me to believe

00:31:13 that maybe they did get religion

00:31:15 in the form of the On the Tape podcast.

00:31:17 And the reason, by the way, that I mentioned August of 2015,

00:31:20 when the Chinese devalued, is because the markets went nuts.

00:31:24 Now they're trying to hold up their currency,

00:31:26 and on its own, it's getting to that magic level of seven.

00:31:30 Seven is your line in the sand.

00:31:31 You see it through seven, that's the year one,

00:31:34 ladies and gentlemen.

00:31:35 And I gotta tell you something,

00:31:36 I don't know who Katie is, I say it all the time,

00:31:39 but she better bar the fricking door,

00:31:41 'cause things are gonna get a little nuts anyway.

00:31:42 Back to you, Danny Moses.

00:31:44 - All right, so I was talking to a friend of mine

00:31:45 from college, Chaz Grossman.

00:31:47 - Chaz.

00:31:47 - He runs $130 million.

00:31:49 You actually met him down at the golf tournament,

00:31:51 down in Naples last year.

00:31:52 - I remember.

00:31:53 I remember those guys at the bar.

00:31:54 - It was the CME Invitational.

00:31:56 - Yeah, the CME Invitational, coming up, coming up.

00:31:58 - It's gotta be FedEx Cup.

00:31:59 - Yeah, so he runs, it's north of 130, $140 million in sales.

00:32:03 He makes protective gear, so just think of like,

00:32:05 auto industry, steel industry, utilities, whatever.

00:32:08 And he listens to our podcast, obviously,

00:32:10 'cause he loves you guys, and he sends me a text.

00:32:12 He goes, "Dirty," which is his nickname for me.

00:32:14 We won't go into that.

00:32:15 "Your last couple of podcasts have been great,

00:32:17 "although you were more bearish than ever.

00:32:19 "I hear you and agree with you on most points,

00:32:21 "but I'd like to add a data point."

00:32:22 - Ah.

00:32:23 - "We service a lot of different industries,

00:32:25 "and our business is strong across the board.

00:32:27 "It doesn't totally make sense to me either,

00:32:29 "but I think USA Manufacturing Infrastructure/Electric

00:32:32 "Utilities are doing well because of this reshoring push

00:32:35 "that started with the pandemic.

00:32:37 "USA manufacturers and servicers spent years

00:32:39 "in years downsizing, and now they are basically sold out,

00:32:42 "and everyone just continues to raise prices

00:32:44 "with barely any threat from imports.

00:32:46 "We just raised prices again and still no pushback,

00:32:49 "like you would expect when the economy slows.

00:32:50 "Like I said, I agree with you on the ridiculousness,

00:32:53 "amount of debt floating around, and a crash seems imminent.

00:32:56 "The only thing I would say is it might take a while

00:32:58 "to trickle down to USA Manufacturing,

00:33:00 "electrical contractors, et cetera.

00:33:02 "No drop in demand at all,

00:33:03 "and everyone still has pricing power, my two cents."

00:33:06 I think those are the things that people are wrestling with

00:33:09 in terms of understanding, and that dynamic from China,

00:33:12 that's inflationary, guy, right?

00:33:13 And so those things are happening.

00:33:14 If you want to push those prices onto people down the line,

00:33:17 it will catch up with them, it will back up eventually.

00:33:18 - So there's always a flip side to a coin.

00:33:21 So you anecdotal, I'm gonna anecdotal your ass

00:33:23 right back, if I may. - Do it, baby, please.

00:33:25 - So I got an email today, today being Thursday, 1:59 p.m.

00:33:29 This is from Enterprise Car Sales.

00:33:31 Attention, guy, like they call me, they know my name.

00:33:34 "We've reduced prices on many of our vehicles."

00:33:37 - Bang. - Car sales.

00:33:38 Now, I loved Lou Manheim in Wall Street.

00:33:42 He was fantastic. - Man stares in the abyss.

00:33:44 Nothing's staring back. - Yeah, exactly.

00:33:45 But the Manheim Index,

00:33:46 which is something that you follow religiously,

00:33:49 it's the other side of that coin.

00:33:52 So you're gonna start to see a crash, I think,

00:33:55 in the whole used car.

00:33:56 Now, I don't know, again, what any of this means,

00:33:58 but none of it's good, none of it's good.

00:34:01 You can say it's helping, I get it,

00:34:02 but that's the other side of this mountain,

00:34:04 what's happening in this, just again, anecdotally,

00:34:07 in the used car market. - Well, finance rates

00:34:09 are up, right? - Yes!

00:34:10 - So it all has, this is what-- - Yes, thank you.

00:34:12 - This is how things work, this is how cycles work, right?

00:34:15 - Yeah, but you guys have seen all the math, right?

00:34:17 I know, we're not supposed to have

00:34:19 a whole heck of a lot of math here.

00:34:20 - No, I was good at the math, though, believe it or not.

00:34:22 - But you've seen, with rates where they are,

00:34:24 whether they're mortgage rates or just rates

00:34:26 for buying a car, this, or whatever,

00:34:27 I mean, that's just literally chomping

00:34:29 into disposable income that people have.

00:34:32 I think the other point about the dollar here

00:34:33 is that any guidance that companies gave for Q3, right,

00:34:37 or for the balance of the year, the dollar's higher now.

00:34:40 If you're a US multinational, right,

00:34:42 and so you have this wage pressure,

00:34:45 you have all these inputs as it relates to energy

00:34:47 and shipping and all that sort of stuff,

00:34:49 and then you have a higher dollar.

00:34:50 And so ultimately, and this goes back to Microsoft

00:34:54 with a couple weeks left in their calendar Q2

00:34:56 when they pre-announced because of the dollar,

00:34:58 it almost feels like Q3 earnings,

00:35:01 when we start to get 'em in mid to late October,

00:35:04 are gonna be the thing that finally causes S&P earnings

00:35:07 to come down in meaningfully because these companies

00:35:09 have been trying to kind of pass through

00:35:11 these cost increases or these price increases

00:35:14 to consumers or to enterprises that they serve,

00:35:17 but that can only go for so long.

00:35:20 - Danny Moses gave us an anecdotal.

00:35:22 He read Grossi, what'd you guys call him growing up?

00:35:24 - Chaz. - Chaz?

00:35:25 - Yeah, I like that, Chaz.

00:35:27 That's such a good name.

00:35:28 I did-- - Hold on, he blocked

00:35:30 for OJ McDuffie in high school.

00:35:31 - Stop it. - Yeah, he was his fullback.

00:35:33 Anyway, go ahead.

00:35:34 - OJ McDuffie from Penn State?

00:35:36 - Yes, that ended up going to Miami Dolphins.

00:35:38 - Nittany Lions, that's a great call by me.

00:35:39 - God, guy, amazing, go ahead.

00:35:41 - Then I anecdotaled him back.

00:35:43 Without you even realizing it, Dan Nathan,

00:35:45 you have an anecdotal as well.

00:35:47 It comes in the form of interactive brokers.

00:35:50 Now, I want you to sort of throw it out there

00:35:52 because this speaks to what I've been saying for a while.

00:35:56 This whole consumer balance sheet is all great

00:35:59 and all the state of the US consumer, horse hockey.

00:36:03 Horse hockey.

00:36:04 So please tell me what you're seeing

00:36:06 and I'll explain to you what I think is happening.

00:36:07 - Purely anecdotal because I saw the headline

00:36:09 come across my machine, okay?

00:36:11 It was that interactive brokers,

00:36:12 August ending client equity down 15%.

00:36:15 I have no idea, again, we're not trying to do

00:36:17 a whole heck of a lot of math here, people.

00:36:19 I have no idea what that calculation is.

00:36:22 But if you think about it, if it's as simple

00:36:24 as either losses of client assets

00:36:27 because they've been exposed to the stock market

00:36:29 or whatever else. - Part of it.

00:36:30 - Or taking money out because they--

00:36:32 - Bingo! - Because they need to

00:36:34 figure out how to pay a mortgage or a car loan

00:36:36 or this and that, whatever.

00:36:37 But I was saying purely anecdotally, again,

00:36:40 is like put that together with what we're seeing

00:36:42 in the housing market, okay?

00:36:44 Houses are not liquid assets, but people feel wealthy

00:36:47 when they keep reading about their Zillow score

00:36:49 or this and that or whatever, their neighbor's

00:36:50 selling their house for this and that or whatever.

00:36:52 The compounding negative wealth effect

00:36:54 of all of this happening is the thing I think

00:36:57 that ultimately weighs on the consumer

00:36:59 as we get into Q4.

00:37:00 - Yeah, and we mentioned it last week,

00:37:02 but it's worth mentioning again, 20 million households,

00:37:05 not people, 20 million households in the United States

00:37:09 are having difficulties paying their utility bill.

00:37:12 That ain't getting better anytime soon.

00:37:14 And it's not all doom and gloom, we're just trying

00:37:16 to point out all the things that we're seeing here.

00:37:17 - Well, let's bring it back to the stock market

00:37:18 for a second here.

00:37:19 - Well, that is part of a stock market mosaic.

00:37:21 - No, I understand that.

00:37:22 So here we are, we have an S&P that's down 17%

00:37:25 in the year, we have a NASDAQ 100 that's down 25%.

00:37:28 I think the S&P and its lows was down 24% in mid-June.

00:37:31 The NASDAQ was down nearly 35%.

00:37:34 The average bear market in a recession in the S&P

00:37:38 is about 35%.

00:37:40 This year, in 2022, the S&P 500 has had four declines

00:37:45 from relative highs of greater than 10%,

00:37:48 averaging about 13%.

00:37:50 So here we are, the S&P's down only 10%

00:37:54 from those mid-August levels here.

00:37:56 So I guess the point is, let's kind of just say,

00:37:59 we're in the last month of Q3.

00:38:01 Earnings season in Q2 was not bad as people thought, okay?

00:38:06 The market crescendoed lower into mid-June.

00:38:09 We had that Fed meeting for whatever reason.

00:38:11 A lot of investors just decided that the Fed

00:38:13 was gonna pivot, Danny was making ill-fated bets

00:38:16 about that in 2022.

00:38:18 - Whatever, dude.

00:38:19 - Okay, all right.

00:38:20 - You can collect when it's time.

00:38:21 - So here we are now.

00:38:22 So is this the quarter, and we actually had

00:38:24 John Butter's earnings insight--

00:38:26 - Love Butters, by the way.

00:38:27 - Okay, on the market call.

00:38:28 He was saying that so far, analysts have cut

00:38:31 S&P earnings estimates 5.4%, two months into Q3

00:38:35 for the quarter, which is above the five, 10,

00:38:38 and 15-year average.

00:38:39 So the point is, analysts are starting

00:38:41 to get in front of this, okay?

00:38:43 So do we have a sort of thing where the market investors

00:38:47 realize that S&P earnings, which we've been saying

00:38:50 all year long, are way too high,

00:38:51 given the environment we're in,

00:38:53 and that's the thing that blasts us through the June lows?

00:38:56 - Here's the thing.

00:38:57 Things will shift to 2023.

00:39:00 - Correct.

00:39:00 - And that will actually be worse, right?

00:39:02 When you start to trade off for multiples.

00:39:03 And the reason is, I just said earlier in the podcast,

00:39:06 it's 13 years of incredible times, right?

00:39:08 It's over, right?

00:39:10 So readjustment, right?

00:39:11 So PEs are too high for the market.

00:39:13 Yes, a three to 4% change in earnings down.

00:39:16 What does that coincide with?

00:39:17 A three to 4% drop in the S&P?

00:39:19 No, it probably should be a lot more,

00:39:20 because this isn't a quick cycle.

00:39:22 This is a secular shift, I think,

00:39:24 in how companies are gonna have to readjust

00:39:26 to access to capital.

00:39:28 It's happening left and right.

00:39:28 And Dan, the lag effect of what the housing market,

00:39:31 and Mike Cantrell does a great job,

00:39:33 and he has a great piece on this.

00:39:34 You follow him on--

00:39:35 - We're gonna have him on the pod.

00:39:36 - I know, he does a great job.

00:39:38 The housing market, we talked about builders,

00:39:41 where those stocks have gone for what they've been

00:39:43 down in the dumps all year.

00:39:45 It's a precursor for what's gonna happen in the economy,

00:39:47 because to your point, Dan,

00:39:48 everything's kind of interlocked together.

00:39:50 And so those lag effects are happening now.

00:39:52 So the housing market coming down,

00:39:53 it takes a while for that to build its way

00:39:55 into the economy.

00:39:56 So those things are on the come down.

00:39:58 I don't mean to be extremely bearish,

00:39:59 but it's about time people started cutting,

00:40:01 and it's just not gonna be a one-time cut.

00:40:03 It's gonna go on for several quarters and into 2020.

00:40:05 - Guy and I have mentioned this on many occasions.

00:40:08 Fast money, it's more soundbitey, right?

00:40:10 It's felt very orderly this year, Guy.

00:40:11 And I just mentioned there's been four declines

00:40:13 of like 10% in short periods of time or more here, right?

00:40:17 And those periods don't feel particularly orderly,

00:40:20 but I guess the thing that you guys,

00:40:22 we all recall the bear market from the highs

00:40:25 in March of 2000 to the lows in October of 2002,

00:40:29 from the highs in November of 2007

00:40:32 to the lows in March, April of 2009,

00:40:35 they felt excruciating 'cause they were long.

00:40:38 So really, if you think about it,

00:40:39 the S&P 500 made an all-time high

00:40:42 on January 2nd of this year.

00:40:44 It's September 2nd as you're listening to this right now.

00:40:48 So does it feel horrible?

00:40:50 Oh, the S&P's only down 17%.

00:40:52 It was up almost two X that last year

00:40:55 with dividends and everything like that.

00:40:56 So at the end of the day, I guess what I'm saying is,

00:40:59 have we had the time equal to pain relative to the dip?

00:41:04 Is that a calculation?

00:41:06 Does that make any sense to you?

00:41:07 - Time, why you punish me?

00:41:10 Go ahead. - Is that Pink Floyd?

00:41:11 - No, that's Hootie and the Blowfish, who Dan hates.

00:41:13 - Hootie and the Blowfish? - I like Hootie.

00:41:15 - Okay, good. - I like Hootie.

00:41:16 - Hootie and the Blowfish.

00:41:17 - You wanna say something really cool?

00:41:18 On July 21st, 1995, I saw them at the Greek Theater

00:41:23 in Berkeley, California.

00:41:24 - That is cool.

00:41:25 - Is it weird that I remember the date?

00:41:27 - July 21st, 1990, the wall at the wall for me in Berlin.

00:41:30 Go ahead, guy.

00:41:30 - Yeah, no.

00:41:31 My 785 Spotify playlist, Hootie and the Blowfish

00:41:36 does not appear.

00:41:37 By the way, the song that would be appropriate

00:41:39 for this conversation is, I think,

00:41:41 one of the top five Rolling Stones songs of all time,

00:41:44 when the great Brian Jones was still alive.

00:41:45 That would, of course, be "Time Is On My Side."

00:41:47 I encourage you friends to go to Blockbuster Tower Records

00:41:50 and maybe buy that album and listen to it.

00:41:52 Before our conversation with CEO of Faxette, Phil Snow,

00:41:56 Dan Nathan, we do something here on the On the Tape podcast

00:42:00 that people have come to sort of,

00:42:01 I think a lot of people might just fast forward right to it.

00:42:03 I have no idea.

00:42:04 You shouldn't do that.

00:42:05 You should listen to the entire thing.

00:42:06 - Well, we clip it and we put it on the Twitter.

00:42:07 - You do what? - We clip it.

00:42:08 We take Danny's ride.

00:42:09 - Oh, I see what you, you can--

00:42:10 - So it's called a rip off the tape.

00:42:12 That's what we call it, right?

00:42:13 - So without further ado, the floor is yours.

00:42:15 - Yeah, it is just a rip.

00:42:15 This is another kind of anecdote,

00:42:18 kind of what I'm seeing out there.

00:42:19 So I remember back in 2000,

00:42:21 'cause I've been thinking a lot about 2000 and comparing it.

00:42:24 Enron, it didn't really crack until way after,

00:42:27 but if you know when the market actually started cracking

00:42:29 when it made its size, Enron soon came out soon after that,

00:42:31 but it was a while and it was a name that people hid in

00:42:34 because they wanted to believe everything

00:42:35 that Enron was telling you.

00:42:36 They wanted to believe the numbers.

00:42:38 They wanted to believe that these guys

00:42:39 were reinventing the wheel.

00:42:40 Turns out there was a lot of accounting tricks going on

00:42:42 and other things that were happening.

00:42:43 Yeah, a lot of Fugazi.

00:42:45 So if you look at the chart, it waited.

00:42:46 So I'm thinking, I put that tweet out a couple of weeks ago,

00:42:48 like if this was a game of chess,

00:42:50 first they're gonna come for, you know, AMC,

00:42:52 then they're gonna come for Bed Bath & Beyond,

00:42:54 and then they're gonna take the pawns

00:42:55 and then they get the rook and bishop,

00:42:57 and they're gonna get the queen, Cathie Wood,

00:42:59 and then they'll eventually come for the king.

00:43:01 What is it gonna take to get to the king?

00:43:02 So this is more of a behavioral finance aspect.

00:43:04 So I looked back.

00:43:05 So Enron was named America's most innovative company

00:43:08 by Fortune for six consecutive years, from 1996 to 2001.

00:43:12 What did they do in 1999?

00:43:14 They created Enron Online,

00:43:15 which was a cool thing to do at the time

00:43:16 because you could grow.

00:43:17 That was electronic trading for commodities.

00:43:20 And then who was their auditor?

00:43:21 Arthur Anderson, who was complicit

00:43:23 in everything that they were doing.

00:43:24 But here's what's funny, guy, you're gonna love this.

00:43:26 Do you know what ended up taking Enron down, actually,

00:43:28 which I had to read in my mind?

00:43:29 Blockbuster.

00:43:30 - Stop it.

00:43:31 - Blockbuster.

00:43:32 So when they signed a deal with Blockbuster,

00:43:34 Enron partnered with Blockbuster in July 2000

00:43:37 for VOD, video on demand using broadband.

00:43:40 Now, why do I bring that up?

00:43:41 'Cause it made the start.

00:43:42 They wanted to keep coming up

00:43:43 with things that would be innovative.

00:43:44 And yes, that will take years and years, right?

00:43:46 We know where video on demand has come

00:43:48 and it's matured and it's been great.

00:43:50 That's like, to me, like full self-driving a little bit

00:43:52 in terms of like, just come up with things

00:43:53 that can people believe in and buy into something

00:43:55 where eventually, you know,

00:43:57 they're gonna basically realize it's all bullshit.

00:43:59 So what happens?

00:44:00 The SEC charges Arthur Anderson, you know,

00:44:03 for all the stuff going on.

00:44:03 It turns out it was all smoke and mirrors.

00:44:05 They kept reinventing these new products and ideas

00:44:07 that didn't come yet or weren't represented

00:44:10 or accounted for correctly on the balance sheet.

00:44:12 So I'm not gonna directly compare Enron to Tesla.

00:44:15 What I am gonna compare is-

00:44:17 - I was waiting for the, it came within,

00:44:19 at the 41 minute mark, here we are.

00:44:22 - Because who was the biggest short on Enron?

00:44:23 It was Jim Chanos, right?

00:44:25 He doesn't do-

00:44:25 - Oh, I didn't know that.

00:44:26 - Oh yeah, that was his thing, right?

00:44:28 And we've had Bethany McLean on this podcast before

00:44:31 that she wrote the book, "Smartest Guys in the Room."

00:44:33 This document, all I'm saying is

00:44:34 it was a culture's type following

00:44:35 and eventually what took it to crack

00:44:37 was blockbuster video on demand.

00:44:38 Like, that's not gonna work, right?

00:44:40 And then so they had all these off balance sheet items.

00:44:42 Anyway, so I'm not comparing the two businesses.

00:44:44 What I am comparing is innovative company,

00:44:46 always on the come, numbers were in the future,

00:44:48 and eventually people lost patience and came after them.

00:44:51 And we'll see what happens.

00:44:52 And it reminded me, last thing I looked.

00:44:54 So Pricewaterhouse is the auditor for Tesla.

00:44:57 They're also the auditor for JP Morgan.

00:44:59 You remember a year ago, Matt Levine wrote that piece

00:45:02 about JP Morgan says that Tesla owes them $162 million

00:45:05 for warrants that were related to issue of debt back.

00:45:08 Where is that?

00:45:09 So my point is that it says that the auditor's conflicted

00:45:11 because they have two different pricing mechanisms,

00:45:14 one for their client and one for the bank.

00:45:16 I'll go with the one for the bank that's gonna be correct.

00:45:18 Anyway, not so much a rot, but I just thinking about

00:45:20 what names haven't cracked yet that they may come for.

00:45:22 It made me realize when Enron came later.

00:45:24 - Tesla has not traded well since the split.

00:45:26 I know we all know this, just worth pointing out.

00:45:28 So your TSLAQ or whatever that thing is

00:45:31 is working well.

00:45:32 By the way, there are 24 initial moves in a game of chess.

00:45:37 I can illustrate how that happens,

00:45:39 but a proper decorum prohibits me at this time.

00:45:42 I know Dan is rolling his eyes.

00:45:43 That's number two.

00:45:45 Number three, great job by you, Danny Moses.

00:45:47 It wasn't a full rot, but it was sort of a,

00:45:49 it was a-- - I just want people

00:45:50 to think out of the box. - Mild rot.

00:45:52 - Think out of the box.

00:45:53 - This is the last week we have before the league

00:45:56 where they play for pay starts.

00:45:57 So I want you to get your handicapping hat on.

00:46:01 Dan Nathan, this season I hope you win a game.

00:46:03 There are 17 weeks.

00:46:05 - Let's be very clear here.

00:46:06 Danny started doing this.

00:46:08 I just started glibly taking the other side of it,

00:46:10 and he went on a 27 free run.

00:46:13 - It's good luck. - Something like that.

00:46:14 - You motivate me, Dan.

00:46:15 - I literally would come in here and he'd have three picks.

00:46:18 I'm like, I'll take the other.

00:46:19 I didn't even know what the lines are.

00:46:20 So I'm just saying, it's a life lesson.

00:46:22 Don't take the other side of-- - Twist your arm.

00:46:24 - Don't fight a land war in Asia.

00:46:25 - Well, here's the other one.

00:46:26 I just want to make this, bringing it back to the markets.

00:46:28 And again, I go back to how we started this podcast.

00:46:31 And so we're coming into the close on Thursday afternoon.

00:46:33 So you guys are gonna know what happened

00:46:35 by the time we get there.

00:46:36 The markets were down and they look pretty ugly

00:46:39 at the lows today.

00:46:40 The fourth or fifth consecutive day lower

00:46:42 since Jackson Hole speech last Friday here.

00:46:45 And so you don't want to get caught in a land war in Asia.

00:46:48 And you also don't want to press shorts

00:46:50 into a market that's down five days in a row

00:46:53 where basically you've had all this time

00:46:55 to digest all this stuff.

00:46:56 You're starting to see the sort of moves

00:46:58 that two year breaking out above that three and a half percent

00:47:02 you see the two 10 spread narrowing

00:47:04 because the 10 for some reason already got on its horse,

00:47:06 you know, where everybody is bearish, right?

00:47:09 Like, it's just really hard to find.

00:47:10 And I think to your point about your buddy

00:47:13 who calls you dirty, which I love.

00:47:14 Dirty Danny, Chaz, Chaz, Chaz.

00:47:17 I mean, again, you sounded really bearish

00:47:19 on last week's pod, okay?

00:47:21 But we're a week later and the market's down,

00:47:23 what, five, 6%?

00:47:24 And some of these things have absolutely been decimated.

00:47:26 Your best buy has been cut in half, right?

00:47:29 - Bed, bath and beyond.

00:47:30 - Whatever. - Yeah.

00:47:31 - Okay. - Yeah, it's been cut in half.

00:47:32 - Blood bath and beyond. - Blood bath, yeah.

00:47:34 - But my point is you're starting to see some of this stuff.

00:47:35 So it doesn't mean you start pressing the hell out of stuff.

00:47:38 - No, let me ask you guys a question

00:47:39 'cause when this comes out, the jobs number

00:47:41 will be coming out, right?

00:47:42 And I don't even know what people want to see.

00:47:44 I think whatever it is is going to now be interpreted bad

00:47:47 versus good.

00:47:48 So the mindset has shifted. - Yeah, we've had decent data

00:47:50 and the market sold off on decent data over the last few.

00:47:53 - So the expectations are 300,000, right?

00:47:55 So I could tell you 400, that's bad.

00:47:57 200, what a disaster. - I think we can all agree

00:48:00 with the unemployment rate at 3.5%,

00:48:02 which is back to the pre-pandemic lows,

00:48:05 which were 40-year lows.

00:48:06 If the unemployment rate ticks up to 4%, okay,

00:48:10 and then goes to 5%,

00:48:11 you heard what some of these Fed guys were saying.

00:48:13 They could see it north of 5%.

00:48:16 That's how they get the inflation battle done.

00:48:19 That'll be devastating for the economy.

00:48:21 And I just don't think that's gonna be good for the stock.

00:48:22 - When you talk about time, to get to 5%,

00:48:25 that will be a painful move.

00:48:26 But I think your point, Dan,

00:48:27 and guys' favorite band, One Direction,

00:48:29 obviously, guys love them. - Yeah, hairstyles.

00:48:30 - Unemployment only has one direction to go,

00:48:33 which is higher, right?

00:48:34 You can't, I mean, could it go to 3.4, I guess, maybe,

00:48:36 which would make the Fed go even more,

00:48:38 but it has one direction to go.

00:48:40 So again, Dan, end it with this.

00:48:42 All the pieces to the puzzle

00:48:43 are starting to come into play, right?

00:48:45 - Yeah, but anytime you've ever seen

00:48:47 a meaningful lift in unemployment,

00:48:50 the Fed has not been tightening policy.

00:48:52 I mean, I think that's the point that people thought--

00:48:55 - But Dan, let me counter it for a second.

00:48:57 And they're wrong about everything.

00:48:58 They're forecast, they're forecasting 4% to 4.2%,

00:49:01 I think next year.

00:49:02 That is within their expectations.

00:49:04 To your point that you're making,

00:49:05 five is a whole 'nother discussion.

00:49:07 The three, six, three, seven, three, eight, three, nine,

00:49:09 right, people will be, have poster boards out

00:49:11 in the streets in front of the Fed.

00:49:12 Look, look, it's 3.8.

00:49:14 You know how low 3.8 is still?

00:49:15 Yes, the direction's bad, but it's not.

00:49:17 So I don't know, but it's the direction

00:49:20 of where this is gonna go.

00:49:21 I totally agree with you.

00:49:22 But it's within expectations of what you're saying.

00:49:23 - Let me tell you one other thing.

00:49:24 So we've been talking about a lot of layoffs

00:49:26 in the tech space.

00:49:27 It started in private tech, but then we saw it

00:49:29 kind of move into some of the biggest names,

00:49:31 kind of at least slow hiring or starting to cut off.

00:49:33 So this week we saw Snap cutting 20% of their workforce.

00:49:37 So one of the things that I keep talking to VCs

00:49:39 is that people, tech workers who've been laid off

00:49:42 have not had a hard time finding new jobs.

00:49:45 Well, that's about to change.

00:49:46 Because if you have these en masse job cuts

00:49:49 and then they start seeping into other parts

00:49:51 of the economy, that's when you start seeing

00:49:53 some of these kind of higher wage earners

00:49:56 not being able to fill those jobs.

00:49:57 And that's where you see a lot of this disposable income

00:50:00 just kind of go whoosh.

00:50:01 - And the last thing, which we'll get out of here,

00:50:03 that we should mention is Goldman Sachs

00:50:05 is now going back to get your ass in the office.

00:50:07 There's no more remote.

00:50:08 Why would you do something like that?

00:50:09 Because they wanna be ready, I think,

00:50:11 to start to have an excuse to kind of downsize, maybe.

00:50:13 I mean, I could be wrong on that,

00:50:15 but to me that means like, all right,

00:50:16 it's time to perform.

00:50:17 - Well, can you imagine when all of these people

00:50:19 who basically have been playing Wirtle

00:50:20 for the last year or so, like half their day,

00:50:24 get back in the office and have to make themselves

00:50:26 look busy again?

00:50:27 - Five letter word, F-I-R-E-D, is that what you're saying?

00:50:30 Anyway, I don't know, hopefully it doesn't get that bad.

00:50:32 But anyway, take us out of here.

00:50:34 - If you're spending half your day playing Wirtle,

00:50:36 you went to the wrong university.

00:50:38 My sense is maybe you attended Syracuse, for example,

00:50:41 or some fine institution like that.

00:50:43 I'm kidding, it's a joke.

00:50:45 When we return, a conversation with Phil Snow,

00:50:49 the CEO of FactSet.

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00:53:00 - Phil Snow is the chief executive officer of FaxSet,

00:53:06 serving in that role since 2015.

00:53:10 Phil began his career at FaxSet back in 1996,

00:53:13 climbing the ranks in various leadership roles

00:53:16 over the years before he became CEO.

00:53:19 So everyone's heard of Carl Icahn.

00:53:21 You're saying this stuff,

00:53:22 why are you bringing up Carl Icahn on this interview?

00:53:25 And I'm like, because what's interesting is,

00:53:27 and I actually do my research, Dan,

00:53:29 on the list of companies,

00:53:31 Icahn Enterprises is a $16.7 billion company.

00:53:37 FaxSet is a $16.7 billion company.

00:53:41 And it's one of those companies

00:53:42 that if you're outside of our industry,

00:53:45 you've probably never heard of.

00:53:46 So Phil, welcome to "On the Tape"

00:53:48 and let's talk about FaxSet,

00:53:50 but more importantly, let's talk about your journey

00:53:52 'cause you've been with the company for decades.

00:53:55 - Yeah, I started with FaxSet in '96

00:53:57 and was just very fortunate to stumble across it

00:54:01 as I was looking for work after business school.

00:54:04 And back then we were probably 120 people,

00:54:06 maybe crossed 50 million in revenues.

00:54:09 And I'd sort of learned, I was 32 at the time,

00:54:11 I'd learned that I liked technology,

00:54:13 I'd gotten an interest in finance,

00:54:15 I liked kind of client service type stuff,

00:54:18 and joined this company.

00:54:19 My plan originally was just to stay two years

00:54:22 and go get a job on the buy side or the sell side

00:54:24 as a biotech analyst,

00:54:25 but it clearly didn't work out that way

00:54:27 for lots of good reasons.

00:54:29 - It's funny, Phil, you mentioned your journey started

00:54:31 in '96 with FaxSet.

00:54:32 Mine started in 1997.

00:54:34 It was the first financial data system that I had.

00:54:37 I just joined a hedge fund at that point.

00:54:40 And it's funny 'cause I spent a lot of time

00:54:42 figuring out this product here.

00:54:45 And one of the things as a user now,

00:54:47 more than two decades later,

00:54:49 you recognize that there's just so much there, right?

00:54:53 Let's talk a little bit about the product roadmap,

00:54:56 what you saw in the business.

00:54:58 You obviously have had a lot of different roles

00:55:01 over the last, call it 25 years or so,

00:55:03 but this has been a business that's been moving forward.

00:55:06 Recently, you guys just made

00:55:07 your largest acquisition to date.

00:55:09 Talk to us a little bit about how the product has evolved,

00:55:12 how the industry has evolved,

00:55:13 because when you were on Fast Money with us

00:55:15 earlier in the spring,

00:55:17 you talked about a TAM,

00:55:18 a total addressable market for your services,

00:55:20 over $30 billion.

00:55:22 - Yeah, maybe I'll take a little trip down memory lane.

00:55:25 I mean, I think what's been brilliant about FaxSet

00:55:27 has been its business model,

00:55:29 and it hasn't really changed over those four decades.

00:55:31 So the founders of the company

00:55:33 set up a platform company at the time.

00:55:36 We were hosted in mainframes

00:55:38 with really sort of all you can eat compute

00:55:40 and very good software on top of third-party content,

00:55:43 and then very high touch level of service.

00:55:45 So I think the company has its roots in data and technology,

00:55:49 and we've been through, I'd say, four or five iterations

00:55:52 of being a platform company since then,

00:55:54 but we've kind of stuck to our knitting,

00:55:56 and I think the subscription model

00:55:59 and sort of how we work with our clients,

00:56:01 it's really served us well over the last 40 years.

00:56:03 I mean, when we started out, Dan,

00:56:05 we were really just focused on equity,

00:56:07 and it was sort of historical looking,

00:56:10 really good product for fundamental analysts,

00:56:12 very good product for quants,

00:56:14 but as the industry's evolved,

00:56:15 we've clearly evolved ourselves.

00:56:17 We're truly multi-asset class now.

00:56:19 We got more into fixed income,

00:56:21 and now we're making a move into sort of private equity.

00:56:24 We introduced a real-time news service,

00:56:27 all of these things that investment professionals need,

00:56:30 but we've kind of stuck to our roots

00:56:32 as being a platform company,

00:56:34 and the integration of content being really

00:56:37 what makes Faxett the most valuable thing

00:56:40 is that catalog of data,

00:56:41 whether it's third-party, our own data, or our client data,

00:56:45 that is the basis of everything we do.

00:56:46 >> What I find remarkable is 90% retention rate

00:56:51 on a customer base approaching 200,000.

00:56:54 It's probably somewhere between 170,000 and 200,000 people.

00:56:58 That's pretty remarkable.

00:56:59 I think you're in 20 countries.

00:57:00 Speak to that number, that 90%,

00:57:03 because I got to believe that is not industry standard.

00:57:07 >> Guy, we're a really sticky product, I think.

00:57:09 When people like Dan start in the '90s using it, right,

00:57:12 they sort of fall in love with the product,

00:57:14 and what we have is indispensable

00:57:16 for financial professionals.

00:57:17 So it's, I wouldn't say we're recession-proof,

00:57:20 but we have the type of service

00:57:22 that people are going to need no matter what the economy is,

00:57:25 and once we get into a firm,

00:57:27 we're very good at cross-selling our products.

00:57:29 So because we've developed

00:57:30 all these other services over time,

00:57:32 we've been able to stay in pretty much

00:57:35 every large asset manager there is globally,

00:57:37 and continue to grow our business

00:57:39 by just selling them more stuff.

00:57:41 >> Yeah, you mentioned when you were on with us,

00:57:43 again, back in Fast Money,

00:57:45 the whole concept of land and expand,

00:57:47 and I think that's what you're kind of talking about.

00:57:49 So you're talking about three core businesses here.

00:57:51 The workstation, that's something that I, obviously,

00:57:54 am very familiar with, and Guy and myself,

00:57:55 and again, we stare at it all day long,

00:57:58 and we do use the increased data sets,

00:58:00 and the research capabilities, and all the estimates,

00:58:03 and obviously, I think you know our relationship

00:58:06 with you guys as it relates to sponsor of Market Call,

00:58:08 and we get to speak with some of your experts,

00:58:11 like John Butters, and talk about his earnings,

00:58:13 inside and out, and I think that's what you're talking about

00:58:15 on the content front.

00:58:16 So the workstation, to a lot of our listeners,

00:58:18 especially professionals, is very in tune with.

00:58:22 Talk to us about, let's say, the portfolio analytics,

00:58:24 or your API business, and that I think,

00:58:27 data management has become a huge focus

00:58:29 of yours going forward.

00:58:30 - So we're experts at managing data,

00:58:32 and a lot of what drove our growth,

00:58:34 it sort of happened when I joined the company,

00:58:36 that I was sort of fortunate that we just started

00:58:38 to release our portfolio analytics product,

00:58:41 but a lot of our growth in the early 2000s

00:58:43 was driven by pretty much every asset manager of any size

00:58:47 uploading their holdings into FactSet,

00:58:48 and so we have, I think, probably the most complete

00:58:51 set of data there in the industry,

00:58:53 and as we've become more multi-asset class,

00:58:56 and created sort of more solutions for risk,

00:59:00 performance, reporting, portfolio attribution,

00:59:04 now we're in trading, it really all started

00:59:06 with portfolio attribution, but we've been able to,

00:59:09 on the buy side particularly, branch out,

00:59:11 and cover the vast majority of the workflow now,

00:59:14 for the buy side, and that's, you know,

00:59:16 the buy side has been under a lot of cost pressure,

00:59:19 you know, that's obvious, right,

00:59:20 with the shift from active to passive,

00:59:22 so they need efficient solutions to win

00:59:25 in the marketplace, essentially.

00:59:26 - Let's talk about culture, because there's definitely

00:59:28 a spree to core there at FactSet, without question,

00:59:31 you can just see it from the people that we have met,

00:59:33 people feel part of something,

00:59:34 and they're proud of where they work,

00:59:37 they're proud of FactSet, they're proud of what you're doing,

00:59:39 they're proud of your vision, can you speak to that?

00:59:41 Because, you know, you've reached a certain level,

00:59:44 I mean, 10,000 people is not an insignificant amount

00:59:46 of people to maintain a culture, how do you do that?

00:59:50 - I think a lot of it has to do with who we hire

00:59:53 in our business model, but we hire a lot of, you know,

00:59:55 really smart people, either in client service,

00:59:58 or engineering, and other roles have evolved over time,

01:00:01 but I think we all take a lot of pride

01:00:03 in the product itself, so part of the secret sauce

01:00:06 at FactSet is everybody really, I think,

01:00:08 taking an interest in what our clients do,

01:00:11 and what our product does for them,

01:00:13 and I think that sort of innate understanding

01:00:16 allows us to build these really great relationships

01:00:18 with people like you, across different industries,

01:00:21 and sort of build that level of trust,

01:00:23 and it is a collegial place, I've stayed here

01:00:27 because of the people and the clients I work with,

01:00:29 that's really, I love the product,

01:00:31 but I get a lot of enjoyment out of who I work with

01:00:34 on a daily basis, and I think that we were just

01:00:36 very fortunate, and that's how the founders

01:00:38 essentially conducted themselves,

01:00:40 and we've been able to keep it going,

01:00:42 and you mentioned we're in 20 countries, Guy,

01:00:44 like, it doesn't matter if I'm in India,

01:00:46 or if I'm Japan, if I'm in Bulgaria,

01:00:49 I feel that same FactSet culture everywhere I go,

01:00:53 which is a really cool feeling.

01:00:54 - It is a really cool feeling, but you know,

01:00:55 I talked about 10,000 people, 20 countries,

01:00:58 170, so thousand customers, that number seems to grow,

01:01:02 it does grow every year, I mean,

01:01:03 the country number might be somewhat flat,

01:01:06 how do you plan on growth strategy,

01:01:08 I guess is my question in a nutshell?

01:01:10 - Yeah, so we've done a very good job,

01:01:12 particularly in the last year or two,

01:01:14 of raising the growth of the buy side,

01:01:17 so our biggest segment is institutional asset management,

01:01:20 that's probably been under the most cost pressure,

01:01:23 and we've now been, you know,

01:01:24 we've been very successful in banking recently,

01:01:27 and these other client types that we're going after now,

01:01:30 private equity, venture capital firms,

01:01:32 getting more into corporations,

01:01:34 we've done very well in the wealth space,

01:01:37 that's a big greenfield opportunity for us,

01:01:40 I think our growth strategy really is to

01:01:42 really focus by firm type,

01:01:44 and think about like all of the data solutions

01:01:47 and service that we can provide to clients,

01:01:49 how do we tailor it for each of those firm types,

01:01:53 and we've done that to some regard over our history,

01:01:56 but we've really had a hyper focus on that recently,

01:01:59 I would say the other key to our growth

01:02:01 has been the latest version of the platform,

01:02:04 so you're both very familiar with the workstation,

01:02:06 but I think the world is moving in new ways,

01:02:08 so we've now released programmatic access to the platform,

01:02:11 so you can code in Python,

01:02:13 you can go into, you know,

01:02:14 you can work in Jupyter notebooks,

01:02:17 you can really, you know,

01:02:18 take our data and our APIs and our analytics

01:02:21 in any way, shape or form,

01:02:22 I think of it sort of like Lego pieces,

01:02:24 before everything we built was very custom,

01:02:26 and it was hard to sort of unbundle that,

01:02:29 but now that we've been able to go through that

01:02:31 and make everything more standardized,

01:02:33 there's a lot more ways to kind of sell

01:02:35 what we already have on the shelf,

01:02:36 so that's a big piece of it,

01:02:39 and I would say the last leg really is

01:02:40 just making sure that that experience

01:02:42 for each user is hyper-personalized,

01:02:44 so instead of you having to configure everything yourselves

01:02:47 to exactly how you want to see it,

01:02:49 we want to be able to lead you to things

01:02:52 that we think you might want to look at

01:02:53 without you having to search for them,

01:02:55 so that's, there's still a lot of work to do there,

01:02:57 but I think that's what everyone expects now

01:02:59 in their daily lives with whatever is their user.

01:03:02 - Yeah, so you mentioned that the cost pressure

01:03:03 is on the buy side, and again,

01:03:05 a lot of that tends to be a little cyclical,

01:03:07 but you see this new opportunity

01:03:09 in the wealth management space.

01:03:11 Talk to us a little bit about that,

01:03:12 because Guy and I actually interact

01:03:14 with a lot of people in that space.

01:03:16 Those wealth managers are always looking for edge, right,

01:03:19 and to think that they were using products

01:03:22 that maybe the organization that they're affiliated with,

01:03:25 they're just kind of dialing it in,

01:03:26 they're trying to go for the lowest cost provider.

01:03:28 What do you think the value add is

01:03:30 as you kind of go deeper into that space?

01:03:33 - In terms of who we're targeting,

01:03:34 we're targeting a lot of the wealth advisors

01:03:37 at the larger firms as well as family offices

01:03:39 and beginning to get more into the RAs,

01:03:41 but I think what we can provide is,

01:03:44 we can make the wealth advisor look like a genius basically

01:03:47 by taking everything that we're seeing

01:03:49 going on in the market,

01:03:50 everything we see going on with their portfolios,

01:03:53 and we can help organize their day.

01:03:55 We have something called Advisor Dashboard now,

01:03:57 which sits on all of our other stuff

01:03:59 and sort of suggests to the advisors sort of,

01:04:02 okay, here are the 10 individuals or families

01:04:05 we think that you should be contacting

01:04:06 for this reason.

01:04:08 So that's sort of this idea of next best action

01:04:11 is important.

01:04:11 We could have always gone at,

01:04:13 I mean, we had product for the wealth space,

01:04:15 but we didn't have the scale to address it before.

01:04:18 So a lot of the growth you've seen in our firms

01:04:21 as well as users has been because

01:04:23 we have a web-based product now

01:04:24 and because we're able to scale the product

01:04:28 and do it efficiently.

01:04:29 - This seems like an extraordinarily important initiative,

01:04:33 like one of those things that comes along

01:04:34 every five or 10 years

01:04:35 that you really sort of wrap your head around,

01:04:37 wrap your arms around and push forward.

01:04:40 I mean, am I off base here or am I spot on?

01:04:42 - Right, so it's a great opportunity for us.

01:04:44 I mean, I think the wealth space,

01:04:46 and we're in actually a pretty narrow sliver guy

01:04:48 of the wealth market.

01:04:49 So similar to what I talked about

01:04:51 with institutional asset management

01:04:52 and owning more of the workflow.

01:04:54 And I think we see that opportunity for us

01:04:56 in the wealth space.

01:04:57 That's something we're very focused on

01:04:58 in terms of how we do things that are naturally adjacent

01:05:02 to what we already have.

01:05:03 - Going back to your start.

01:05:04 So you started at Faxat at a time where,

01:05:07 we use terms like the buy side.

01:05:09 The firm that I started with in 1997,

01:05:12 I remember the founder of that firm doing high fives

01:05:15 when we just crossed $600 million in management.

01:05:18 That firm now manages tens of billions of dollars.

01:05:22 So just to put that in context,

01:05:24 the explosion of the business,

01:05:26 and you've also managed this company,

01:05:28 you've grown it through these booms and bust cycles.

01:05:31 I mean, really, if you think of the boom

01:05:33 into the dot-com and the long bus there.

01:05:36 And again, I'm sure there was a lot of pressure

01:05:39 on your business, on your margins in the early 2000s.

01:05:42 And then you had another big run-up,

01:05:44 different asset class this time,

01:05:46 but again, large recession, deep stock market,

01:05:49 depression or correction, if you will.

01:05:52 And then here we are now,

01:05:53 this one feels a little different.

01:05:55 The 2020 period, a black swan event, no one saw it coming.

01:05:58 But what was interesting about this one is never,

01:06:01 were people more reliant on their technology tools,

01:06:05 if you think about it over the last couple of years.

01:06:07 So how have you guys thought about your business

01:06:09 in the context of a kind of hybrid workforce going forward?

01:06:13 Because I'll tell you,

01:06:14 I've worked on a trading desk on a bank,

01:06:17 and the idea that any trader could be sitting at home

01:06:20 in their apartment or their house up in the country

01:06:22 and trading securities for a client

01:06:25 was not something that ever was even conceivable

01:06:28 for a whole host of other reasons.

01:06:30 Now it seems to be, it's gonna be part of the norm

01:06:32 going forward.

01:06:33 - It is gonna be part of the norm.

01:06:35 I'm very pleased with how we performed

01:06:36 over the last two years,

01:06:38 and a little surprised, frankly,

01:06:39 by how quickly we were able to transition

01:06:42 and very encouraged by our clients also.

01:06:46 So we're very fortunate in ourselves

01:06:48 and our clients were able to adapt in this way.

01:06:50 But I do think it's helped us be more efficient,

01:06:52 and I do think that it's helped us,

01:06:55 there've been clear pressures on talent

01:06:57 just because of all the hiring that's been going on

01:06:59 and people competing for talent.

01:07:01 But I think in the end, it's gonna be a good thing

01:07:04 that there are more places we can hire talent for FaxEd

01:07:07 and we can construct teams in new ways

01:07:10 so that teams aren't gonna be tied to geography anymore,

01:07:12 they're gonna be tied to what they're able to do.

01:07:15 You could almost gamify putting together a team

01:07:17 in terms of the attributes of the particular people

01:07:20 that you need.

01:07:21 And our employees are, I think, very,

01:07:25 they're excited, I think,

01:07:26 by sort of the new balance they have.

01:07:28 I've told people I wanna see people in the office

01:07:31 up to two days a week, that's hybrid,

01:07:33 but we're not being real strict about enforcing it yet

01:07:36 because I don't think any of us really know yet

01:07:37 exactly what the right answer is.

01:07:39 So I see stuff in the news now about firms

01:07:42 that are requiring people to come in

01:07:44 and the rebellion that's happening.

01:07:45 - Well, Guy has been trying to quiet quit

01:07:48 from being my podcast partner now for a few months

01:07:51 and I'm really at wit's end about it, Guy,

01:07:53 so we're gonna figure that out.

01:07:55 And I did something that Guy would normally feel

01:07:58 remind me that two-part questions don't work well

01:08:02 in podcasting and I did that to you.

01:08:04 So I started out by saying that the fund that I worked at,

01:08:08 it was 600 million and now it's tens of billions.

01:08:10 I'm no longer there, there.

01:08:12 So they've all done really well.

01:08:13 But talk to us a little bit about your vision back then,

01:08:18 you were probably primarily focused

01:08:20 on large institutional firms,

01:08:22 but this explosion of the buy side that we've saw,

01:08:25 multi-strat funds, you're seeing it in private equity,

01:08:28 you're seeing it in VC now,

01:08:30 discuss a little bit about how,

01:08:33 are those complimentary sort of businesses,

01:08:35 you know what I mean, over time?

01:08:37 I'm just curious how you guys think about the VC dataset

01:08:41 versus a public markets dataset

01:08:43 and how you kind of sell services into those end markets.

01:08:46 - We're having great success in private equity

01:08:50 and venture capital,

01:08:51 but it's a very small part of our business today,

01:08:54 but it's one of the fastest growing pieces.

01:08:55 So we're investing quite heavily in data there

01:08:59 and working on partnerships to sort of build up

01:09:02 the data we need, tie it together and create the analytics.

01:09:05 So I think there's a ton of runway there,

01:09:07 but there's no doubt that to be successful,

01:09:09 you've got to be a multi-asset class product now,

01:09:11 and you've got to be able to serve those large institutions

01:09:14 that have the efficiency to do everything.

01:09:17 And then you've got to be able to serve the boutique firms

01:09:19 that are sort of really great at getting alpha

01:09:21 in one particular area.

01:09:23 The interesting part of the bell curve is the middle, right?

01:09:25 Whereas those managers that don't have the scale,

01:09:28 that are trying to do like two or three things,

01:09:31 we can help them too.

01:09:32 But I think that's the part of the industry that I look at

01:09:34 and think about being under real pressure.

01:09:37 And that's why you're seeing,

01:09:37 I think some of the consolidation that we've seen.

01:09:40 - What I think is important is knowing what you're good at.

01:09:43 More important is knowing what you're not.

01:09:45 And for me, that's a laundry list,

01:09:47 but I bring that up in the context of,

01:09:49 and I know you probably have conversations internally,

01:09:53 retail.

01:09:54 There's always gonna be the conversation.

01:09:55 Should we go down that route?

01:09:57 You've decided not to,

01:09:58 but I'm just curious as to the thought process around it,

01:10:01 'cause it's probably the right strategy.

01:10:02 - I wouldn't rule it out like somewhere way down the road,

01:10:05 but we're not focused on it.

01:10:07 And I think that's probably a different model.

01:10:10 We need even more scale,

01:10:12 but as we transform our platform,

01:10:15 I don't think that that's impossible to think about.

01:10:17 It just seems like a natural progression

01:10:19 from where we are today,

01:10:21 but it's certainly not,

01:10:23 we're not thinking like Robin Hood type stuff.

01:10:26 (laughs)

01:10:27 - Yeah, no, I mean, it's a good point.

01:10:29 And I actually remember when I first met you, Phil,

01:10:32 a couple of years ago,

01:10:33 I saw you speaking at an industry conference,

01:10:35 and I think I asked you that question at the time,

01:10:37 and you gave, at the time, I think in 2021,

01:10:41 there was just manias going around,

01:10:43 around SPACs, around crypto.

01:10:45 And I guess at the end of the day,

01:10:46 you can still use a fact set system, a workstation,

01:10:49 the content that's created to help you evaluate those.

01:10:52 And what was going on at the time

01:10:53 is that institutions were very much focused

01:10:56 on those products that were primarily, in my opinion,

01:10:59 being driven by retail interest,

01:11:02 but it doesn't mean that it's a good business line

01:11:04 to go down, and you could just look at all the crypto stuff

01:11:07 that was very retail focused, I think,

01:11:09 over the last couple of years,

01:11:11 or you just mentioned Robin Hood.

01:11:13 I mean, listen, here's a platform

01:11:15 that was supposed to democratize, right,

01:11:17 access to financial markets.

01:11:19 So I guess the point is there's plenty of pitfalls

01:11:21 chasing the shiny object too at each different cycle.

01:11:24 - Yeah, there's so much, I mean, that 30 billion

01:11:26 that you mentioned, Guy, in terms of market share, right?

01:11:29 There's still so much wood for us to chop there.

01:11:31 It just seems from a risk reward standpoint

01:11:33 that that's the best thing for us

01:11:34 to focus on in the short term.

01:11:36 - It's interesting.

01:11:37 I know internally you have a lot of conversations

01:11:39 about things, growth is obviously important,

01:11:42 but media is something that you were,

01:11:45 I don't want to say reluctant to do,

01:11:46 that's not the right word,

01:11:47 but is this not something you really focused on?

01:11:50 Do you think it's important,

01:11:51 not only to have a good story, which you clearly do,

01:11:54 but be able to tell a good story,

01:11:57 which I think it's something

01:11:58 you're clearly, I think, embracing now?

01:12:00 - Yeah, that is important.

01:12:02 I do think that we are not a well understood story,

01:12:05 particularly outside of people

01:12:07 that have not used our product.

01:12:08 And I do think there's a great opportunity there

01:12:11 for us to show or talk about how we're different

01:12:14 than the main competitors in our space.

01:12:16 So we have not spent a large percentage

01:12:19 of our revenues on marketing or brand.

01:12:21 It's been not a priority for the company.

01:12:23 But I think now at the scale that we're at

01:12:26 and what we've been able to do in terms of our strategy

01:12:29 and the investment we've made,

01:12:30 I think we're kind of at the cusp of something interesting

01:12:34 and I would like to figure that out.

01:12:36 So maybe I'll turn it around and ask you,

01:12:38 like if you were me, like, you know,

01:12:41 what do you think, and you know our space well,

01:12:44 you know who the competitors are and who our clients are,

01:12:46 what do you think would resonate

01:12:48 and be worth the investment?

01:12:49 - No, I think that's a, listen,

01:12:50 I'm glad you asked that question.

01:12:51 I'm glad this is a conversation

01:12:53 'cause something I've said,

01:12:54 and I'm not suggesting I'm right,

01:12:55 but I've brought it up a number of times,

01:12:57 I think 10 or 15 years ago,

01:12:59 I don't think it necessarily mattered.

01:13:00 I think the world's changed extraordinarily quickly.

01:13:02 And I would submit, I think one of the reasons

01:13:05 a company like J.P. Morgan gets the premium valuation

01:13:08 that they get is because Jamie Dimon is able

01:13:12 to tell the story in an intelligent way

01:13:15 that people can synthesize and understand.

01:13:17 And I do think there's a value in that,

01:13:20 and I think it manifests itself in your valuation

01:13:23 and in your market cap and in all those different things.

01:13:25 So I think as much as it shouldn't necessarily be important,

01:13:30 I think it is important to be able to get out there,

01:13:34 have your face, your face becomes associated with the brand.

01:13:37 People get to know that, and over time,

01:13:40 I think you're rewarded for it.

01:13:41 And again, that's my opinion, not suggesting I'm right,

01:13:43 but just anecdotally, that's what I've sort of seen, Phil.

01:13:46 - Got it, okay, that's helpful.

01:13:47 - Yeah, no, and I would add that it's interesting

01:13:50 when you come on CNBC, a lot of viewers

01:13:53 are gonna be very familiar with your products.

01:13:55 They hear people like Guy and me say,

01:13:57 "The fact set estimate here,"

01:13:59 or, "I'm looking at street accounts here,"

01:14:02 or, you know, like, so again, I mean,

01:14:04 I think that that audience is very familiar with it.

01:14:07 I think the flip side of that is that, you know,

01:14:09 retail, which we just talked about,

01:14:11 they're looking for great stories to invest in, right?

01:14:14 Things that they can come across by their own right.

01:14:17 And I think being able to articulate what you do

01:14:19 and how it's unique is really important.

01:14:21 And I know that you came on with us

01:14:23 and you got to ask this question

01:14:25 about your premium valuation.

01:14:26 Well, oftentimes, and Guy and I,

01:14:28 how many times, Guy, have you said this?

01:14:30 Starbucks deserves this premium valuation because of this.

01:14:33 It's just a foregone conclusion.

01:14:35 Great management, great product, you know,

01:14:37 great market share, great growth perspective.

01:14:39 And so lean into that sometimes,

01:14:41 is kind of what we would say.

01:14:42 Tell the story, let people who don't use your product

01:14:45 understand why it is a dominant platform

01:14:48 within your industry.

01:14:50 - Yeah, one of the other things that I think

01:14:51 makes it even more important now

01:14:53 is the war out there for talent

01:14:54 or the competition for talent.

01:14:56 So people want to work at companies they believe in, right?

01:14:59 Or they feel good about,

01:15:00 and that might be more true now than it was,

01:15:03 you know, 10 or 20 years ago.

01:15:04 - Well, let's talk about that.

01:15:05 I'm curious as to how you do recruit.

01:15:07 Are you recruiting on college campuses?

01:15:09 Are you looking for people that have established themselves?

01:15:11 I mean, I'm sure it's some amalgam of those things.

01:15:14 And I know diversity, equity, inclusion

01:15:16 is really important on your website.

01:15:18 There's a space that talks about exactly that,

01:15:21 but you can talk about how you're finding that talent

01:15:23 because to your point,

01:15:25 it is becoming more and more difficult

01:15:27 to find the best talent.

01:15:28 - Yeah, we're looking in new places.

01:15:30 I mean, historically, it was just really right out of school

01:15:33 from a certain set of universities.

01:15:35 And as we've gotten bigger,

01:15:36 like you have to hire in laterally for different roles.

01:15:40 You know, something really interesting we're doing now

01:15:42 is really not requiring four-year degrees

01:15:44 for a lot of our jobs and thinking about like,

01:15:46 how can we get a diverse pipeline of talent

01:15:49 from community colleges, for example.

01:15:51 So we're working closely

01:15:52 with Norwalk Community College in Connecticut.

01:15:54 We just did a pilot with two engineers

01:15:56 that don't have four years degrees that came in.

01:15:59 They both did brilliantly.

01:16:00 And one of them is gonna come back for an internship.

01:16:03 And we hope that he ends up working for us as an engineer.

01:16:06 But companies are gonna have to start thinking this way.

01:16:09 And particularly if you wanna develop

01:16:11 a diverse pipeline of talent,

01:16:13 I think you have to start thinking about community colleges.

01:16:16 You have to start thinking about high schools.

01:16:18 I mean, we're even considering that,

01:16:20 but you've gotta build it up over time.

01:16:22 So we got a lot of irons in the fire there.

01:16:24 And I think a lot of them are gonna pay off.

01:16:27 - So Phil, we'd be remiss to have a CEO

01:16:30 of a company of your size on our podcast

01:16:32 and not kind of ask some questions

01:16:35 about the macro environment in general.

01:16:37 What are some of the things that kind of keep you up at night

01:16:40 as a steward of the brand,

01:16:43 of all of these employees that you have,

01:16:45 of all these customers that you guys wake up every day

01:16:48 and know that you have to do a great job for?

01:16:50 You know, in this environment, again,

01:16:51 we know that we just got through this kind of,

01:16:54 you know, two and a half year period,

01:16:55 which again was a bit of a black swan,

01:16:58 but kind of managing it on the way out,

01:17:00 it seems like, and Guy and I say this,

01:17:02 I feel like every day,

01:17:03 it's about as confusing of a macro environment

01:17:06 that we can remember in our careers.

01:17:08 And mine in 25 years, Guy's about 45 years.

01:17:11 Talk to us a little bit about

01:17:13 what kind of keeps you up at night

01:17:14 and as a CEO of Faxette.

01:17:16 - Well, you know, there's only so much I can control,

01:17:19 the management team can,

01:17:20 and we know, we're confident that we can manage

01:17:23 through big corrections in the market.

01:17:25 We did it when the dot-com bubble burst

01:17:27 and we did it when, you know, the financial crisis hit,

01:17:29 you know, a little over 10 years ago.

01:17:31 And I think we're even better positioned today,

01:17:35 if anything like that happened.

01:17:36 It doesn't feel as bad to me,

01:17:38 at least for our business or our clients,

01:17:40 this time as it did back then.

01:17:41 I don't, you know, maybe it ends up being that way,

01:17:44 but I think our business model and, you know, how we work,

01:17:48 you know, I'm confident we'll be able to manage through it.

01:17:51 The majority of our costs are people,

01:17:53 and, you know, we can always,

01:17:54 it doesn't mean we have to have layoffs,

01:17:56 but we can definitely modulate our hiring

01:17:58 based on how things are going on in the market.

01:18:01 So I try not to get too distracted by that, honestly,

01:18:05 and just work on what's in front of us.

01:18:08 - So I would submit, and again,

01:18:10 first of all, Dan said 45 years,

01:18:12 just so we understand each other, Phil,

01:18:14 that would mean I started working when I was 13 years old,

01:18:17 which I did, by the way, out of necessity,

01:18:19 but not in our industry, number one.

01:18:20 So let's just clarify that.

01:18:21 - What was your first job, Dan?

01:18:23 - I'll tell you what, my first job, I worked at Carvel.

01:18:26 I mean, not to bore the complete you-know-what out of you,

01:18:28 but I completely digress.

01:18:31 But I would submit that as volatility goes up

01:18:34 as measured by the VIX,

01:18:36 my sense is your engagement probably goes up,

01:18:39 and you probably see that anecdotally

01:18:41 in some of the metrics you use.

01:18:42 Can you speak to that?

01:18:43 - Yeah, it certainly does.

01:18:44 So it's a good, disruption's a good time

01:18:48 for active management, and even though we, you know,

01:18:50 we've been able to kind of solve for the shift to passive,

01:18:54 it certainly, our product is very geared

01:18:56 towards active managers.

01:18:58 So it doesn't hurt us if budgets, you know,

01:19:01 get really kind of slashed,

01:19:03 obviously that's gonna have some sort of an effect.

01:19:06 But I always took the approach as a salesperson

01:19:08 of going into my client during a period like this

01:19:10 and being proactive and saying,

01:19:12 "Listen, I know you're under pressure.

01:19:14 "Let's sit down, be more open

01:19:15 "about what you're dealing with,

01:19:17 "and we can create a win-win here.

01:19:19 "So if you're willing to kind of open your books

01:19:21 "and show me what other stuff you're getting,

01:19:23 "I can tell you how FactSet can solve problems for you."

01:19:26 So very often, periods like this force firms

01:19:29 into making tougher decisions or things that,

01:19:32 if times were good, they wouldn't need to do.

01:19:34 So that's worked well for us.

01:19:36 - Well, we started this by talking about, you know,

01:19:38 how long you've been with the company,

01:19:39 and my sense is, and please correct me if I'm wrong,

01:19:43 but you seem about as excited today

01:19:44 as you probably were when you started.

01:19:46 So that speaks to somebody that really has a vision

01:19:49 for the company, is not going anywhere anytime soon.

01:19:52 Can you sort of talk about that quickly?

01:19:54 - Yeah, I'm so happy, you know, like two or three years ago,

01:19:56 we made a tough decision.

01:19:58 We took our margins back, you know,

01:19:59 where it affected our earnings growth,

01:20:01 which had been, you know, we'd had quarters and quarters

01:20:04 of 10% growth, but I just felt like we had to make

01:20:06 a big enough bet on our own digital transformation

01:20:10 to get our top-line growth back up again.

01:20:12 And, you know, as of the end of last quarter,

01:20:14 we were growing, I think, around 10% organic growth.

01:20:16 So that was material acceleration from even 12 months ago.

01:20:20 So I think there's a great level of excitement

01:20:22 about the company, about the product we have,

01:20:25 the amount of stuff our salespeople have

01:20:27 to go out there to market, a lot of pride in our culture

01:20:30 and how we've been able to navigate the last few years.

01:20:33 So we have a lot to be proud of and excited about

01:20:37 as a company, and I think we're in a great position

01:20:40 moving forward.

01:20:40 So that's certainly a good feeling.

01:20:41 And then on top of that, I feel like I've got

01:20:43 an excellent management team.

01:20:45 So a team, you know, that really works well together.

01:20:48 We're not siloed, it's not a particularly

01:20:50 political organization.

01:20:52 So it's just fun to come to work every day.

01:20:53 - No question.

01:20:54 And I will say on behalf of Dan and myself,

01:20:57 we're thrilled with the partnership we have with Faxed.

01:20:59 We are indebted to you for having, you know,

01:21:02 the trust in us to be stewards of your brand

01:21:05 'cause we feel as if we are.

01:21:07 So Phil, thank you for joining us here on "The Tape."

01:21:09 - Anytime, thank you.

01:21:10 Thanks, Guy, thanks, Dan.

01:21:12 - Thanks once again to CME Group and iConnections

01:21:15 for sponsoring this episode of "On The Tape."

01:21:18 If you like what you heard, make sure you hit follow

01:21:20 and leave us a review.

01:21:22 It helps people find our show and we love hearing from you.

01:21:25 Can also email us at onthetape@riskreversal.com anytime.

01:21:30 Follow and connect with us on Twitter @OnTheTapePod

01:21:35 and we'll see you next time.

01:21:37 - "On The Tape" is a Risk Reversal Media production.

01:21:40 This podcast is for informational purposes only.

01:21:42 All opinions expressed by me, Dan Nathan, Guy Adami,

01:21:46 Danny Moses, and any other participants

01:21:48 are solely our opinions and should not be relied upon

01:21:50 for specific investment decisions.

01:21:52 (upbeat music)

01:21:55 [BLANK_AUDIO]

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