Jay Pestrichelli, CEO of ZEGA Financial, is on a special 200th episode of the Broken Pie Chart Podcast to go over their predictions for 2023. Will we have a recession? What will the earnings be? What will be the highs, lows, and year end 2023 10 year yield, S&P 500 Index, gold, bitcoin, oil, fed funds rate, and more. Off course these should not be traded on, but instead hear some of our thought process in arriving at these numbers. Plus, as always, some recommendations.     2022 Saw 91% of days with VIX higher than 20% Skew in options market not showing much fear? 2023 prediction rundown. What will the high low and year end S&P 500 2023 number be? Where will the US dollar finish? How high will the Fed Funds rate and 10 Year Treasury yields go? What earnings EPS on the S&P 500 might wind up in 2023 Plus, recommendations Is Die Hard a Christmas movie? Is Lethal Weapon a Christmas movie?       Mentioned in this Episode:     Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050   Derek’s new book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1   Contact Derek [email protected]

What’s the saying, history doesn’t repeat itself but often rhymes? In 1994 the Fed was raising rates all the way through the Feb 1995 meeting. How does that period compare to now? And does that mean we are in for a repeat of markets? Derek Moore explores that period and makes some comparisons.     1994 Fed interest rate hikes 1994-95 interest rate cycle and market returns The 1995 Fed pivot When did markets turn higher? Hint it’s before the last rate hike. Curious reasons Fed began raising rates in 1994. Are the Fed projections ever right (hint, usually not their SEP or statement of econ projections       Mentioned in this Episode:   History of Fed rate hikes https://www.thebalancemoney.com/fed-funds-rate-history-highs-lows-3306135#:~:text=The%20highest%20fed%20funds%20rate,in%20response%20to%20rising%20inflation.   The 94-95 rate cycle including some look back at newspaper headlines and stories https://www.businessinsider.com/1994-federal-reserve-tightening-story-2013-1#protests-grow-louder-in-the-press-following-the-fomcs-may-18-decision-below-are-headlines-from-two-syndicated-ap-columns-the-next-day-18   Effective Fed Funds rate today https://www.newyorkfed.org/markets/reference-rates/effr   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]  

Every time you tune into CNBC you hear predictions about when the recession will hit. Then, when the Fed will pivot. But are people focused on the wrong things? Jay Pestrichelli is back with Derek Moore to discuss markets, earnings, and why the contrarian take is everyone can’t be right. Plus, the more the yield curve inverts, the harder it will be for a recession to arrive in 2023.     2023 Earnings EPS scenarios review Forward P/E ratios and where multiples will be Why the market goes up or down form here (or sideways) Employment differences in the Household Survey vs Establishment Survey NFP labor market survey low response rate Atlanta Fed Wage tracker moving in wrong direction (moving higher) Monthly Inventories and sales ratios showing higher inventory builds PPI comparing core less food and energy with total PPI PPI higher but lower YoY number History of Fed Pivots and where we are now in the cycle Index of companies with international sales inverse with US Dollar strength Why the dollar needs to go lower Shanghai to Los Angeles container shipping rates almost back to pre-Covid average     Mentioned in this Episode:   Podcast FTX Crypto Debacle | Yield Curve Inversion | Enough with Recession Talk  https://podcasts.apple.com/us/podcast/ftx-crypto-debacle-yield-curve-inversion-enough-with/id1432836154?i=1000586865880   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3iSUbXp   Contact Derek [email protected]

Last week the payroll and unemployment numbers came out. They surprised to the upside but does the Fed really want people to lose their jobs? How are the unemployment numbers calculated? And an under the radar demographic trend on working age population. Plus, the 2023-year end S&P 500 Index targets are coming out and they are bearish!     What are investment banks 2023-year end S&P 500 Index price targets? How do the 2023 targets compare to last year’s year end 2022 targets? How wrong were they and will they be wrong again? Are S&P 500 market predictions too bearish and is that good from a contrarian standpoint? What do the unemployment and payroll numbers mean? What’s going on with demographics that working age population is trending lower? Labor force participation rate Unemployment rate Working age population     Mentioned in this Episode:   Atlanta Fed Wage Growth Tracker https://www.atlantafed.org/chcs/wage-growth-tracker   Nonfarm payrolls https://fred.stlouisfed.org/series/PAYEMS   Household employment survey employment level https://fred.stlouisfed.org/series/CE16OV   Labor force participation rate https://fred.stlouisfed.org/series/CIVPART   Working age population https://fred.stlouisfed.org/series/LFWA64TTUSM647S#0   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Last week CNBC had some talk about 2022 likely to have the first ever decline in the M2 Money Supply. Is that really a big deal given 2020 record 25% growth followed by 2021 12% growth? Then, why velocity of money may not mean anything for inflation after all.     What is the M2 money supply? What is the M1 money supply? Comparing M2 vs M1 money supply Discussing massive increase in money supply in 2020-2021 First ever decline in money supply in 2022? Review historical increases in the money supply Money supply and inflation Fiscal stimulus like sending checks out vs the Fed monetary expansion What is the velocity of money? How is velocity of money calculated? Is velocity and inflation correlated? Why velocity and inflation may have lower correlation than thought       Mentioned in this Episode:   Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050   Academic paper showing low correlation between velocity and inflation: The Behavior of Money Velocity in High and Low Inflation Countries Hugo Rodríguez Mendizábal https://www.jstor.org/stable/3839075   Crypto Crash | US Dollar is the thing to watch podcast https://podcasts.apple.com/us/podcast/crypto-crash-us-dollar-is-the-thing-to-watch/id1432836154?i=1000586009794   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]  

Jay Pestrichelli, CEO of ZEGA Financial, is back with Derek this week where they talk FTX bankruptcy and whether it means the end for crypto? Then they discuss the 3-month treasury bond yield inverting with the 10-year treasury bond. Yes, every time that has happened there have been recessions, so what about this time? Earnings continue to be the thing to watch. A quick game of who is right after the Atlanta Fed GDP Nowcast is showing 4.3% growth compared to a measly 0.5% current estimate for Q4 GDP. Finally, some recommendations.     FTX Bankruptcy Whether crypto has any use case One bad actor doesn’t make the whole space Who’s right, the Atlanta Fed GDP Nowcast or the street consensus on Q4 GDP? 3-Month US Treasury inversion with the 10-Year Treasury Yield Does a recession always happen after this inversion? Examining typical un-inversion prior to recessions Discussing whether we had inversion prior to 2020 recession Q3 earnings are mostly done so what does that mean for stocks? Nominal vs real (after inflation) retail sales numbers       Mentioned in this Episode:   Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1   Contact Derek [email protected]

Derek gives his thoughts on the FTX crypto collapse and bankruptcy. Why crypto are NOT currencies. Then, why everyone should be paying attention to the US Dollar. Why the US Dollar is so important for multi-national companies and their revenues. How those revenues are impacted when the dollar is strong (or weak). Then finally a check in on the Fed Funds probabilities for future rate hikes.   Why crypto currencies have failed to be currencies How some crypto returns seem too good to be true There is risk when returns are greater than the risk-free rate Explaining how revenues for US companies are affected by value of US Dollar Why the dollar may be the thing to watch right now Anti-correlations between the US Dollar and stocks US Dollar has biggest one day fall in years How interest rates affect currency exchange rates Deep dive into examples of revenues and earnings with strong and weak US Dollar Microsoft stated they had a 5% negative revenue impact in Q1 from currencies Speculation that FTX used customer funds inappropriately     Mentioned in this Episode:   Coin Desk article explaining FTX collapse https://www.coindesk.com/policy/2022/11/10/ftx-violated-its-own-terms-of-service-and-misused-user-funds-lawyers-say/   Fed Funds Rate probabilities from CME https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html   Microsoft revenues impacted in Q1 2023 earnings report https://www.fool.com/investing/2022/10/30/microsoft-beats-back-king-dollar-and-rising-intere/   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Derek is joined again by ZEGA CEO Jay Pestrichelli to discuss what market capitulation looks like and are we there yet? Plus, how markets tend to turn up prior to the economy bottoming historically. Before some recommendations they discuss why the VIX isn’t higher and what the VIX curve is telling us now and in the past.     What is market capitulation? Historical examples of markets bottoming months ahead of the economy Are markets smarter than the economy? The VIX futures curve Why VIX isn’t higher What the VIX is really telling us about volatility expectations Can markets bottom out with just apathy instead of panic? Post Midterm Election bounce? Are we sure we are going to have a recession? Everyone says a recession is coming but can everyone be right?     Mentioned in this Episode:   Higher interest rates provide opportunity for Buy and Hedge https://podcasts.apple.com/us/podcast/higher-rates-create-opportunity-for-hedging/id1432836154?i=1000581025635   Do markets always go higher after midterms? https://podcasts.apple.com/us/podcast/do-markets-always-go-up-after-midterm-elections/id1432836154?i=1000579103232   Why hedging is the answer for portfolios https://podcasts.apple.com/us/podcast/why-hedging-is-the-answer-for-portfolios-can-hedgers/id1432836154?i=1000578323267   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]  

Derek is joined by Spencer Wright of Halbert Wealth to discuss historical impact on markets Plus, they discuss the house, senate, and the prevailing polls and other indicators to sift through the noise. Finally, they give their picks in the 5 senate races that matter.     Market performance post midterm elections since 1962 Why markets might like split government What the polls and adjusted polls are saying What the past tells us about likelihood of change of power in the house during midterms What do polls miss? Markets in midterm years leading up to election day Why long term it doesn’t matter which party is in power President, Senate, and house How sitting president approval ratings play into races What the betting markets are saying about the senate race and late momentum When will we know the outcomes (hint: it may not be on election night) Where can you find info on latest polls Where can you find deadlines for mail ballots and when they will be counted Disparity between Democrats and Republican candidate money raised and spending Bias adjusted poll averages and what they are     Mentioned in this Episode:   RCP (real clear politics) latest polling data https://www.realclearpolitics.com/epolls/latest_polls/   Interactive US Senate 2022 midterm map https://www.270towin.com/2022-senate-election/ CNBC piece detailing candidate spending for Senate races https://www.cnbc.com/amp/guide/midterms-2022-top-senate-races-oz-walker-vance-kelly/ State legislature info on states mail ballot processing, counting, and deadlines https://www.ncsl.org/research/elections-and-campaigns/vopp-table-16-when-absentee-mail-ballot-processing-and-counting-can-begin.aspx  Absentee ballot deadlines https://www.vote.org/absentee-ballot-deadlines/ Five Thirty Eight election probability models https://projects.fivethirtyeight.com/2022-election-forecast/ What betting markets say about election probabilities https://electionbettingodds.com/ Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr

The Fed is paying out more in interest than it is taking in, resulting in an IOU to the US Treasury. Is this a big deal? Did the Fed believe this was possible? Understand why you may see in the news the Federal Reserve is running a deficit. Plus, is the Treasury about to do bond buybacks to increase liquidity in markets?     What is a Federal Reserve deferred asset liability How much of a deficit is the Fed running? Why is the Fed paying out more in liabilities than its receiving in interest? Why are Janet Yellen and the Treasury thinking about doing bond buybacks? What does it mean when bond markets are illiquid? What is the average interest rate on outstanding US Treasuries? Can the Federal Reserve go bankrupt? What role to Fed Overnight Reverse Repos have in this? How does the fed pay interest out to banks through excess reserves? Reviewing 2013 Fed paper on potential for deferred assets (liability) to arise       Mentioned in this Episode:   Financial Times article on treasury bond liquidity https://www.ft.com/content/bc7271f9-a0aa-4643-bed3-40d2d5ec80d1   Brookings article on Fed running a deficit and owing the Treasury https://www.brookings.edu/blog/up-front/2022/06/01/what-if-the-federal-reserve-books-losses-because-of-its-quantitative-easing/amp/   Average interest rates on US Treasury bonds, bills, notes https://fiscaldata.treasury.gov/datasets/average-interest-rates-treasury-securities/average-interest-rates-on-u-s-treasury-securities   NY Fed list of current SOMA Fed holdings https://www.newyorkfed.org/markets/soma-holdings   Fed Overnight Reverse Repo outstanding https://fred.stlouisfed.org/series/RRPONTSYD   What are Overnight Reverse Repos https://podcasts.apple.com/us/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106   Fed earnings remittances due to the U.S. Treasury https://fred.stlouisfed.org/series/RESPPLLOPNWW#0     Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

The Federal Reserve shows no sign of slowing down rate hikes in the near term. But are they doing anything? ZEGA CEO Jay Pestrichelli is back on the show with Derek Moore to debate. Plus, why we care about England’s BOE moves. Finally, some recommendations.     What is the deal with the UK’s pensions and government bonds? Is the Fed doing it all wrong? Container shipping rates back to normal? The waiting is over at the Port of LA Inflation run rates and what we need to happen What would it take for a Fed pivot based on some historical numbers Real vs Nominal numbers in economics Lag in OER (Owners Equivalent Rents) and Rent of Primary Residence in CPI       Mentioned in this Episode:   What are Overnight Reverse Repos https://podcasts.apple.com/us/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1   Contact Derek [email protected]

As Q3 earnings season is about to kick off we’ll look at what the drivers of returns are for the S&P 500 Index and individual stocks. Annualized returns are a mix of sales growth, margin growth, dividends, share count, and PE multiple growth. See how to think about these levers in relation to price.     What are the return attributions of the S&P 500 Index returns? PE multiple growth vs multiple contraction How share buybacks or issuance increase or decrease earnings Dividend yield as a percentage of total return Net Margin expansion or contraction Sales growth has been lower than you might think over the last 10 years EPS or earnings per share 2022 Q3 earnings estimates on EPS and sales Nature of rotation of sectors contributing to total earnings of the S&P 500 Value After Hours podcast and YouTube channel     Mentioned in this Episode:   Augustus investor letter (click on first one) page 24 breaking down 2011-2021 earnings attributions https://www.semperaugustus.com/clientletter   Refinitiv Q3 earnings preview breakdown https://lipperalpha.refinitiv.com/2022/10/sp-500-22q3-earnings-preview-a-turning-point/   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

The rise of interest rates has been all over the news, but is there a silver lining? Yes, due to higher rates in short-term US treasuries hedged equity strategies now can further manage risk by substituting out short duration high yield to short term treasuries. ZEGA Financial CEO Jay Pestrichelli and Derek Moore are back to explain how a flagship strategy Buy and Hedge is leveraging the new environment.     What are Buy and Hedge strategies? Comparing the risk profile of short-term US Treasuries vs short-duration high yield bonds. Comparing risk profile of treasuries to corporate bonds Explaining the yield to maturity on bonds Where a return comes from in a bond Coupon payments(interest) vs appreciation to par Interest rate risk in bonds Duration as a measurement of how market values change for every 1% change in rates How Buy and Hedge has limited risk in buying long call options and US treasuries         Mentioned in this Episode:   Why hedging is the answer for investors https://podcasts.apple.com/us/podcast/why-hedging-is-the-answer-for-portfolios-can-hedgers/id1432836154?i=1000578323267   Margin Call Movie and Value at Risk Explained https://open.spotify.com/episode/2XJ58KAoQKw2sdC48KHyPp   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1   Contact Derek [email protected]  

Does anyone who makes predictions in the financial news media know anything? Lots of headlines are making predictions so why not add some perspective from past bear markets (and bull markets) where many things’ people say never came true. Why investors make bad decisions due to news. How investors opt to stay in cash even as markets firm up.  We’ll go through some past predictions to see how the mood sways at different points in cycles.     What the financial media is saying New estimates and predictions are taking a bearish tone Reading prior headlines from several periods show predictions aren’t worth that much Why investors tend to shy away from markets even when things are cheaper How analyst estimates can be wrong while the market focuses on the forward PE ratio         Mentioned in this Episode:   Why hedging is the answer for investors https://podcasts.apple.com/us/podcast/why-hedging-is-the-answer-for-portfolios-can-hedgers/id1432836154?i=1000578323267   Is the strong us dollar a problem? https://podcasts.apple.com/us/podcast/is-the-strong-us-dollar-a-problem/id1432836154?i=1000571388439   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Inflation surprised to the upside last week. Although it was close to the Cleveland Fed’s nowcast estimate. So, what would it take for inflation to get back to the 2% level and when? We’ll go through the numbers today to illustrate what rate of monthy inflation would be needed to get there buy the spring. Its just math, so here we see the Feds base rates come into plan.     How is inflation month over month calculated? How is inflation year over year calculated? How do month to month and year over year numbers matter for future inflation? What is the difference between CPI and Core CPI? Why Core CPI might keep going higher for a while due to lagging affect What is OER or Owners Equivalent Rent?         Mentioned in this Episode:   Inflation Nowcast Cleveland Fed https://www.clevelandfed.org/our-research/indicators-and-data/inflation-nowcasting.aspx   Do markets go up after midterm elections? https://podcasts.apple.com/us/podcast/do-markets-always-go-up-after-midterm-elections/id1432836154?i=1000579103232   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Do markets always go up after the midterm elections? What about market performance during the presidential cycle? Interesting data points to historical numbers being bullish for markets next year. What could go wrong? Plus, why it may not matter what political party is in power.     Market performance before and after midterm elections When are midterm elections held? Significant swings in power during midterm election years Market performance and presidential cycles Which year of president’s term is the best for markets historically? Why markets historically are flat to down pre-midterm elections Why markets historically rally post-midterm elections Market performance depending on which party holds power Does it matter which political party is in power for markets?       Mentioned in this Episode:   Market historical performance during different years of Presidency https://www.trade2win.com/articles/2128-presidents-politics-u-s-stock-market   Market performance pre and post midterm elections https://www.usbank.com/investing/financial-perspectives/market-news/stock-market-performance-after-midterm-elections.html   Market performance in midterm election years vs all other years https://www.capitalgroup.com/advisor/ca/en/insights/content/articles/us-midterm-elections-and-market-moves.html   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Why Hedging Is the Answer for Portfolios | Can Hedgers Buy Markets Lower?   Show Summary:   Rather than try to time markets or worry about whether there is a selloff around the corner, look to stay invested but be hedged. But what is hedged equity? What are the benefits for investors who may be barraged by various predictions and news? How do hedged equity strategies work? All this and more plus some new recommendations.     Eliminate the need to time markets Reduce fear- but stay invested Who is hedged equity for? How to look for more growth especially near or in retirement 3 main phases for investors accumulation, base maximization, and distribution What is the hedgers opportunity? What is the cost of hedging? How the short duration fixed income (or other income producing pieces) reduces cost How do each of the components move within a portfolio Comparing hedged equity to the 60/40 portfolio Will treasuries be used in lieu of corporate bonds as a funding source? What are the main risks for bonds? How bonds move closer to par value at maturity baring defaults What is the current default rate for high yield bonds?       Mentioned in this Episode:   Debating what a recession is https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3Je7xqa   Contact Derek [email protected]

Was Bed Bath and Beyond a Gamma Squeeze? How the options market can sometimes drive buying and selling. Plus, Jerome Powell does a short press conference talking tough about taming inflation.     Ryan Cohen option positions in Bed Bath and Beyond What is a Gamma Squeeze? How market makers hedge their book to remain flat When gamma squeezes don’t move the markets Jerome Powell talks tough in his press conference trying to send right message Did markets not understand the fed before? Some recommendations including the Game of Thrones House of Dragons Premiere D.B. Cooper documentary on Netflix     Mentioned in this Episode:   Debating what a recession is https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3Je7xqa   Contact Derek [email protected]

Jay Pestrichelli once again joins Derek Moore whether stocks never make new lows after retracing half a bear market drawdown. Plus, how many in the industry have never see a rising rate environment. Then, deconstructing earnings, profit margins, and revenues to go under the hood and how the US dollar strength plays into all of this.     Have stocks ever went on to new lows after retracing half a bear market drawdown? Looking at the 2000-2002 bear market Reviewing the 2008-2009 great recession Chart crimes Most investment professionals haven’t seen a rising rate environment Relationship between profit margins and earnings Relationship between revenues and earnings Playing devils advocate on net profit margins How the US Dollar strength is affecting earnings Some TV show recommendations     Mentioned in this Episode:   Debating what a recession is https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306   Does a strong dollar pose problems for US companies? https://podcasts.apple.com/us/podcast/is-the-strong-us-dollar-a-problem/id1432836154?i=1000571388439   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3Je7xqa   Contact Derek [email protected]

Derek Moore is back to talk about the difference between diversifiable risk and systematic market risk. Diversification might fail the very time you want it most. The argument for diversification + hedging. Why bonds didn’t act as a diversifier this year.     Diversifiable risk Systematic market risk 2007-2009 Period where diversification failed Why diversification is better than concentrated stock positions Comparing some individual companies vs indexes in 2008 Why bonds failed to diversify during 2022’s bear market How interest rates are the main driver of bond market value changes Why new investors should diversify Comparing single stock volatility to well diversified indices         Mentioned in this Episode:   Download full whitepaper on hedging single stock concentrated risk https://static.twentyoverten.com/5b313bf81c53ec3270915df3/27gJFrs2H/Concentrated-stock-positions-Full-White-Paper.pdf   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Derek Moore is back to discuss the war on share buybacks after a rumored 1% excise tax announcement. What are share buybacks? Why do companies do them? Plus, when you’ll officially here whether we are in a recession.     Recessions are called long after they start NBER Nation Bureau of Economic Research committee dating business cycles What NBER criteria uses to call recessions Are share buybacks good or bad? 1% excise tax on share buybacks Dilution vs anti-dilution of share issuance and share buybacks How share buybacks affect EPS Earnings per Share Walmart share buybacks and net income effects to EPS Amazon has more shares today than in 2006 Employee stock-based compensation and share buybacks How little corporate taxes represent of total revenues of US government Dividend yield vs share buyback yield Total augmented stock yield (buybacks + dividends)     Mentioned in this Episode:   Debating what a recession is and isn’t podcast https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306   NBER business cycles – when a recession or end of recession was called https://www.nber.org/research/business-cycle-dating/business-cycle-dating-committee-announcements   Apple’s buyback yield https://finbox.com/NASDAQGS:AAPL/explorer/buyback_yield   Economic PI site     http://econpi.com/index.php   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Jay Pestrichelli once again joins Derek Moore to discuss the disconnect between the market’s expectation of future interest rate raises and the Fed’s stated intentions. Did the market hear the right things from Jay Powell? How earnings through Q2 have held up and are still growing despite pessimistic calls otherwise. Plus, the debate about what a recession is and is not.     Someone is wrong on interest fed rate raises Debate about what is a recession Why 2 quarters is not a recession How the NBER is the arbiter of official recessions Q2 earnings rise along with revenues despite pessimistic forecasts What happens if inflation is over 8% when release in August? Disconnect between market and inflation Inflation 2x2 and EPS analysis 4 outcomes on EPS and inflation and what it means for markets Post midterm election bounce in the S&P 500 Index? What sectors are growing, and which are declining per Q2 earnings Stagflation discussion Can we really have a recession with low unemployment?     Mentioned in this Episode:   Does a strong dollar pose problems for US companies? https://podcasts.apple.com/us/podcast/is-the-strong-us-dollar-a-problem/id1432836154?i=1000571388439   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3Je7xqa   Contact Derek [email protected]

The US Dollar has been surging (getting stronger) as the Fed is raising rates more than some other countries or regions central bank. So why is a strong dollar problematic? How does a strong or weak US Dollar hurt or help US companies? Derek Moore is back to give some easy to understand examples plus how USD denominated debt from other countries will come under pressure with a stronger dollar.     Why a strong US Dollar can hurt companies Why a weak US Dollar can help companies US Dollar at parity with the Euro How sales in foreign countries are affected by changes in the US Dollar Does FactSet data on Q2 earnings disprove the strong dollar bad for earnings narrative? US companies report earnings in US dollars no matter where their sales are from What is the dollar index? What is the trade weighted dollar index? Exchange rates explained between two countries’ currencies Examples of how changes in currency exchange rates impact sales and costs   Mentioned in this Episode:   Current makeup of Trade Weighted US Dollar Index The Fed - Foreign Exchange Rates - H.10 - Currency Weights (federalreserve.gov)   FactSet earnings and revenues comparison companies with less than 50% of revenue from outside US and companies with greater than 50% of revenues from outside the US https://t.co/ZS4eCCc1v6   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

Michael Lewis wrote the book “The Big Short” that later was turned into a movie starring Christian Bale, Steve Carrell, and Ryan Gosling, Brad Pitt, and Jeremy Strong. The movie focused on 3 different investors who bet against mortgage bonds before the Great Recession and housing market collapse using credit default swaps. Want to get a primer on swaps and how they work before you watch or re-watch the movie?     What are Credit Default Swaps (CDS)? What do bond ratings mean? What are the annual premiums on credit default swaps? How to convert basis points to an interest rate percentage? What is counter party risk? What does Michael Burry use to short housing in the Big Short Movie? How did people bet against the housing market? What does the spread on credit default swaps mean? Using Credit Default Swaps to hedge or speculate   Mentioned in this Episode:   Current Credit Default Swaps Spreads on Sovereign Country Bonds https://www.cnbc.com/sovereign-credit-default-swaps/   Michael Lewis Book the Big Short https://amzn.to/2SNhUr1   The Big Short Movie https://amzn.to/31ROJrc   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr   Contact Derek [email protected]

This week Derek Moore notes the historic start to the year in bonds given the rise in interest rates and how low they were at the beginning of this cycle. Then Derek discusses target date funds. Popular in 401k plans, many investors don’t fully understand what they are and the different types of risks inherent in them.   Historic first half drawdown in the US Aggregate Bond Index What are target date funds? What is the glide path for target date funds? What the intent of target date funds is Why investors might believe they have less risk than they do The 2008-09 experience for investors in target date funds Post Great Financial Crisis hearings on target date funds How target date funds with same date experienced so variation in returns Examining some near-term retirement date funds Chapter 2 from the book Broken Pie Chart and target date funds     Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Public hearings 2009 on retirement target date funds https://www.sec.gov/spotlight/targetdatefunds/targetdatefunds061809.pdf

This week Derek Moore is joined again by ZEGA Financial CEO Jay Pestrichelli to talk about the recent blowups in Crypto and review some contrarian picks that worked and didn’t work. Plus, what is the recent backup in rates in the bond market telling us about the probability of a recession and negative GDP for Q2?   Yields backing off predicting a recession? Flattening & Inverted (once again) yield curve Crypto winter and blowups What is the bond market telling us? Contrarian corner - what has aged well and what has not? Will the earnings story hold up? (Margins, EPS, inflation, inventory) Top Gun movie gets a recommendation       Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s book “Broken Pie Chart” https://amzn.to/3OGm1RG   ZEGA Financial www.zegafinancial.com   Jay Pestrichelli Book “Buy and Hedge” https://amzn.to/3y4wwak   MicroStrategy Bitcoin play https://podcasts.apple.com/us/podcast/is-bitcoin-play-by-microstrategy-ceo-michael-saylor-crazy/id1432836154?i=1000567039227   Podcast 4 R’s recession, rates, reduction of https://podcasts.apple.com/us/podcast/most-telegraphed-recession-ever-the-4-rs-recession/id1432836154?i=1000563145394   Death of 60/40 Portfolio https://podcasts.apple.com/us/podcast/death-of-60-40-portfolio-markets-during-midterm/id1432836154?i=1000555384965   Earnings Multiple expansion vs earnings expansion (or reduction) https://podcasts.apple.com/us/podcast/desconstructing-stock-price-earnings-multiple-expansion/id1432836154?i=1000545436987

This week Derek Moore tries to answer the question of why things like TIPS Bonds (Treasury Inflation Protected Securities) down YTD are even though inflation is up. Plus, golds response to inflation. Finally, can we have a recession with low unemployment plus why Bitcoin thus far has not been an inflation hedge despite claims otherwise.   Why TIPS bonds (Treasury Inflation Protected Securities) were down YTD even though inflation was up Duration risk and interest rate risk for bonds TIPS bonds had negative yield to maturities earlier in the year What about gold as an inflation hedge this year? Bitcoin has proven not to be a good inflation hedge in its first test Bitcoin has traded more like a risk-on asset What questions to BLS surveys use to determine if you are employed or unemployed What is the labor force participation rate? Can we have a recession with low unemployment?       Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   BLS Unemployment – How They come up with unemployment number https://www.bls.gov/cps/cps_htgm.pdf   Marcel Benjamin explains in detail how TIPS bonds work https://podcasts.apple.com/us/podcast/tips-inflation-protected-bonds-explained-interest-rate/id1432836154?i=1000535445537   Marcel Benjamin’s deep dive on High Yield Bonds plus what are Zombie companies https://brokenpiechart.libsyn.com/marcel-benjamin-high-yield-bonds-explained-what-are-zombie-companies

This week Derek Moore discusses the news around MicroStrategy’s leveraged Bitcoin strategy and the impending margin call should Bitcoin close below 21,000. Why would a company put their cash in a volatile asset like crypto? Derek explains the situation and news coverage considering Bitcoin’s recent drop in price.   How much Bitcoin does MicroStrategy hold? How much has MicroStrategy lost on Bitcoin? What is digital asset impairment charge due to Bitcoin drop? Leveraged Bitcoin strategy by Michael Saylor CEO of MicroStrategy Terms of Bitcoin loan When will a margin call occur on MicroStrategy’s collateralized Bitcoin loan? MicroStrategy issued debt including senior notes, convertible notes, and common stock to fund Bitcoin purchases. Why not just buy other stocks (sarcasm) if a company is going to buy a volatile asset like crypto? What about Tesla’s Bitcoin holdings? Did Michael Saylor say to mortgage your house to buy Bitcoin? What is MicroStrategy’s average cost on their Bitcoin holdings?       Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Forbes talks accounting treatment of Bitcoin for companies https://www.forbes.com/sites/shehanchandrasekera/2022/06/01/bitcoins-accounting-treatment-is-artificially-degrading-microstrategys-bottom-line/?sh=c4abb4433e11   MicroStrategy Q4 2021 report https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-announces-fourth-quarter-2021-financial-results_02-01-2022.pdf   MicroStrategy Q1 2022 report https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/events-presentations/Q1-2022_microstrategy-earnings-presentation.pdf   MicroStrategy Bitcoin margin call on loan https://fortune.com/2022/05/04/michael-saylor-microstrategy-margin-call-bitcoin/amp/

This week Derek Moore discusses why Tesla’s 3-1 stock split and Amazons 20-1 stock split don’t really matter except potentially making them eligible to join the Dow Jones Index. Plus, some have made comparisons of the selloff in tech to the 2000 Dotcom crash. As Derek explains, they are different and not similar given the numbers then and now. Finally, Derek gives some surprising data points about who the number one weighted stock was in March of 2000 in the Nasdaq 100 Index. You’ll never guess it!   Who was the highest weighted company in March 2000 in the Nasdaq 100 Index (QQQ)? Comparing companies in the Dotcom crash era to today’s highest weighed tech companies Why this is not a Dotcom 2.0 situation Comparing the forward earnings multiple then and now Is Tesla going into the Dow Jones Index? Will Amazon join the Dow Jones Index? What companies remain in the top 10 QQQ today vs. 2000? Sirius Satellite cumulative 10-year earnings 1990-2000 Why stock splits don’t matter explained Why stock splits do matter given companies were probably already moving higher How the S&P 500 Index and Nasdaq 100 Index weight companies compared to the Dow Jones Index     Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Tesla announces 3-1 stock split https://finance.yahoo.com/news/tesla-stock-split-june-2022-212130185.html   What does Amazon’s 20-1 stock split mean for investors https://www.morningstar.com/articles/1097120/what-does-amazons-stock-split-mean-for-investors

Derek Moore gives an in-depth explanation of each of the components that make up GDP. No, 2 consecutive negative quarters of GDP do not mean a recession! How to use GDP nowcasts to spot trends in GDP and spot recession risks. How the NBER declares recessions and what they look at.   How is GDP calculated? What are components of GDP? What are the most important components driving GDP? Business investment vs consumer spending Government spending is not the most important aspect Explaining Change in Private Payrolls Consumer Spending PCE Residential Investment Non-Residential Fixed Investment Change in Private Inventories Government spending What is the NBER National Bureau of Economic Research How NBER declares recessions Why NBER declares recessions and recoveries after the fact Historical list of recessions   Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Atlanta Fed GDP Nowcast https://www.atlantafed.org/cqer/research/gdpnow?panel=3   BEA contributions to percent change in real gross domestic product https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2&isuri=1&1921=survey#reqid=19&step=2&isuri=1&1921=survey   Podcast most telegraphed recession ever? https://podcasts.apple.com/us/podcast/most-telegraphed-recession-ever-the-4-rs-recession/id1432836154?i=1000563145394   Real GDP precent change historical https://fred.stlouisfed.org/series/A191RL1Q225SBEA   NBER historical recessions https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions   How NBER declares a recession based on 4 or 2 categories https://www.nber.org/research/business-cycle-dating

Derek Moore is back to discuss historical bear markets. How long do they last and how long does it take to get back to previous highs? What lessons can we take from prior bear markets? Are people too pessimistic about the economy? Plus, why the high yield market may be in better shape given the maturity schedule.   How long do bear markets last? How long after a bear market do stocks recover their losses? Are high yield bond underlying companies financially, ok? Did high yield bond companies already refinance into lower rates? When will high yield companies need to refinance when bonds mature? Reviewing some surveys that point to extremely pessimistic investing public Does the length of market declines tell us how long to recover? Explaining what happens when companies’ debt matures What is a call provision on a bond?   Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Historical bear market drawdowns and time to recovery since 1950 https://awealthofcommonsense.com/2022/05/how-long-do-bear-markets-last/

ZEGA CEO Jay Pestrichelli joins Derek Moore to discuss the current economic and market environment. Topics include the 4 Rs Recession, Rates, Reduction of Multiples (PE Ratios), and the conflict in Russia.   Why the Fed raising rates may not help inflation Impact of Walmart and Target earnings results on net profit margin expectations End of 2021 market was pricing in higher margins and growth Earnings so far have held up well Earnings expectations have increased not decreased Why interest rates matter for many putting values on companies and markets Is Russia factored into markets? Everyone is talking recession so is it so obvious people may be wrong? The market continues the 2021 trend in 2022 by reducing the forward PE ratio A detour to explain how a reverse discounted cash flow on Tesla shows in the end its buyers and sellers Retail sales as something to watch in the aftermath of Walmart and Target       Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Jay Pestrichelli’s Book Buy and Hedge https://amzn.to/3wHn1gz   How interest rates affect market valuations https://podcasts.apple.com/us/podcast/why-interest-rates-effect-stock-market-valuations/id1432836154?i=1000561458590   CME Fed Interest Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore explains why commentators on CNBC and Bloomberg have been talking about valuations coming down due to interest rates increasing. Why do interest rates matter to stock valuations? How would you explain it to someone? Plus, how all these inputs are estimates and can change over time.   How to understand the present value of future cash flows DCF or discounted cash flow model Earnings estimates on the market for 2022, 2023, and 2024 Intrinsic valuation of the S&P 500 Index based on different index rates What is the equity risk premium? What is the discount rate? How does the 10-year treasury bond interest rate factor in? What is the terminal rate of growth for markets?       Mentioned in this Episode:   Jurrien Timmer of Fidelity 2-Year Treasury Yield Implied PE vs Forward PE S&P 500 Index https://twitter.com/TimmerFidelity/status/1525190396413894657   Professor Aswath Damodaran S&P 500 valuation estimate worksheet https://aswathdamodaran.blogspot.com/2022/05/in-search-of-steady-state-inflation.html   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Spencer Wright of Halbert Wealth is back on with Derek to discuss what races in the Senate to watch. Predictions for the House to flip Republican or say Democratic. And a way to early look at the 13 Keys to the White House and the state of things as they are now. Plus, what do markets historically do pre and post the midterm elections.   How many 2022 Senate races are considered up for grabs? Reviewing the big edge republicans have in the generic ballot polls. What does win of one or both houses do for the party in power? Why the midterms matter for the stock market. Reviewing the 13 Keys to the White House as they stand now. Discussion of the state of the economy in the short and long term. What historically has happened around midterms in the past for markets? Where can people follow key races? What is the generic congressional polling telling us? How does the economy play into House and Senate races? What will be the impact of inflation on elections?         Mentioned in this Episode:   Updated Senate Consensus predictions map https://www.270towin.com/2022-senate-election/consensus-2022-senate-forecast   Updated House Consensus predictions map https://www.270towin.com/2022-house-election/   13 Keys to the White House predictive model https://pollyvote.com/en/components/models/mixed/keys-to-the-white-house/   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

ZEGA Financial CEO Jay Pestrichelli is back to discuss what asset classes have the best real, after inflation returns historically. Plus, is bad news good news around economic releases as it pertains to chances the Fed can’t raise rates as much? What would a bad Q1 GDP print mean for markets? Then they discuss the volatility regime and touch on talk about recessions by Deutsche Bank.   Does bad news mean good news if the Fed can’t raise rates as much? Talking real after inflation returns historically and how commodities have lagged Deutsche Bank calling for a recession Why raising rates can’t solve supply chain issues but can tamp down demand. Bonds having a bad year With the Q1 GDP announcement what would surprise the markets? Midterm elections and the markets Earnings still growing along with revenues Market multiple re-rating continues       Mentioned in this Episode:   Contact Derek Moore [email protected]   ZEGA Financial www.zegafinancial.com   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Buy and Hedge by Jay Pestrichelli https://amzn.to/3KA40Se   White Paper On Hedging Low Basis Concentrated Stock positions (right hand side to download) https://zegafinancial.com/products/concentrated-stock

Derek Moore explains that drops like Netflix this week are not that rare in single stocks. There are tons of examples, especially around earnings releases. Why do people have concentrated portfolios? Diversification vs. single stocks. Problems with selling low-cost basis stocks. How to hedge large, concentrated positions.     What caused Netflix to drop 35% after earnings? The risk inherent in holding large, concentrated positions in stocks Reasons investors hold concentrated stock positions Low-cost basis concentration reasons versus the YOLO (You Only Live Once) crowd Examining why investment advisors haven’t been able to offer value for concentrated low basis shares The numbers don’t lie when it comes to standard deviation and risk compared to markets Examples of past single day drops after earnings Surprisingly, many stocks are down 40% or 50% from all-time highs Single stock risk versus market risk When diversification on its own failed Why diversification plus hedging works       Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   White Paper On Hedging Low Basis Concentrated Stock positions (right hand side to download) https://zegafinancial.com/products/concentrated-stock

Derek Moore takes listener requests by taking a deep dive into the how and why when it comes to market values of bonds changing. How to understand what duration is and why it matters to measure risk in bonds to changes in interest rates. What about mortgage-backed bonds? Bonds can be confusing, but Derek breaks down the terms so next time you hear someone talking on CNBC you know what they are referring to.   What is a bonds duration in relationship to interest rates? How to calculate a bonds duration. What is negative convexity with mortgage bonds? Why are lower coupon bonds more at risk for changes to interest rates? Why are shorter maturity bonds less susceptible to interest rate risk? How do cash flows from coupon payments effect bond market values? What is the after-inflation calculation for return? What are real returns (after inflation)     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Tips Treasury Inflation Protection securities | Interest Rate Risk and Duration https://brokenpiechart.libsyn.com/tips-inflation-protected-bonds-explained-interest-rate-risk-duration-and-more-with-marcel-benjamin   Senior Loans and Leveraged Loans explained https://brokenpiechart.libsyn.com/dan-mcmullen-talks-senior-loans-leveraged-loans-clos-and-more   High Yield Bonds Explained plus what zombie companies are https://brokenpiechart.libsyn.com/marcel-benjamin-high-yield-bonds-explained-what-are-zombie-companies

Derek Moore gives a contrarian take on the Fed raising rates. What if raising rates causes a major component of the CPI to increase rather than decrease? If the Fed raises rates, mortgage rates rise, demand increases for rents, and owner’s equivalent rents rise? In this episode, Derek explains what is measured in the CPI and explains how OER or Owners Equivalent rent and rents are calculated by the BLS each month.   What percentage of the CPI is housing? How is OER or Owners Equivalent Rent calculated by the BLS? How mortgage rates impact the supply and demand of housing Study showing housing rents increase during monetary contractionary shocks Financing costs for home builders How the construction of housing costs was changed by BLS in 1983 Discussing relationship between mortgage rates and housing prices The type of inflation we are experiencing Supply side vs demand side inflation       Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Study referenced showing housing component rises doing contractionary monetary shocks https://onlinelibrary.wiley.com/doi/full/10.1002/jae.2679   How BLS creates housing data https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf

Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to talk yield curve inversion. What is the yield curve inversion and why do investors care? Plus, reviewing historical precedent on prior yield curve inversions prior to recessions. What is the average time to recession from yield curve inversion? When has it not worked? Later, they discuss inflation’s effect US Large Cap earnings. What are the consequences from higher inflation? What about deflation?   What is the yield curve inversion? Why 10-year US Treasury minus 2-year US Treasury yields are watched by market prognosticators What about the 5 year and 10-year treasury inversion? Reviewing historical yield curve inversions and recessions Idea that inversion alone doesn’t cause a recession without a catalyst What does higher inflation mean for corporate earnings? What does higher inflation mean for net profit margins? Touching on deflation effect on companies     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Jay Pestrichelli Book Buy and Hedge https://amzn.to/3i2UZoL

Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to discuss whether now is finally the death of the 60/40 portfolio? A Bloomberg article points out when 10-year treasury yields move up or through long term channel resistance things happen. Plus, travel back in time to 1982 where we read some expert comments in NY Times article around predictions on interest rates. Finally, how markets have historically done in midterm election years.   Bond yields spike while the curve flattens or inverts What happens historically when the 10-year treasury yield moves to long term channel resistance? Equities during midterm election years Reviewing year to date total returns in US Aggregate Bond Index (AGG) vs the S&P 500 Index (SPY) How bonds may not provide the same protection this time. How housing prices still rose even during a 10-year period of high inflation and rising interest rates. Going to the archives of a 1982 NY Times article when the 30-year treasury yield was pushing 16%     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Jay Pestrichelli Book Buy and Hedge https://amzn.to/3i2UZoL

Derek Moore is back to talk about inflation and how there are some misconceptions about what happens if inflation subsides. At the same time, many things we use are enjoying decades long deflation making them cheaper to use. Hint: long distance calling. Plus, why low interest rates do and don’t cause inflation. Will raising rates reduce oil prices? Supply and demand is still king.   What are some misconceptions around inflation? Inflation coming down is a reduction in the upward rate of change How to inflation adjust prices across periods CPI Consumer Price Index Low interest rates and inflation Discount rate for future earnings in stocks Housing and asset price inflation Oil prices and supply and demand Oil rig counts and inventories Will raising rates cause a recession?     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   CPI Consumer Price Index historical https://fred.stlouisfed.org/series/CPIAUCSL

Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to discuss why volatility remains high. How the VIX Index stays elevated even after the initial reasons subside. What is driving the market pricing of the S&P 500 Index and how it compares to prior 10-year periods. Plus, comparing this high oil price period to prior ones on an inflation adjusted basis.   What are driving returns right now (earnings or multiples) Is the market getting cheap on a forward PE multiple base? Comparing 10-year periods (referencing Sempres Augustus letter) Looking at price inputs like revenues, share count, margins, multiples, and dividend yield Is the embedded volatility premium (VIX Index) here to stay? Discussing oil prices on an inflation adjusted basis When do high oil prices matter? When does inflation matter to the economy and margins for companies? Will CPI released in April for the month of March reveal a +10% YoY? Plus, Derek admits a bad beat on the contrarian corner   Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Jay Pestrichelli Book Buy and Hedge https://amzn.to/3i2UZoL   Sempres Augustus letter (see page 24 for where returns come from) PDF https://static.fmgsuite.com/media/documents/8b3d617a-4dc3-4dec-a621-23b1f6333833.pdf

Derek Moore explains in easy-to-understand terms what risk parity strategies are. Plus, he explains Harry Browne’s Permanent Portfolio and Ray Dalio’s All Weather Portfolio. How standard deviation is used and how some versions use leverage including futures to create risk parity weighted exposure.   What are risk parity strategies? What are All Weather Portfolios? What is the Permanent Portfolio? Equalizing risk via standard historical deviation Using futures to create leveraged notional value What are the risks in a rising rate environment?   Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Derek Moore relays how markets have done historically around geopolitical events. Plus, how being hedged allows investors to stay in the market. Interesting stats on markets 1-year later after drawdowns. It may surprise you. What the latest Russia/Ukraine situation means for inflation and interest rates.   How markets perform around geopolitical events Does the Russia conflict increase inflation risks? Will the Fed raise interest rates less in 2022 now? Energy prices and inflation Commodities rallied in the short term After corrections how do markets do a year later? What percentage of corrections turn into bear markets? Market corrections vs bear markets Historical market returns after worst days, 3-months a year later Probability of Fed ¼ point vs ½ point rate hikes   Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Cleveland Fed Inflation Nowcast https://www.clevelandfed.org/our-research/indicators-and-data/inflation-nowcasting.aspx   Atlanta Fed GDP Now https://www.atlantafed.org/cqer/research/gdpnow   JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/   Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html   CNN Business analysis on inflation with higher oil prices due to Russia Ukraine conflicthttps://www.cnn.com/2022/02/15/economy/russia-ukraine-inflation/index.html)   Mohamed El-Erian from Allianz discusses impact of Russian Ukraine conflict on 2022 Fed interest rate moves https://www.youtube.com/watch?v=Yh-RKSbS_hI&t=22s   Schwab market correction article showing corrections and bear markets since 1974 https://www.schwab.com/resource-center/insights/content/market-correction-what-does-it-mean   Table with market shock events and stock market performance historical https://www.investopedia.com/solving-the-war-puzzle-4780889

Derek Moore explores how stock and bonds have done after the Fed starts raising rates. Is there any difference between when they raise greater than 1% compared to less than 1%? Why people should be surprised in March when February CPI numbers are released. More debate about what caused inflation. Plus, stocks continue to rerate with multiples contracting while earnings are up year to date.   Examining stocks and bonds after the Fed starts raising rates Inflation causes February CPI released in March indicated to be high still by Cleveland Fed Nowcast Supply side vs demand side inflation How fiscal policy contributed to inflation How have high yield bonds done after the Fed starts raising rates Small caps vs large caps after the Fed starts raising rates Cleveland Fed Inflation Nowcast Atlanta Fed GDP Now     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Surprising stock market returns by President, Senate, and House party make up podcast. https://podcasts.apple.com/us/podcast/surprising-historical-returns-by-presidents-senate/id1432836154?i=1000489545724   Cleveland Fed Inflation Nowcast https://www.clevelandfed.org/our-research/indicators-and-data/inflation-nowcasting.aspx   Atlanta Fed GDP Now https://www.atlantafed.org/cqer/research/gdpnow   JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/   Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Jay Pestrichelli, CEO ZEGA Financial, is back with Derek to say congratulations to our government debt reaching $30 Trillion! What are the ramifications of high debt levels? What the interest on that debt could be if rates rise? Does this put pressure on the Fed NOT to raise rates so much? Plus, interest in hedging at the highest levels since April of 2020. Is that a sign of contrarian optimism for the stock market? And contrarian corner is back where we each give some contrarian picks that go against the grain.   US Debt – debt held by the public vs. overall debt How much of the budget do net interest payments make up? Average interest rate US pays on Treasury bonds Effect of rise of 1% in rates to interest payments on debt Political pressure to keep rates down? Treasury bonds do not have call provisions Investors are buying put options Hedging appetite highest since April of 2020 Contrarian Trades Emerging Market Value – Betting Against Too Many Rate Hikes     Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Jay Pestrichelli Book Buy and Hedge https://amzn.to/3uRbuMa   Average maturity of US Treasury debt https://data.nasdaq.com/data/USTREASURY/AVMAT-average-maturity-of-total-outstanding-treasury-marketable-securities   Average interest rate on US Treasuries https://www.treasurydirect.gov/govt/rates/avg/2022/2022_01.htm   Marcel Benjamin explains how TIPS bonds work https://podcasts.apple.com/us/podcast/tips-inflation-protected-bonds-explained-interest-rate/id1432836154?i=1000535445537   JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/   Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore discusses how the recent selloff is due to a multiple contraction rather than an earnings one. How 2021 and now so far in Q1 22 stocks are rerating by shrinking the multiple. Plus, what the shape of the yield curve is telling us in light of expected Fed action on interest rates.   Driver of stock prices multiple declines vs earnings expansion PE Ratios coming down on a forward basis Earnings estimates on the S&P 500 Index for 2022 only shrink nominally What is the yield curve Yield curve steepness vs inversion What the yield curve is telling us about views on continued economic expansion Inversions before recessions Inflation breakeven rates Probability of Fed hikes updated       Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   Marcel Benjamin explains how TIPS bonds work https://podcasts.apple.com/us/podcast/tips-inflation-protected-bonds-explained-interest-rate/id1432836154?i=1000535445537   JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/   Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore discusses how markets have experienced selloffs but many times wind up positive at the end of the year. Plus, answering questions around small caps and the Russell 2000 Index ETF IWM PE Ratio. How the index differs from others in not including negative earnings in the computation. Then, watching latest inventory data reported this week.   Intrayear stock market selloffs vs end of year total returns PE Ratios computation in Russell 2000 Index ETF vs S&P 500 Index PE calculations Most indexes just aggregate all companies earnings Index divisor to convert index market cap to index levels New inventory levels show GDP was buoyied by restocking during Q4       Mentioned in this Episode:   Contact Derek Moore [email protected]   Derek Moore’s Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&   JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/   Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html