You might have read that covered calls are a good way to hedge. They do have utility for investors, but they are not an optimal hedge. Understand how they only minimally reduce the downside while reducing the upside. Plus, see how low interest rates have undermined call premiums.     What are covered calls? How much do covered calls hedge the downside? How do covered calls cap upside moves? Examples of covered calls and the premium received vs. downside hedge What are options collar strategies? What is the option Greek RHO? How option premiums are affected by interest rates Why record low interest rates make covered calls less appealing     Mentioned  in  this  Episode:     Contact Derek www.razorwealth.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

Recently I found several different research pieces showing how at the very lows of the Great Recession in 2009 the percentage of funds in money market funds was at its highest. In 2009 the fund flows to bonds were greater than the previous 5 years combined. So why with equities so cheap did people stay in cash or bonds? Wouldn’t they want stocks when they were cheaper? This highlights how investors who panic an make rash decisions can do so at the very worst times.      Why do investors panic? How does fear guide investor decisions? Percentage of funds in money markets spiked at time of March of 2009 lows Why investors didn’t rebalance out of bonds and into stocks during the great recession 2009 fund flows were a record year for bonds How using Buffered or Hedged Equity Strategies can help reduce fear and irrational choices Benefits of staying invested while hedged Why now is a good time to be hedged     Mentioned  in  this  Episode:     Contact Derek www.razorwealth.com   Morningstar Bond Fund Flows 2009 Chart https://morningstardirect.morningstar.com/clientcomm/2009.pdf   Dalbar Quantitative Analysis on Investor Behavior Report https://www.qidllc.com/wp-content/uploads/2016/02/2016-Dalbar-QAIB-Report.pdf   Podcast talking about markets within 3% of all-time highs 36% of time https://podcasts.apple.com/us/podcast/fear-investing-surprising-data-points-to-markets-near/id1432836154?i=1000443860686   Why diversification fails https://podcasts.apple.com/us/podcast/ep012-does-diversification-alone-reduce-systematic/id1432836154?i=1000423615813   Buffered Equity Strategies https://podcasts.apple.com/us/podcast/adding-downside-buffers-to-investment-portfolios-using/id1432836154?i=1000419699076   Why investors need a hedged equity strategy https://podcasts.apple.com/us/podcast/why-investors-need-a-protective-hedged-equity-strategy/id1432836154?i=1000418366567   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  

You here quite a bit of talk about the top 1% of wealth in the media. But what if it was easier than you think to land yourself into the top 10% of wealth in the United States and across the world? Derek Moore takes you through the numbers explaining what asset levels it takes to get into various percentiles of net worth and runs the numbers on what type of assumed growth rates and contributions it might take over various time periods.   How much net worth does it take to get into the top percentiles in the United States? How would your net worth rate compared to adults around the globe in USD? The power of committing to contributing money monthly over many years Median vs. Mean net worth numbers Using PMT Function in excel to estimate return and contributions needed to get to a level of wealth Discussing Credit Suisse’ Global Wealth Report pyramid How many millionaires are in the U.S. and various countries around the world?   Mentioned  in  this  Episode:   Download Credit Suisse Global Wealth Report 2018 https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com

Post corporate tax cuts of 2018, share buybacks have been talked about both in positive and negative lights. Some think companies should use their free cash flow differently. But how do share buybacks benefit shareholders by boosting earnings per share? Key  Takeaways: What are share buybacks? How share buybacks increase earnings per share or EPS Similarities between dividends and share buybacks How to calculate a share buyback yield versus dividend yield Uses of free cash flow to equity shareholders Share buybacks don’t get taxed at the shareholder level like dividends Share buybacks provide more flexibility compared to dividends for corporations   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Contact Derek Moore www.razorwealth.com    

No one likes paying capital gains tax (although better than losses). Yet what if you were paying on gains only due to inflation where your purchasing power didn’t grow? Recently some U.S. Senators wrote a letter to the Treasury Secretary Steve Mnuchin urging him to consider indexing capital gains for inflation. What would that mean for individual investors?    What would it mean to index capital gains for inflation? Examples showing differences in capital gains tax due when cost basis is indexed for inflation Would it result in opening opportunities to diversify if the tax bill was reduced? How gains due to inflation don’t equate to increased buying power Senator Ted Cruz Coke Stock example showing capital gains due even though loss after inflation adjustment How this could help long time homeowners Can the Treasury just instituted indexing for inflation or does Congress have to pass a law?   Mentioned  in  this  Episode:   Current capital gains rate tables https://www.schwab.com/public/schwab/investing/retirement_and_planning/taxes/current-rates-rules/dividends-capital-gains-tax-brackets   Barron’s article around indexing for capital gainshttps://www.barrons.com/articles/indexing-capital-gains-to-inflation-makes-no-economic-sense-51564833600   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com

Debit and deficits continue to be in the news. This includes funding levels for public state pensions. But what does it mean to be underfunded or overfunded? What discount rate or investment return assumptions are they using and are they realistic? Derek Moore discusses and simplifies what makes up this discussion and ways that they could get on track.   What makes a pension underfunded? Are investment return expectations realistic? Which states are the worst regarding funding levels? Differences between defined benefit plans and defined contribution plans Options for pensions include cutting benefits, raising contributions, or increasing investment returns Differences between public pension discount rates and private corporation’s investment assumptions Pension plans in a low interest rate environment Is there any hope for states to get their funding percentages higher?   Mentioned  in  this  Episode:   State pensions funding gap https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2019/06/the-state-pension-funding-gap-2017#targetText=States%20reported%20a%20total%20liability,funding%20gap%20of%20%241.28%20trillion.   How well funded is your states pension? https://taxfoundation.org/state-pension-plan-funding-2019/   Podcast explaining negative yielding bonds https://razorwealth.com/wacky-negative-yielding-bonds-and-need-for-alternative-income/   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com  

It seems like lately there has been more an more talk about interest rates moving closer to zero in the U.S. So which bonds will move the most when rates move lower (or higher)? Derek talks through various types of bonds and how they are different plus see how to tell how much a change in rates can hurt or help investors holding bonds. We even touch on bond convexity!   How do interest rates change the value of a bond? What is modified duration and how it can project a rise or fall in value? Introduction to bond convexity Unique aspects to U.S. Treasuries, Corporate Bonds, Municipal Bonds, and Mortgage Bonds Callable Bond Features, Puttable Bond Features, and Convertible Bonds How rates moving lower negatively affect mortgage bonds Is the bond trade based on lower rates getting crowded? How low interest rates can help companies   Mentioned  in  this  Episode:   Podcast explaining negative yielding bonds https://razorwealth.com/wacky-negative-yielding-bonds-and-need-for-alternative-income/   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com  

Companies can issue debt via bonds to raise capital. But how can you tell whether they have too much debt issued? What are some key ratios to look at to evaluate for yourself? Derek Moore explains how interest rates effect the cost of capital (WACC) and how to see when a stocks debt is maturing and what interest rates they must pay. And what are Zombie Companies?   Interest Coverage Ratios Debt Ratio (Total Debt/Total Assets) Debit to Equity (Total Debt/Stockholders Equity) WACC Weighted Average Cost of Capital What happens when bonds come due for companies? What are Zombie Companies? Where to find list of a company’s outstanding debt? How low interest rates can help companies   Mentioned  in  this  Episode:   Netflix list of it’s outstanding bonds (page 51) on annual report https://www.sec.gov/Archives/edgar/data/1065280/000106528018000069/q4nflx201710k.htm   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com  

Commentators on CNBC are always opining about whether a market is overvalued or undervalued. But how would you look for yourself to make your own opinion? In this episode Derek Moore reviews the S&P 500 Index earnings per share, forward earnings estimates, PE Ratio, Forward PE ratio, and more. Plus, a review of what composes earnings per share growth including margins, share count, and revenue. Learn how to form you own opinions.   S&P 500 Index Earnings Per Share S&P 500 PE Ratio and Forward PE Ratio Where are we historically on S&P 500 Forward Price to Estimated Earnings? Shiller PE Ratio or CAPE Ratio Earnings Per Share Growth Components: Revenues, Margins, and Share Counts Share Buybacks effect on Earnings Per Share Interest Rate Effects on Discounting Future Earnings Subsequent 5-year annualized returns from various forward PE ratios   Mentioned  in  this  Episode:   Podcast on being an armchair economist https://razorwealth.com/is-a-recession-coming/   JP Morgan Guide to the Markets Report https://am.jpmorgan.com/blob-gim/protected/1383426387662/83456/MI-GTM_3Q19_August.pdf   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com

Lately commentators have been trying to predict the next recession. But what would you look at to try and tell for yourself what the numbers are? In this episode Derek Moore reviews the 5 areas that the NBER per their site uses to develop their criteria to call recessions.    What is a recession? NBER historical list of recessions Real GDP Growth Rate Real Median Income Growth in the U.S.  Unemployment Rate Retail Sales Monthly Growth Rate Industrial Production Index Real versus Nominal Growth Rates   Mentioned  in  this  Episode:   Federal Reserve Bank of Atlanta GDP Now Forecast https://www.frbatlanta.org/cqer/research/gdpnow.aspx   United States Real GDP Growth Rate https://tradingeconomics.com/united-states/gdp-growth   United States Inflation Rate https://tradingeconomics.com/united-states/inflation-cpi   Federal Reserve Bank of St. Louis FRED Retail Sales Monthly growth rate https://fred.stlouisfed.org/series/RETAILMPCSMSA   US Annual Median Real Wage Levels https://fred.stlouisfed.org/series/MEHOINUSA672N   US Real Median Personal Income Levels https://fred.stlouisfed.org/series/MEPAINUSA672N   US Civilian Unemployment Rate https://fred.stlouisfed.org/series/UNRATE   US Industrial Production Index https://fred.stlouisfed.org/series/INDPRO   Atlanta Fed Real Wage Growth Tracker (more updates)  https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx   Atlanta Fed Real Wage Growth by Job Switcher and Job Stayer https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com

How risky is just holding a single stock in a portfolio? Often either through company stock grants or holding company shares for very long periods where it has appreciated investors may wind up holding either a single stock or just a few. This creates single stock risk and has both systematic stock risk and idiosyncratic stock risk. Derek Moore reviews how the volatility via the standard deviation may increase as well as some interesting historical data on Apple stock regarding its annual drawdowns and volatility.   What is concentrated stock risk? What is systematic stock market risk? What is idiosyncratic stock risk? Comparing volatility of single stocks to a market portfolio How many stocks does it take to achieve diversification? How does correlation indicate whether diversification will work? Why diversification fails when markets sell off badly Apple’s annual compounded growth rate performance 1981 through 2008 Apple annual significant drawdowns Apple stock standard deviation from 1981 through 2018         Mentioned  in  this  Episode:   Book: Broken Pie Chart https://amzn.to/31oy1hE   Razor Wealth Management www.razorwealth.com   Study showing single stock volatility compared to market portfolio http://ppca-inc.com/Articles/DiversByNumbers.pdf

Derek Moore explains the theory of time decay in options otherwise known as options theta. How does the erosion of time decay benefit option sellers? Plus, how much do position decay from day to day. How much of a factor is theta time decay relative to other things like volatility and underlying price movement? And how does options time decay work over weekends and long holiday weekends with regard to theta?   Benefits of options time decay to option sellers What is options theta? How much do option positions lose value each day due to time decay? Options weekend time decay (Theta) Should option sellers put on positions prior to weekends and holiday weekends? How much does a short spread position realize option theta each day? Options software utilizing 365-day calendar versus 252-day calendar Why some options software overestimates time decay going into the weekend         Mentioned  in  this  Episode:   Podcast on selling option spreads and volatility https://razorwealth.com/high-probability-options-strategies-explained-podcast/   Razor Wealth Management www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547

Derek Moore and Jay Pestrichelli team up once again to discus how probabilities are used to understand where to sell short options to generate premium. Discussed in this episode are who is on the other side of the short volatility trade, how changes in implied volatility impact expected multiple standard deviations of expected movement, and how value at risk VAR impacts option premiums. Plus, they discuss how professional management adds value especially when option spreads widen and volatility increases.   Using probabilities to generate short high probability option positions Expected underlying index moves based on varied levels of implied volatility How large investment banks take the opposite side of the trade looking to reduce Value at Risk (VAR) Difference between being patient for opportunities versus and always in the market strategy What happens to option spreads when markets sell off? Value at Risk VAR impact on institutional hedging as dynamic volatility hedging increases Why sell options on large diverse indexes as opposed to individual stocks Netflix example of implied volatility right before earnings and expected moves Single stock risk using Netflix and Disney examples of over 10% moves down after announcements           Mentioned  in  this  Episode:   Jay Pestrichelli and Derek Moore talk myths of the 60/40 portfolio https://razorwealth.com/discussing-myths-around-the-classic-60-40-portfolio-part-i/   How are options priced and what is short volatility? https://razorwealth.com/how-are-options-priced-and-what-is-short-volatility-podcast/   What implied volatility on options tells us about stock earnings expectations? https://razorwealth.com/what-the-options-market-tells-us-about-expected-stock-moves-around-earnings/   Razor Wealth Management www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547  

Jay Pestrichelli once again joins host Derek Moore to discuss all things hedging and options. This week they talk through some surprising data Jay compiled that shows markets are within 3% its all-time highs 36% of the time. Many people like to try and time the market thinking markets are too high. Another data set shows often markets never get a pullback during bull runs. Plus, Jay and Derek test out new hedging analogies on the fly to see if they work.   How often are stock markets within 3% of their all-time high? Comparing portfolio hedging to buying car insurance? Comparing the Brooklyn Nets getting 75% of Kevin Durant’s pre-injury game versus their downside risk How often is the market 10% lower one year later study Discussing fear investors have at getting into markets at perceived highs How the hedgers opportunity may let investors buy more lower The Random Walk Theory in stock markets How Random Walk needs and upward bias to fit its narrative How sometimes waiting to buy into markets causes investors to miss out Is it better to lose early or lose late in retirement? The effect withdrawals for income have on portfolios         Mentioned  in  this  Episode:   Jay Pestrichelli and Derek Moore talk myths of the 60/40 portfolio https://razorwealth.com/discussing-myths-around-the-classic-60-40-portfolio-part-i/   Razor Wealth Management www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547

See what factors determine how an option is priced. Whether on a stock index or underlying stock, time, implied volatility, interest rates, dividends, and distance in or out of the money all play a role. Known as the Black-Scholes model, Derek breaks down the inputs and which ones are more significant not only to option premium levels but also changes in price.   Explaining the option greeks Delta, Gamma, Theta, Vega, Rho What is implied volatility and why is it so important in options pricing? How do option premiums decay towards expiration day? What determines whether an option is in or out of the money? How to convert a stock’s implied volatility percentage to expected multiple standard deviation ranges? What does is mean to sell option volatility premium for income?         Mentioned  in  this  Episode:   What the options market tells us about stock moves around earnings releases https://razorwealth.com/what-the-options-market-tells-us-about-expected-stock-moves-around-earnings/   Razor Wealth Management www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547

There are now over $12.5 Trillion dollars outstanding of negative yielding bonds. That’s right, theoretically you are paying some country to lend them money. In reality you don’t write a check twice a year. The idea of a negative yielding bond may not make much sense. Derek Moore will explain how negative yielding bonds work and how much more sensitive (and therefore risk) they are to changes in interest rates. Plus explain how the time value of money is thrown off by these low or negative rates.   How can a bond’s yield be negative? Why would someone buy a bond that has a negative interest rate? How a bonds price being above par might make the yield to maturity negative Does someone really have to write a check to a government if they buy a negative yielding bond? What is the modified duration of a negative yielding bond? Why the time value of money is thrown out off by using a negative or zero discount rate What the after inflation yield or return would be accounting for inflation How alternative income strategies utilizing option premium selling might be an alternative strategy Challenges low or negative bond yields present to investors Is Greece’s 7-year bond yield really lower than the US 7 Year Treasury Bond yield?   Mentioned  in  this  Episode:     Contact Derek www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547                                                                

Want a Bond refresher? Derek Moore talks about how bonds work, what effects prices and rates, and how to look at corporations and their debt.    How do bond ratings work and what do they mean? What is the interest coverage ratio? What is the corporate debt ratio? Differences between government and corporate debt How interest rates effect bond prices What is the yield to maturity? What is the yield to call and why do corporations call bonds early? What is a bonds coupon rate really mean? What is modified duration and how does maturity and coupon rates effect it?   Mentioned  in  this  Episode:     Podcast on US Budget, Debt, and Is it possible to pay for Universal Basic Income? https://razorwealth.com/get-the-facts-to-win-your-debate-around-us-deficits-budgets-and-spending-including-universal-basic-income-ubi/   Podcast where I go into how bonds modified duration affects market values https://razorwealth.com/discussing-myths-around-the-classic-60-40-portfolio-part-i/   Contact Derek www.razorwealth.com   Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547    

Broken  Pie  Chart  |  Episode 31 With  Derek  Moore   Is The Federal Reserve Really That Bad At Long Range Economic Forecasts?   Show  Summary:   In this episode Derek Moore discusses how the Federal Reserve economic survey projections have been off, especially for long run economic forecasts. He also clarifies the difference between the Fed Funds Rate, Discount Rate, and IOER or Interest on Excess Reserves. Plus, Derek explains where to find the probabilities for the Fed Funds rate by looking at the CME Fed Funds Futures.    Should the Federal Reserve even be doing long range forecasting? How St. Louis Fed President James Bullard once left his long-range interest rate dot blank? What is the Federal Funds Rate? What is the Federal Reserve’s Discount Rate? What is the Interest Rate on Excess Reserves (IOER)? What is the Federal Reserve’s Dot Plot? How to find Fed Funds probabilities of interest rate changes Where to find historical Federal Reserve Dot Plots     Mentioned  in  this  Episode:     St. Louis Fed President James Bullard says Fed can’t do long range projections https://theotrade.com/dramatic-shift-feds-bullard-says-fomc-stop-making-long-run-projections/   Fed Funds Futures Probabilities of Rate Cuts or Rate Rises https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html   Federal Reserve Monetary Policy Calendar and Historical Dot Plots https://www.federalreserve.gov/monetarypolicy.htm   Contact Derek Moore www.razorwealth.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

In this episode Derek Moore helps to clarify the difference between a real return (adjusted for inflation) and a nominal return. This is especially important when looking to increase your purchasing power. Plus, Derek simplifies the difference between taking a simple average and a geometric average. The difference may surprise many people.      What is a real return versus a nominal return? What is the formula to calculate an inflation adjusted real return? Difference between a simple average annual investment return and a geometric average annual return How has gold performed as a hedge historically? Gold’s real historical returns including inflation adjusted real geometric returns Gold has gone 30 years plus without providing a positive compounded return Alternatives to using gold include buying broad index-based ETFs and hedging The benefits of using options to hedge downside risk.     Mentioned  in  this  Episode:     Myths of 60/40 Portfolio Podcast https://razorwealth.com/discussing-myths-around-the-classic-60-40-portfolio-part-i/   Part 2 Myths of the 60/40 Portfolio https://razorwealth.com/part-two-discussing-myths-around-the-classic-60-40-portfolio/   How Purchasing Power of the Dollar is Eroding Due to Inflation https://razorwealth.com/how-purchasing-power-of-the-dollar-is-eroding-plus-why-inflation-hurts-investors/   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 is back to join Derek Moore in a discussion around options. Particularly myths around options investing. Why we don’t do individual stock analysis and picking. How someone with low-cost basis in a concentrated stock position can hedge. And are coconut’s more dangerous than sharks?   • Why use Broad Index Exchange Traded Funds for diversification • Why we don’t do complex individual stock analysis • Why doing stock valuation is complex due to making guestimates on the future • What is a concentrated stock position? • What is low cost basis stock position? • Myths around options including that they are only for short term traders and most people only lose money • How to hedge new IPO’s like Uber and Lyft • Synthetic dividend capture option strategies • How to hedge individual stock positions • Are coconuts more dangerous than sharks? • Jay Pestrichelli’s Yahoo Finance TV appearance   Mentioned  in  this  Episode:     Jay Pestrichelli talks options with Yahoo Finance https://zegafinancial.com/blog/jay-speaks-with-yahoo-finance-about-what-volatility-means-for-investors   Do Coconuts kill more people than Sharks? https://www.snopes.com/fact-check/coconuts-kill-more-sharks/   Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Rules-Investing-Minyanville/dp/0132825244   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    

Often investors notice that after an earnings announcement a stock has the potential to move depending on the news. But what type of volatility or movement was expected before the announcement? Using implied volatility, we can look at how option premiums are pricing in potential expected moves. Derek Moore explains how the numbers work and how you can see what a one standard deviation expected move is once you know where to find implied volatilities of the underlying stock or index.    • What is the VIX Index • How does the VIX measure volatility via options premiums on the S&P 500 Index. • What is implied volatility or IV? • What does the implied volatility translate to regarding expected stock movement? • Formula using implied volatility to calculate expected single standard deviation ranges • Why does implied volatility rise sometimes prior to an earnings announcement? • What is the straddle option strategy? • Why long straddle options positions are a more complicated trade than you think. • How to calculate expected one standard deviation ranges for any number of days • What is the VIX futures curve? • Inverted VIX curve   Mentioned  in  this  Episode:   VIX Futures Curve www.vixcentral.com    CBOE VIX Explanation http://www.cboe.com/vix   Podcast on Inverted Yield Curve https://podcasts.apple.com/us/podcast/yield-curve-inverted-plus-explaining-different-ways/id1432836154?i=1000433804263   What is the Yield Curve Inversion and Why People Care Podcast? https://podcasts.apple.com/us/podcast/what-is-the-yield-curve-inversion-and-why-people-care/id1432836154?i=1000418244386

Lately things like the Universal Basic Income (UBI) and Social Security are debated on TV. Commentators throw around numbers and whether a program can be paid for. Plenty of debate on each side but why not understand for yourself where all these numbers are coming from. In this episode Derek Moore covers what makes up the Federal Budget, Tax Revenue, Interest Payments on Debt, and how much something like a UBI would cost so you can decide. Plus, the effect rising rates and increases in debt with have on annual net interest payments as a percentage of the Federal Budget.   • What is the Universal Basic Income or UBI? • How much would a Universal Basic Income cost? • How much is the current US debit held by the public? • What is the annual amount of interest paid annually on the US debt? • What are the mandatory, discretionary, and net interest payments of the US Federal Budget? • How much does Social Security, and Medicaid, Medicare cost? • Difference between total US debt and debt held by the public • What interest rate does the US pay on its national debt? • What percentage of the federal budget does net interest payments on debt make up? • What and when were the largest annual budget deficit in the US? • Effective historical tax rates versus marginal tax rates • How much free cash flow do the largest corporations generate annually? • For each additional Trillion in debt, how much more interest needs to be paid? • For each 1% increase in interest rates, how much do interest payments rise?   Mentioned  in  this  Episode:   Average interest rates on US Treasury Securities https://www.treasurydirect.gov/govt/rates/pd/avg/avg.htm   Annual interest on US debt outstanding https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm   Gross debt versus debt held by the public explanation https://www.crfb.org/papers/qa-gross-debt-versus-debt-held-public   Federal surplus or budget deficit historical chart https://fred.stlouisfed.org/series/FYFSD   Breaking down the 2020 US Federal Budget https://www.thebalance.com/u-s-federal-budget-breakdown-3305789   2010 US Census breakdown of adults 18 and over, 62 and over, and total population https://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf   Historical tax revenue as percentage of GDP by year https://fred.stlouisfed.org/series/FYFRGDA188S   Historical effective tax rate on top 1%  https://taxfoundation.org/taxes-rich-1950-not-high/   Historical top federal income tax bracket rates https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx  

Derek Moore and Jay Pestrichelli are back with part 2 of their discussion around the myths prevalent in the 60/40 portfolio. This week they highlight how bonds with low yields may have even more potential interest rate risk than investors think. Plus, they elaborate on why some diversification strategies fail touching on increased risk of the All-Weather Portfolios and Risk Parity Strategies. Finally, they expand on the “Hedgers Opportunity” where a good hedged equity strategy may allow investors to miss much of a selloff and have a chance at buying more shares when prices are depressed.    • How is sensitivity to interest rates determined for bonds? • How is Modified Duration or Macaulay Duration altered by time to a bonds maturity and coupon percentage rates? • What would happen to bonds prices should interest rates rise? • How interest rates rising would affect the real return for bond investors • What is the All-Weather Portfolio concept? • What are the assets in an All-Weather Portfolio? • Why the All-Weather Portfolio concept may have more risk than before? • Why using historical back testing for All Weather Portfolio Strategies may not pick up future expected returns and risks • What is the Risk Parity Strategy? • How a Risk Parity Strategy leveraging up the fixed income or bond component may have more risk than people think • How changing correlations between equities and bonds could break the Risk Parity Strategy • What is the Hedgers Opportunity and how a good hedged equity strategy can allow potential investments and lower prices? • How alternative strategies like Hedged Equity have more defined outcomes including downside floors than normal diversification. • Discussion of real versus nominal returns   Mentioned  in  this  Episode:   Part I Podcast Myths of the 60/40 Portfolio with Jay Pestrichelli and Derek Moore http://brokenpiechart.libsyn.com/discussing-myths-around-the-classic-6040-portfolio-part-i   Contact Derek Moore www.razorwealth.com    The Hedgers Opportunity by Jay Pestrichelli https://www.investmentnews.com/article/20190401/BLOG09/190409991/the-hedgers-opportunity   Historical Gold Prices https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM#0   How do Treasury Inflation Protected Securities TIPS work? https://www.thebalance.com/how-do-tips-work-417128

You’ve probably heard about the so called “Unicorn” IPOs or Initial Public Offerings on CNBC. With Lyft already public and Uber, Pinterest, Air B&B, and more on the way, everyone will finally get a glimpse of the financials for all these names. Do they make money? How much or if they lose money, how big is the loss? For those looking forward to finally getting a look inside these companies it can be like Christmas morning. We’ll review what information is disclosed and then compare Amazon and Pets.com S-1 information from back in the late nineties.     • What is an S-1 filing by a company slated to do an IPO • What type of information can be gleamed from a firms S-1 • Reviewing Risk Factors, Use of Proceeds, Revenue, Earnings, and Balance Sheet date. • Using Lyft’s S-1 to review various financial metrics • Remember the sock puppet Pets.com from the Dot.com era? A look back at their interesting risk factors from S-1 • What were some risk factors from Amazon’s initial public offering S-1 document? • When will Uber’s financials via their own S-1 be available?   Mentioned  in  this  Episode:   Uber’s S-1 Financials https://www.sec.gov/Archives/edgar/data/1543151/000119312519103850/d647752ds1.htm   Lyft S-1 Document https://www.sec.gov/Archives/edgar/data/1759509/000119312519059849/d633517ds1.htm#toc633517_7   Pets.com S-1 IPO document https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=1440847   Amazon S-1 IPO document https://www.nasdaq.com/markets/ipos/filing.ashx?filingid=1249014

For years you’ve been told that to get better risk adjusted returns you should diversify with some percentage in stocks and some in bonds. Yet when you look at the inflation adjusted annualized returns, is the idea of a 60/40 portfolio to manage downside risk more of a myth? In this interesting conversation Derek Moore and Jay Pestrichelli discuss why bonds may not offer much of a real return given where rates are. Plus, they delve into whether a 60/40 portfolio offers better risk adjusted returns using classic measures like a Sharpe Ratio. Also, is gold still a modern hedge in portfolios? Stay tuned for Part II coming soon.   • Exploring historical real returns on a classic 60/40 stock and bond portfolio. • How real returns after inflation are determined and whether historical bond returns offer much growth • Has gold been an effective hedge of downside moves and inflation given its periods of negative real returns? • Historical risk adjusted returns measured by Sharpe Ratios  • If a portfolio of stocks and bonds is so good, why does it have theoretically subpar Sharpe Ratios? • What are TIPS (Treasury Inflation Protected Securities) and how do they hedge inflation? • Real versus Nominal returns for stocks and bonds • Why investors need to not only keep up with inflation but exceed it to grow purchasing power • How using options to define downside risk may be a more optimal hedge  • Introduction to the concept of Buying and Hedging a market with a defined downside floor.   Mentioned  in  this  Episode:   Contact Derek Moore www.razorwealth.com    The Hedgers Opportunity by Jay Pestrichelli https://www.investmentnews.com/article/20190401/BLOG09/190409991/the-hedgers-opportunity   Historical Gold Prices https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM#0   How do Treasury Inflation Protected Securities TIPS work? https://www.thebalance.com/how-do-tips-work-417128

The yield curve has inverted. Well it did at certain points last December already. Now that the 3-month Treasury Bill yield went above 10-year yields, historically what does that mean? Has the yield curve inversion predicted every recession and if so how long in advance? Plus, calculated annualized returns doesn’t need to be that complicated right? Learn the differences in annualizing using simple averages versus geometric compounded averages. Finally, how do you calculate a real inflation adjusted return?   • Yield Curve Inversion: 3-month Treasuries yields higher than 10-year yields? • How long historically has yield curve inverted prior to recessions? • Difference between Fed Funds rate, Discount Rate, and IOER or Interest on Excess Reserves • What are real returns versus nominal returns • Why is it potentially bad for short term bond rates to be above long-term rates? • Why do people think yield curve inversions are bad? • How to calculate simple average of annual investment returns • How to calculate real inflation adjusted investment returns? • Geometric annualized returns calculation and use   Mentioned  in  this  Episode:   Federal Reserve Bank of Cleveland Yield Curve article https://www.clevelandfed.org/our-research/indicators-and-data/yield-curve-and-gdp-growth.aspx   Podcast Explaining What Yield Curve Inversion Means https://www.iheart.com/podcast/269-broken-pie-chart-29878781/episode/what-is-the-yield-curve-inversion-29880275/

You’ll often hear things like “The US Dollar is losing purchasing power”. But what exactly does it mean when the dollar loses value? In this episode Derek Moore will explain how to calculate dollar purchasing power over time and how to adjust for inflation the costs of good and services. Plus, why inflation is so hurtful to investors.   • How does inflation affect retirement investors? • How do you inflation adjust something? • Why a dollar in 1800 is only worth a little less than 7 cents today • What are real returns versus nominal returns • What was hyperinflation in Zimbabwe and Weimar Germany? • Average annual inflation over several time periods. • What is the CPI or Consumer Price Index basket of goods indicator? • Formula to inflation adjust current year dollars to a previous year • How to explain the loss of purchasing power in the dollar • Inflation adjusted costs of goods and services 1976 to 2016 • Inflation adjusted cost of New York Yankees box seats in 1976   Mentioned  in  this  Episode:   Federal Reserve Bank of Minneapolis estimated inflation from 1800 to 2018  https://www.minneapolisfed.org/community/financial-and-economic-education/cpi-calculator-information/consumer-price-index-1800     CNBC article comparing various costs from 1976 to today with purchasing power https://www.cnbc.com/2018/04/17/how-much-more-expensive-life-is-today-than-it-was-in-1960.html   Federal Reserve Bank of Minneapolis inflation calculator (bottom right of page) https://www.minneapolisfed.org/

Have you ever watched CNBC or Bloomberg and wondered what commentators are talking about with earnings and valuations on individual stocks? Derek Moore explains common financial metrics and ratios to help listeners become informed and how to interpret things like PE Ratios, Earnings, EBITDA, and more. Plus, hear what back testing is and pros and cons of it. Key  Takeaways: • What is the difference between top line and bottom line in an earnings report? • How to calculate what a company’s market cap is? • What makes up the PE Ratio and how to calculate it? • Where to look to see how much debt a company has and its net interest rate on debt? • Dividend Discount Model versus Free Cash Flow Valuation • What is free cash flow of a stock? • Dividend payout ratios versus retention or plowback ratios on reinvested growth • What is EBITDA and what is amortization and depreciation? • What is backtesting investment strategies? • Pros and cons of backtesting   Mentioned  in  this  Episode: See stock earnings financials and ratios www.marketwatch.com    Podcast comparing hedging portfolios to efficient frontier portfolios https://www.stitcher.com/podcast/broken-pie-chart/e/58410386

In this episode Derek Moore explains the one benefit most investors overlook as a very important benefit of using a hedged equity strategy. The benefit of reinvesting avoided losses or hedging profits to pick up more shares while markets are lower. Key  Takeaways: • If you lose this much, how much is needed to get back to breakeven level? • Benefits of using a hedged equity strategy • How hedged equity can take out some guesswork on timing the market. • Explaining how monetizing hedging profits or avoided losses can buy more shares at market lows. • Expected returns depending on annual market return. • How avoided losses or hedging profits can bee reinvested at lower levels • What are the historical occurrences of market returns between certain ranges? • How reinvesting hedging profits potentially allows for more upside capture in market rebounds.   Mentioned  in  this  Episode:   Jeremy Seigel “Stocks for the Long Run” book https://amzn.to/2GVctSC   Robert Shiller “Irrational Exuberance” https://amzn.to/2BNQGJf   Broken Pie Chart Book by Derek Moore https://amzn.to/2COXRAS   Podcast on hedging for protection https://razorwealth.com/why-investors-need-a-protective-hedged-equity-strategy/

In this episode Derek Moore discusses situations where investors might own a concentrated position in one stock or more with low cost basis. These present difficulties as selling would incur tax consequences however owning non-diversified positions pose significant single stock downside risk. Key  Takeaways: • What is a concentrated stock position? • What are the risks of single stock holdings versus diversified portfolios? • Tax consequences of trying to diversify low cost basis positions. • Explaining options to hedge the downside and build protection on individual positions. • Ways to hedge portfolios using beta weighting to design downside protection. • How avoided losses or hedging profits can bee reinvested at lower levels • How hedging profits can enable investors to diversify into other strategies.   Mentioned  in  this  Episode:   Broken Pie Chart Book by Derek Moore https://amzn.to/2COXRAS   Podcast on How Diversification Can Fail When You Need It Most https://razorwealth.com/does-diversification-alone-reduce-systematic-stock-market-risk/     Podcast on hedging for protection https://razorwealth.com/why-investors-need-a-protective-hedged-equity-strategy/

In this episode Derek Moore discusses what Modern Portfolio Theory (MPT) and Efficient Frontier Investing means and how traditional investment risk rely heavily on standard deviation and variance to determine where a portfolio fits into a risk metric. Plus, Derek comments on how positive upside returns can actually increase traditionally used investment ratios like Sharpe. Key  Takeaways: • What is Modern Portfolio Theory • What is an Efficient Frontier Portfolio? • How is investment portfolio standard deviation calculated? • Easy ways to understand standard deviation using simple three-day temperature example • Explain what a risk adjusted return means in relationship to portfolio returns and volatility • Problems with traditional portfolio design especially given low bond yields • Why being long markets while being hedged may be more optimal for investors near retirement? • How Sharpe Ratio may get worse after strong upside market move. • Alternatives such as post-modern portfolio theory only considering downside deviation.    Mentioned  in  this  Episode:   Broken Pie Chart Book by Derek Moore https://amzn.to/2COXRAS   Target Date Funds https://razorwealth.com/podcast-target-date-investment-funds-good-bad-or-just-misunderstood/   Modern Portfolio Theory (MPT) + Efficient Frontier https://www.investopedia.com/terms/e/efficientfrontier.asp

In this episode Derek Moore discusses the various ways the Federal Reserve through its FOMC committee utilizes interest rates, buying or selling bonds, and the banks reserve ratios to increase or decrease the money supply. Plus, when pundits on CNBC, Blooomberg, or Fox Business talk about probabilities of future rate decisions, how do they come up with those and where to find them. Key  Takeaways: • What are Fed Funds Futures? • How are Fed Funds Futures utilized to determine probabilities of future months interest rate decisions? • What is the difference between the Fed Funds Rate, Discount Rate, and IOER or Interest on Excess Reserves? • What is the Federal Reserve’s Dot Plot and where to find this so-called Dot Plot? • Where to find current probabilities of the Fed raising or lowering interest rates by month • Why are interest rates important to the economy and stock prices? • Who makes up the FOMC or Federal Open Market Committee • How often are FOMC meetings held? • What is Interest on Excess Reserves (IOER)   Mentioned  in  this  Episode:   CME Fed Funds Watcher Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html   FOMC Dot Plot Graph https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html   Tracking Changes to Federal Reserve Fed Funds Probabilities https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html   Effective Fed Funds Rate % Chart From Federal Reserve Bank of St. Louis or FRED https://fred.stlouisfed.org/series/DFF#0   FOMC Meeting Calendar https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm  

In this episode Derek Moore is joined by Jay Pestrichelli, Founder of ZEGA Financial and author of Buy and Hedge: The 5 Iron Rules For Investing Over the Long Term, to discuss how if a bear market materializes clients using a hedged equity strategy have already planed for it and have defined downside floors in portfolios. While not predicting themselves what markets will do, Jay and Derek discuss the features and benefits of limiting downside, participating in the majority of the upside, while having the ability to reinvest at much lower levels should the market selloff materialize. Key  Takeaways: • How investors using a hedged equity strategy are prepared for a bear market should it materialize • What is a hedged equity downside limiting strategy? • What is the difference between an investment strategy that has a downside buffer versus a downside floor? • How the risk profile is swapping equity risk and volatility for fixed income (bond) risk • Why people with hedged equity strategies might want the market to continue down • How a good hedged equity strategy avoids losses and has ability to reinvest those avoided losses in more shares • How hedged equity strategies give investors piece of mind and sometimes called the “sleep at night portfolio” • The difference between holding short duration bonds to maturity versus longer maturity dated vehicles • Hedging not only the equity portion but hedging the hedges when it comes to high yield • Comments around recessions and how sometimes the crowd is wrong when everyone says there is going to be a recession • How using hedged equity strategies like “Buy and Hedge” can reduce fear about investing at the wrong time in markets. • How the fixed income portion of the portfolio has been performing in 2018 Mentioned  in  this  Episode:   Article by Jay Pestrichelli “This selloff is what you prepared for” http://zegafinancial.com/2018/12/18/this-sell-off-is-what-you-prepared-for/   Article by Derek Moore “Buy and Hedge Fixed Income Update” http://zegafinancial.com/2018/12/14/buy-and-hedge-retirement-fixed-income-update/   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Welcome to the Broken Pie Chart Podcast Episode 15. In this episode Derek Moore discusses the often-misunderstood target date funds prevalent in many workers 401k accounts and whether they are a good or bad idea especially given their drawdowns during the 2008 financial crisis. Key  Takeaways: • What are target date funds? • How did target date funds do during the 2008 market? • What was performance so different between some target date funds during financial crisis? • What is the purpose of target date funds in retirement accounts? • How target date funds are really just age-based asset allocations adjusted as a person ages. • What are the drawbacks of target dated funds? • Why are target date funds so misunderstood? • How do target date funds compare with college saving accounts and 529 plans? • How target date funds do not take into account outside assets when making allocations • Understand why target date funds may not allow for more personalized advice • Did Congress really hold hearings about target date funds post the Great Recession? • What is the target date glide path and asset allocation adjustment schedule? • Target Date funds do not have embedded downside protection  • What are alternatives to target date funds? • What was the target date surprise?   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Report From Committee on Aging Congressional on Target Date Funds https://www.govinfo.gov/content/pkg/CPRT-111SPRT53067/html/CPRT-111SPRT53067.htm

In this episode Derek Moore discusses the concept of Risk-Adjusted Returns, Standard Deviation of Returns, Sortino Ratio, Risk Free Interest Rates. Plus, how to compare two investment returns against one another on a risk adjusted basis and why many investors might be using the wrong investor benchmarks against their portfolios. Key  Takeaways: • What are risk adjusted investment returns? • What is the standard deviation of investment returns? • What is the Risk-Free Interest or Discount Rate? • Why do people use Treasury Bills or Treasury Bonds as the Risk-Free Rate? • What is the Sharpe Ratio? • How is the Sharpe Ratio calculated? • How is the Sharpe Ratio different than the Sortino Ratio? • How larger than expected upside investment returns can actually raise the standard deviation of portfolios • The pitfalls of using past historical returns to try and evaluate expected returns • Why do many investors always use the S&P 500 Index as the benchmark? • What would be a more appropriate way to choose investment benchmark indexes for comparison?   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Sortino Ratio https://www.investopedia.com/terms/s/sortinoratio.asp   Sharpe Ratio https://www.investopedia.com/terms/s/sharperatio.asp

Welcome to the Broken Pie Chart Podcast Episode 13. In this episode Derek Moore is joined by ZEGA Financial Founder Jay Pestrichelli to discuss volatility as an asset class, implied volatility, the VIX Index and more. Key  Takeaways: • What is the VIX Index? • Volatility Indexes for the Nasdaq 100 VXN and the Russell 2000 Index RVX • How is the VIX Volatility Index constructed? • What is implied volatility vs historical volatility? • How implied volatility looks to predict perceived potential trading ranges for underlying assets • Options premium pricing around earnings and other events • Probability based credit spread selling strategies • How probability calculations illustrate options market perception of 1 standard deviation and 2 standard deviation moves • Benefits of adding alternative income strategies such as short volatility to potentially provide income compared to bonds • How selling deep out of the money credit spreads can potentially generate returns in up, down, or flat markets • Differences in ZEGA’s High Probability Options Strategy compared with the ETFs and funds shorting volatility using VIX Futures and options • Thoughts around the “Volpocalypse” or “Volnado” when funds shorting volatility ran into trouble • How risk management in selling volatility is key and picking spots to tactically enter markets increases probabilities   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2TaBmO5

Welcome to the Broken Pie Chart Podcast Episode 12. In this episode Derek Moore discusses why diversification alone may not reduce systematic material stock market risk using the backdrop of the 2008 Financial Crisis. Plus, potential solutions using real hedging in portfolios. Key  Takeaways: • What are the two main types of stock market investment risk? • What is single stock or concentrated stock risk? • What is systematic market risk? • What is diversifiable stock risk?  • Why spreading investments between sectors or regions may not reduce risk in a material correction • Comparing investment returns during the 2007 to 2009 peak to trough in areas of the market • What typical advice from “experts” you tend to hear during market selloffs  • How dividend paying stocks only provide so much protection against market selloffs • Strategies that have embedded hedges, floors, or buffers to reduce stock market risk • How bonds low interest rates may make them less appealing as a stock market hedge • Alternative investment strategies to manage systematic risk in markets   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Mark Cuban says “Diversification is for idiots” https://www.youtube.com/watch?v=u5Pp1HEKSPM   Episode Talking About Buy and Hedge Strategies https://player.fm/series/broken-pie-chart/why-investors-need-a-protective-hedged-equity-strategy

Welcome to the Broken Pie Chart Podcast Episode 11. In this episode Derek Moore discusses how changes in interest rates affect not only obvious things like car loans and home loans but also potential stock market and stock valuations. How does a higher discount or interest rate change the present value of earnings? Key  Takeaways: • How Do Higher Interest Rates Potentially Affect Stock Valuations? • What is the Discount Rate? • How Do Interest Rates Affect the Value of Future Earnings or Cash Flows from Companies? • How Do Interest Rates Affect the Present Value of Payments? • Why Net Present Value Changes Depending on Higher Discount or Interest Rates • Comparing the Value of Future Earnings Across Various Interest Rates • Difference in Home and Car Loan Payments Depending on Interest Rates • Fundamental Analysis and Interest Rates • What is Free Cash Flow? • How the Fed Keeping Rates Low Encouraged Investments That Otherwise Wouldn’t Qualify • Interest Rates Rising Effect on Bonds   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Buffett Indicator https://razorwealth.com/the-buffett-indicator-explained/

Welcome to the Broken Pie Chart Podcast Episode 10. In this episode Derek Moore discusses some economic indicators that matter to investors. Many people hear the terms GDP, Inflation, Unemployment, and the Fed Funds Rate but aren’t exactly sure what they really mean. We look to deconstruct these popular indicators and show how they are important to investors. Key  Takeaways: • What is Inflation and the Consumer Price Index or CPI? • What is GDP (Gross Domestic Product)? • What is the difference between real and nominal returns and indexes? • How is unemployment in the US constructed? • Who gets included and excluded from unemployment numbers? • Does people working two jobs impact the unemployment figures? • Hedonic adjustments to CPI  • How CPI uses substitutes to put in and take out items from the basket • How the economic indicators can help determine future Fed Funds changes • Nominal versus Real GDP • Employment indicators like Quit Rate and Labor Force Participation • Measuring Wage Growth in the economy • How Social Security cost of living adjustment or COLA is calculated? • When is GDP number released?   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Real GDP Growth Rate https://fred.stlouisfed.org/series/A191RL1Q225SBEA   Unemployment Rate https://tradingeconomics.com/united-states/unemployment-rate   US Atlanta Fed Wage Growth Tracker https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx?panel=1   Atlanta Fed GDP Now Forecast https://www.frbatlanta.org/cqer/research/gdpnow.aspx   CPI All Urban Consumers https://fred.stlouisfed.org/series/CPIAUCSL   Inflation Rate https://tradingeconomics.com/united-states/inflation-cpi   Shadow Stats Alternative Inflation Charts http://www.shadowstats.com/alternate_data/inflation-charts  

Welcome to the Broken Pie Chart Podcast Episode 9. In this episode Derek Moore discusses the relationship between bonds and interest rates. Plus, what everyone gets wrong when pointing to bond returns during the late seventies when interest rates were rising and how returns weren’t that bad. While we can’t predict where interest rates will go, we certainly can learn a lot about what drives bond market values regarding interest rates and how a spike in rates now would be different from the nineteen seventies version Key  Takeaways: • What is the inverse relationship between interest rates and bonds • Explaining bond par value, coupon interest payments, payment frequency • How much bond market values are impacted by changes up or down in interest rates • Understanding how Macaulay Duration and Modified Duration can show how sensitive bonds are to changes in rates • Examining article from New York Times February 1982 when 30 Year Treasury Bonds yielded nearly 15% • What the media is missing when saying bonds returns during 1970 to 1982 period weren’t that bad? • How higher coupon interest payments and lower modified duration buffered against larger losses in the seventies • Nominal returns versus real returns when accounting for inflation • How in the long run total returns from bonds are driven mostly by the coupon interest payments? • Discussing present value of future interest payments regarding bond principle repayment risk. • US Aggregate Bond Index AGG movement thus far in 2018   Mentioned  in  this  Episode:     Global Bond Yields http://www.wsj.com/mdc/public/page/2_3022-govtbonds.html   1982 New York Times Article Archive All Time High In Bond Yields https://www.nytimes.com/1982/02/05/business/record-set-on-30-year-us-bonds.html   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   US Aggregate Bond Index Returns vs S&P 500 Index Returns 1980-2017 https://www.thebalance.com/stocks-and-bonds-calendar-year-performance-1980-2013-417028   Current US Treasury Bond Yields as well as Modified Duration http://www.wsj.com/mdc/public/page/2_3022-bondmkt.html

Welcome to the Broken Pie Chart Podcast Episode 8. In this episode Derek Moore reviews the so-called Buffett Indicator as well as the Shiller PE Ratio. With markets once again at all-time highs we are seeing some various articles and commentary on how to tell what market valuations might be considered too high or low.  Key  Takeaways: • What is the Warren Buffett Indicator? • How is the Buffett Indicator calculated? • Where to find the Nominal GDP and market cap to use to calculate the Buffet Indicator • How do interest rates affect stock market valuations? • Present value versus future value of future earnings estimates • What is the Shiller PE Ratio? • How is the Shiller PE Ratio Calculated? • Rolling average of S&P 500 Index earnings vs current PE Ratio • Possible solutions to protecting downside market moves • How valuation indicators may or may not predict future market moves   Mentioned  in  this  Episode:     Razor Wealth article explaining Buffett Indicator https://razorwealth.com/the-buffett-indicator-explained/   Fortune Article http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm Nominal GDP https://fred.stlouisfed.org/series/GDP Wilshire 5000 Full Cap Price Index https://fred.stlouisfed.org/series/WILL5000PRFC Nonfinancial corporate business; debt securities; liability, Level (NCBDBIQ027S) https://fred.stlouisfed.org/series/NCBDBIQ027S Shiller PE Ratio http://www.multpl.com/shiller-pe/   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Welcome to the Broken Pie Chart Podcast Episode 7. In this episode Derek Moore is joined by Alpha DNA Founder Wayne Ferbert to discuss how they are using big data, machine learning, digital internet analytics, and proprietary algorithms to detect changes in consumer demand which can lead to pinpointing earnings surprises in a universe of 3000 companies across various market caps. These changes in trends seen by analyzing the digital internet footprint looks to determine whether companies’ quarterly earnings announcements will surprise the street and by how much. Wayne also discusses turning these high-level analytics into investment strategies including a long/short version and a best picks strategy. Key  Takeaways: • The early ways institutions tried to generate alpha including overhead parking lot photos at Walmart and satellite photos of oil tankers • How analyzing internet data can identify changes in trends and potential earnings surprises • The complexity of turning raw “big data” into something usable  • How the Internet Advantage Strategy (IAS) Long/Short looks to own the best companies and short the worst ones to minimize systematic market risk • The goal of delivering alpha through Alpha DNA’s Best Picks Strategy • How analyzing the hidden demand trends can help to find edges in earnings forecasting • Discussing the Harvard Business Review article around measuring digital strength of a company versus its market cap • Opportunities for companies to increase their digital footprint • How President Trump’s comments about going to a twice a year earnings release versus quarterly might affect company forecasts.  • What effect if any the recent Facebook data controversy might have in the ability to continue to utilize internet data in their strategies   Mentioned  in  this  Episode:     Harvard Business Review Article https://hbr.org/2017/09/are-you-accurately-measuring-your-companys-digital-strength   Alpha DNA www.alphadnaim.com   Buy and Hedge Book by Wayne Ferbert and Jay Pestrichelli https://amzn.to/2xcfeZv   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Welcome to the Broken Pie Chart Podcast Episode 6 Adding Downside Buffers to Investment Portfolios Using Options. In this episode Derek Moore is again joined by Jay Pestrichelli, founder of ZEGA Financial and co-author of the book Buy and Hedge to discuss using options to create positions which control but don’t own shares of stock market indexes. These positions have the goal of providing upside greater than the market while installing a downside buffer down to a certain level in case markets sell off. Also discussed is the idea of using fixed income as a funding source via dividends to pay for long stock ownership. This switches the risk from an un-buffered long stock profile to more of a short duration high yield fixed income risk profile.   Key  Takeaways: • What are long stock portfolios with embedded downside buffers? • How are options utilized to reduce risk by building a synthetic long stock position? • Targets of utilizing a Buffered Index Growth strategy include greater upside participation. • Targets also include not participating in the first roughly 25% down moves in markets thus providing a buffer. • Understanding frequency and size of downside market moves. • Why everyone doesn’t adopt a Buffered Indexed Growth strategy • How a portfolio has the goal of shifting from a stock risk profile to a fixed income risk profile. • How short duration fixed income (bonds) can perform in various market conditions • Why losing less in a stock portfolio leads to potentially growing more over time • Those within 10 to 15 years of retirement may need more growth but can’t take more un buffered, un hedged equity risk • Bonds usefulness at low interest rates in portfolios may not be as helpful as they once were   Mentioned  in  this  Episode:     Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2xcfeZv

Welcome to the Broken Pie Chart Podcast Episode 5 Do Presidential, Senate, and House Party Affiliations Really Impact Stock Market Returns? In this episode host Derek Moore takes listeners through historical S&P 500 Index Total Returns back to 1923 matched up with the President, whether they were republican or democratic, as well as the party affiliation of the senate and house. Many might be surprised at the results when Derek explains the annual average stock market returns by various combinations of control. Plus, see how Presidents back 96 years average annual stock market returns have faired against one another. Including Presidents Coolidge, Hoover, FDR, Truman, Eisenhower, Kennedy, LBJ, Nixon, Ford, Carter, Reagan, G.H. Bush, Clinton, G.W. Bush, Obama, and Trump. Plus, see which presidents have enjoyed the best annual non-seasonally adjusted Gross Domestic Product (GDP) growth on an annual basis.    Key  Takeaways: • What are the stock market historical results by past presidents? • How does the market do when comparing republicans to democrats? • How does the stock market perform when republicans or democrats control the presidency, senate, and house? • What are historical market returns based upon combinations of party’s president, senate, and house? • The time a president takes office in an economic cycle may have more to do with results • Should the Federal Reserve of the President get more credit for the stock market and economy? • Role of inflation and interest rates in stock market returns • What was President Obama’s average annual GDP growth rate non-seasonally adjusted? • How does Trump’s GDP annual growth rate in 2017 compare to past presidents? • Compare historical per president average annual GDP growth rate.   Mentioned  in  this  Episode:   Article Showing Historical S&P 500 Returns by President, Senate, and House Party https://razorwealth.com/do-presidents-and-the-congress-really-impact-stock-market-returns/   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Welcome to the Broken Pie Chart Podcast Episode 4 Hedged Equity and Protective Investment Strategies. This week host Derek Moore , author of Broken Pie Chart, is once again joined by Jay Pestrichelli of ZEGA Financial and author of Buy and Hedge. Investors often miss out because of staying un-invested for fear of large market drawdowns or try to pick the absolute market top and sell too early. Derek and Jay have a lively discussion around what exactly strategies that hedge downside risk are and how they may solve some dilemmas for investors. They also examine how the trick is shifting equity risk for more short duration fixed income risk while keeping the cost of downside protection low. Later they discuss how investors often want insurance at the very worst times when it costs the most while shunning the idea for protective strategies when they are the cheapest to put on. Learn how investors can look to have the goal of capturing much of the upside in markets while eliminating most of the downside.      Key  Takeaways: • What are hedged equity strategies? • How do investment strategies protect the downside in portfolios? • Why do investors suffer from fear and greed? • Why simply getting long equities and buying puts is only half the story. • Derek Moore highlights parts of the book Buy and Hedge explaining who hedges work in portfolios • Jay Pestrichelli elaborates on the crafty change from Buy and Hold to Buy and Hedge • Are bonds and thus the old 60/40 portfolios a thing of the past? • Why investors within 10-20 years of retirement might need more growth that they think • When markets sell off substantially, it all goes down • Derek Moore elaborates on the chapter Why Diversification Fails from his book Broken Pie Chart • Later Jay and Derek discuss various approaches which offer only soft hedges and floors rather than hard floors. • Finally, they tease a future episode with a short introduction to providing downside buffers in portfolio strategies   Mentioned  in  this  Episode:   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2P3gw17

Welcome to the Broken Pie Chart Podcast Episode 3 Short Volatility. In this episode Derek Moore and guest Jay Pestrichelli discuss the emergence of short volatility strategies. How selling option premium with short put spreads and short call spreads can potentially generate income. With the low interest rate environment bonds are experiencing, will short volatility strategies start nudging fixed income’s place in many portfolio pie charts? We also discuss how sometimes the VIX Index is mistakenly thought of as the only way to play volatility and how VIX strategies differ from other short volatility strategies.      Key  Takeaways: • What are short volatility strategies? • Selling put and call credit spreads to generate income. • Should short volatility strategies be part of portfolios given low bond interest rates? • What is the VIX index? • Why selling volatility premium doesn’t necessarily mean the VIX • Broad based index options  • How do probability calculations factor into position? • Implied volatility as a proxy for expected market moves • Implied volatility versus historical volatility • Risks in selling option premium • How high probability options selling might handle various market conditions   Mentioned  in  this  Episode:   Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk   Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2P3gw17