Libsyn Directory

Interest Rate Shock! Is Inflation Coming?

Release Date: 02/28/2021

Market Correction | Mortgage Rates Higher | No Thanks 24-Hour Trading | Synthetic Options

Broken Pie Chart

Derek Moore and Mike Puck from ZEGA Financial discuss Friday’s selloff. It’s official, we are in a 5% market correction. Looking back at other corrections greater than 5% from the highs. Mortgage rates move back up while 10-year treasury yields surge. Commodities are higher on the year but still down from all-time highs. Gold makes another all time high. Later they look at the value vs growth performance including the magnificent 7 stocks compared to the rest of the market. Finally, stocks and bonds are more correlated than people realize in higher inflation regimes. Futures selloff...

Market Selloff | No Rate Cuts? | Bitcoin vs Gold | CPI Inflation Sticky | VIX Curve

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss Friday’s selloff. So, was it all the readjustment of Fed rate cut expectations? Is CPI Inflation putting the Fed in a box? Michael Saylor says Bitcoin is better than Gold. The rally in Gold that everyone is sleeping on. CPI Supercore trending higher showing services not goods are the culprit. Later they examine the VIX Futures curve as the front months rise. Finally, they talk about the continued bear market due to higher rates on 10-to-30-year US Treasuries from the March 2020 all-time highs against the stock market and high...

Buying At All-time Highs Better? | S&P 500 Returns After Last Hike | Developed International Beats the S&P | How To Tell Whether Options Are Expensive

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, are back to explore surprising data about buying the market at all-time highs vs any other day. Plus, how do markets and bonds perform post the last fed hike? Later, while you were sleeping developed international markets outperform U.S. markets. And listener question “who do I know what a good price for an option is?” What is a high or low price for an option? Components that make up and drive option prices Market performance post last fed rate hike Bond market performance after last fed rate hike MSCI EAFE developed markets...

Most Record Highs Since 2013 | The Fed No Rush to Cut? | VVIX and VIX Super Quiet | Value vs Growth | Cocoa More Valuable than Gold?

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss Fed governor Waller (not Christopher Walkin) hinting the Fed should be in no rush to cut interest rates. Plus, we haven’t seen this many record stock market highs since Q1 of 2013. So, what does that mean if anything? Examining VVIX and VIX which both are really quiet and low right now. Growth has outperformed value by quite a bit, but do some relative value charts hint value may have its time in the sun? Later, corporate profit margins continue to be strong despite many saying they must revert to the mean. Finally, no Cocoa is...

The Fed Gets Bullish? | Markets Don’t Go Down Just Because They Go Up | Yield Curve Inversion Record | Bitcoin Halving

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss the Fed getting bullish by reducing unemployment estimates, raising GDP growth estimates, and doing nothing else but the market liked it. All while the yield curve inversion sets a record for longest in history. What is Bitcoin halving and what does it do for supply and demand? Looking at the stock market after going up a lot, why historically it can continue going (or not) up. Looking at 1995-1999 post Fed cut bullish moves. Why media explanations of 2 or 3 interest rate cuts by the Fed based on the median interest rate aren’t...

Michael Saylor is Right on Bitcoin? |Worst Crash Since 1929 Coming? | Semiconductors Get Big Flows | 0 DTE Option Stats

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, talk through some examples of options trading in 0 DTE options on the SPX and Nvidia. Plus, a hedge fund manager says the worst crash since 1929 is coming. Looking at huge inflows into the semiconductor ETFs. Derek actually agrees with Michael Saylor’s points on Bitcoin including whether it’s a currency or property. Media mentions of stock market bubble are rising but so are continued mentions of AI. Finally, PPI producer price index comes in hot especially services while real retail sales still hasn’t gone above its 2022 highs....

Worst Market Timing Ever? | Options Cost of Carry | Option Put Call Parity | Unemployment Bad News Is Bad News?

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss how the magnificent 7 stocks aren’t all going up this year. Plus, reviewing what the worst time to buy stocks was and how investors would have done even if they had. Later, they explain why the last 10-15 years before retirement need growth but hedging. How Japan’s central bank might take interest rates from negative to positive, shipping container rates, inflation, Nvidia probabilities and the 15th anniversary of CNBC’s “Mark Haines Bottom” 3/10/2009. What is the cost of carry for options What is put call parity...

Why VIX Is Hard to Trade | SuperCore PCE High Again?| High Yield Bond Spreads | The Fed Is Not Cutting? | Semiconductors Surging (Again)

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, explain why it’s so hard to trade the VIX via options or VIX futures given the nature of the products and how VIX works. Supercore PCE, yeah that’s a thing now, came in hot so what does that mean for the Fed and rates? Speaking of the Fed cutting rates, what if they don’t cut this year? Later they explore how High Yield Bonds aren’t showing any fear and comparing the High Yield spread, the long term annualized total return of the High Yield Bond Index, and how CCC Junk Bonds once were yielding a few years ago what short...

Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap?

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss Nvidia’s beat on earnings, their march towards $2trillion market cap, and how as earnings forecasts rise, even though the stock has made new highs, forward PE ratios go lower. Then, they explore what the options market via implied volatility was forecasting for an Nvidia move post earnings. Later, they review a comparison between the S&P 500 Index annual return vs the EPS growth to see if there is any relationship. Hint, it’s not too correlated even when they compare the current year market performance against the 1 year...

Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down)

Broken Pie Chart

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, follow up on last week’s PE ration (useless?) discussion explaining how stocks go up or down based on earnings, multiples, and other factors. Then they delve into correlations between the US Dollar Index and the S&P 500 Index. Later, the surprising fact that as Japan’s Nikkei Index makes 35-year all-time highs they are in a technical recession. Finally, more evidence shows that inflation may be stickier and some that it may not. As always, they’ll have some recommendations! Explaining how EPS earnings per share works How...

More Episodes

Interest rates made a historic move higher last week as the treasury bond market sold off. But is this spike in interest rates previewing a higher move in inflation in the short term? What are breakeven inflation rates saying? Is the FED owning 30% of the TIPS bond market skewing inflation expectations?

What is duration risk in bond portfolios?

How does lower rates extend duration risk in bonds?

Investor expectation of annual returns equal to the current yield to maturity?

2018 when both stocks and bonds via the US Aggregate Total Return Index were negative.

Fed has purchased 30% of the TIPS Treasury Inflation Protected Bond Market

2^nd highest precent change in 5-year treasury yields back to 1962.

CPI Consumer Price Index

Weighting of the CPI index components

COVID-19 impact on consumer prices and inflation

5-year breakeven rate inverted with the 10-year breakeven rate

YTD bond funds down even on a total return basis

Mentioned in this Episode: