Powell vs. Bond Traders | Option Volatility During Earnings | Mortgage Rate Spread to Treasuries
Release Date: 10/22/2023
Barons Contrarian Cover | Negative GDP Details | Fed Rate Cuts? | Unemployment Was Fine | Sell in May? | S&P 500 After Near Bear Markets 1-Year Later
Broken Pie Chart
Derek Moore talks through what caused the negative GDP number and compares it to 2022 Q1’s more negative print. Hint, it’s those darn imports and exports. Should you sell in May and go away? Plus, whether the Fed may do anything at the May meeting. Unemployment was ok while inflation hasn’t gone back up so why won’t they cut? What happens 1-year later after an almost bear market (less than -20% drawdown)? All that plus some volatility talk. Components of GDP Net exports calculation When markets have a near bear market how much on average is the market higher 1-year later? What...
info_outline
Is The Bottom In? | Now They Change Their S&P 500 Targets | Apple Earnings Implied Volatility Expected Move |
Broken Pie Chart
Derek Moore goes through how markets have bottomed (maybe?) and are now up 10% since then. All the while investment banks have now started moving their 2025 year end targets down. The bear case on corporate net profit margins (and bull case). Plus, how max bearishness against US equities at market lows may have been a contrarian signal. With more earnings this week, Apple’s implied volatility is forecasting what as an expected 1 standard deviation move. Keeping perspective on the markets as the media talks about ends of eras and more. Apple earnings implied volatility What is...
info_outline
Economic Forecast Crowding | Gold ATH | High Yield Spreads Not Recession Levels | Flight to Quality Trades Not Working | No the VIX Is Not Predicting Actual Moves Still
Broken Pie Chart
Derek Moore talks about airport business as a sign or lack thereof of recessions. Gold makes another all-time high while the safety trade like treasuries and the US dollar aren’t working lately. Plus, looking at typical widening of high yield spreads during recessions compared to today. Later, the VIX Index is still not appropriately pricing in historical volatility given the moves again this week in equity markets. Also, surveys of economists are up to 45% probability of recession in the next 12 months although short of the 60%+ probability in late 2022 and early 2023 so why should we even...
info_outline
Market Bottom? | VIX Should Be 100 | Bond Market Yields Spike | Bitcoin and S&P 500 10 Day Volatility is Equal Wow!
Broken Pie Chart
Derek Moore reviews the surge in bond yields, and why the VIX Index should have been 100-125 this week as there is a mismatch between expected volatility and realized volatility. Earnings season begins but will analysts start downgrading their S&P 500 Index forecast? Why does the market often bottom out ahead of whatever reason its scared happens. Plus, believe it or not over the past 10 days Bitcoin’s historical volatility is the same as SPY. All this and more this week. Bitcoin volatility vs SPY volatility Did the market bottom this week? Comparing volatility in March 2020 to...
info_outline
Sell Sell Sell | Tariffs | Nasdaq in Bear Market Territory | Buying Opportunity?| Don’t Make Emotional Decisions
Broken Pie Chart
Derek Moore is joined by Mike Puck to compare this selloff to others like 2020, 1998, 2015, 2000 and more. Then they talk about how the Trump administration is arriving at their tariff percentages. Later, they discus how the market didn’t price in the eventual announcement. How things like the VIX Index and the High Yield Bond spread Thursday weren’t high enough. Did the market miscalculate the tariff announcement? What is the sentiment among advisors and investors from what we are hearing and are we at max panic yet plus the continued case for hedging. When do we...
info_outline
Back in Correction? | Recession? | Atlanta FED GDP Now | S&P 500 Index Year End Target Update | Useless Fed Dot Plots | 1 YR Stock Market Expectations Plummet | Implied Volatility
Broken Pie Chart
Derek Moore reviews two paths for market post -10% correction with and without a recession. Plus, talking through the difference between expectations miss vs the actual data through the lens of YoY PCE Core Inflation. Later, confidence in the stock market plummeted. Oh, and like clockwork, the first investment bank lowered its year end S&P 500 Index price target and 12-month forward earnings outlook. Are more coming? And what is going on with the Atlanta Fed GDP now model? Tune in for this and more this week. Recession or not in next year may determine market returns from here Inflation...
info_outline
Intra Year Drawdowns | LEI Leading Economic Indicator | VIX Index to Be Normal Soon? | Useless Fed Dot Plots
Broken Pie Chart
Derek Moore is back to discuss markets, volatility, and the economy through the prism of intra year drawdowns, Spot VIX vs Vix Futures prices, and LEI or Leading Economic Indicator. Why are the Fed’s Dot Plots useless (still). Thoughts on the idea that Buffered strategies don’t beat the market. How different markets have performed since the first Fed rate cut in September and much more. Since September Rate Cut Mag 7 vs SPX vs Equal Weight Intra Year Drawdowns vs full year return Comments on AQR post on Buffered funds VIX Index vs VIX Futures in the coming months AAII Bull...
info_outline
Max Bearishness at a Bottom? | VIX Curve Inversion | Nvidia Rallies | Dollar Problem Solved? | Fear and Greed Index | Consumer Sentiment Indicator is Worthless
Broken Pie Chart
Derek Moore is back to break down the wild week including Nvidia rallying when against the bearish tide. How the US Dollar index pulling back might be bullish for earnings. Plus, have we reached max panic and max bearishness setting up for a near term bottom in markets? Later, looking at the Fear and Greed Index, the VIX Inversion and what that means for markets, and why people are now bullish or bearish based on politics. All that and more! Fear and Greed Index Drawdowns vs full year market performance US Dollar index US Trade Weighed Dollar Index University of Michigan Sentiment...
info_outline
Market Correction Turmoil | Don’t Panic | VIX Spikes | 3 Fed Cuts? | Atlanta Fed GDP Now Collapses | Tariffs | Listener Emails
Broken Pie Chart
Derek Moore is back together with Jay Pestrichelli this week to react to the market turmoil. What is going on and is this just a revaluation or something worse? Plus, now the Fed Funds’ futures indicate 3 rate cuts. Looking at the Mag 7 selloff compared to the rest of the market. Unemployment was fine so what’s the big deal? Later, looking at whether the options market via the implied volatility readings is pricing in more, less, or just right actual historical volatility. They even take a listener question and read a sad email from an avid listener who is boycotting the show. We hope they...
info_outline
Investors Get Bearish |Nvidia Earnings | Implied Volatility Broadcom | Effective Tariff Increase | Mag 7 Correction
Broken Pie Chart
Derek Moore goes through last week’s pullback and Nvidia’s post earnings move. Then, looking at the AAII survey where investors got really bearish. Later, he looks at how the Mag 7 hasn’t made a new high since December but other things have. The yields are dropping at the same time forward PE ratios are lower after a slight increase in forward earnings expectations and the market dropping down. Nvidia kills earnings but sells off proving investing is hard Treasury yields ease Mag 7 vs the total world stock market ETFs Forward PE levels drop as markets retrace while...
info_outlineDerek Moore is back with ZEGA Financial CEO Jay Pestrichelli to discuss whether Jay Powell or bond traders are in charge of interest rate policy? How option volatility changes around earnings announcements. Why the spread between the 30-year Mortgage Rate and 10-year treasuries is historically wide including MBS (Mortgage-Backed Securities) impact. Plus, how MBS are doing something kind of weird right now. Later they discuss financial conditions, how high yield loans and bonds have greatly outperformed “safer” fixed income areas, and the breadth of the market vs the “magnificent 7” companies.
Is the bond market doing the Fed and Jay Powells work for them?
How higher interest rates tighten financial conditions.
The Fed not buying bonds creating lack of buyers?
Typical spread between the 30-year mortgage rate and the rate on US 10-year treasuries
How the spread is historically high (like 2 standard deviations)
When the 30-year mortgage spread over treasuries widened in the past
Does this mean mortgage rates need to come down or treasury rates have more to rise?
What are MBS Mortgage-Backed Securities
How MBS bond convexity is positive (hint, it’s almost always negative)
Interest rates moving higher means less refinancing (and home sales) extending loan durations.
What is bond convexity and how does it relate to interest rate sensitivity risk
High yield bonds and loans surprising outperformance over investment grade and treasuries
Divergence is higher now than before Silicon Valley Bank
Chicago Fed National Financial Conditions Index
S&P 500 Equal Weight Index vs the magnificent 7
How the S&P 500 Index forecasted next 12-month earnings are higher now
The forward PE ration of the S&P 500 Index back down to about 17.5 PE
Are we behind the trough in earnings?
Mentioned in this Episode:
Deep Dive: Can Bonds Recover? | TLT ETF Breakdown |Inflation and the Fed https://podcasts.apple.com/us/podcast/deep-dive-can-bonds-recover-tlt-etf-breakdown-inflation/id1432836154?i=1000631358491
Bond Market Collapse https://podcasts.apple.com/us/podcast/bond-market-collapse-oil-price-problems-bond-stock/id1432836154?i=1000630742799
Cheap vs Expensive Options | Warren Buffett on Options | Fed Powell Presser
0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact https://podcasts.apple.com/us/podcast/0dte-options-analysis-inflation-coming-back-strong/id1432836154?i=1000628157831
Implied Volatility Deep Dive | Real Interest Rate Yields | The Big Short | Tesla vs Nvidia
GameStop Short Squeeze by the Reddit Wall Street Bets Traders Explained
https://podcasts.apple.com/us/podcast/broken-pie-chart/id1432836154?i=1000507187446
The Big Short Movie and Credit Default Swaps Explained
https://open.spotify.com/episode/6FG0xHkxfhSXEtbJbFbDF6
Margin Call Movie and Understanding Value at Risk https://open.spotify.com/episode/2XJ58KAoQKw2sdC48KHyPp
Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3jQYgMt
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
Contact Derek [email protected]