Broken Pie Chart

The Broken Pie Chart Podcast offers fresh looks at investment portfolio management, economics, markets, retirement planning, and more by simplifying and explaining important aspects of financial markets and the economy in easy to understand ways.

Reinvesting High Dividends Deep Dive | Unemployment & the Fed | Option Time Value Explained | Shareholder Yield 05/05/2024

Now Its 1 Fed Rate Cut? | Nvidia Options Volatility Implied Move at Earnings | Sell in May and Go Away in Election Years? | Inflation Higher Than 1970s? 04/28/2024

Market Correction | Mortgage Rates Higher | No Thanks 24-Hour Trading | Synthetic Options 04/21/2024

Market Selloff | No Rate Cuts? | Bitcoin vs Gold | CPI Inflation Sticky | VIX Curve 04/14/2024

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 04/08/2024

Most Record Highs Since 2013 | The Fed No Rush to Cut? | VVIX and VIX Super Quiet | Value vs Growth | Cocoa More Valuable than Gold? 03/31/2024

The Fed Gets Bullish? | Markets Don’t Go Down Just Because They Go Up | Yield Curve Inversion Record | Bitcoin Halving 03/24/2024

Michael Saylor is Right on Bitcoin? |Worst Crash Since 1929 Coming? | Semiconductors Get Big Flows | 0 DTE Option Stats 03/17/2024

Michael Saylor is Right on Bitcoin? |Worst Crash Since 1929 Coming? | Semiconductors Get Big Flows | 0 DTE Option Stats 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. All that and more this week. Is Bitcoin a currency or property? MicroStrategy’s Michael Saylor interview on CNBC Hedge fund manager says worst market crash since 1929 coming How the same people make the same market predictions all the time Semiconductor ETFs get massive flows of money last week Examining detailed option data on SPX and NVDA 0 DTE options Media mentions of “stock market bubble” are rising Media mentions of AI and artificial intelligence jumped prior to the takeoff in AI stocks PPI producer price index comes in hotter than expected Services inflation now higher than goods inflation Comparing US Deposits at commercial banks vs money markets Money markets assets hit new highs What do big money market balances mean for the stock market if anything? Advanced real (after inflation) retail and restaurant sales YTD 2024 ETF category flows bitcoin vs gold Mentioned in this Episode Michael Saylor CNBC interview about Bitcoin and whether it’s a currency or property Previous Week’s Podcast: Worst Market Timing Ever? | Options Cost of Carry | Option Put Call Parity | Unemployment Bad News Is Bad News? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/30406423

Worst Market Timing Ever? | Options Cost of Carry | Option Put Call Parity | Unemployment Bad News Is Bad News? 03/11/2024

Why VIX Is Hard to Trade | SuperCore PCE High Again?| High Yield Bond Spreads | The Fed Is Not Cutting? | Semiconductors Surging (Again) 03/03/2024

Why VIX Is Hard to Trade | SuperCore PCE High Again?| High Yield Bond Spreads | The Fed Is Not Cutting? | Semiconductors Surging (Again) 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 duration Treasury Bills are yielding now. Oh, and let’s not forget to look at the SOX Semiconductor Index which just surged again to new highs. What is PCE Supercore compared to CPI? PCE Supercore comes in higher than expected. What if the Fed doesn’t cut interest rates and why they would or wouldn’t cut this year? What is the VIX Index Explaining VIX Futures and VIX Options Why its so hard to play the VIX using futures or options? The VIX Futures curve What the VIX Futures around the election are showing What is the high yield spread? Annualized returns for the High Yield Index since 1997 Examining times when high yield spreads spiked CCC rated bonds yield to worst What is a Yield to Worst for bonds? SOX Semiconductor Index and future projected earnings growth Remember when Cisco was thought to be the picks and shovels of the internet? Has Cisco ever eclipsed its 2000 dotcom era highs? Super Micro Computer joins the S&P 500 Index replacing Whirlpool Comparing Super Micro Computer’s revenues vs Whirlpool’s Largest companies by market cap in each decade Mentioned in this Episode: Super Micro Computer joins the S&P 500 Index . Previous Week’s Podcast: Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/30206673

Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap? 02/25/2024

Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap? 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 forward actual earnings. All that and more will be explained including some recommendations. Nvida’s stock is rising while its forward PE just got cheaper Nvidia’s recent earnings beat including EPS growth, revenue growth, and gross and net margins What would it take for Nvida to overtake Microsoft as the largest company in the S&P 500? Implied move post earnings based on the implied volatility of the options market Price of the at the money long straddle on Nvidia the afternoon of earnings Regression analysis of S&P 500 Index annual return vs EPS growth Correlations between market returns and earnings growth Comparing correlations with same year market returns vs same year and 1 year forward EPS Markets are forward looking Probability of Nvidia reaching $3.06T in market cap in one year per options market Mentioned in this Episode: Where returns come from see start of page 23 in Semper Augustus group letter Previous Week’s Podcast: Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down) Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/30099673

Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down) 02/19/2024

Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down) 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 the PE can change due to earnings going up or the multiple going up How a stocks movement from one year to the next can be attributed to earnings and multiples How the correlation between the US Dollar Index and the S&P 500 Index has flipped of late Why a lower dollar helps large multinational companies earnings Congratulations, Japan is making all-time highs while in a technical recession What is a technical recession that everyone is now calling 2 quarters of negative GDP growth Car insurance premiums rose another 20% year over year…inflationary? How lagging price changes may continue to be sticky for inflation Looking at how OER Owners Equivalent Rent has been trending lower How higher rates may have put pricing pressure on rents How market returns and earnings growth aren’t the same every year Mentioned in this Episode: Historical Returns on Stocks, Bonds and Bills: 1928-2023 NYU Aswath Damodaran Previous Week’s Podcast: Is the Forward PE Useless?| S&P 500 Election Seasonality | Gen Z vs. Gen X Special Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/30014333

Is the Forward PE Useless?| S&P 500 Election Seasonality | Gen Z vs. Gen X Special 02/11/2024

Too Focused on Fed Rates?| META Earnings Implied Volatility | NAV Erosion Myth 02/04/2024

Too Focused on Fed Rates?| META Earnings Implied Volatility | NAV Erosion Myth Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss the Fed and Powell press conference market reaction. Plus, they look at META and Apple option’s implied volatilities did or didn’t predict the post earnings moves. 1994-95 experience in Fed rates and bond yields compared to today. Later, they set the record straight on what NAV erosion is, why the Shiller PE may not be predictive of markets, low response rates to economic surveys, and correlation between CPI and shipping container rates. Fed Meeting Powell press conference roiled markets for all of 1 day Who is right, the bond market or the stock market on rates? Typical moves in bond yields around fed meetings and outside of fed meetings The Fed Funds rate and the 10-year treasury bond yield aren’t as related as you think Looking back at the 1994-95 Fed rate hiking and easing cycle META blows out earnings and adds the most market cap ever in one day Looking at META options implied volatility pre-earnings to see if it got it right Reviewing Apple’s ATM straddle, implied volatility, and post earnings move Confusion around what the meaning of NAV erosion is Total return which includes dividends vs price return. Correlation between CPI year over year change and container shipping rates JOLTS Job Openings Less Turnover Survey response rates drop How economic surveys sample small amounts to gauge total economy Shiller PE CAPE Ratio and predictive power Mentioned in this Episode: 1994-95 All Over Again in Markets? BLS Bureau of Labor Statistics January 2024 employment report Previous Week’s Podcast: What Option Volatility Means for Markets | Is the Market Too Dovish on Interest Rate Expectations? | Does the Fed Need an Economics Lesson? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/29792238

Explaining Telsa Implied Volatility | Bitcoin Selloff Post Spot ETF | What History Tells Us About Election Year Returns 01/28/2024

Explaining Telsa Implied Volatility | Bitcoin Selloff Post Spot ETF | What History Tells Us About Election Year Returns Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, are it at once again where they analyze Tesla’s implied volatility right before earnings vs what happened. Did the option’s market misprice premiums? Also, in the episode they talk about Bitcoin’s drop as a sell the news buy the rumor example while Derek argues that Bitcoin’s volatility make it unusable as a currency to transact business. Later they dive into some data showing that when markets are up 20% the year before the election, election years historically have never been down and does that mean anything for 2024? Finally, they talk about China’s selloff relative to US markets and how everyone thought emerging markets would be the thing in 2023. Bitcoin in a bear market drawing down greater than 20% from pre-ETF launch high Bitcoin at least in the short term seems like people bought the rumor but are selling the news Can Bitcoin be a currency if it drops 20% within a month? What is an option’s implied volatility mean vs an option’s historical volatility Looking at the price of the at the money straddle on Tesla right before earnings How to figure out what the options market is pricing in for a 1 standard deviation move Post Tesla earnings did the markets accurately price in how much Tesla moved after earnings? 2023 was up > 20% so what does that mean for election year based on some data? Election year and the markets China’s stock market gets a little rocky but no bearing on US markets? Emerging markets were picked at the beginning of 2023 to close the gap on US markets Emerging markets still underperforming the S&P 500 Index Explaining how companies earnings in S&P 500 Index are aggregated together not weighted Comparing Apple’s earnings in a quarter to Starbucks and why the big 7 matter most right now Semiconductors weighting in the S&P 500 Index hits a high Semiconductors as the picks and shovels, bluejeans play for AI? Mentioned in this Episode: What Option Volatility Means for Markets | Is the Market Too Dovish on Interest Rate Expectations? | Does the Fed Need an Economics Lesson? Hedging With Options Examples | Soft Landing? | US Congress Trading Returns | Is Good News or Bad News Good? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/29680628

What Option Volatility Means for Markets | Is the Market Too Dovish on Interest Rate Expectations? | Does the Fed Need an Economics Lesson? 01/21/2024

Bitcoin ETF Sell the News? | Expect Stock Market Corrections | Value vs. Growth | Travel Inflation Cooling? 01/14/2024

Hedging With Options Examples | Soft Landing? | US Congress Trading Returns | Is Good News or Bad News Good? 01/08/2024

Hedging With Options Examples | Soft Landing? | US Congress Trading Returns | Is Good News or Bad News Good? Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, are back this week to discuss some hedging examples and how hedging is cheap right now. They even go through a few examples. Then they get into the sharp rise in container shipping costs before discussing the weaker PMI Services data. Later they note Bloomberg’s data showing articles mentioning “soft landing” are the highest since the 2000-2001 recession. A fun segment where they go through data from Unusual Whales showing the 2023 returns from members of congress and which members traded the most including options. Finally, they discuss whether so goes January goes the rest of the year in markets is a good indicator. The cost of hedging with options is cheap right now. Examples of hedging using the S&P 500 Index ETF SPY and Nvidia Zero cost collars to hedge downside risk. Is good news in markets or bad news in markets good news? Container shipping costs spike due to the Red Sea and Suez Canal re-routing. PMI Services data shows employment dipped below 50, which is contraction. What is the PMI Services Survey? “Soft Landing” shows up in Bloomberg articles the most since the 2000-2001 recession. Which members of the US Congress beat the markets last year 2023? Unusual Whales publishes report showing number of trades and performance of US Congress Which congressman traded over 4000 times last year? What does January performance say about the rest of the year’s performance in markets? NY Fed global supply chain pressure index Mentioned in this Episode: Report from Unusual Whales showing 2023 members of congress trading returns December ISM Services PMI report NY Federal Reserve Bank Global Supply Chain Pressure Index (GSCPI) 2024 Predictions | Late Year Rally Bullish? | What if Investors Are Expecting Too Many Rate Cuts? 0 DTE Options to Blame for Selloff? | 2024 Targets for S&P 500 Index | Fed Dot Plots Always Wrong? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/29379658

2024 Predictions | Late Year Rally Bullish? | What if Investors Are Expecting Too Many Rate Cuts? 01/01/2024

2024 Predictions | Late Year Rally Bullish? | What if Investors Are Expecting Too Many Rate Cuts? Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, go through their 2024 predictions and review how right or wrong they were in 2023. Why predictions are so hard to make and why they are overrated. When markets go up over 10% in the final 2 months of the year historically what does that mean for returns the following year? How earnings growth and market returns are non-correlations. According to NAAIM Active Manager Equity exposure is now greater than 100% compared to the October lows where it was only around 30%. No surprise there as people are more bullish when markets are making highs. 2024 predictions covering interest rates, the fed, markets, earnings, gold, bitcoin, oil and more. Reviewing the 2023 predictions and how wrong or right they were. How investors and institutions tend to be more long stocks when markets are at highs How investor psychology gets in the way of buying when they should be buying Questioning that everyone sold stocks to go into money market funds. How bank assets may have rolled into money markets due to low interest rates at banks Comparing correlations between earnings growth in a year and the market returns When markets are down greater than 22% in a year, what is the average return the next year? What if investors are expecting too many Fed rate cuts? S&P 500 Index price vs EPS during bear markets When final two months of the year are up greater than 10% what are returns the following year? NAAIM Active Manager Equity exposure now 103% vs under 30% during October lows Mentioned in this Episode: 0 DTE Options to Blame for Selloff? | 2024 Targets for S&P 500 Index | Fed Dot Plots Always Wrong? Everyone Betting on Rate Cuts | Blackrock Buying 44% of Homes? | Record Call Option Volume & VVIX and VIX Out of Synch? No, Wall Street investors haven’t bought 44% of homes this year Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/29295733

0 DTE Options to Blame for Selloff? | 2024 Targets for S&P 500 Index | Fed Dot Plots Always Wrong? 12/23/2023

0 DTE Options to Blame for Selloff? | 2024 Targets for S&P 500 Index | Fed Dot Plots Always Wrong? Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss how people are blaming the Wed 1.5% selloff on 0 DTE options while the CBOE says not so fast as dealers may have been buying stocks during the drawdown thus stabilizing markets. Later they talk shipping container rates spiking higher due to issues in the Suez Canal and Red Sea. Is this a fly in the ointment for inflation? Then they talk about how analysts making 2024 S&P 500 Index price and earnings estimates must get the forward 2025 earnings estimate right and what multiple the market will be trading at. What about oil in 2024? Analysts seem to be bearish, but Jay and Derek look at potential for refilling the SPR (strategic petroleum reserve). Finally, they talk VIX and VVIX and note how compressed the daily changes have been and what if anything that means going forward. 0 DTE Options (or ZERO Days to Expiration Options) are blamed for midweek selloff. Why the CBOE says 0 DTE options are not to blame and instead dealers were buying stocks. How market makers were a stabilizing force during the selloff rather than adding to selloff Are they getting wrong the impact of 0 DTE options? Why calls for Volmageddon 2.0 might be missing what caused Volmageddon 1.0 S&P 500 Index targets for 2024 vary quite a bit Why is it so hard to nail next years S&P 500 Index targets because you really need 2025 EPS. How analysts could have the same earnings targets but different multiple expectations Shipping container rates spiked due to the issues in the Red Sea leading to the Suez Canal Below the surface inflation pressure and remembering how container rates foretold inflation SPR Strategic Petroleum Reserve levels and whether refilling them will be inflationary. Gasoline prices have softened while analysts are pretty bearish on oil for 2024. Contrarian view might be to look at oil to recover which would move CPI. The Fed Dot Plots never wind up being correct. Is Diehard a Christmas movie or not? Mentioned in this Episode: Zero-Day Options Shouldn’t Be Blamed for Selloff, Cboe Says Everyone Betting on Rate Cuts | Blackrock Buying 44% of Homes? | Record Call Option Volume & VVIX and VIX Out of Synch? No, Wall Street investors haven’t bought 44% of homes this year S&P 500 Targets | VIX Index Largest 7-Week declines | Simplifying Synthetic Long Stock with Covered Calls | Labor Force Participation Dave Ramsey Wrong? | Huge VIX Options Bets | S&P 500 Seasonality | When Does Government Debt Become a Problem? Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/29211558

Everyone Betting on Rate Cuts | Blackrock Buying 44% of Homes? | Record Call Option Volume & VVIX and VIX Out of Synch? 12/17/2023

S&P 500 Targets | VIX Index Largest 7-Week declines | Simplifying Synthetic Long Stock with Covered Calls | Labor Force Participation 12/11/2023

VIX Index Goes Nowhere | Cheap Puts to Hedge? |Cheaper to Rent Than Buy? | Markets During Presidential Election Years 12/03/2023

VIX Index Goes Nowhere | Cheap Puts to Hedge? |Cheaper to Rent Than Buy? | Markets During Presidential Election Years Derek Moore and Jay Pestrichelli join up to discuss an unchanged VIX and VVIX index. Was our trading platform screen broken? Whether the VIX and VVIX Index is a coiled spring as they are both in compression mode of late. Then, they explore new data that shows the cost to buy a home vs rent is really high meaning its very costly to buy vs rent right now. Did the Fed cause this? Jay and Derek also explore how cheap 1 year out puts are on the S&P 500 Index right now. Does no one want protection? Finally, they dip their toes into the all to soon 2024 presidential election looking at data around how markets do during election years. Does it even matter if it’s a Republican or Democrat? The VIX Index and the VVIX Index both closed unchanged on Wednesday this week Both VIX and VVIX are showing signs of compression in their standard deviations of late What smaller ranges over a period mean for the VIX and markets with regard to expected moves Not since the pre-Great Financial crisis has buying a home been more expensive than renting How now one ever compares the interest paid in a mortgage payment to rental payments Did the Federal Reserve cause rent inflation by freezing the housing market creating demand? The 1-year out at-the-money-puts are a cheap hedge right now, does anyone want hedged? How everyone wants to be hedged when markets are crashing but not when its cheap Why buying but hedging makes sense for the long haul. How do markets do in the 4th year of a presidential cycle election year? Market returns during presidential elections when democrats vs republicans get elected Mentioned in this Episode: Dave Ramsey Wrong? | Huge VIX Options Bets | S&P 500 Seasonality | When Does Government Debt Become a Problem? Total compounded annualized growth rate S&P 500 index by decade Probability of Recession? | Explaining How US Treasury Bond Auctions Work | S&P 500 Index Member Changes | Option Premium Intrinsic vs. Extrinsic Stock Market Returns after First Rate Cut Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28903978

Dave Ramsey Wrong? | Huge VIX Options Bets | S&P 500 Seasonality | When Does Government Debt Become a Problem? 11/26/2023

Dave Ramsey Wrong? | Huge VIX Options Bets | S&P 500 Seasonality | When Does Government Debt Become a Problem? Derek Moore is back with Jay Pestrichelli this week where they analyze the recent viral video where Dave Ramsey suggests people can safely withdraw 8% forever in retirement. What doesn’t make sense, what is left out, and why the assumptions may be faulty. Then, they discuss the market seasonality and whether this November pop higher already delivered a year end rally? Later Jay and Derek discuss the huge purchase of VIX calls this week and what it did to the VVIX Index as well as an interesting VIX option trade for December. Finally, they touch on Argentina’s plan to dollarize the economy and when the US and other countries high debt to GDP can expect it to be a problem and what is so frustrating to traders making bearish bets against it. Dave Ramsey viral video saying 8% withdrawal rate on accounts will work forever How Dave Ramsey makes fun of people arguing for 3%-5% withdrawal rates The claim of simply investing in mutual funds making 12% annually doesn’t add up How ignoring the sequence of return risk doesn’t paint a true picture for retirees Dave Ramsey seems to imply even retirees should be 100% invested in equities How the sequence of returns only matters to returns when withdrawing or adding money Simple average annual return vs CAGR compounded annual growth rate Contrary to Dave Ramsey’s advice not everyone should paying off their mortgage early What historical seasonality of the S&P 500 Index says about year end performance One of the largest November month returns on record for S&P 500 Index since 1928 What does Novembers month to date returns mean for seasonality? Sovereign government debt at historic highs measured as debt to GDP Argentina new president Javier Milei’s plan to dollarize Argentina’s history of debt defaults Discussing the huge VIX call trade that moved the VVIX Index this week Why people are buying VIX calls The VIX Index closed at the lowest level since January of 2020 Interesting VIX call breakeven levels for December calls Mentioned in this Episode: Total compounded annualized growth rate S&P 500 index by decade Probability of Recession? | Explaining How US Treasury Bond Auctions Work | S&P 500 Index Member Changes | Option Premium Intrinsic vs. Extrinsic Stock Market Returns after First Rate Cut Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28792833

Probability of Recession? | Explaining How US Treasury Bond Auctions Work | S&P 500 Index Member Changes | Option Premium Intrinsic vs. Extrinsic 11/20/2023

Probability of Recession? | Explaining How US Treasury Bond Auctions Work | S&P 500 Index Member Changes | Option Premium Intrinsic vs. Extrinsic Derek Moore is back with Jay Pestrichelli, CEO of ZEGA Financial, to review the Goldman Sachs probability of recession and Fed rate forecast for 2024. Then they do a deeper dive on key aspects of US Treasury Bond auctions. Hint, it’s a Dutch auction and how to read the results of treasury auctions including the bid to cover ratio. Later they talk through changes in the makeup of the S&P 500 Index companies and what the impact on earnings may be. Plus, how even when stocks go in and out of the index how the “divisor” calculation smooths the S&P 500 price out. Finally, Jay and Derek do a deep dive into the difference of options premium intrinsic value vs. extrinsic value using some examples. Oh, we have some recommendations as well. What does Goldman Sachs have for probability of recession now? What does Goldman Sachs estimate for Fed interest rates in 2024? How do US Treasury bond auctions work? What is a Dutch auction? What is the bid to cover ratio mean in a US Treasury auction? Looking at supply and demand metrics within Treasury Bond auctions. S&P 500 Index committee that determines what companies come in and out of the index. What is the S&P 500 Index divisor? The largest company not in S&P 500 index is Uber? Index changes underappreciated for earnings growth? Airbnb, Blackstone, Lululemon all added to the S&P 500 Index in 2023 What is the difference between intrinsic premium and extrinsic premium in options? How the option greeks like delta, gamma, theta impact extrinsic premium but not intrinsic Comparing covered calls to ITM short puts on an index Time decay implied in extrinsic premium When covered calls are likely to get called away around dividends and extrinsic premium left Why are ITM cash secured puts misunderstood Mentioned in this Episode: Stock Market Returns after First Rate Cut Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28715403

Stock Market Returns After First Rate Cut | Yield Curve Preceding Recessions | Investors Rooting for the Wrong Thing 11/12/2023

Stock Market Returns After First Rate Cut | Yield Curve Preceding Recessions | Investors Rooting for the Wrong Thing Derek Moore does a deep dive asking the question why is everyone rooting for the Fed to lower rates? If the Fed must lower interest rates, doesn’t that mean there is trouble? Should investors instead be rooting for stable but higher rates where the long end un-inverts as a proxy for higher growth? What happens to market performance between the last Fed hike and first rate cut? What is the historical performance of markets post the first Fed rate cut? Then looking at past yield curve (10-year treasury minus 3-month treasury yield) before recessions. How the Fed normally inverts and then un-inverts the curve by hiking and then lowering interest rates. Finally, what is the NBER (National Bureau of Economic Research Board) looking at to determine recessions? What is the inverted yield curve? How have past yield curves inverted and un-inverted around recessions? How does the stock market perform between the final rate hike and first rate cut? How does the stock market perform after the first rate cut by the Fed? Are rate cuts a sign of strength in the economy? How the Fed typically causes inversions by hiking the Fed funds rate. Historically the yield curve un-inverted because the Fed is cutting rates. Will this time be different where long rates move higher to un-invert the curve? What is the NBER National Bureau of Economic Research looking at for recessions? How predictive of recessions is the yield curve? Mentioned in this Episode: Liz Young Sofi article showing S&P 500 Index market returns from last rate cut to first hike and post first Fed cut FRED Spread of 10-year treasury bond to 3 month treasury bill difference updated NBER business cycle dates (past recession dates) Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28603433

Option Selling ETFs Boom | Probability of Future Fed Moves | Bad News is Good News on Employment 11/05/2023

Correction Territory | No Fear Yet in Markets? | When Does Capitulation Happen in Markets? 10/29/2023

Correction Territory | No Fear Yet in Markets? | When Does Capitulation Happen in Markets? Derek Moore and ZEGA Financial CEO Jay Pestrichelli to discuss how despite the correction territory (markets down 10% from top), the VIX index hasn’t shown any real fear. So, what will it take to see capitulation in the markets? Thus far high yield spreads haven’t reflected too much worry. Then Derek is tired of pundits talking about equal weighted market vs the “Magnificent 7” comparison as this is why you buy the index! Later, they discuss the new Fed survey showing how much net worth one needs to get into the top 10% plus median net worth by age range. All this and more plus some recommendations. Is there enough fear in the stock market? Why hasn’t the VIX spike more during a 10% stock market correction? VVIX vs VIX What would capitulation in the stock market look like right now? What is a stock market correction vs a bear market? Checking in the on High Yield bond spread Is rebalancing traditional portfolios from stocks to bonds causes equity weakness? The “Magnificent 7” Tesla Apple Google Meta Microsoft Nvidia Amazon Equal weighted stock indexes vs the S&P 500 Index Fed survey on household finances shows how much net worth to get into different percentiles. What is the median net worth by age group? How US median net worth has increased. Fed Survey of Consumer Finances (SCF) Mentioned in this Episode: Fed Survey of Consumer Finances (SCF) showing median net worth and income by age Powell vs. Bond Traders | Option Volatility During Earnings | Mortgage Rate Spread to Treasuries 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Implied Volatility Deep Dive | Real Interest Rate Yields | The Big Short | Tesla vs Nvidia The Big Short Movie and Credit Default Swaps Explained Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28452176

Powell vs. Bond Traders | Option Volatility During Earnings | Mortgage Rate Spread to Treasuries 10/22/2023

Powell vs. Bond Traders | Option Volatility During Earnings | Mortgage Rate Spread to Treasuries Derek 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 Bond Market Collapse Cheap vs Expensive Options | Warren Buffett on Options | Fed Powell Presser 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact 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 The Big Short Movie and Credit Default Swaps Explained Margin Call Movie and Understanding Value at Risk Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28386794

Deep Dive: Can Bonds Recover? | TLT ETF Breakdown |Inflation and the Fed 10/15/2023

Deep Dive: Can Bonds Recover? | TLT ETF Breakdown |Inflation and the Fed Derek Moore explains what it would take interest rate wise for bonds and TLT to get back to breakeven on price. A lot of misunderstanding is out there on buying bonds at the bottom and what that means. How bonds have different drivers than stocks. Plus, inflation is ticking back up and what that means for the Fed. Finally, a deep dive into TLT components and the math behind what those buying TLT are hoping for. What would make bonds go back up? Examining TLT iShares 20+ etf components Effective Duration to show how interest rates affect bond etfs and bonds. Math behind movement in bonds What would it take for TLT to get back to breakeven with regard to interest rates? Looking at 30-year treasuries issued in 2020 that are down greater than 50% Inflation ticked back up with CPI year over year reaching 3.7% YoY from its low of 3% What does inflation moving back up mean for the Fed and interest rates? Earnings seasons begins with expectations rising Are earnings still the most important driver of price? Multiple expansion vs earnings falling Mentioned in this Episode: Bond Market Collapse Government Shutdowns & Markets | Short ITM Puts Alternative to Covered Calls | Why Hedging Works John Hussman 12-year forward nominal return estimates chart Cheap vs Expensive Options | Warren Buffett on Options | Fed Powell Presser 0DTE Options Analysis| Inflation Coming Back? | Strong US Dollar Impact Warren Buffett and Charlie Munger Berkshire Hathaway meeting discuss using and pricing options 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 The Big Short Movie and Credit Default Swaps Explained Margin Call Movie and Understanding Value at Risk Jay Pestrichelli’s book Buy and Hedge Derek’s new book on public speaking Effortless Public Speaking Derek Moore’s book Broken Pie Chart Contact Derek /episode/index/show/brokenpiechart/id/28318418

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