ZEGA CEO Jay Pestrichelli and Derek are back together to discuss some surprising data that shows missing just the two best stock market days of the year can dramatically change returns. How Buy and Hedge Hedged Equity Strategy can be a hedge on missing out on markets when your fearful or bearish. Plus, life hacks from a 10-year-old and a famous Peter Lynch quote Peter Lynch quote What is Buy and Hedge Strategy? What is Buy and Hedge Retirement Strategy? Hedged Equity to avoid FOMO in the stock m...
Jun 13, 2021•53 min•Ep. 120
The Fed announced it plans to sell the ETFs and bonds it purchased. They are already doing reverse repo operations. Some have asked when they will reduce their monthly asset purchases. So, what is the Fed doing, and what are some potential things they might do? Fed Taper? Fed Reverse Repo Overnight Market Fed Funds Rate Interest Rates Asset Purchase Program Operation Switch MBS Mortgage-Backed Securities IOER Interest on Excess Reserves Probability of Fed rate hike? What is the SOFR rate? What i...
Jun 06, 2021•26 min•Ep. 119
The Federal Reserve this week set a record participating in the Overnight Reverse Repo Market. Previously in 2019 they had to enter the Overnight Repo Market as annualized rates soared. So, what are Reverse Repos? What are Repos? Why is the Fed trying to control interest rates by doing market operations in the Reverse Repo Market? What is the Reverse Repos? What are Repos? What is the Overnight Repo Market and Overnight Reverse Repo Market ON RRP What is the annualized repo rate? How to calculat...
May 31, 2021•25 min•Ep. 118
Market Bubbles are tough to spot the absolute turning point. But most bubbles have the same stages and patterns. So what are some potential tells that we are in a bubble using historical examples? Comparing Dotcom Bubble to the Tulip Bubble. Are Bitcoin or Ethereum in an asset bubble? What is an asset bubble? Stages of an asset bubble The housing bubble Dotcom bubble Tulip Bubble South Seas Bubble Kathy Lee Gifford and the rough rice futures market bubble Irrational exuberance Mentioned in this ...
May 23, 2021•30 min•Ep. 117
Broken Pie Chart | Episode 116 With Derek Moore How is Inflation Measured? Sticky CPI vs Flexible CPI Show Summary: All you hear these days on CNBC is inflation. How high will inflation go? What is causing inflation? But how is the CPI constructed to measure inflation? What are the weightings of CPI components? And, what is the PCE Inflation Index which is preferred by the Fed? • What is the CPI Consumer Price Index? • What is the PCE Personal Consumption Expenditures? • What is Trimmed Mean PCE...
May 16, 2021•41 min•Ep. 116
Recently more and more investors are asking about Ethereum and Bitcoin. How much crypto currency should I have as a percentage of a portfolio? Is Bitcoin and Ethereum a good hedge against rising inflation? Derek and Jay Pestrichelli, CEO of ZEGA Financial, discuss what they are, the differences between them, and what is going on with Dogecoin? What is Ethereum Crypto Currency? What is Bitcoin? What is the difference between Ethereum and Bitcoin? What is Dogecoin? Is Bitcoin an actual currency? B...
May 09, 2021•1 hr 1 min•Ep. 115
SPACs or Special Purpose Acquisition Companies 2021 growth has outpaced even 2020’s record year. So, what are SPAC companies? Are SPAC companies good or bad? What are some famous SPAC companies? SPAC Special Purpose Acquisition Companies SPAC timeline from creation to IPO of new company What Happens if the SPAC cannot find an acquisition target? SPAC companies have record 2021 with over $100billion raised. SEC looking at SPAC companies according to WSJ What am I buying with a SPAC? Why do they c...
May 04, 2021•19 min•Ep. 114
Many investors saw a rise in rates causing negative returns on bonds in Q1 of 2021. Many were surprised. How is risk heightened due to low interest rates? Duration vs Maturity in understanding bond rate risk. Plus, how have US Treasuries performed by decade. 10 Year US Treasury Returns by Decade Duration vs Maturity to Determine Interest Rate Risk Coupon Payments Time to Capture Principle Call Provisions in US Treasuries? Comparing different 30 Year Treasuries Current Market Value Decade by Deca...
Apr 28, 2021•27 min•Ep. 113
Marcel Benjamin, Fixed Income Strategist with State Street Global Advisors SPDR ETF Fixed Income Group, joins to present a deep dive into the High Yield Fixed Income space. What makes a bond part of high yield? What are the risks with High Yield Bonds? How do the ratings differ across the spectrum? Plus, what makes a company a “Zombie Company”? • US What does it mean to be considered high yield? • Differences in companies who go from BBB to Junk. • CCC vs BB • Size of high yield market • Size of...
Apr 19, 2021•56 min•Ep. 112
Spencer Wright from Halbert Wealth is back on the program to engage in a discussion around what makes up the Federal Budget. How much does all this cost and where do revenues come from? Plus, some thoughts around why MMT or Modern Monetary Theory may never work despite some economists’ best intentions. US Federal Budget Items What does the US government spend money on? What is the net interest payments on the national debt? Where does the revenue come from? Comparing US government tax revenue co...
Apr 11, 2021•44 min•Ep. 111
Recently I looked up Google Trends to see how terms like inflation and stock market bubble were doing? They have been popular which means people are searching for them. Is this contrarian? How to play armchair stock market valuation game by looking at expected earnings. US Treasuries had the worst quarter performance since 1980 and third worst since 1830. GDP growth according to Goldman Sachs will be 8%. Is that inflationary? Goldman Sachs says 2021 GDP growth will be 8% Does this point to highe...
Apr 04, 2021•29 min•Ep. 110
Recently John Hussman put out a piece that the expected value of a 60/30/10 stock and bond portfolio over the next 12 years would be -5%. Future projections can be wrong or right, but what he explained that the option value of cash or a hedged equity approach may be more suited. So how does hedged equity play into this? How Deal or No Deal game show explains the expected value calculation. And why bonds with low rates and risk of rising rates might present challenges in the typical 60/40 portfol...
Mar 28, 2021•40 min•Ep. 109
Watch CNBC for more than 5 minutes and you are bound to hear discussion around is inflation coming? Are rising interest rates going to sink the stock market? But what has the stock market done historically during periods of rising rates? You might be surprised to find out. Take a look back at S&P 500 Returns in rising rate environments, rising inflation, rising unemployment, and more. Once again, worries about the stock market led us to a Hedged Equity Strategy How have stock markets perform...
Mar 14, 2021•23 min•Ep. 108
Recently financial news media mentioned that bearish short bets against the US Dollar were the highest since 2011. But what is the dollar index and is it the best measure? What is the Trade Weighted US Dollar Index? What is the good and bad of a strong vs week US Dollar? US Dollar Index Trade Weighted US Dollar Index Pros and Cons Strong Dollar Pros and Cons Week Dollar Short US Dollar position reaches highest level in a decade. US Dollar and commodities How to figure out how many US dollars nee...
Mar 07, 2021•25 min•Ep. 107
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 ...
Feb 28, 2021•26 min•Ep. 106
Bonds prices are a function of current interest rates compared to their present value of cash flows and return of capital (baring defaults) at maturity. So, with interest rates so low around the world, is this a period of higher risk in bonds (fixed income)? How much more sensitivity to interest rate changes do we currently see in the sector? How do callable bonds mute the positive effects of reductions in market rate of interest? How does the US Aggregate Bond Index compare to the Global Ex-US ...
Feb 25, 2021•25 min•Ep. 105
This week Jay Pestrichelli and Derek Moore are back to discuss whether Bitcoin or Gold are good hedges. What the appeal of cryptocurrencies are? How just being long the market while have a hedged floor in the portfolio allows investors to be in the historically best inflation adjusted return asset. Appeal of Bitcoin How Inflation is hurting the dollar’s purchasing power Gold as an inflation hedge Golds real return might be less than people think. Aren’t bitcoin transactions all recorded via bloc...
Feb 14, 2021•46 min•Ep. 104
This week we follow up on or episode last week covering what the Gamestop short squeeze was all about. Are hedge funds naked shorting stocks? How margin accounts cause risk to brokerage firms like Robinhood. Why didn’t Gamestop do a secondary offering selling shares when the price was high? Why short sellers don’t ruin companies outright. Naked Short Selling Failure to Deliver Shares Reports FTD Short Interest Reports Secondary equity stock offerings AMC convertible debt into shares How margin a...
Feb 07, 2021•30 min•Ep. 103
The Wall Street Bets community executed a short squeeze through Reddit on stocks like GameStop and AMC Theatres this week. But what is a short squeeze? How did they and others buying stocks and options cause the stock to go up at least in the short term? Is short selling bad? Why potentially some brokers had to halt trading in certain names? A look back to the late nineties when internet chat rooms were pushing stocks. Examples of the little investor turning thousands into millions, and vice ver...
Jan 31, 2021•43 min•Ep. 102
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...
Jan 24, 2021•24 min•Ep. 101
With this month’s increase in US Treasury interest rates the talk about inflation came up quite a bit in the financial news. But what causes inflation? What are the different types of inflation? How is inflation measured? Different causes of inflation Cost Push Inflation Demand Pull Inflation Hyperinflation Structural Inflation CPI Index Hedonic Adjustments to CPI Substitutions in CPI measurement Velocity of Money Productivity Measurements in Economy Mentioned in this Episode: What is Velocity o...
Jan 21, 2021•27 min•Ep. 100
Recently there have been many discussions on the valuation of the S&P 500 based on forward earnings multiples. But what role do bond yields have in that evaluation? Does the implied P/E ratio of the Baa bond yield or US 10 Year Treasury yield imply that stocks have more room to run? In any case, why not just buy but hedge as a strategy? S&P 500 Index earnings yield Inverse of P/E ratio is the E/P earnings yield. Baa bond yield to calculate the implied P/E ratio Baa bond yields vs US 10 Y...
Jan 10, 2021•22 min•Ep. 99
Derek Moore and Jay Pestrichelli team up once again to discuss 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...
Dec 27, 2020•37 min•Ep. 98
Lately some high-profile companies have gone public using the IPO process. But how does it work and what are the differences between a traditional IPO listing and a Direct Listing IPO? Is Bill Gurley right when he says companies are leaving too much money on the table? AirBnB IPO price pop IPO Process – Investment banks and selling syndicate Direct Listing IPO Greenshoe IPO provision Bill Gurley advocates for direct listings IPO price vs trading price Spotify and Slack as direct listing IPOS How...
Dec 13, 2020•20 min•Ep. 97
Some investors wonder whether it would be better to have bad returns early or bad returns late? Surprisingly unless someone is withdrawing funds or bringing in money it does not matter. But when does it matter? It can be quite a significant different during the withdrawal stage. Learn about how the sequence of returns comes into play depending on what phase you are in. Is it better to have bad investment returns early or late? Three main phases of an investor’s lifecycle Contribution Phase, Base...
Dec 06, 2020•22 min•Ep. 96
Viktor Nebehaj guests on the episode to discuss how app-based brokerage Freetrade is looking to help millennials break down barriers and costs to make investing a habit. How technology has reduced friction in helping them get started. Why they and others like Robinhood have been able to acquire investors even though the legacy brokers offer the same or more. How do companies like his make money when commissions are zero? Freetrade bringing ease of investing to Europe and the world How companies ...
Nov 29, 2020•49 min•Ep. 95
The Wall of Worry pertains to investors always worrying as markets climb higher. So what are some of the bull and bear cases on the markets, valuations, inflation, interest rates, stocks and bonds? Jay Pestrichelli is back on the program to discuss all these and hedging strategies as alternatives. What is the Wall of Worry for investors? Are Bonds even worth it given such low interest rates? Potentially better portfolio hedges than bonds The bull and bear case for inflation Why higher money supp...
Nov 15, 2020•56 min•Ep. 94
Clean your garage this weekend to find something to sell on EBAY to fund your investment account. Where to go to open an investment account. How to buy fractional shares of companies. Should I buy a fund or individual stocks when starting out? Schwab vs Robinhood? Schwab and Fidelity stock slices for fractional share purchases How to buy your first stock Dollar cost averaging periodic investment each month Minimums for investments How to find money to put towards investments (clean out your gara...
Nov 15, 2020•24 min•Ep. 93
Spencer Wright of Halbert Wealth Management joins the podcast to talk through the various Senate and Presidential races. What are the polls saying? What about the hidden Trump vote? Likely scenarios for the electoral college. Review of key senate races and predictions The electoral college landscape in key states Why Michigan, Pennsylvania, and Arizona may decide the 2020 election Reliability of polls The Trafalgar Polls vs. everyone else Someone is wrong in the polling world Mentioned in this E...
Nov 01, 2020•1 hr 17 min•Ep. 92
Given the varies stimulus plans in 2020 the national debt has risen to new records. Yet, this political season we’ve heard little to nothing about it. How to understand the national debt, debt to GDP, debt held by the public. Plus, what does the CBO (Congressional Budget Office) say the debt to rise to? Will the interest payments exceed the cost of social security and all of defense before long? • How to see what the US national debt held by the public is • Compare debt held by the public and to...
Oct 27, 2020•27 min•Ep. 91
