Derek Moore is back to discuss the war on share buybacks after a rumored 1% excise tax announcement. What are share buybacks? Why do companies do them? Plus, when you’ll officially here whether we are in a recession. Recessions are called long after they start NBER Nation Bureau of Economic Research committee dating business cycles What NBER criteria uses to call recessions Are share buybacks good or bad? 1% excise tax on share buybacks Dilution vs anti-dilution of share issuance and share buyba...
Aug 08, 2022•27 min•Ep. 180
Jay Pestrichelli once again joins Derek Moore to discuss the disconnect between the market’s expectation of future interest rate raises and the Fed’s stated intentions. Did the market hear the right things from Jay Powell? How earnings through Q2 have held up and are still growing despite pessimistic calls otherwise. Plus, the debate about what a recession is and is not. Someone is wrong on interest fed rate raises Debate about what is a recession Why 2 quarters is not a recession How the NBER i...
Jul 30, 2022•51 min•Ep. 179
The US Dollar has been surging (getting stronger) as the Fed is raising rates more than some other countries or regions central bank. So why is a strong dollar problematic? How does a strong or weak US Dollar hurt or help US companies? Derek Moore is back to give some easy to understand examples plus how USD denominated debt from other countries will come under pressure with a stronger dollar. Why a strong US Dollar can hurt companies Why a weak US Dollar can help companies US Dollar at parity w...
Jul 27, 2022•28 min•Ep. 178
Michael Lewis wrote the book “The Big Short” that later was turned into a movie starring Christian Bale, Steve Carrell, and Ryan Gosling, Brad Pitt, and Jeremy Strong. The movie focused on 3 different investors who bet against mortgage bonds before the Great Recession and housing market collapse using credit default swaps. Want to get a primer on swaps and how they work before you watch or re-watch the movie? What are Credit Default Swaps (CDS)? What do bond ratings mean? What are the annual pre...
Jul 17, 2022•25 min•Ep. 177
This week Derek Moore notes the historic start to the year in bonds given the rise in interest rates and how low they were at the beginning of this cycle. Then Derek discusses target date funds. Popular in 401k plans, many investors don’t fully understand what they are and the different types of risks inherent in them. Historic first half drawdown in the US Aggregate Bond Index What are target date funds? What is the glide path for target date funds? What the intent of target date funds is Why i...
Jul 10, 2022•25 min•Ep. 176
This week Derek Moore is joined again by ZEGA Financial CEO Jay Pestrichelli to talk about the recent blowups in Crypto and review some contrarian picks that worked and didn’t work. Plus, what is the recent backup in rates in the bond market telling us about the probability of a recession and negative GDP for Q2? Yields backing off predicting a recession? Flattening & Inverted (once again) yield curve Crypto winter and blowups What is the bond market telling us? Contrarian corner - what has ...
Jul 05, 2022•50 min•Ep. 175
This week Derek Moore tries to answer the question of why things like TIPS Bonds (Treasury Inflation Protected Securities) down YTD are even though inflation is up. Plus, golds response to inflation. Finally, can we have a recession with low unemployment plus why Bitcoin thus far has not been an inflation hedge despite claims otherwise. Why TIPS bonds (Treasury Inflation Protected Securities) were down YTD even though inflation was up Duration risk and interest rate risk for bonds TIPS bonds had...
Jun 26, 2022•28 min•Ep. 174
This week Derek Moore discusses the news around MicroStrategy’s leveraged Bitcoin strategy and the impending margin call should Bitcoin close below 21,000. Why would a company put their cash in a volatile asset like crypto? Derek explains the situation and news coverage considering Bitcoin’s recent drop in price. How much Bitcoin does MicroStrategy hold? How much has MicroStrategy lost on Bitcoin? What is digital asset impairment charge due to Bitcoin drop? Leveraged Bitcoin strategy by Michael ...
Jun 19, 2022•26 min•Ep. 173
This week Derek Moore discusses why Tesla’s 3-1 stock split and Amazons 20-1 stock split don’t really matter except potentially making them eligible to join the Dow Jones Index. Plus, some have made comparisons of the selloff in tech to the 2000 Dotcom crash. As Derek explains, they are different and not similar given the numbers then and now. Finally, Derek gives some surprising data points about who the number one weighted stock was in March of 2000 in the Nasdaq 100 Index. You’ll never guess ...
Jun 13, 2022•26 min•Ep. 172
Derek Moore gives an in-depth explanation of each of the components that make up GDP. No, 2 consecutive negative quarters of GDP do not mean a recession! How to use GDP nowcasts to spot trends in GDP and spot recession risks. How the NBER declares recessions and what they look at. How is GDP calculated? What are components of GDP? What are the most important components driving GDP? Business investment vs consumer spending Government spending is not the most important aspect Explaining Change in ...
Jun 05, 2022•30 min•Ep. 171
Derek Moore is back to discuss historical bear markets. How long do they last and how long does it take to get back to previous highs? What lessons can we take from prior bear markets? Are people too pessimistic about the economy? Plus, why the high yield market may be in better shape given the maturity schedule. How long do bear markets last? How long after a bear market do stocks recover their losses? Are high yield bond underlying companies financially, ok? Did high yield bond companies alrea...
May 29, 2022•22 min•Ep. 170
ZEGA CEO Jay Pestrichelli joins Derek Moore to discuss the current economic and market environment. Topics include the 4 Rs Recession, Rates, Reduction of Multiples (PE Ratios), and the conflict in Russia. Why the Fed raising rates may not help inflation Impact of Walmart and Target earnings results on net profit margin expectations End of 2021 market was pricing in higher margins and growth Earnings so far have held up well Earnings expectations have increased not decreased Why interest rates m...
May 22, 2022•50 min•Ep. 169
Derek Moore explains why commentators on CNBC and Bloomberg have been talking about valuations coming down due to interest rates increasing. Why do interest rates matter to stock valuations? How would you explain it to someone? Plus, how all these inputs are estimates and can change over time. How to understand the present value of future cash flows DCF or discounted cash flow model Earnings estimates on the market for 2022, 2023, and 2024 Intrinsic valuation of the S&P 500 Index based on di...
May 15, 2022•25 min•Ep. 168
Spencer Wright of Halbert Wealth is back on with Derek to discuss what races in the Senate to watch. Predictions for the House to flip Republican or say Democratic. And a way to early look at the 13 Keys to the White House and the state of things as they are now. Plus, what do markets historically do pre and post the midterm elections. How many 2022 Senate races are considered up for grabs? Reviewing the big edge republicans have in the generic ballot polls. What does win of one or both houses d...
May 08, 2022•50 min•Ep. 167
ZEGA Financial CEO Jay Pestrichelli is back to discuss what asset classes have the best real, after inflation returns historically. Plus, is bad news good news around economic releases as it pertains to chances the Fed can’t raise rates as much? What would a bad Q1 GDP print mean for markets? Then they discuss the volatility regime and touch on talk about recessions by Deutsche Bank. Does bad news mean good news if the Fed can’t raise rates as much? Talking real after inflation returns historica...
May 01, 2022•37 min•Ep. 166
Derek Moore explains that drops like Netflix this week are not that rare in single stocks. There are tons of examples, especially around earnings releases. Why do people have concentrated portfolios? Diversification vs. single stocks. Problems with selling low-cost basis stocks. How to hedge large, concentrated positions. What caused Netflix to drop 35% after earnings? The risk inherent in holding large, concentrated positions in stocks Reasons investors hold concentrated stock positions Low-cos...
Apr 24, 2022•22 min•Ep. 165
Derek Moore takes listener requests by taking a deep dive into the how and why when it comes to market values of bonds changing. How to understand what duration is and why it matters to measure risk in bonds to changes in interest rates. What about mortgage-backed bonds? Bonds can be confusing, but Derek breaks down the terms so next time you hear someone talking on CNBC you know what they are referring to. What is a bonds duration in relationship to interest rates? How to calculate a bonds dura...
Apr 17, 2022•28 min•Ep. 164
Derek Moore gives a contrarian take on the Fed raising rates. What if raising rates causes a major component of the CPI to increase rather than decrease? If the Fed raises rates, mortgage rates rise, demand increases for rents, and owner’s equivalent rents rise? In this episode, Derek explains what is measured in the CPI and explains how OER or Owners Equivalent rent and rents are calculated by the BLS each month. What percentage of the CPI is housing? How is OER or Owners Equivalent Rent calcul...
Apr 10, 2022•21 min•Ep. 163
Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to talk yield curve inversion. What is the yield curve inversion and why do investors care? Plus, reviewing historical precedent on prior yield curve inversions prior to recessions. What is the average time to recession from yield curve inversion? When has it not worked? Later, they discuss inflation’s effect US Large Cap earnings. What are the consequences from higher inflation? What about deflation? What is the yield curve...
Apr 03, 2022•36 min•Ep. 162
Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to discuss whether now is finally the death of the 60/40 portfolio? A Bloomberg article points out when 10-year treasury yields move up or through long term channel resistance things happen. Plus, travel back in time to 1982 where we read some expert comments in NY Times article around predictions on interest rates. Finally, how markets have historically done in midterm election years. Bond yields spike while the curve flatt...
Mar 27, 2022•53 min•Ep. 161
Derek Moore is back to talk about inflation and how there are some misconceptions about what happens if inflation subsides. At the same time, many things we use are enjoying decades long deflation making them cheaper to use. Hint: long distance calling. Plus, why low interest rates do and don’t cause inflation. Will raising rates reduce oil prices? Supply and demand is still king. What are some misconceptions around inflation? Inflation coming down is a reduction in the upward rate of change How...
Mar 21, 2022•26 min
Derek Moore is joined once again by ZEGA Financial CEO Jay Pestrichelli to discuss why volatility remains high. How the VIX Index stays elevated even after the initial reasons subside. What is driving the market pricing of the S&P 500 Index and how it compares to prior 10-year periods. Plus, comparing this high oil price period to prior ones on an inflation adjusted basis. What are driving returns right now (earnings or multiples) Is the market getting cheap on a forward PE multiple base? Co...
Mar 13, 2022•59 min•Ep. 159
Derek Moore explains in easy-to-understand terms what risk parity strategies are. Plus, he explains Harry Browne’s Permanent Portfolio and Ray Dalio’s All Weather Portfolio. How standard deviation is used and how some versions use leverage including futures to create risk parity weighted exposure. What are risk parity strategies? What are All Weather Portfolios? What is the Permanent Portfolio? Equalizing risk via standard historical deviation Using futures to create leveraged notional value Wha...
Mar 06, 2022•22 min•Ep. 158
Derek Moore relays how markets have done historically around geopolitical events. Plus, how being hedged allows investors to stay in the market. Interesting stats on markets 1-year later after drawdowns. It may surprise you. What the latest Russia/Ukraine situation means for inflation and interest rates. How markets perform around geopolitical events Does the Russia conflict increase inflation risks? Will the Fed raise interest rates less in 2022 now? Energy prices and inflation Commodities rall...
Feb 27, 2022•27 min•Ep. 157
Derek Moore explores how stock and bonds have done after the Fed starts raising rates. Is there any difference between when they raise greater than 1% compared to less than 1%? Why people should be surprised in March when February CPI numbers are released. More debate about what caused inflation. Plus, stocks continue to rerate with multiples contracting while earnings are up year to date. Examining stocks and bonds after the Fed starts raising rates Inflation causes February CPI released in Mar...
Feb 20, 2022•34 min•Ep. 156
Jay Pestrichelli, CEO ZEGA Financial, is back with Derek to say congratulations to our government debt reaching $30 Trillion! What are the ramifications of high debt levels? What the interest on that debt could be if rates rise? Does this put pressure on the Fed NOT to raise rates so much? Plus, interest in hedging at the highest levels since April of 2020. Is that a sign of contrarian optimism for the stock market? And contrarian corner is back where we each give some contrarian picks that go a...
Feb 13, 2022•43 min•Ep. 155
Derek Moore discusses how the recent selloff is due to a multiple contraction rather than an earnings one. How 2021 and now so far in Q1 22 stocks are rerating by shrinking the multiple. Plus, what the shape of the yield curve is telling us in light of expected Fed action on interest rates. Driver of stock prices multiple declines vs earnings expansion PE Ratios coming down on a forward basis Earnings estimates on the S&P 500 Index for 2022 only shrink nominally What is the yield curve Yield...
Feb 06, 2022•33 min•Ep. 154
Derek Moore discusses how markets have experienced selloffs but many times wind up positive at the end of the year. Plus, answering questions around small caps and the Russell 2000 Index ETF IWM PE Ratio. How the index differs from others in not including negative earnings in the computation. Then, watching latest inventory data reported this week. Intrayear stock market selloffs vs end of year total returns PE Ratios computation in Russell 2000 Index ETF vs S&P 500 Index PE calculations Mos...
Jan 31, 2022•24 min•Ep. 153
Derek Moore discusses the recent market selloff while giving some perspective around this and others. Why is everyone waiting on pins and needles for the Jan 26th Jerome Powell Fed press conference. Plus, how markets retracing means valuations are coming back down, so long as earnings remain strong. Netflix meets on top line, and beats on bottom line but the streat was not a fan of guidance on subscribers. Probability of FED future rate hikes Netflix meats, beats, and dissapoints Anticipation gr...
Jan 23, 2022•27 min•Ep. 152
Derek Moore is joined once again by ZEGA CEO Jay Pestrichelli to give a few contrarian takes on markets. What are the inverse of obvious trades when inflation is perceived to be continuing? How commodities have run but gold has disappointed. Plus, why the Fed raising rates might increase costs. Yup, that’s contrarian but we’ll explain on the podcast. Good news bad news market reactions Contrarian trade ideas Are FED interest rate expectations too much? Inflation continues as calls for the FED to...
Jan 16, 2022•1 hr 7 min•Ep. 151
