Broken Pie Chart

This week we discuss how advances in technology and dropping costs have made it better for investors. Has it ever been this good? Maybe investors worrying about payment for order flow are worried about the wrong things? Looking back when there was no dividend reinvestment and high commissions, it would have cost you an arm and a leg to replicate the index. Then we discuss updates to the S&P 500 earnings estimates and forward PE valuations. How things have changed from March of 2020. How bid/ask spreads have narrowed greatly over the years. Decimalization vs. fractions in trading Higher commissions changed to zero commissions Payment for order flow Dividend Reinvestment Before index funds no way to replicate the S&P 500 Index How earnings estimates have risen since March of 2020 Earnings estimate ranges for the S&P 500 Index Forward PE Ratios Historical Averages PE Ratio S&P 500 Index Calculating the forward PE Mentioned in this Episode: JP Morgan Guide to the Markets https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Last week the latest CPI inflation data came out from the BLS. If you watched the news, they played it up. While we don't know what inflation will be with any certainty, stop watching the news and start watching the data for yourself. In this week's episode, Derek runs through factors to keep an eye on and where you can track the data for yourself. What's going in with rental car prices? What about energy prices? What happens if you remove the re-opening items from core CPI? CPI Consumer Price Index up 5.4% year over year in June 2021 Why are rental car prices surging? Commenting on Scott Minerd's piece on Guggenheim's site around inflation Sticky CPI vs Flexible CPI Real Disposable income check-in Housing prices vs mortgage payments as a percent of real disposable income Interesting items in CPI including rent, owners equivalent rent, shelter, used cars, rental cars, and more How you can track CPI trends Where to find the data on FRED Federal Reserve Bank of St. Louis site Mentioned in this Episode: Real Disposable Income data https://fred.stlouisfed.org/series/DSPIC96 Sticky CPI vs Flexible CPI data https://www.atlantafed.org/research/inflationproject/stickyprice Mortgage Debt Service as Percent of Disposable Income https://fred.stlouisfed.org/series/MDSP Household Debt Service as Percent of Disposable Income https://fred.stlouisfed.org/series/TDSP Article explaining the rise in rental car prices https://www.businessinsider.com/rental-car-shortages-us-travel-demand-chip-shortage-2021-4 Scott Minerd Guggenheim piece saying not to panic on inflation https://www.guggenheiminvestments.com/perspectives/macroeconomic-research/still-no-reason-to-panic-about-inflation?utm_source=twitter&utm_medium=social&utm_term=scott+minerd&utm_content=macroeconomic+research&utm_campaign=macro+alert BLS Inflation Data Release https://www.bls.gov/cpi/ Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Container shipping rates are at all-time highs. So How bad is the situation? How bad is the backup at various container shipping ports? What effect is this having on inflation in the short term? Evergiven container ship released from Suez Canal Busiest Container Shipping Ports Problems at Yantian port Ships anchored of container shipping ports causing backups The surge in Container shipping prices Panana Spread all-time high container shipping rates Empty sailings containing shipping Dwelling time container shipping The difference in rates Shanghai to LA vs La to Shanghai Container shipping rates impact on inflation New container shipbuilding orders up in 2021 to around 17% to 20% of the fleet Evergiven stuck in Suez Canal Evergiven container ship finally release from Suez Canal Effect on global trade due to container ships stuck in Suez Canal Mentioned in this Episode: Book The Box by Marc Levinson https://amzn.to/3hwcj61 Book Outside the Box by Marc Levinson https://amzn.to/3e7AgyN Podcast Is Inflation Really Out of Control? https://podcasts.apple.com/us/podcast/is-inflation-really-out-of-control/id1432836154?i=1000526178078 Supplychaindive charts showing Covid container ship problems https://www.supplychaindive.com/news/yantian-china-port-covid-charts-data-congestion-ships-supply-chain/602014/ Balance of Trade Chart https://fred.stlouisfed.org/series/BOPGSTB Yantian port back to normal? https://theloadstar.com/yantian-back-to-normal-tomorrow-but-box-backlog-will-take-weeks-to-clear/ from THELOADSTAR site Infographic showing impact to global trade from stuck Evergiven container ship in Suez Canal from Freightwaves site https://www.freightwaves.com/news/daily-infographic-ever-given-finally-released-from-custody-in-egypt Yantian port to re-engage with pre-financial crisis expansion of 3 million TUEs at port https://theloadstar.com/port-of-yantian-dusts-off-pre-financial-crisis-plan-to-add-3m-teu-capacity/

Dan McMullen Senior Managing Director and Senior Portfolio Manager in Blackstone's Credit Liquid Credit Strategies Unit, SPDR Blackstone Senior Loan ETF (Symbol: SRLN) joins the podcast to explain what senior loans are. How senior loans compare to leveraged loans and CLOs or collateralized loan obligations. Plus, Dan explains what the risks are, how they compare to high yield bonds, and what happens in the event of bankruptcy. Later Dan gets into how loans trade and are priced plus whether they are based on SOFR, LIBOR, or something else. What types of covenants or restrictions do investors put on companies accessing these markets? What type of companies use senior loans and why this instrument versus equity or bonds. Dan McMullen also is a member of Blackstone Credit's LCS Management, LCS US Syndicated Credit, Global Structured, and Asset Allocation investment committees. What are senior loans? Senior Loans versus Leveraged Loans What are CLOs (Collateralized Loan Obligation) What types of collateral do companies put up against loans? Where do senior loans site on the balance sheet? Where do ongoing interest payments sit on the income statement? What happens if companies go bankrupt? What is a typical recovery percentage on loans in default? Is the industry transitioning away from Libor and to SOFR? Effect of interest rates on existing and future issuance of senior loans Where do senior loans sit in the capital structure Why companies use senior loan markets Senior loans during the worst of Covid Prices of loans versus prices of high yield bonds Recovery rates on loans versus high yield bonds How loans in bankruptcy can be sold Amortization in senior loans Restrictions or covenants put on senior loan issuers Mentioned in this Episode: More on Dan McMullen and senior loans ETF https://www.ssga.com/us/en/institutional/etfs/funds/spdr-blackstone-senior-loan-etf-srln Marcel Benjamin deconstructs High Yield Bonds and What are Zombie Companies https://podcasts.apple.com/be/podcast/marcel-benjamin-high-yield-bonds-explained-what-are/id1432836154?i=1000517760353 Derek Moore book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=tmm_hrd_swatch_0?_encoding=UTF8&qid=&sr=

Often, we get questions on why one company's options are priced so differently than another. So how options prices differ based on implied volatility? What makes up intrinsic value vs extrinsic value in options premium? Compare a high volatility company to a lower volatility company in the options market. How to calculate expected single standard deviation expected move based on IV Implied Volatility Implied Volatility Volatility Intrinsic Value Extrinsic Value Time value in premium LEAP Options How Days to Expiration Inform Option Prices Gamestop Options vs 3M Options Mentioned in this Episode: Podcast High Probability Options Strategies https://open.spotify.com/episode/5r05EHn8TBaJFCwGT7J8WN Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

The Federal Reserve this week held their June meeting and released their new dot plot. Chairman Powell also did his customary press conference. The Fed says inflation is transitory and likely temporary. Others disagree. They even said they are talking about talking about tapering. So is inflation out of control or transitory as the Fed claims. Plus, what did they do or did not do on policy changes? Sticky CPI vs Flexible CPI The Fed's new dot plot Fed track record on projections ON RRP Market (Overnight Reverse Repo Market) Monthly Asset Purchases the Fed Talking about Talking about Tapering IOER Interest on Excess Reserves Used Cars inflation Mentioned in this Episode: Podcast Fed Tapering options https://podcasts.apple.com/us/podcast/fed-tapering/id1432836154?i=1000524411838 Podcast What are Reverse Repos? https://podcasts.apple.com/us/podcast/what-are-reverse-repos-repos-fed-enters-overnight-reverse/id1432836154?i=1000523659106 Sticky CPI Inflation vs Flexible CPI Inflation Podcast https://podcasts.apple.com/us/podcast/how-is-inflation-measured-sticky-cpi-vs-flexible-cpi/id1432836154?i=1000521909707 Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

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 market. Hack for fresh French fries at McDonalds Hedge on Cash mentioned by Value Afterhours podcast Value investors and market valuation Father's Day gifts books from Jay Pestrichelli and Derek Moore Hedged equity for fearful investors Hedged equity for investors believing markets is at tops. Mentioned in this Episode: Podcast discussing Hedged Equity vs 60/40 Stock/Bond Portfolio https://open.spotify.com/episode/63WSsB3ZDWM0w0ttMv60TE Fear of Investing When Markets Are High? Podcast showing that markets are within a few percent of all-time highs 36% of the time. https://open.spotify.com/episode/2Fv0sV2mZT2Sy8Chjo79Oo Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy Jay Pestrichelli book Buy and Hedge https://amzn.to/3wlfFhh

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 is the effective fed funds rate? Mentioned in this Episode: Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk Fed Balance Sheet h.4.1 report https://www.federalreserve.gov/releases/h41/current/ Fed SMCCF corporate bonds and ETF buying program https://www.federalreserve.gov/monetarypolicy/smccf.htm Fed Overnight Reverse Repo Operations https://fred.stlouisfed.org/series/RRPONTSYD NY Fed Effective Fed Funds Rate https://www.newyorkfed.org/markets/reference-rates/effr SOFR Rate Secured Overnight Funding Rate https://fred.stlouisfed.org/series/SOFR

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 calculate what the repo rates are? How do collateralized repo transactions work? Fed Funds rate Federal Reserve IOER Interest on Excess Reserves Mentioned in this Episode: New York Fed Overnight Reverse Repos https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements Financial Times FT article on reverse repo Fed intervention https://www.ft.com/content/cdec7f2e-6129-412c-b118-8906a2a0f92f Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

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 Episode: Podcast Big Short Movie and Credit Default Swaps https://open.spotify.com/episode/6FG0xHkxfhSXEtbJbFbDF6?si=hr0qDh8US_6rmU3CRSxG3A How much Bitcoin or Ethereum should I have in my portfolio podcast https://open.spotify.com/episode/5ZDfSVCAZx6WW6944oqZZh?si=ew34IusHRYON025A6P6c2g&nd=1 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 www.razorwealth.com

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 Inflation? • Owners' equivalent rent • How often do components of the CPI index change? • Difference between CPI and PCE • Sticky CPI vs Flexible CPI • Headline Inflation vs Core Inflation • Where to find inflation data • Difference between YOY Year over Year and MOM Month over Month data Mentioned in this Episode: Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk PCE Trimmed Mean Inflation https://www.dallasfed.org/research/pce.aspx CPI BLS Bureau of Labor Statistics latest inflation data https://www.bls.gov/cpi/ Sticky CPI and Flexible CPI Atlanta Fed https://www.atlantafed.org/research/inflationproject/stickyprice

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? Blockchain as a utility What percentage of a portfolio should you have in Bitcoin or Ethereum? The skeptical and the optimistic view of crypto currencies Is Dogecoin real? Are either Bitcoin or Ethereum good hedges against inflation? Questions as to how Bitcoin would be taxed if using it to buy a Tesla. Mentioned in this Episode: Article How Much Bitcoin Should You Have in Your Portfolio https://zegafinancial.com/blog/how-much-bitcoin-should-be-in-your-portfolio Jay Pestrichelli's book Buy and Hedge https://amzn.to/3hcYkm3 Derek Moore's book Broken Pie Chart https://amzn.to/2SB2Y34

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 call SPAC companies "black check companies"? Virgin Galactic and DraftKings famous SPACs SPAC companies on CNBC How SPAC Mergers work Mentioned in this Episode: Athletes and Celebrities join SPAC boom https://news.crunchbase.com/news/athletes-and-celebrities-join-the-spac-boom-sec-takes-notice/ Beware the SPAC https://seekingalpha.com/article/4397498-beware-spac-how-work-and-why-are-bad How SPAC mergers work https://www.pwc.com/us/en/services/audit-assurance/accounting-advisory/spac-merger.html 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

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 Decade Comparison of Total Return on 10 Year US Treasuries More risk with low yields How much more negative can bond yields go? Mentioned in this Episode: Marcel Benjamin on High Yield Bonds https://directory.libsyn.com/episode/index/show/brokenpiechart/id/18776195 Trouble with Treasuries: Bonds have one of worst starts to year since… https://zegafinancial.com/blog/us-treasuries-third-worst-start-to-year-since-1830-market-reaches-new-highs-while-many-big-names-in-correction-territory 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

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 high yield market by rating • Risk of defaults historically • Defaults 2008 vs 2020/21 so far • Spreads widening vs narrowing. • Short duration high yield vs longer duration • Implied risk of default by yield spread. • Historical recovery rates • Brief explanation of default process for bonds • Zombie Companies • What are they (i.e., 3 years Operating Earnings • Interest coverage ratios • % of companies now vs historical considered zombies • How companies may recycle and roll debt upon maturity Mentioned in this Episode: Information on State Street Global Advisors SPDR fixed income products https://www.ssga.com/us/en/intermediary/etfs/capabilities/simplify-investing-with-fixed-income-etfs/sdpr-fixed-income-etfs CCC High Yield Spread from Federal Reserve Bank of St. Louis (FRED) https://fred.stlouisfed.org/series/BAMLH0A3HYC High Yield Spread from Federal Reserve Bank of St. Louis (FRED) https://fred.stlouisfed.org/series/BAMLH0A0HYM2 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

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 collected across high and low tax rates. Overview of MMT or Modern Monetary Theory Reflect on our attempt to predict the US 2020 Presidential Election Maybe the Keys to the Whitehouse were correct after all? How wide is the US federal budget deficit? Mentioned in this Episode: JP Morgan Guide to the Markets (check out slides around page 27 for what we were looking at) https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/ US Treasury Direct Average Interest Rates on US Treasuries Issued March 2021 report https://www.treasurydirect.gov/govt/rates/avg/2021/2021_03.htm 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 www.razorwealth.com

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 higher inflation or just a regaining of the previous trend? US Treasuries issued in 1812 to fund the War of 1812. US Treasuries performance worst since 1980 and third worst going back to 1830. Share buybacks plus Dividends equal total return of capital to shareholders. Estimating the intrinsic value of the stock market using earnings expectations Google Trends highlight popularity of investment search terms like inflation and market bubble. Real GDP accounts for inflation Mentioned in this Episode: Hussman article on the option value of cash due to market expectations https://www.hussmanfunds.com/comment/mc201201/ Professor Aswath Damodaran S&P 500 valuation model using earnings estimates https://twitter.com/AswathDamodaran/status/1345461746622898176 Podcast episode where we talk about hedged equity and valuation timing https://directory.libsyn.com/episode/index/show/brokenpiechart/id/18495611 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 www.razorwealth.com

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 portfolio. How to Calculate expected value Deal or No Deal Example on expected value Exploring Hussman's option value of cash Expected returns based on valuation. 60/40 stock and bond portfolio vs hedged equity approach Container shipping revolutionized trade like the internet? Stuck container ship causing global trade snafu. Real returns on bonds after inflation Mentioned in this Episode: Hussman article on the option value of cash due to market expectations https://www.hussmanfunds.com/comment/mc201201/ The Box book on Container Shipping by Marc Levinson https://amzn.to/3dcx8jO Buy and Hedge Book https://amzn.to/31kXXfV 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 www.razorwealth.com

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 performed during rising rate environments? How have markets done during rising inflation? Is this time different with the recent rise in rates? Looking at historical market returns over cycles. Surprising that during late seventies GDP grew and President Carter had average annualized growth in stocks. Markets climbing the wall of worry. Risk heightened in bonds due to record low interest rates. Comparing bonds in 1970's with high coupon rates to today Mentioned in this Episode: Risk for bonds with lower and rising interest rate environments https://directory.libsyn.com/episode/index/show/brokenpiechart/id/18089738 Numbers show stock markets have done ok during rising rate environments historically https://zegafinancial.com/blog/historically-markets-have-done-pretty-good-in-periods-of-rising-rates Stagflation explained and data on CPI inflation, unemployment, and GDP growth 1965-1985 https://zegafinancial.com/blog/historically-markets-have-done-pretty-good-in-periods-of-rising-rates 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 www.razorwealth.com

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 needed to exchange. Exchanging foreign currency into US dollars. US Dollar and Interest Rates Global US Companies benefit from weaker dollar Mentioned in this Episode: Current Weights in US Trade Weighted Dollar Index https://www.federalreserve.gov/releases/h10/weights/default.htm 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 www.razorwealth.com

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 2nd 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: How do TIPS Treasury Inflation Protected Securities Work? https://brokenpiechart.libsyn.com/fed-buying-which-etfs-and-bonds-how-do-tips-treasury-inflation-protected-bonds-work CPI Consumer Price Index release for January 2021 https://www.bls.gov/news.release/cpi.nr0.htm Understanding TIPS bonds https://www.pimco.com/en-us/resources/education/understanding-treasury-inflation-protected-securities/ Explaining negative yielding bonds https://podcasts.apple.com/us/podcast/wacky-negative-yielding-bonds-need-for-alternative/id1432836154?i=1000442461907 Real returns vs nominal returns above inflation https://podcasts.apple.com/us/podcast/importance-real-returns-above-inflation-how-to-calculate/id1432836154?i=1000440384756 Myths of the 60/40 stock/bond portfolio https://podcasts.apple.com/us/podcast/discussing-myths-around-the-classic-60-40-portfolio-part-i/id1432836154?i=1000434346248 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 www.razorwealth.com

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 Aggregate Bond Index from a yield and duration risk comparison? Derek Moore discusses these and other aspects of evaluating risk in bonds due to changes in interest rates. What is duration risk in bond portfolios? Comparing duration and yields between US Aggregate Bond Index and Global World EX-US Aggregate Bond Index? Negative yield to maturity bonds in Europe and Japan How does lower rates extend duration risk in bonds? How do callable bonds potentially mute upside market move in bonds when rates fall? Bonds market value a combination of present value of cash flows (interest payments) and return of capital at maturity What are call provisions on corporate 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 Mentioned in this Episode: Short Selling Terms Explained through Tesla https://podcasts.apple.com/us/podcast/short-selling-explained-tesla-short-interest-short/id1432836154?i=1000463711042 Explaining negative yielding bonds https://podcasts.apple.com/us/podcast/wacky-negative-yielding-bonds-need-for-alternative/id1432836154?i=1000442461907 Real returns vs nominal returns above inflation https://podcasts.apple.com/us/podcast/importance-real-returns-above-inflation-how-to-calculate/id1432836154?i=1000440384756 Myths of the 60/40 stock/bond portfolio https://podcasts.apple.com/us/podcast/discussing-myths-around-the-classic-60-40-portfolio-part-i/id1432836154?i=1000434346248 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 www.razorwealth.com

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 blockchain anyway? Stocks for the long run Stocks real return, after inflation, higher than gold or bonds Portfolio hedging for retirees and near retirees. Advice on size of potential cryptocurrencies Mentioned in this Episode: Gamestop Short Squeeze Wall Street Bets Explained https://directory.libsyn.com/episode/index/show/brokenpiechart/id/17756252 Derek's book Broken Pie Chart on Amazon https://amzn.to/2ZbRrXT Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jLHxG8 Contact Derek www.razorwealth.com

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 accounts work and raise firm risk How short sellers (or short squeezes) do and don't affect the underlying companies Synthetic short positions using options. Mentioned in this Episode: Gamestop Short Squeeze Wall Street Bets Explained https://directory.libsyn.com/episode/index/show/brokenpiechart/id/17756252 SEC Failure to Deliver Report https://www.sec.gov/data/foiadocsfailsdatahtm Why Gamestop couldn't do secondary offering at the high stock prices https://www.fool.com/investing/2021/02/05/why-gamestop-couldnt-take-this-golden-opportunity/ Explaining Delta and Gamma Options Squeeze Robinhood vs Softbank Whale https://brokenpiechart.libsyn.com/robinhood-option-traders-vs-the-softbank-whale Contact Derek www.razorwealth.com

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 versa. How short sellers can root out fraud in companies with examples. Jay Pestrichelli and Derek Moore get into this and more in this very timely and fascinating episode. What is a short squeeze? What is the GameStop short squeeze? How did Reddit group Wall Street Bets execute a short squeeze? How some people have made a lot of money How other people may lose a lot of money? What is short interest ratio? What is short interest as percent of float? What is a delta or gamma squeeze in options on stocks? Large in the money option open interest in GameStop at expiration How short selling adds liquidity. What are short days to cover metric? Short sellers uncovering fraud in Amazon Prime documentary the China Hustle. Short sellers with Enron, Nikola, Wirecard Trading halts and liquidity requirements on brokerages Congressional hearings coming on Robin Hood and Wall Street Bets GameStop activity Examples of pump and dump in 2000 by Michael Lewis in New York Times Short selling was found useful even in 1918. How short selling in itself does not bankrupt companies. How short selling that drives price lower can impact ability for secondary equity offering. Mentioned in this Episode: Explaining Delta and Gamma Options Squeeze Robinhood vs Softbank Whale https://brokenpiechart.libsyn.com/robinhood-option-traders-vs-the-softbank-whale Derek Moore's Book Broken Pie Chart https://amzn.to/2YoxRaF Documentary "The China Hustle" on Amazon Prime Video https://amzn.to/39uBJgm Michael Lewis article on 16-year-old penny stock trader 2001 https://www.nytimes.com/2001/02/25/magazine/jonathan-lebed-s-extracurricular-activities.html ZEGA Financial www.zegafinancial.com Jay Pestrichelli's Buy and Hedge Book on Amazon https://amzn.to/2YoJDSg

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 have on annual net interest payments as a percentage of the Federal Budget. What is the Universal Basic Income or UBI? How much would a Universal Basic Income cost? How much is the current US debit held by the public? What is the annual amount of interest paid annually on the US debt? What are the mandatory, discretionary, and net interest payments of the US Federal Budget? How much does Social Security, and Medicaid, Medicare cost? Difference between total US debt and debt held by the public What interest rate does the US pay on its national debt? What percentage of the federal budget does net interest payments on debt make up? What and when were the largest annual budget deficit in the US? Effective historical tax rates versus marginal tax rates How much free cash flow do the largest corporations generate annually? For each additional Trillion in debt, how much more interest needs to be paid? For each 1% increase in interest rates, how much do interest payments rise? Mentioned in this Episode: Average interest rates on US Treasury Securities https://www.treasurydirect.gov/govt/rates/pd/avg/avg.htm Annual interest on US debt outstanding https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm Gross debt versus debt held by the public explanation https://www.crfb.org/papers/qa-gross-debt-versus-debt-held-public Federal surplus or budget deficit historical chart https://fred.stlouisfed.org/series/FYFSD Breaking down the 2020 US Federal Budget https://www.thebalance.com/u-s-federal-budget-breakdown-3305789 2010 US Census breakdown of adults 18 and over, 62 and over, and total population https://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf Historical tax revenue as percentage of GDP by year https://fred.stlouisfed.org/series/FYFRGDA188S Historical effective tax rate on top 1% https://taxfoundation.org/taxes-rich-1950-not-high/ Historical top federal income tax bracket rates https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx

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 of Money and Impact on Inflation? https://brokenpiechart.libsyn.com/does-falling-money-velocity-point-to-lower-inflation Inflation breakeven 10 year on St. Louis Fed site https://fred.stlouisfed.org/series/T10YIE Inflation rate US https://fred.stlouisfed.org/series/FPCPITOTLZGUSA Razor Wealth Management www.razorwealth.com Derek Moore's book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547

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 Year Treasury yields to compare to stock earnings yield How to calculate the earnings yield on stocks How to calculate the implied PE ratio from bond yields Forward PE ratio calculation Earnings estimates vs reality. How earnings estimates and earnings can change Bond yields vs Earnings Yields Mentioned in this Episode: Book Buy and Hedge https://amzn.to/3bq8FYM Derek Moore's book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547 Razor Wealth Management www.razorwealth.com Baa Corporate Bond Yields https://fred.stlouisfed.org/series/BAA JP Morgan Guide to the Markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/ Podcast on Hedged Equity Strategies https://podcasts.apple.com/us/podcast/why-investors-need-a-protective-hedged-equity-strategy/id1432836154?i=1000418366567

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 increases. Using probabilities to generate short high probability option positions Expected underlying index moves based on varied levels of implied volatility How large investment banks take the opposite side of the trade looking to reduce Value at Risk (VAR) Difference between being patient for opportunities versus and always in the market strategy What happens to option spreads when markets sell off? Value at Risk VAR impact on institutional hedging as dynamic volatility hedging increases Why sell options on large diverse indexes as opposed to individual stocks Netflix example of implied volatility right before earnings and expected moves Single stock risk using Netflix and Disney examples of over 10% moves down after announcements Mentioned in this Episode: Jay Pestrichelli and Derek Moore talk myths of the 60/40 portfolio https://razorwealth.com/discussing-myths-around-the-classic-60-40-portfolio-part-i/ How are options priced and what is short volatility? https://razorwealth.com/how-are-options-priced-and-what-is-short-volatility-podcast/ What implied volatility on options tells us about stock earnings expectations? https://razorwealth.com/what-the-options-market-tells-us-about-expected-stock-moves-around-earnings/ Razor Wealth Management www.razorwealth.com Derek Moore's book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547

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 do IPOs raise money for early investors and companies? Don't use market orders on IPOs first day of trading Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Podcast on S-1 IPO filings and Unicorn IPOs https://brokenpiechart.libsyn.com/the-unicorn-ipos-are-coming-what-their-s-1-filings-divulge Contact Derek www.razorwealth.com

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 Maximization Phase, Withdrawal Phase Dollar cost averaging Retirement and inflation Withdrawal rates in retirement Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Downside Hedging in Portfolios https://directory.libsyn.com/episode/index/show/brokenpiechart/id/7043961 Contact Derek www.razorwealth.com

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 like Freetrade reach non investors traditional brokerage firms don't How you reduce the friction and make it easier to get started. How Freetrade derives revenue as a different model from traditional brokerages Different ways of marketing for to find non-traditional investors Opportunity for investors using an always with you investment app How technology is reducing barriers and costs in general Price deflation for consumers and trade offs for now free services like google gmail Fractional share revolution for investors who want to own stocks Owning individual stocks vs index ETFs to build knowledge Mentioned in this Episode: Freetrade https://www.freetrade.io/ Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Contact Derek www.razorwealth.com

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 supply has not exactly meant higher inflation Money velocity CAPE Ratio, Shiller PE Are valuations high or does prior 20-year growth rate say returns can be good over next 10 years? Being long stocks with no bonds but being hedged? Is gold an effective hedge? What does the President and Senate control say about future stock market returns? Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Jay Pestrichelli's book Buy and Hedge https://amzn.to/3lvSz2d Video and articles mentioned on podcast at ZEGA Financial Site https://zegafinancial.com/blog Podcast reviewing historical market performance by President and Parties https://directory.libsyn.com/episode/index/show/brokenpiechart/id/15806990 Contact Derek www.razorwealth.com

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 garage) Individual stocks vs mutual funds or ETFs Reducing friction in the brokerage space for new investors Doesn't Schwab do everything Robinhood does? Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Podcast reviewing historical market performance by President and Parties https://directory.libsyn.com/episode/index/show/brokenpiechart/id/15806990 Contact Derek www.razorwealth.com

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 Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Podcast reviewing historical market performance by President and Parties https://directory.libsyn.com/episode/index/show/brokenpiechart/id/15806990 Volatility around elections and the 2000 Bush v Gore market environment https://directory.libsyn.com/episode/index/show/brokenpiechart/id/16298195 Contact Derek www.razorwealth.com

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 total debt • How much debt does the Federal Reserve have on its balance sheet? • How much debt does the social security trust fund own? • What is the average interest rate on US treasuries on our national debt? • CBO Congressional Budget Office projections of growth of the US national debt • What is debt to GDP? • Revenues and Expenditures of the United States Government budget • US debt to revenues collected Mentioned in this Episode: Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk Interest on national debt annualized https://fred.stlouisfed.org/series/A091RC1Q027SBEA CBO Congressional Budget Office long term budget outlook https://www.cbo.gov/publication/56516#:~:text=0%205%20Projected-,Debt.,percent%20of%20GDP%20by%202050. Debt held by public as percentage of GDP https://fred.stlouisfed.org/series/FYGFGDQ188S Federal Reserve US Treasuries on balance sheet size https://fred.stlouisfed.org/series/TREAST US Government revenues receipts https://fred.stlouisfed.org/series/FGRECPT

Whether owning a home or owning stocks creates strong opinions on both sides. But what would be a way to evaluate the differences? Historically how have returns of homes vs the S&P 500 Index compared? What homeowners miss about gains in the price of their home. Historical annualized returns housing vs the stock market Is your house an asset or a liability? How to think about your total true cost of owning a home Your home as a hedge on inflation Rent vs Own Historical median home prices United States Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Historical Median Home Prices US https://fred.stlouisfed.org/series/MSPUS Pay of mortgage or invest? https://brokenpiechart.libsyn.com/should-i-payoff-my-mortgage-early-or-invest Contact Derek www.razorwealth.com

Rates jumped 30% in the US Treasury 5-year maturities this past week! Off course they only went from .25% to .33%, but why are some analysts on CNBC saying the next 10 years bonds may not return the same amount? What are the risks in bonds should interest rates rise? Do bonds offer a negative real return after inflation? End of the Bull Market in Bonds? Bonds sensitivity to interest rate changes 1970s and 1980s inflation effect on bonds total returns The 60/40 portfolio in the future with low interest rates Correlations between US Treasury Bonds and US Stocks Historical interest rates 1694-2016 from Bank of England How negative could interest rates go? Coupon % on bonds as predictor of future annualized returns Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx JP Morgan Guide to the Markets: https://am.jpmorgan.com/us/en/asset-management/gim/protected/adv/insights/guide-to-the-markets CFA institute article on bond coupon rates as predictor for future returns https://blogs.cfainstitute.org/investor/2020/06/25/redefining-fixed-income/ Contact Derek www.razorwealth.com

Your starting to hear about the options market pricing in huge volatility for November. This week, there was talk about the December contract getting bid up in case of a contested election. What does that mean? And how did volatility react during the Bush vs. Gore Florida recount and supreme court decision in the 2000 Presidential Election? VIX Futures VIX before and after Bush v Gore 2000 election November VIX futures vs October and December How much more volatility is the November futures pricing in? 2000 contested election and volatility How to look up monthly VIX futures contracts Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Podcast reviewing historical stock market returns by presidents and parties https://brokenpiechart.libsyn.com/surprising-historical-returns-by-presidents-senate-and-house-by-party-reviewing-the-13-keys-to-the-white-house-for-2020-predictions-for-the-2020-election-president-and-senate Contact Derek www.razorwealth.com

As October is here naturally the stories start to appear around volatility and historical market returns. Many people assume October is the worst month for the stock market. Is October the most volatile? What is the average stock market returns by month? In this episode we will review and answer those questions. Plus, is it more important for the market to expect volatility in the "implied volatility" vs historical volatility? Stock market returns in October Stock market volatility in October Historical stock market returns by month Stock market volatility by month Implied Volatility vs. Historical Volatility Importance of just being hedged Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx MarketWatch article stock market volatility by month https://www.marketwatch.com/story/heres-how-stocks-typically-perform-in-october-and-why-you-might-want-to-buckle-up-2020-09-25 Why investors need a hedging strategy to protect portfolio downside https://brokenpiechart.libsyn.com/why-investors-need-a-protective-hedged-equity-strategy Podcast reviewing historical stock market returns by presidents and parties https://brokenpiechart.libsyn.com/surprising-historical-returns-by-presidents-senate-and-house-by-party-reviewing-the-13-keys-to-the-white-house-for-2020-predictions-for-the-2020-election-president-and-senate Podcast Episode Robin Hood Option Traders and option pricing and market maker delta hedging https://brokenpiechart.libsyn.com/robinhood-option-traders-vs-the-softbank-whale Contact Derek www.razorwealth.com

Jay Pestrichelli co-hosts this episode with Derek where they discuss the continued talk around Robinhood Traders buying deep out of the money options to force market makers to buy stock. Plus, they discuss the reported $4 Billion spent buy Softbank to purchase option positions in some tech names. How do market makers hedge and the challenges with short term deep out of the money call option buying? Plus, why they both hate and love the idea of covered calls. Robinhood Option Traders buying cheap deep out of the money call options Does call buying really force market makers to buy up a lot of shares? Examining option delta and time decay on short term Tesla call options How the market sometimes makes you pay a tuition as you acquire trading knowledge One of the best trading books Market Wizards by Jack Schwager Examining the reported Softbank option spread positions Why covered calls sometimes are detrimental to a portfolio How often the overall market is up more than 15% in a year historically What does option delta mean? How does an options delta factor into how a market maker hedges? Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/3iKpRcx Jay Pestrichelli's book Buy and Hedge https://amzn.to/2ZQcYGg Derek Moore and Jay Pestrichelli White Paper on Concentrated Stock Hedging download here https://zegafinancial.com/products/concentrated-stock Market Wizards by Jack Schwager https://amzn.to/2FUwGcI Stock Market Wizards by Jack Schwager https://amzn.to/3cbnhK5 (New Book) Unknown Market Wizards by Jack Schwager https://amzn.to/3kuMuSB Contact Derek www.razorwealth.com

Lately you have probably heard analysts going on CNBC saying given where interest rates are valuations are or are not overstretched. But how do interest rates, and low interest rates, affect stock valuations? How to they affect the cost of capital and the ROIC or return on invested capital? How do you discount down future earnings based on a discount rate? Why interest rates matter to investors The present value of future earnings Interest rates and the WACC or weighted average cost of capital How low rates may make it easier to achieve ROIC greater than WACC Historical risk free rates in US Treasury Bonds and Bills Mentioned in this Episode: US Treasury Bonds Historical Yield Curve Site https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yield Warren Buffett Indicator explained podcast and article https://razorwealth.com/the-buffett-indicator-explained/ 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 www.razorwealth.com

Many people know they should understand what their current net worth is. Many also know they should get a handle on their cash flow versus income. Yet it often seems too complicated. Lets uncomplicate personal finance a bit and see how to come up with your current assets and liabilities quickly and easily. Also, how to compile and work through your expenditures versus income. The larger expenses matter more than your little Netflix monthly expense Liquid vs Illiquid assets and liabilities Is a house an asset or liability? Your car may not be an asset How to eBay stuff lying around to contribute or start an investment account Building your personal balance sheet What your monthly savings could be worth in 5 years Why budgets do not have to be complicated Now is a good time to see what memberships you no longer need Mentioned in this Episode: Derek Moore's book Broken Pie Chart https://amzn.to/31CDzYP Contact Derek www.razorwealth.com

The US Presidential election season is in full swing. But does it matter for the Stock Market which party gets elected? Spencer Wright from Halbert Wealth joins Derek to review some surprising historical statistics around market returns and GDP growth. Including some surprising data on some Presidents you might have been better or worse. Plus, they go through Professor Alan Lichtman's 13 Keys model to try and predict this year's election. Historical stock market returns by Presidents and Party in Power President, Senate, and House Historical GDP growth rate by Presidents How often does the President, House, and Senate combinations of Republican or Democrat happen Reviewing the Electoral College Map prospects for 2020 What is the "13 Keys to the White House" saying about the 2020 election Predictions for 2020 election Does the President's party matter for stock market returns? Surprises within the historical data on returns and GDP growth Link to 97 years of historical returns by president Mentioned in this Episode: Historical Stock Market and GDP Growth by President, Senate, and House Party https://razorwealth.com/do-presidents-and-the-congress-really-impact-stock-market-returns/ 270 to Win Electoral Map https://www.270towin.com/ Book 13 Keys to the White House by Alan Lichtman https://amzn.to/2G77GPH 13 Keys to the White House 2020 Version https://amzn.to/3b6ST37 Derek Moore's book Broken Pie Chart https://amzn.to/31CDzYP Contact Derek www.razorwealth.com

If you listen to CNBC or Bloomberg you probably hear analysts talking about how the Forward PE Ratio is higher than historical averages on the stock market. But how are they figuring these numbers? How does the drop in earnings in the S&P 500 in 2020 due to Covid19 compare with earnings drops in 2008 and 2009? How long did it take them to recover? What is a Forward PE Ratio? How is the Forward PE Ratio calculated? What is the Earnings Yield? How is Earnings Yield calculated? Drop in earnings 2008 vs 2020 and years to recover Are Forward PE Ratios a good predicter of future returns? Cape Ratio or Shiller PE Mentioned in this Episode: 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 www.razorwealth.com

For years many have pointed to the end of the 60/40 Portfolio's reign as a mass recommended asset allocation. But even in 2020, it still worked as bonds rallied and interest rates dropped to record low levels in the US. But with rates this low, do the risks now outweigh any potential benefits? How much more could bonds rally due to changes in interest rates given where they are? How negative could rates go? What is 60/40 Stock Bond portfolio? Is it realistic to think bonds will have same run as 1981-2020 going forward? How negative can US Treasury yields go? Nominal Returns vs Real Returns after inflation Amount of negative yielding debt around the world More interest rate risk while yields and cash flows are lower Alternatives to the 60/40 Portfolio Bill Gross said rates would have to go to negative -17% to equal last 40 year run in bonds Mentioned in this Episode: 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 Podcast Myths around the 60/40 Portfolio https://brokenpiechart.libsyn.com/discussing-myths-around-the-classic-6040-portfolio-part-i Contact Derek www.razorwealth.com

In the recent Covid financial crisis the Federal Reserve "printed" a bunch of money that increased the money supply. This should lead to massive inflation, right? Well, maybe not if we look at the relationship between the velocity of money (how often the same dollar is used) and the inflation rate. See how to figure out the velocity of money. What is the money supply and where to find it? What is the Velocity of Money? What is the money supply? Difference between MZM, M1, and M2 money supply Relationship between money velocity and inflation Comparing increase in money supply now in 2020 to the 2008-09 period Money supply has increased over 20% since Feb in the US Money as a medium of exchange What happens when the velocity of money goes below 1 (like in Q2 2020)? Japan experience with deflation and low money velocity Where can you find the money supply, GDP, and money velocity charts? Mentioned in this Episode: See the graph money velocity vs. inflation here https://razorwealth.com/money-velocity-relationship-to-inflation/ Current Nominal GDP US https://fred.stlouisfed.org/series/GDP Current Velocity of Money Supply MZM https://fred.stlouisfed.org/series/MZMV Current Money Supply MZM in US https://fred.stlouisfed.org/series/MZM Free Chapter from my book Broken Pie Chart https://www.book2look.com/book/YcqUhbCrtN 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 www.razorwealth.com

Apple released earnings last week but also announced their board authorized a 4-1 stock split. Do stocks splits matter anymore? And would a 4-1 Apple stock split completely shake up the weighting of the Dow Jones Industrial Index? Effect of Stock Splits Authorized stock split vs. implemented How a stock split affects a company's market cap What changes around earnings history and price history post stock split? How are companies in the Dow Jones Index weighted? Price weighted indexes vs. market cap weighted indexes How Apple's proposed stock split will upend the weighting in the Dow Jones Index Mentioned in this Episode: Dow Jones Index companies current index weightings http://indexarb.com/indexComponentWtsDJ.html Free Chapter from my book Broken Pie Chart https://www.book2look.com/book/YcqUhbCrtN 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 www.razorwealth.com

Last week we talked about Tesla's potential to qualify for the S&P 500 Index. Post earnings, some new option traders were surprised by the stock and options prices post positive earnings release. Plus, a paper recently updated called "Day trading for a living?" compile data on day traders trading futures contracts. The results were not too promising but what did the paper leave out? Tesla options implied volatility in premiums post earnings release Robinhood traders on Reddit message boards – do they know what they are doing? "Day Trading for a Living?" a paper recently updated sheds light on futures traders What is the trading risk of ruin table? Position sizing and percent of capital put at risk for traders Mini Ibovespa futures contracts in Brazil High volatility of returns cited in day trading paper 97% of traders lose money day trading according to paper What is the risk of ruin? Comparing risk of ruin across different payoff ratios Mentioned in this Episode: "Day Trading for a Living? " paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423101 How are options priced podcast https://brokenpiechart.libsyn.com/how-are-options-priced-and-what-is-short-volatility Book: A Trader's Money Management System: How to Ensure Profit and Avoid the Risk of Ruin by Bennett McDowell , Forward by Steve Nison https://amzn.to/32WqJ8W Free Chapter from my book Broken Pie Chart https://www.book2look.com/book/YcqUhbCrtN 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 www.razorwealth.com

Tesla has had a meteoric rise lately. At their recent high their market cap would have put them in the top 10 weighted companies of the S&P 500 Index. But will Tesla have the required consecutive quarters of positive earnings? What are the criteria for a company to be included in the S&P 500 Index? When does S&P do their index rebalancing? Which companies have been added and deleted from the index? Tesla current market cap What would Tesla's weighting be if they made the S&P 500 Index Why do investors want their stocks included in indexes? Tesla next earnings announcement Consensus analyst earnings expectations Tesla Which companies were added and deleted from the S&P 500 Index? Can S&P committee stray from the guidelines to add or delete companies? How soon could Tesla be added to the S&P 500 Index S&P 500 Index scheduled rebalancing calendar Tesla and Zoom in the Nasdaq 100 Index Last stocks to be added and deleted from the S&P Index Mentioned in this Episode: Fortune article Will Tesla Be Added to S&P 500? https://fortune.com/2020/07/14/tesla-s-and-p-500-index-stock-added/ Historical changes to S&P 500 Index companies additions and deletions https://en.wikipedia.org/wiki/List_of_S%26P_500_companies#Selected_changes_to_the_list_of_S&P_500_components 2020 Trading Calendar showing index rebalance dates and options expiration – trading holidays https://www.nasdaq.net/PublicPages/assets/MyMID/Trade_Calendar_2020.pdf Nasdaq 100 Index companies by weighting https://www.slickcharts.com/nasdaq100 Criteria for inclusion in the S&P 500 Index https://www.thebalance.com/what-is-the-sandp-500-3305888#:~:text=As%20of%20February%202020%2C%20the,S%26P%20500%20was%20%2424.4%20trillion.&text=To%20qualify%20for%20the%20index,at%20least%20%241%20per%20share. Free Chapter from my book Broken Pie Chart https://www.book2look.com/book/YcqUhbCrtN 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 www.razorwealth.com