Broken Pie Chart

Derek Moore revisits the 1994-95 interest rate and market environment against the current backdrop regarding treasury yields and future S&P 500 Index returns. Plus, going through the case for higher for longer, whether that is good or bad for markets, and the adjustment the market would need to go through. Later, quantifying how sensitive the S&P 500 Index is to change in the forward PE ratio by putting into actual numbers and levels. Also, looking at Arista Networks and Alibaba before earnings and what the options market is saying their expected one standard deviation moves might be up or down. Finally, most people look at Real Inflation adjusted GDP, but Nominal GDP growth may be correlated to the 10-year yield and what that means if we go back to pre-GFC nominal growth rates. All this and more.

What is Nominal GDP Growth Rate?

What is Real GDP growth?

The US Dollar index and whether we are out of the zone of significance yet?

Inflation in services remains sticky

Why interest rates staying higher isn't necessarily a problem for the stock market

Quantifying sensitivity of the S&P 500 Index to small changes in the forward PE multiple

1994-95 vs 2024-25 update around treasury yields, S&P 500 returns

Alibaba and Arista earnings this week and their option implied moves

How to calculate expected move around earnings based on implied volatility levels

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Jay Pestrichelli is back with Derek Moore to react to the unemployment report. Was it good or bad for the markets and why? Plus, they review the last trade and tariff war from 2017-2018 and how the market actually did pretty well. Later, the latest survey on forward inflation expectations is now over 5%. Finally, they compare MicroStrategy's implied volatility to Blackrock's IBIT ETF and whether the options market is undervaluing MSTR's IV. All that and more this week.

Markets performance back in 2017-2018 when tariffs were enacted

Inflation expectations shoot up due to tariffs

Stock market performance during the 2017-2018 trade and tariff war

MicroStrategy implied volatility

Comparing MicroStrategy volatility to Blackrock's IBIT Bitcoin ETF

Looking at the breakeven on a long MSTR straddle and the risks

Reviewing the unemployment report

Will unemployment go down due to new government strategic focus?

AI mentions on S&P 500 earnings calls

83% of mortgage holders have an interest rate below 6%

US Non-Farm Payrolls consecutive positive months

BLS forgot to fill in the monthly change on unemployment report?

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore previews Palantir, Amazon, and Google earnings implied volatility expectations based on the option market. Plus, how currency movements may or may not mute new tariffs. Later, Derek answers a listener question on why mortgage rates (and bonds) have a spread between their rate and the 10 Year Treasury yield. Plus, digging into new data that shows analysts producing earnings estimates on the S&P 500 Index are pretty accurate as it turns out. Finally, what is market fragility and are we in a fragility period right now?

What is market fragility?

Analyst estimates vs actuals show analysts might know what they are doing

30-year mortgage rates vs the 10-year treasury

Why is there a spread above treasuries

What is reinvestment risk on mortgage bonds?

Tariffs impact on markets

How currency moves on the Canadian Dollar, Mexican Peso, and Chinese Yuan may blunt tariffs

Will tariffs cause more onshoring and manufacturing in the US?

Sentiment was tariffs would be used as a threat, then they'll be short lived, so now what?

Mentioned in this Episode

Analysts are pretty good at predicting earnings from Sam Ro https://www.tker.co/p/analysts-earnings-estimates-accuracy

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore previews Apple, Tesla, and Microsoft earnings by looking at the implied moves around earning by the options market. Plus, Bloomberg comes out with a new inflation gauge called The Bacon Egg & Cheese Sandwich index. Later, Derek talks about a new study which shows the percentage of time in recessions by decades. Oh, and reacting to a headline "hedging is for suckers" and why it's wrong.

Zero Hedge article headline "Downside Protection is for Suckers" reaction

Percent of time in recessions

Bacon Egg & Cheese Inflation Index from Bloomberg

Implied volatility on major companies reporting earnings TSLA, MSFT, and AAPL

How to easily calculate the options market implied 1-day 1-standard deviation move

Why implied volatility moves higher pre-earnings

Cost of a options Straddle trade around earnings

Risks of a straddle trade both buying and selling the straddle

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is joined by guest co-host Mike Puck to talk markets including how people seem to think making money in Bitcoin is too easy and what that means. Plus, why the S&P 500 Index concentration may not be as big of a deal when looking at how the index changes. Comparing the top 10 market weighted stocks in 1997 to today. Later they discuss value vs growth performance, the dollar index, interest rates, and look at the implied volatility of Netflix options before earnings. Finally, they talk about how what seems obvious to all the CNBC talking head guests may not be the case.

Concentration in the top stocks within the S&P 500 Index

Comparing the top weighted companies today vs 1997 in the S&P 500 Index

How today its all tech vs 30 years ago

Why owning the S&P 500 Index is more active than you think

Additions to the S&P 500 Index in 2024 and their performance

Implied volatility in Netflix options pre-earnings

Calculating the implied move around earnings based on implied volatility

Looking at the ATM long straddle before earnings including the risk

Dollar index and EPS in the S&P correlation

Bitcoin believers are starting to think its too easy to make money

Bitcoin maximalists have been rewarded, and Derek is still a skeptic

Value vs Growth and why Value is a tough sell to money managers

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore is joined by guest co-host Spencer Wright to discuss the surge in bond yields, the surge in the US Dollar Index, and whether those two things might cause some near-term pain for equity markets. Plus, discussing whether AI Artificial Intelligence is a true next technological revolution and what it means for earnings. Then they talk semiconductors as the picks and shovels of AI and do some technical analysis reviewing the patterns in the S&P 500 Index, the Nasdaq 100, Semiconductors and bond yields. Oh, and there was the unemployment report that markets didn't like in the moment as it was "too good" because does it mean the Fed is done cutting? All this and more this week!

Bond interest rates surge as 10-year treasury hits 4.7%

UK Gilt Bonds surge to a higher rate than when the government had to step in

Unemployment surprises at 4.1% but market reacts negatively

Fed rate cuts not priced in until October 29th meeting and 1 cut at that

AI Artificial Intelligence – is it the 6th great sea change revolution?

Semiconductors as the picks and shovels of AI

Technical analysis triangle patters

Technical analysis on NDX, SPX, and Semiconductors

The trade weighted dollar index and impact to earnings due to currency exchange

Are high rates bad or just the journey to get there first?

Technical analysis book recommendations

Mentioned in this Episode

Encyclopedia of Chart Patterns by Thomas N. Bulkowski https://amzn.to/4gVExnm

Technological Revolutions and Financial Capital by Carlota Perez https://amzn.to/3Wefgwd

Technical Analysis of the Financial Markets by John Murphy https://amzn.to/3Wefgwd

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore talks about the level of implied volatility in MicroStrategy and its performance relative to bitcoin. Plus, looking at how much future fed cut expectations have fallen for 2025. Later, Derek explains what drives returns looking at the forward p/e ratio vs forward analyst eps estimates for the S&P 500 Index, 2/10s US Treasury spread widening as yields rise, are 10 Year Treasury yields about to break out, and quietly crude oil has been rising. What would that mean for CPI and inflation navigation for the Fed?

Bitcoin vs MicroStrategy

Calculating implied 1 standard deviation moves based on options data

MicroStrategy implied volatility

S&P 500 Index analyst forward 1 year EPS estimates

Forward PE ration level and whether it is a predictor of markets 1 and 5 years in the future

Mag 7 net profit margins, earnings growth, and pe ratio vs the rest of the S&P 500 Index

Looking at max pullbacks for each calendar year and subsequent year end returns S&P 500

Cup and Handle pattern in the 10-Year Treasury yield

Fed Funds futures pricing and probabilities for future rate cuts in 2025 by the Fed

How markets move based on multiple expansion/contraction and earnings estimates

WTI (West Texas Intermediate) oil prices making a move?

Oil as a part of the CPI inflation numbers

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://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore and Jay Pestrichelli round out the year with some 2025 predictions on markets, rates, bonds, oil, bitcoin, the dollar, GDP, inflation, and gold. Plus, does Bitcoin have a Quantum Computing problem? What's going on with deflation in China and is it the answer to potential tariffs? And news flash, the inverted yield curve is no more as the 10-year treasury yield rises above the 3-month treasury yield. All this and more!

2025 Predictions

China Deflation including 10-year Chinese Government Bond yields falling

China currency valuation, bond yields, and deflation a recipe to nullify US tariffs?

Quantum computer by Google and can it mine Bitcoin?

Will Quantum computers put Bitcoin wallets at risk? (part of our random predictions)

The reversion or un-inversion of the 10 year and the 3-month treasury

The inverted yield curve was the longest ever and didn't cause a recession

Will the un-inverted yield curve now cause a recession?

VIX Index vs VIX futures spread

Additions and subtractions to the S&P 500 Index

Commodities including coffee, rubber, and cocoa rise

Earnings season soon upon us

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore and Jay Pestrichelli react to the Fed meeting where people are calling it a hawkish cut and a reset of future expectations of where interest rates end up. Plus, the Dot Plots say long run PCE Inflation will only go to 3% not 2%. Later looking at the Trade Weighted Dollar Index breakout and if it will become a problem for earnings growth in 2025. Of course, the big news last week was the spike in the VIX as the market had a temper tantrum. Finally, they go into earnings expectation, price to forward sales ratio, real retail sales, and more and even a wacky (or not) Amazon prediction.

Fed Hawkish Rate cut

Fed PCE Inflation Dot Plot 3% long run target

The Fed Pivot or Fed Reset in effect?

The VIX Spikes as the market has a tantrum after Powell press conference

Looking at current forward pe ratio for the S&P 500 Index now

Earnings expectations and the strong US Dollar

The US Dollar breaks out above resistance

Forward Price to Sales ratio getting elevated?

Goods vs services inflation

PPI services is still elevated

Would Amazon ever break out its business units to take advantage of AI and their chip?

Greenspan fed vs Powell

1994 bull market vs this bull market and does it mean longer to run?

Mentioned in this Episode

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]

Derek Moore and Jay Pestrichelli gather once again to discuss whether inflation is too high for the Fed to aggressively cut rates more. Then, they talk about the probability of the S&P 500 closing or getting to 7000 by year end 2025. Plus, is inflation still too high looking at Core CPI and CPI Supercore for the fed to cut rates as much as projected. Later, they go into some myths on the US debt and foreign ownership of treasuries, US Dollar Index against some resistance levels, what does paying your fair share in taxes mean, and more.

How probabilities are calculated based on option prices

Current probability of the S&P 500 Index hitting 7000 by year end 2025

Difference between probability of touching and probability of expiring in the money

Looking at the current forward PE ratio and multiple for the S&P

Calculating theoretical year end 2025 S&P price at different earnings and multiples

Is the PE multiple too high?

US Dollar moves higher but coming up against resistance?

Looking at who owns the $34 Trillion US Debt

Percentage of foreign countries who own treasuries

Many people think China owns more treasuries than it currently does

How much does the Fed own of outstanding US debt?

What does paying your fair share in taxes mean?

Income comparisons when including government transfer payments (benefits) and taxes

Data from New York City points to a small number of people paying most of the taxes

CPI Supercore

CPI Core and the Fed targets

Shelter inflation

How big of a company would SpaceX be if it went public?

Broadcom hits $1 Trillion in market cap today

Mentioned in this Episode

CBO report on Distribution of Household Income

https://www.cbo.gov/publication/56575

NYC Department of Taxation https://www.tax.ny.gov/data/stats/taxfacts/personal-income-tax.htm

Derek Moore's book Broken Pie Chart https://amzn.to/3S8ADNT

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3jQYgMt

Derek's book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag

Contact Derek [email protected]