Broken Pie Chart

Derek Moore is back with Mick Puck to discuss the Warren Buffett quote excoriating opponents to share buybacks. Why buybacks and dividends are more closely related than you think. Using Walmart to explain how the change in shares outstanding affect EPS. Where to see share repurchases and dividends on a company's cash flow statement. Plus, our quick overview of the Silicon Valley Bank (SVB) debacle and what the FDIC's list of troubled banks at the end of 2022 told as (if anything) about the 3 banks that failed the last 2 weeks.

SVB Silicon Valley bank example of duration risk in bonds (mortgage-backed securities)

How MBS mortgage-backed bonds see duration sensitivity to interest rates rise as rates rise

Where to find the FDIC quarterly report on banks including their watch list and amounts

Warren Buffett statement on how share buybacks are misunderstood.

Do companies always buy back shares when their stock is undervalued?

Where to find on cash flow statement share repurchases and issuance

Where to find on cash flow statement dividends paid out

Explaining the difference between a buyback yield and dividend yield

How much did Apple repurchase through buybacks last year vs dividends

Walmart as an example showing how reduction in outstanding shares effects earnings per share

Comparing capital gains on shares to dividends for normal investors and their preferences

How buybacks are more flexible for dividends

Do buybacks show confidence in one's own shares for companies?

Positives and negatives for buybacks including stock based compensation and dilution

Finally, some recommendations on a movie and a TV show

Mentioned in this Episode:

FDIC watch list of troubled banks and quarterly bank profile graphs https://www.fdic.gov/analysis/quarterly-banking-profile/graph-book/2022dec/

Sequence of recessions and what comes first https://podcasts.apple.com/us/podcast/sequence-of-recessions-slowdowns-dividends-make/id1432836154?i=1000603802075

US Debt Bomb and Growing Interest Rates effects on US Federal Deficit and Budget https://podcasts.apple.com/us/podcast/us-debt-bomb-interest-rates-brewing-auto-loan-problem/id1432836154?i=1000602839094

Underperformance of International Stocks https://podcasts.apple.com/us/podcast/underperformance-of-international-stocks-valuations/id1432836154?i=1000601650028

Wharton Magazine article Beware of High Dividends https://magazine.wharton.upenn.edu/digital/beware-high-dividend-yield-stocks/

Reuters article showing Discount Window picked up towards the end of 2022 https://www.reuters.com/markets/us/fed-discount-window-borrowing-is-edging-up-is-it-problem-2022-12-09/

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

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

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 [email protected]

Jay Pestrichelli, CEO of ZEGA Financial, joins Derek Moore again to discuss markets going higher even when earnings decline post bear markets. Plus, they discuss Michael Kantro's HOPE graph showing the order of slowing in the economy through the lens of Housing, New Orders, Profits, and Employment. Then they move on to the drivers of returns talking through PE multiples, margins, revenues, buybacks, and dividends. Speaking of dividends, are they going to be the next big thing if investors believe markets may trade flat for a while? Finally, Jay and Derek give some recommendations that may or may not be good.

Percentage of total stock returns dividends historically make up

Examining prior 1 year forward stock returns after bear market low is in vs. earnings declines

HOPE or Housing, Orders, Profits, Employment, and typical cycles from slowdown to expansion

How dividends plus premium (covered call) selling may augment returns in flat markets

Where market returns come from

How changing margins, PE multiples, share buybacks, and revenues determine returns

Examining where returns came from in other decades and where we stand now

Will dividends be the next hot investment area funds flow to?

Number of new highs in markets by year

Number of greater than >1% down days in the S&P 500 Index

How much the Fed Funds futures implied interest rate has changed by a wide amount

Being hedged vs a dividend strategy

Mentioned in this Episode:

US Debt Bomb and Growing Interest Rates effects on US Federal Deficit and Budget https://podcasts.apple.com/us/podcast/us-debt-bomb-interest-rates-brewing-auto-loan-problem/id1432836154?i=1000602839094

Underperformance of International Stocks https://podcasts.apple.com/us/podcast/underperformance-of-international-stocks-valuations/id1432836154?i=1000601650028

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

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

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 [email protected]

Jay Pestrichelli, CEO of ZEGA Financial, joins Derek Moore again to discuss whether this current bear market is tracing the 2000/2001 bear market. Plus, they highlight how tight yield spreads are looking at what the 3-month treasury bill/ 2-year treasury note are yielding compared to high yield and investment grade bonds. Then Jay and Derek go through the looming US debt bomb in regard to where interest payments might go and whether there will be political pressure for the Fed to keep rates low. Finally, after going through the avocado vs bitcoin relationship, they give a few recommendations.

The US Federal Debt is growing but what if rates stay higher and net interest owed goes up?

What does the yield spread tell us about relationships of corporate bonds to treasuries?

Is the current bear market tracking the 2000-2001 bear market?

Does the price of Bitcoin and Avocados really track one another?

Tom Lee points to breakouts in Nasdaq stocks

Tom Lee Ex-FAANG forward PE ratios for the S&P 500 Index

US Federal Debt held by the public

Nominal GDP Growth vs US 10 Year Treasury Yield

Looking at John Hussman regression chart on 10-year trailing growth vs nominal GDP

US government spending next 10 years at WWII levels

Current net interest payments by US government

Average car price in the US hit new highs in 2022 while interest rates rising

Negative equity on used cars getting rolled into new car loans

Most home owners locked in really low interest rates

Corporations interest costs as percent of cash flows low because they locked in low bond rates

Comparing 3-Month Treasury Yields spread to high yield and investment grade bonds

Car loans are getting too long considering cars are a depreciating asset

Mentioned in this Episode:

Underperformance of International stocks for a long time and valuations still too high? https://podcasts.apple.com/us/podcast/underperformance-of-international-stocks-valuations/id1432836154?i=1000601650028

No Volmageddon 2.0 | No Landing for the Economy? https://podcasts.apple.com/us/podcast/no-volmageddon-2-0-no-landing-for-the-economy/id1432836154?i=1000600413796

2019 WSJ article on car owners rolling negative equity on long term car loans into their next car https://www.wsj.com/articles/the-seven-year-auto-loan-americas-middle-class-cant-afford-their-cars-11569941215

Nominal (not inflation adjusted) US GDP https://fred.stlouisfed.org/series/GDP

Federal government current expenditures net interest payments on debt https://fred.stlouisfed.org/series/A091RC1Q027SBEA

Words and Numbers Podcast where they talk about tax receipts (what government takes in) have gone up 50%+ since 2020 https://open.spotify.com/episode/2zjC18iPqIm0LUeDPF2nAP?si=o2wX9sn8SB25BMSMrk2xzw

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

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

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 [email protected]

Derek Moore is back with Mike Puck, Director of Business Development at ZEGA Financial to talk underperformance of international stocks and how "everyone" is saying this is the year that trend gets reversed. Mike shares what people were talking about at the Miami ETF Conference around flows into international funds to start the year. Plus, they talk about what investors give up if they rotate out of S&P 500 US type investments and how you might already have international exposure in large US companies. Finally, they discuss the consensus for the US Dollar to drop in 2023 along with some other odds and ends within markets and the economy.

Why we don't try and pick markets and instead just Buy and Hedge!

Comparing the performance of international stocks and value stocks

Relative underperformance for over a decade in international stocks

Is 2023 the year international finally outperforms again?

Spain's IBEX Index price (not including dividends) is the same as it was in 1997-98

Makeup of stocks within the S&P 500 Index vs some international indexes

Looking at the top 100 companies worldwide by market cap

John Hussman Price/Sales ratio chart

Price to sales still higher than average – although margins remain higher than average

Market may be assuming net profit margins will stay elevated

Google searches for Soft Landing are up

Comparing the Nominal GDP growth to the 10-Year Treasury yield

Early 90s Emerging Markets dominance

International stock indexes have less technology and more value type stocks

Mentioned in this Episode:

No Volmageddon 2.0 | No Landing for the Economy? https://podcasts.apple.com/us/podcast/no-volmageddon-2-0-no-landing-for-the-economy/id1432836154?i=1000600413796

John Hussman article on current valuations https://www.hussmanfunds.com/comment/mc230221/

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

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

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 [email protected]

Derek Moore is back with ZEGA Financial CEO Jay Pestrichelli to discuss recent discussion on 0 DTE (zero days to expiration) options and potential for a new Volmageddon event due to them. Then, they again get into The Fed and the idea of hard landing, soft landing, or no landing (that's a new one). Plus, they discuss some odds and ends within markets and the economy including some chart crimes, shipping container rates, next 12 month returns ONCE a bear market bottom is in, and why US Investment Grade Bonds are yielding less than the 3-month treasury bond at higher percentages than before.

Volmageddon 2.0 (or Volpocalypse 2.0)

What are 0 DTE Zero Days to Expiration Options

Why we now see much more trading in 0 DTE Options

Why 0 DTE options aren't that big of a deal

What is a No Landing Economy scenario?

Why the Fed might revert back to the 90s on interest rates

If the economy is growing why do rates need to fall?

The idea of the Fed keeping dry powder just in case

Non-voting Fed members are making a lot of noise about rates

IF the bear market low is in (and that's still an if) forward 12 month returns positive

Shipping container rates including the Rotterdam to New York down 80% off highs

Examples of 2011 expiration of SPY options available versus now (hint a lot more now)

Comparing treasury yield curves over select periods

Bankruptcies and 90-day credit card delinquencies are up (do these lack perspective?)

Mentioned in this Episode:

Jay and Derek's prior episode 'Now Everyone is Bullish? | Shocking Impact of Missing Just the 2 Best Days Each Year' https://podcasts.apple.com/us/podcast/now-everyone-is-bullish-shocking-impact-of-missing/id1432836154?i=1000599235040

Bloomberg: JP Morgan's Kolanovic Warns of Volmageddon 2.0' risk in Options https://www.bloomberg.com/news/articles/2023-02-15/jpmorgan-strategist-kolanovic-warns-of-volmageddon-2-0-risk-in-options-market

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

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

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 [email protected]

Derek Moore is back with ZEGA Financial CEO Jay Pestrichelli to discuss how AFTER the market ran up in January people are bullish according to the new AAII Individual Investor survey. Plus, updated numbers on the difference in hypothetical returns if you missed ONLY the 2 best day each year over a 10 or 20-year period. Then, we continue to get economic data that is telling different stories so what to believe? Then they give some recommendations.

AAII Sentiment Poll Bulls minus Bears turns positive after 44 consecutive weeks bearish.

NAAIM Exposure Index (Active Manager Equity Exposure) most bullish since Jan 2022

Shocking difference in returns when taking out 2 best market days over 10 and 20 years

Worst 20 year rolling return was still positive

Atlanta Wage Growth tracker shows wage growth still strong

Difference between job switchers and job stayers still wide (make more switching)

Leisure and Hospitality wages still surging to new highs

Since WWII markets have taken off 7 months post inflation peaks on average

Inventories in durable goods and lumber (and other construction materials) move higher

Fed governors talk tough and market implied fed funds rate surges higher

People are spending down the post-Covid excess savings

Mentioned in this Episode:

Personal Savings https://fred.stlouisfed.org/series/PSAVE

Wage growth tracker https://www.atlantafed.org/chcs/wage-growth-tracker

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

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

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 [email protected]

Derek Moore is back to talk about the one thing no one seems to think is a possibility with interest rates. Plus, why the tightening of the triple BBB corporate bond spreads above 3-month Treasury Bills and Fed Funds is something to watch for markets. Then, Derek explains the 4 stock market scenarios people are watching.

Disconnect between market expectations and the Fed

Spread between corporate bonds and treasuries narrows

BBB Corporate bond spread to Fed Funds smallest since 2007

What do interest rate spreads mean?

How are interest rate spreads calculated?

What happens when spreads widen or narrow in bonds and stocks?

What are Overnight Reverse Repos

Fed Funds ranges vs exact rate

What is the effective fed funds rate

Where to find the fed funds rate

CME Fed Interest Rate probability tool

The federal reserve dot plots

Mentioned in this Episode:

What are Overnight Reverse Repos ON RRP that Fed is using nowhttps://open.spotify.com/episode/09VOIffldtn3WxNm7rzyNx

Effective Fed Funds Rate https://www.newyorkfed.org/markets/reference-rates/effr

See Probabilities of future Fed Funds hikes or lowering https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

The triple BBB bond spread https://fred.stlouisfed.org/series/BAMLC0A4CBBB

Wall Street Journal banks predict recession and Fed Pivot in 2023 https://www.wsj.com/articles/big-banks-predict-recession-fed-pivot-in-2023-11672618563

Prof Aswath Damodaran market scenarios post https://aswathdamodaran.blogspot.com/2023/01/data-update-2-for-2023-rocky-year-for.html

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

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 [email protected]

Derek Moore and Mike Puck discuss the upcoming Fed meeting and whether rates will stick around at higher levels for a while despite general estimates for lower rates in the back half of 2023 and early 2024. Mixed signals in the labor market as tech announces layoffs while other companies point to hiring. Why it's tough to pick individual stocks using Tesla as an example.

Does the Fed still want bad things to happen in the economy?

Watch the Fed press conference

Tech stocks see gains after layoff announcements

Why picking individual stocks is so hard

Tesla record earnings and revenues but 2022 was a bad year for its stock price

Bull market in Orange Juice?

LEI Leading Economic Indicators flashing recession signal

Strong Q4 GDP but interesting durable goods transportation contribution

Fed Funds futures don't believe the Fed will keep interest rates high

Would it be so bad if we got to 4.8% Fed Funds and stayed there?

Why markets don't like rate uncertainty

Q4 earnings look to be below the prior year

Accuracy of the Atlanta Fed GDP Nowcast Model

NFIB Small Business survey not so rosy?

Jeremy Siegel the eternal optimist

So is good news "good news" again?

Mentioned in this Episode:

Earnings declines don't always mean stock market declines https://podcasts.apple.com/us/podcast/max-bearish-earnings-declines-dont-mean-falling-stocks/id1432836154?i=1000596061448

1994-95 all over again for stock market? https://podcasts.apple.com/us/podcast/1994-95-all-over-again-in-markets/id1432836154?i=1000590865306

ZEGA Financial https://zegafinancial.com/

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

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

Jay Pestrichelli, CEO of ZEGA Financial and Derek Moore are back to talk Netflix earnings, why earnings declines don't necessarily mean falling stock prices, wide bid ask spread in housing, and volatility dropping in the currency and fixed income markets. Plus, the AAII investor survey points to record lows in bullish sentiment. Why margins are being overlooked in earnings estimates. Finally, is Japan an unknown, unknown and Derek (without any knowledge) predicts Amazon buys AMC and Apple buys Netflix.

Does the market still care about Netflix earnings?

Netflix low YoY quarterly revenue growth

Wild prediction on Apple buying Netflix

Why doesn't Amazon buy AMC?

Existing home sales continue to make new lows year over year

Earnings declines don't equal lower stock prices all the time

Comparing years where earnings are lower but stocks are higher

Why markets look forward to future earnings expectations

Volatility dropping in FX and fixed income markets

Spread between equity volatility and Fixed Income volatility still wide

Used car prices finally printing lower lows

AAII survey points to low bullish sentiment and high bearish sentiment

Margins in earnings should be the story

Why Japan may be a thing to watch as an unknown unknown

Mentioned in this Episode:

2023 market predictions that will probably be wrong again https://podcasts.apple.com/us/podcast/2023-predictions-markets-and-the-economy/id1432836154?i=1000591390337

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

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

Jay Pestrichelli's book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1

Contact Derek [email protected]

Derek and Mike Puck, ZEGA Director of Business Development, discuss whether Value will have a period of outperforming Growth. How Value and Growth have experienced long regimes where one outperforms another. Where we are in the current cycle. Plus, how dividends historically have accounted for 40% of total returns in the S&P 500 Index.

What makes a stock a "value stock"?

Growth vs Value historically

How growth has outperformed value for extended period of time

Are we about to switch where value outperforms growth?

How value investors have been fooled in the past

How older companies reap the benefits of technology.

Different types of assets and do they get missed with Growth stocks?

Dividends have accounted for 40% of S&P 500 index total returns historically.

Dividends over last few decades less than buybacks as percentage of net income

Idea of strategy that has dividends Plus option premium from covered calls.

Goals of covered call strategies

Concept of dogs of the Dow

How dividend yields move higher as price moves lower (so long as they keep paying dividends)

Mentioned in this Episode:

Chart showing Growth vs Value relative performance historically https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/CCWP105.pdf

Dividends as percentage of total returns historically S&P 500 Index https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html

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

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 [email protected]