Broken Pie Chart

Jay Pestrichelli, CEO of ZEGA Financial and Derek are back to talk about how there is conflicting bullish and bearish data in the economy. Jobs data vs manufacturing tells a different story. Plus, digging into the labor force participation rate conundrum. This week Campbell Harvey who came up with the 3 month over 10 year treasury yield curve inversion indicator said despite being right every time on recessions, this time may be different.

Cambell Harvey yield curve inversion signals false this time?

3 Month Treasury inverted against the 10 Year Treasury Bond

Labor force participation rate explained.

Is low unemployment rate because a few million people are not looking for work?

PMI data shows things are slowing while employment is strong.

Wage growth revised lower a bullish sign for markets?

Has Spain's stock market really gone nowhere for past 13 years?

It's about to get real for earnings seasons once again.

Banks are first up for earnings which may give hints around the economy

Don't overlook Taiwan Semiconductor earnings as an econ barometer for economy.

And recommendations for a few movies, shows, and books.

Mentioned in this Episode:

Yield curve inversion false signal this time according to Cambell Harvey? https://finance.yahoo.com/finance/news/pioneering-yield-curve-economist-sees-151304568.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

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 is back with the first show of 2023. On this week's episode, looking at successive negative market years frequency and returns by decade. Hint, we're still positive decade to date by more than you think. Plus, examining frequency of T bills outperforming the S&P 500 Index.

Review S&P 500 Index market returns by decade

How frequent do markets have succussive down years?

How can T-bills outperform the S&P 500 Index?

Decade to date is still positive by more than people think.

How markets have been good (outside of 2022)

Looking at markets over longer horizons

Mentioned in this Episode:

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

John Hussman article on markets showing when T-bills outperform equity markets https://www.hussmanfunds.com/comment/mc190906/

Contact Derek [email protected]

Jay Pestrichelli, CEO of ZEGA Financial, is on a special 200th episode of the Broken Pie Chart Podcast to go over their predictions for 2023. Will we have a recession? What will the earnings be? What will be the highs, lows, and year end 2023 10 year yield, S&P 500 Index, gold, bitcoin, oil, fed funds rate, and more. Off course these should not be traded on, but instead hear some of our thought process in arriving at these numbers. Plus, as always, some recommendations.

2022 Saw 91% of days with VIX higher than 20%

Skew in options market not showing much fear?

2023 prediction rundown.

What will the high low and year end S&P 500 2023 number be?

Where will the US dollar finish?

How high will the Fed Funds rate and 10 Year Treasury yields go?

What earnings EPS on the S&P 500 might wind up in 2023

Plus, recommendations

Is Die Hard a Christmas movie?

Is Lethal Weapon a Christmas movie?

Mentioned in this Episode:

Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050

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]

What's the saying, history doesn't repeat itself but often rhymes? In 1994 the Fed was raising rates all the way through the Feb 1995 meeting. How does that period compare to now? And does that mean we are in for a repeat of markets? Derek Moore explores that period and makes some comparisons.

1994 Fed interest rate hikes

1994-95 interest rate cycle and market returns

The 1995 Fed pivot

When did markets turn higher? Hint it's before the last rate hike.

Curious reasons Fed began raising rates in 1994.

Are the Fed projections ever right (hint, usually not their SEP or statement of econ projections

Mentioned in this Episode:

History of Fed rate hikes https://www.thebalancemoney.com/fed-funds-rate-history-highs-lows-3306135#:~:text=The%20highest%20fed%20funds%20rate,in%20response%20to%20rising%20inflation.

The 94-95 rate cycle including some look back at newspaper headlines and stories https://www.businessinsider.com/1994-federal-reserve-tightening-story-2013-1#protests-grow-louder-in-the-press-following-the-fomcs-may-18-decision-below-are-headlines-from-two-syndicated-ap-columns-the-next-day-18

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

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]

Every time you tune into CNBC you hear predictions about when the recession will hit. Then, when the Fed will pivot. But are people focused on the wrong things? Jay Pestrichelli is back with Derek Moore to discuss markets, earnings, and why the contrarian take is everyone can't be right. Plus, the more the yield curve inverts, the harder it will be for a recession to arrive in 2023.

2023 Earnings EPS scenarios review

Forward P/E ratios and where multiples will be

Why the market goes up or down form here (or sideways)

Employment differences in the Household Survey vs Establishment Survey

NFP labor market survey low response rate

Atlanta Fed Wage tracker moving in wrong direction (moving higher)

Monthly Inventories and sales ratios showing higher inventory builds

PPI comparing core less food and energy with total PPI

PPI higher but lower YoY number

History of Fed Pivots and where we are now in the cycle

Index of companies with international sales inverse with US Dollar strength

Why the dollar needs to go lower

Shanghai to Los Angeles container shipping rates almost back to pre-Covid average

Mentioned in this Episode:

Podcast FTX Crypto Debacle | Yield Curve Inversion | Enough with Recession Talk https://podcasts.apple.com/us/podcast/ftx-crypto-debacle-yield-curve-inversion-enough-with/id1432836154?i=1000586865880

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://amzn.to/3iSUbXp

Contact Derek [email protected]

Last week the payroll and unemployment numbers came out. They surprised to the upside but does the Fed really want people to lose their jobs? How are the unemployment numbers calculated? And an under the radar demographic trend on working age population. Plus, the 2023-year end S&P 500 Index targets are coming out and they are bearish!

What are investment banks 2023-year end S&P 500 Index price targets?

How do the 2023 targets compare to last year's year end 2022 targets?

How wrong were they and will they be wrong again?

Are S&P 500 market predictions too bearish and is that good from a contrarian standpoint?

What do the unemployment and payroll numbers mean?

What's going on with demographics that working age population is trending lower?

Labor force participation rate

Unemployment rate

Working age population

Mentioned in this Episode:

Atlanta Fed Wage Growth Tracker https://www.atlantafed.org/chcs/wage-growth-tracker

Nonfarm payrolls https://fred.stlouisfed.org/series/PAYEMS

Household employment survey employment level https://fred.stlouisfed.org/series/CE16OV

Labor force participation rate https://fred.stlouisfed.org/series/CIVPART

Working age population https://fred.stlouisfed.org/series/LFWA64TTUSM647S#0

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]

Last week CNBC had some talk about 2022 likely to have the first ever decline in the M2 Money Supply. Is that really a big deal given 2020 record 25% growth followed by 2021 12% growth? Then, why velocity of money may not mean anything for inflation after all.

What is the M2 money supply?

What is the M1 money supply?

Comparing M2 vs M1 money supply

Discussing massive increase in money supply in 2020-2021

First ever decline in money supply in 2022?

Review historical increases in the money supply

Money supply and inflation

Fiscal stimulus like sending checks out vs the Fed monetary expansion

What is the velocity of money?

How is velocity of money calculated?

Is velocity and inflation correlated?

Why velocity and inflation may have lower correlation than thought

Mentioned in this Episode:

Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050

Academic paper showing low correlation between velocity and inflation: The Behavior of Money Velocity in High and Low Inflation Countries

Hugo Rodríguez Mendizábal https://www.jstor.org/stable/3839075

Crypto Crash | US Dollar is the thing to watch podcast https://podcasts.apple.com/us/podcast/crypto-crash-us-dollar-is-the-thing-to-watch/id1432836154?i=1000586009794

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, is back with Derek this week where they talk FTX bankruptcy and whether it means the end for crypto? Then they discuss the 3-month treasury bond yield inverting with the 10-year treasury bond. Yes, every time that has happened there have been recessions, so what about this time? Earnings continue to be the thing to watch. A quick game of who is right after the Atlanta Fed GDP Nowcast is showing 4.3% growth compared to a measly 0.5% current estimate for Q4 GDP. Finally, some recommendations.

FTX Bankruptcy

Whether crypto has any use case

One bad actor doesn't make the whole space

Who's right, the Atlanta Fed GDP Nowcast or the street consensus on Q4 GDP?

3-Month US Treasury inversion with the 10-Year Treasury Yield

Does a recession always happen after this inversion?

Examining typical un-inversion prior to recessions

Discussing whether we had inversion prior to 2020 recession

Q3 earnings are mostly done so what does that mean for stocks?

Nominal vs real (after inflation) retail sales numbers

Mentioned in this Episode:

Capitulation: What does it look like for market bottoms podcast https://podcasts.apple.com/us/podcast/capitulation-markets-tend-to-lead-the-economy/id1432836154?i=1000585228050

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 gives his thoughts on the FTX crypto collapse and bankruptcy. Why crypto are NOT currencies. Then, why everyone should be paying attention to the US Dollar. Why the US Dollar is so important for multi-national companies and their revenues. How those revenues are impacted when the dollar is strong (or weak). Then finally a check in on the Fed Funds probabilities for future rate hikes.

Why crypto currencies have failed to be currencies

How some crypto returns seem too good to be true

There is risk when returns are greater than the risk-free rate

Explaining how revenues for US companies are affected by value of US Dollar

Why the dollar may be the thing to watch right now

Anti-correlations between the US Dollar and stocks

US Dollar has biggest one day fall in years

How interest rates affect currency exchange rates

Deep dive into examples of revenues and earnings with strong and weak US Dollar

Microsoft stated they had a 5% negative revenue impact in Q1 from currencies

Speculation that FTX used customer funds inappropriately

Mentioned in this Episode:

Coin Desk article explaining FTX collapse https://www.coindesk.com/policy/2022/11/10/ftx-violated-its-own-terms-of-service-and-misused-user-funds-lawyers-say/

Fed Funds Rate probabilities from CME https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

Microsoft revenues impacted in Q1 2023 earnings report https://www.fool.com/investing/2022/10/30/microsoft-beats-back-king-dollar-and-rising-intere/

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 is joined again by ZEGA CEO Jay Pestrichelli to discuss what market capitulation looks like and are we there yet? Plus, how markets tend to turn up prior to the economy bottoming historically. Before some recommendations they discuss why the VIX isn't higher and what the VIX curve is telling us now and in the past.

What is market capitulation?

Historical examples of markets bottoming months ahead of the economy

Are markets smarter than the economy?

The VIX futures curve

Why VIX isn't higher

What the VIX is really telling us about volatility expectations

Can markets bottom out with just apathy instead of panic?

Post Midterm Election bounce?

Are we sure we are going to have a recession?

Everyone says a recession is coming but can everyone be right?

Mentioned in this Episode:

Higher interest rates provide opportunity for Buy and Hedge https://podcasts.apple.com/us/podcast/higher-rates-create-opportunity-for-hedging/id1432836154?i=1000581025635

Do markets always go higher after midterms? https://podcasts.apple.com/us/podcast/do-markets-always-go-up-after-midterm-elections/id1432836154?i=1000579103232

Why hedging is the answer for portfolios https://podcasts.apple.com/us/podcast/why-hedging-is-the-answer-for-portfolios-can-hedgers/id1432836154?i=1000578323267

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]