Broken Pie Chart

Derek is joined by Spencer Wright of Halbert Wealth to discuss historical impact on markets Plus, they discuss the house, senate, and the prevailing polls and other indicators to sift through the noise. Finally, they give their picks in the 5 senate races that matter.

Market performance post midterm elections since 1962

Why markets might like split government

What the polls and adjusted polls are saying

What the past tells us about likelihood of change of power in the house during midterms

What do polls miss?

Markets in midterm years leading up to election day

Why long term it doesn't matter which party is in power President, Senate, and house

How sitting president approval ratings play into races

What the betting markets are saying about the senate race and late momentum

When will we know the outcomes (hint: it may not be on election night)

Where can you find info on latest polls

Where can you find deadlines for mail ballots and when they will be counted

Disparity between Democrats and Republican candidate money raised and spending

Bias adjusted poll averages and what they are

Mentioned in this Episode:

RCP (real clear politics) latest polling data https://www.realclearpolitics.com/epolls/latest_polls/

Interactive US Senate 2022 midterm map https://www.270towin.com/2022-senate-election/

CNBC piece detailing candidate spending for Senate races https://www.cnbc.com/amp/guide/midterms-2022-top-senate-races-oz-walker-vance-kelly/

State legislature info on states mail ballot processing, counting, and deadlines https://www.ncsl.org/research/elections-and-campaigns/vopp-table-16-when-absentee-mail-ballot-processing-and-counting-can-begin.aspx

Absentee ballot deadlines https://www.vote.org/absentee-ballot-deadlines/

Five Thirty Eight election probability models https://projects.fivethirtyeight.com/2022-election-forecast/

What betting markets say about election probabilities https://electionbettingodds.com/

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

The Fed is paying out more in interest than it is taking in, resulting in an IOU to the US Treasury. Is this a big deal? Did the Fed believe this was possible? Understand why you may see in the news the Federal Reserve is running a deficit. Plus, is the Treasury about to do bond buybacks to increase liquidity in markets?

What is a Federal Reserve deferred asset liability

How much of a deficit is the Fed running?

Why is the Fed paying out more in liabilities than its receiving in interest?

Why are Janet Yellen and the Treasury thinking about doing bond buybacks?

What does it mean when bond markets are illiquid?

What is the average interest rate on outstanding US Treasuries?

Can the Federal Reserve go bankrupt?

What role to Fed Overnight Reverse Repos have in this?

How does the fed pay interest out to banks through excess reserves?

Reviewing 2013 Fed paper on potential for deferred assets (liability) to arise

Mentioned in this Episode:

Financial Times article on treasury bond liquidity https://www.ft.com/content/bc7271f9-a0aa-4643-bed3-40d2d5ec80d1

Brookings article on Fed running a deficit and owing the Treasury https://www.brookings.edu/blog/up-front/2022/06/01/what-if-the-federal-reserve-books-losses-because-of-its-quantitative-easing/amp/

Average interest rates on US Treasury bonds, bills, notes https://fiscaldata.treasury.gov/datasets/average-interest-rates-treasury-securities/average-interest-rates-on-u-s-treasury-securities

NY Fed list of current SOMA Fed holdings https://www.newyorkfed.org/markets/soma-holdings

Fed Overnight Reverse Repo outstanding https://fred.stlouisfed.org/series/RRPONTSYD

What are Overnight Reverse Repos https://podcasts.apple.com/us/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106

Fed earnings remittances due to the U.S. Treasury https://fred.stlouisfed.org/series/RESPPLLOPNWW#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]

The Federal Reserve shows no sign of slowing down rate hikes in the near term. But are they doing anything? ZEGA CEO Jay Pestrichelli is back on the show with Derek Moore to debate. Plus, why we care about England's BOE moves. Finally, some recommendations.

What is the deal with the UK's pensions and government bonds?

Is the Fed doing it all wrong?

Container shipping rates back to normal?

The waiting is over at the Port of LA

Inflation run rates and what we need to happen

What would it take for a Fed pivot based on some historical numbers

Real vs Nominal numbers in economics

Lag in OER (Owners Equivalent Rents) and Rent of Primary Residence in CPI

Mentioned in this Episode:

What are Overnight Reverse Repos https://podcasts.apple.com/us/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106

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]

As Q3 earnings season is about to kick off we'll look at what the drivers of returns are for the S&P 500 Index and individual stocks. Annualized returns are a mix of sales growth, margin growth, dividends, share count, and PE multiple growth. See how to think about these levers in relation to price.

What are the return attributions of the S&P 500 Index returns?

PE multiple growth vs multiple contraction

How share buybacks or issuance increase or decrease earnings

Dividend yield as a percentage of total return

Net Margin expansion or contraction

Sales growth has been lower than you might think over the last 10 years

EPS or earnings per share

2022 Q3 earnings estimates on EPS and sales

Nature of rotation of sectors contributing to total earnings of the S&P 500

Value After Hours podcast and YouTube channel

Mentioned in this Episode:

Augustus investor letter (click on first one) page 24 breaking down 2011-2021 earnings attributions https://www.semperaugustus.com/clientletter

Refinitiv Q3 earnings preview breakdown https://lipperalpha.refinitiv.com/2022/10/sp-500-22q3-earnings-preview-a-turning-point/

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]

The rise of interest rates has been all over the news, but is there a silver lining? Yes, due to higher rates in short-term US treasuries hedged equity strategies now can further manage risk by substituting out short duration high yield to short term treasuries. ZEGA Financial CEO Jay Pestrichelli and Derek Moore are back to explain how a flagship strategy Buy and Hedge is leveraging the new environment.

What are Buy and Hedge strategies?

Comparing the risk profile of short-term US Treasuries vs short-duration high yield bonds.

Comparing risk profile of treasuries to corporate bonds

Explaining the yield to maturity on bonds

Where a return comes from in a bond

Coupon payments(interest) vs appreciation to par

Interest rate risk in bonds

Duration as a measurement of how market values change for every 1% change in rates

How Buy and Hedge has limited risk in buying long call options and US treasuries

Mentioned in this Episode:

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

Margin Call Movie and Value at Risk Explained https://open.spotify.com/episode/2XJ58KAoQKw2sdC48KHyPp

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]

Does anyone who makes predictions in the financial news media know anything? Lots of headlines are making predictions so why not add some perspective from past bear markets (and bull markets) where many things' people say never came true. Why investors make bad decisions due to news. How investors opt to stay in cash even as markets firm up. We'll go through some past predictions to see how the mood sways at different points in cycles.

What the financial media is saying

New estimates and predictions are taking a bearish tone

Reading prior headlines from several periods show predictions aren't worth that much

Why investors tend to shy away from markets even when things are cheaper

How analyst estimates can be wrong while the market focuses on the forward PE ratio

Mentioned in this Episode:

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

Is the strong us dollar a problem? https://podcasts.apple.com/us/podcast/is-the-strong-us-dollar-a-problem/id1432836154?i=1000571388439

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]

Inflation surprised to the upside last week. Although it was close to the Cleveland Fed's nowcast estimate. So, what would it take for inflation to get back to the 2% level and when? We'll go through the numbers today to illustrate what rate of monthy inflation would be needed to get there buy the spring. Its just math, so here we see the Feds base rates come into plan.

How is inflation month over month calculated?

How is inflation year over year calculated?

How do month to month and year over year numbers matter for future inflation?

What is the difference between CPI and Core CPI?

Why Core CPI might keep going higher for a while due to lagging affect

What is OER or Owners Equivalent Rent?

Mentioned in this Episode:

Inflation Nowcast Cleveland Fed https://www.clevelandfed.org/our-research/indicators-and-data/inflation-nowcasting.aspx

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

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]

Do markets always go up after the midterm elections? What about market performance during the presidential cycle? Interesting data points to historical numbers being bullish for markets next year. What could go wrong? Plus, why it may not matter what political party is in power.

Market performance before and after midterm elections

When are midterm elections held?

Significant swings in power during midterm election years

Market performance and presidential cycles

Which year of president's term is the best for markets historically?

Why markets historically are flat to down pre-midterm elections

Why markets historically rally post-midterm elections

Market performance depending on which party holds power

Does it matter which political party is in power for markets?

Mentioned in this Episode:

Market historical performance during different years of Presidency https://www.trade2win.com/articles/2128-presidents-politics-u-s-stock-market

Market performance pre and post midterm elections https://www.usbank.com/investing/financial-perspectives/market-news/stock-market-performance-after-midterm-elections.html

Market performance in midterm election years vs all other years https://www.capitalgroup.com/advisor/ca/en/insights/content/articles/us-midterm-elections-and-market-moves.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

Contact Derek [email protected]

Why Hedging Is the Answer for Portfolios | Can Hedgers Buy Markets Lower?

Show Summary:

Rather than try to time markets or worry about whether there is a selloff around the corner, look to stay invested but be hedged. But what is hedged equity? What are the benefits for investors who may be barraged by various predictions and news? How do hedged equity strategies work? All this and more plus some new recommendations.

Eliminate the need to time markets

Reduce fear- but stay invested

Who is hedged equity for?

How to look for more growth especially near or in retirement

3 main phases for investors accumulation, base maximization, and distribution

What is the hedgers opportunity?

What is the cost of hedging?

How the short duration fixed income (or other income producing pieces) reduces cost

How do each of the components move within a portfolio

Comparing hedged equity to the 60/40 portfolio

Will treasuries be used in lieu of corporate bonds as a funding source?

What are the main risks for bonds?

How bonds move closer to par value at maturity baring defaults

What is the current default rate for high yield bonds?

Mentioned in this Episode:

Debating what a recession is https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306

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/3Je7xqa

Contact Derek [email protected]

Was Bed Bath and Beyond a Gamma Squeeze? How the options market can sometimes drive buying and selling. Plus, Jerome Powell does a short press conference talking tough about taming inflation.

Ryan Cohen option positions in Bed Bath and Beyond

What is a Gamma Squeeze?

How market makers hedge their book to remain flat

When gamma squeezes don't move the markets

Jerome Powell talks tough in his press conference trying to send right message

Did markets not understand the fed before?

Some recommendations including the Game of Thrones House of Dragons Premiere

D.B. Cooper documentary on Netflix

Mentioned in this Episode:

Debating what a recession is https://podcasts.apple.com/us/podcast/debating-what-a-recession-is-someone-is-wrong/id1432836154?i=1000571629306

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/3Je7xqa

Contact Derek [email protected]