Broken Pie Chart

Derek Moore discusses the recent market selloff while giving some perspective around this and others. Why is everyone waiting on pins and needles for the Jan 26th Jerome Powell Fed press conference. Plus, how markets retracing means valuations are coming back down, so long as earnings remain strong. Netflix meets on top line, and beats on bottom line but the streat was not a fan of guidance on subscribers.

Probability of FED future rate hikes

Netflix meats, beats, and dissapoints

Anticipation grows for FED meeting

Market re-rates valuation metrics and PE ratios lower after selloff

Once again remember market predictions are often wrong

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

JP Morgan Guide to the markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/

Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore is joined once again by ZEGA CEO Jay Pestrichelli to give a few contrarian takes on markets. What are the inverse of obvious trades when inflation is perceived to be continuing? How commodities have run but gold has disappointed. Plus, why the Fed raising rates might increase costs. Yup, that's contrarian but we'll explain on the podcast.

Good news bad news market reactions

Contrarian trade ideas

Are FED interest rate expectations too much?

Inflation continues as calls for the FED to do something increase

Will raising interest rates actually do anything for inflation?

What if raising rates will cause more inflation?

Well intentioned government programs have unintended consequences

The Cobra Problem

Bad Superbowl Predictions

The return of Ozark show on Netflix

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Jay Pestrichelli Book Buy and Hedge https://amzn.to/3nuzHUg

www.zegafinancial.com

Podcast Words and Numbers Supply Chain Insider Describes the issues https://podcasts.apple.com/us/podcast/episode-256-an-insiders-view-of-the-supply-chain/id1237781005?i=1000547016908

Podcast explaining overnight reverse repurchase agreements https://podcasts.apple.com/au/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106

Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore explains what was in those Fed minutes released last week that stirred up selling in the markets. What does balance sheet normalization mean? When are forecasters expecting the first interest rate hike? Is the Fed worried about the yield curve?

Why did the Fed Minutes release rile markets

Increasing the probability of the normalization of rate policy

Removing accommodation by reducing the size of the balance sheet.

What is balance sheet runoff?

Fed comments on the shape of the yield curve

Using Overnight Reverse Repo Market to help smooth policy normalization

When are Fed meeting minutes released?

When are the next Fed Meetings scheduled?

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Podcast explaining overnight reverse repurchase agreements https://podcasts.apple.com/au/podcast/what-are-reverse-repos-and-repos-fed-enters-overnight/id1432836154?i=1000523659106

Fed Rate Probability Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Derek Moore reviews asset classes like stocks, bonds, bitcoin, and gold. What investors thought would be a no brainer with higher inflation didn't work. Plus, Derek goes back ten years and reads some bearish doom and gloom predictions for crashes that never came true. How wrong where they and why you maybe shouldn't listen to them. Instead just invest but be hedged.

2021 Inflation hedges like gold lost money in 2021.

Why the obvisous short bonds and buy gold showed less than steller returns despite higher inflation.

How to do specific google searches by year to see how prognostications were wrong.

Those saying this was the worst market conditions in 2012 were way wrong.

What you should do instead.

How to tune out the noise, be invested, but be hedged encase markets selloff.

Without naming names, Derek reads some quotes on impending crashes from some of the same people making the same predictions now.

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Jay and Derek's lighthearted 2022 market predictions podcast https://podcasts.apple.com/us/podcast/2022-market-predictions/id1432836154?i=1000546252301

How have stocks done during periods of high inflation? https://podcasts.apple.com/us/podcast/stocks-during-high-inflation/id1432836154?i=1000542624663

Inflation deep dive

https://podcasts.apple.com/us/podcast/inflation-deep-dive/id1432836154?i=1000541759655

Marcel Benjamin explains TIPS Treasury Inflation Protected Bonds https://podcasts.apple.com/us/podcast/tips-inflation-protected-bonds-explained-interest-rate/id1432836154?i=1000535445537

Jay Pestrichelli joins Derek Moore to review some 2022 market predictions. You shouldn't trade of these! Make sure to listen in a year to see what they got right, and what they got wrong.

2022 S&P 500 Index Year End Predictions

2022 Inflation

2022 Earnings on the S&P 500 Index

Will the S&P 500 see multiple expansion, earnings growth, or both?

Plus, Bitcoin, Oil, and Gold.

Will there be a recession in 2022?

What will GDP growth be in 2022?

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Jay Pestrichelli's Book Buy and Hedge https://amzn.to/3HexeER

Podcast Explaining multiple expansion vs earnings expansion in stock price multiples https://podcasts.apple.com/us/podcast/desconstructing-stock-price-earnings-multiple-expansion/id1432836154?i=1000545436987

Podcast stocks during high inflationary periods https://podcasts.apple.com/us/podcast/stocks-during-high-inflation/id1432836154?i=1000542624663

Derek Moore responds to market pundits making 2022 predictions where they examine whether stock prices will see moves diven by changes in earnings vs PE multiples expanding. Also covered will be effect share buybacks have on earnings per share EPS. Then he compares Amazon and Apple forward multiples and share counts.

PE Ratio

EPS Earnings per share

Calculate Market Cap

Multiple expansion versus earnings expansion

Forward PE vs PE Ratio

S&P 500 2021 price driven by earnings expansion while multiples contracted

Amazon AMZN comparing 2020 earnings to 2005 price along with share counts

Apple has seen a 37% reduction in shares outstanding due to buybacks over 10 years

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

Derek Moore reviews the range of potential moves the Federal Reserve may take given rising inflation. Will the Fed reduce their monthly purchases? What does the Fed Fund probability tracker show the market is expecting interest rates to be? What about the trillions of dollars the Fed is doing in the Overnight Reverse Repo Market?

Monthly Fed purchases of MBS and Treasuries

$1.5 Trillion in Overnight Reverse Repos

Fed Rate Hike Probabilities

Chairman Jerome Powell gets more hawkish?

Inflation effect on interest rates?

Effective Fed Funds Rate

Will raising inflation actually reduce inflation?

Inflation nowcast indicates higher inflation in December

Mentioned in this Episode:

Contact Derek Moore [email protected]

Previous Podcast: What are Reverse Repos? https://podcasts.apple.com/au/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_=nav_signin&

Federal Reserve Balance Sheet h.4.1 https://www.federalreserve.gov/releases/h41/current/

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

Fed Rate Probability CME site https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

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

Fed Overnight Reverse Repurchase Activity https://fred.stlouisfed.org/series/DTB3#0

3-Month Treasury Bill Rates https://fred.stlouisfed.org/series/TB3MS

Jay Pestrichelli is back to co-host with Derek where they simplify risk measures like Alpha and Sharpe. Then they discuss the market drop that started during the short post Thanksgiving day session. Later an inflation check in, corporate profit margins at multi-decade highs, the yield curve flattening, and oil prices.

Markets pullback from highs

Market valuations

Alpha explained

Sharpe Ratio explained

Comparing portfolio managers through risk adjusted returns

Comparison benchmarks

Market moves during short staffed holiday trading sessions

SPR Strategic Petroleum Reserve release impact

Oil inventories and demand

The yield curve continues to flatten what does it suggest?

Profit margins his multi-decade highs even during inflation

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

JP Morgan Guide to the Markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/

Jay Pestrichelli's Book Buy and Hedge https://amzn.to/3EqSTc6

Derek reviews some key market themes including things to watch on corporate earnings, profit margins and more. Then he discusses the current situation around oil rig counts and inventories versus demand. Later Derek talks about how government responses such as lockdowns can impact the economy.

S&P 500 Earnings

Profit Margins at Decade Highs

Multiple expansion

Earnings expansion

Difference between multiple expansion and earnings growth

JP Morgan Guide to the Markets data

What is the market risk of Covid?

Earnings growth

Market valuations

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

JP Morgan Guide to the Markets https://am.jpmorgan.com/us/en/asset-management/protected/adv/insights/market-insights/guide-to-the-markets/

Derek is back to review data put out by OSAM showing periods of severe inflation, high inflation, and how stocks have done historically. How have bonds done during periods of high inflation? How common is severe or high inflation?

Severe Inflation

High Inflatipon

Moderate Inflation or Fed Target Inflation

Low Inflation

Deflation

How to calculate real returns after inflation

Stocks and bonds performance during inflationary periods

How common is high or severe inflation

Looking at stock returns during the late 1970s and early 1980s

Value of being hedged vs traditional 60/40 portfolios during high inflation

Mentioned in this Episode:

Contact Derek Moore [email protected]

Derek Moore's Book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547?ref_=nav_signin&

OSAM Historical Real Returns Stocks and Bonds During Various Inflation Regimes https://www.osam.com/Commentary/inflation-and-the-us-bonds-and-stock-markets