Broken Pie Chart

Often, we get questions on why one company's options are priced so differently than another. So how options prices differ based on implied volatility? What makes up intrinsic value vs extrinsic value in options premium? Compare a high volatility company to a lower volatility company in the options market. How to calculate expected single standard deviation expected move based on IV Implied Volatility

Implied Volatility

Volatility

Intrinsic Value

Extrinsic Value

Time value in premium

LEAP Options

How Days to Expiration Inform Option Prices

Gamestop Options vs 3M Options

Mentioned in this Episode:

Podcast High Probability Options Strategies https://open.spotify.com/episode/5r05EHn8TBaJFCwGT7J8WN

Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

The Federal Reserve this week held their June meeting and released their new dot plot. Chairman Powell also did his customary press conference. The Fed says inflation is transitory and likely temporary. Others disagree. They even said they are talking about talking about tapering. So is inflation out of control or transitory as the Fed claims. Plus, what did they do or did not do on policy changes?

Sticky CPI vs Flexible CPI

The Fed's new dot plot

Fed track record on projections

ON RRP Market (Overnight Reverse Repo Market)

Monthly Asset Purchases the Fed

Talking about Talking about Tapering

IOER Interest on Excess Reserves

Used Cars inflation

Mentioned in this Episode:

Podcast Fed Tapering options https://podcasts.apple.com/us/podcast/fed-tapering/id1432836154?i=1000524411838

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

Sticky CPI Inflation vs Flexible CPI Inflation Podcast https://podcasts.apple.com/us/podcast/how-is-inflation-measured-sticky-cpi-vs-flexible-cpi/id1432836154?i=1000521909707

Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

ZEGA CEO Jay Pestrichelli and Derek are back together to discuss some surprising data that shows missing just the two best stock market days of the year can dramatically change returns. How Buy and Hedge Hedged Equity Strategy can be a hedge on missing out on markets when your fearful or bearish. Plus, life hacks from a 10-year-old and a famous Peter Lynch quote

Peter Lynch quote

What is Buy and Hedge Strategy?

What is Buy and Hedge Retirement Strategy?

Hedged Equity to avoid FOMO in the stock market.

Hack for fresh French fries at McDonalds

Hedge on Cash mentioned by Value Afterhours podcast

Value investors and market valuation

Father's Day gifts books from Jay Pestrichelli and Derek Moore

Hedged equity for fearful investors

Hedged equity for investors believing markets is at tops.

Mentioned in this Episode:

Podcast discussing Hedged Equity vs 60/40 Stock/Bond Portfolio https://open.spotify.com/episode/63WSsB3ZDWM0w0ttMv60TE

Fear of Investing When Markets Are High? Podcast showing that markets are within a few percent of all-time highs 36% of the time.

https://open.spotify.com/episode/2Fv0sV2mZT2Sy8Chjo79Oo

Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

Jay Pestrichelli book Buy and Hedge https://amzn.to/3wlfFhh

The Fed announced it plans to sell the ETFs and bonds it purchased. They are already doing reverse repo operations. Some have asked when they will reduce their monthly asset purchases. So, what is the Fed doing, and what are some potential things they might do?

Fed Taper?

Fed Reverse Repo Overnight Market

Fed Funds Rate

Interest Rates

Asset Purchase Program

Operation Switch

MBS Mortgage-Backed Securities

IOER Interest on Excess Reserves

Probability of Fed rate hike?

What is the SOFR rate?

What is the effective fed funds rate?

Mentioned in this Episode:

Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

Fed Balance Sheet h.4.1 report https://www.federalreserve.gov/releases/h41/current/

Fed SMCCF corporate bonds and ETF buying program https://www.federalreserve.gov/monetarypolicy/smccf.htm

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

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

SOFR Rate Secured Overnight Funding Rate https://fred.stlouisfed.org/series/SOFR

The Federal Reserve this week set a record participating in the Overnight Reverse Repo Market. Previously in 2019 they had to enter the Overnight Repo Market as annualized rates soared. So, what are Reverse Repos? What are Repos? Why is the Fed trying to control interest rates by doing market operations in the Reverse Repo Market?

What is the Reverse Repos?

What are Repos?

What is the Overnight Repo Market and Overnight Reverse Repo Market ON RRP

What is the annualized repo rate?

How to calculate what the repo rates are?

How do collateralized repo transactions work?

Fed Funds rate

Federal Reserve IOER Interest on Excess Reserves

Mentioned in this Episode:

New York Fed Overnight Reverse Repos https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements

Financial Times FT article on reverse repo Fed intervention https://www.ft.com/content/cdec7f2e-6129-412c-b118-8906a2a0f92f

Derek Moore book Broken Pie Chart https://amzn.to/2RUP4sy

Market Bubbles are tough to spot the absolute turning point. But most bubbles have the same stages and patterns. So what are some potential tells that we are in a bubble using historical examples? Comparing Dotcom Bubble to the Tulip Bubble. Are Bitcoin or Ethereum in an asset bubble?

What is an asset bubble?

Stages of an asset bubble

The housing bubble

Dotcom bubble

Tulip Bubble

South Seas Bubble

Kathy Lee Gifford and the rough rice futures market bubble

Irrational exuberance

Mentioned in this Episode:

Podcast Big Short Movie and Credit Default Swaps https://open.spotify.com/episode/6FG0xHkxfhSXEtbJbFbDF6?si=hr0qDh8US_6rmU3CRSxG3A

How much Bitcoin or Ethereum should I have in my portfolio podcast https://open.spotify.com/episode/5ZDfSVCAZx6WW6944oqZZh?si=ew34IusHRYON025A6P6c2g&nd=1

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 www.razorwealth.com

Broken Pie Chart | Episode 116

With Derek Moore

How is Inflation Measured? Sticky CPI vs Flexible CPI

Show Summary:

All you hear these days on CNBC is inflation. How high will inflation go? What is causing inflation? But how is the CPI constructed to measure inflation? What are the weightings of CPI components? And, what is the PCE Inflation Index which is preferred by the Fed?

• • What is the CPI Consumer Price Index?
• • What is the PCE Personal Consumption Expenditures?
• • What is Trimmed Mean PCE Inflation?
• • Owners' equivalent rent
• • How often do components of the CPI index change?
• • Difference between CPI and PCE
• • Sticky CPI vs Flexible CPI
• • Headline Inflation vs Core Inflation
• • Where to find inflation data
• • Difference between YOY Year over Year and MOM Month over Month data

Mentioned in this Episode:

Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk

PCE Trimmed Mean Inflation https://www.dallasfed.org/research/pce.aspx

CPI BLS Bureau of Labor Statistics latest inflation data https://www.bls.gov/cpi/

Sticky CPI and Flexible CPI Atlanta Fed https://www.atlantafed.org/research/inflationproject/stickyprice

Recently more and more investors are asking about Ethereum and Bitcoin. How much crypto currency should I have as a percentage of a portfolio? Is Bitcoin and Ethereum a good hedge against rising inflation? Derek and Jay Pestrichelli, CEO of ZEGA Financial, discuss what they are, the differences between them, and what is going on with Dogecoin?

What is Ethereum Crypto Currency?

What is Bitcoin?

What is the difference between Ethereum and Bitcoin?

What is Dogecoin?

Is Bitcoin an actual currency?

Blockchain as a utility

What percentage of a portfolio should you have in Bitcoin or Ethereum?

The skeptical and the optimistic view of crypto currencies

Is Dogecoin real?

Are either Bitcoin or Ethereum good hedges against inflation?

Questions as to how Bitcoin would be taxed if using it to buy a Tesla.

Mentioned in this Episode:

Article How Much Bitcoin Should You Have in Your Portfolio https://zegafinancial.com/blog/how-much-bitcoin-should-be-in-your-portfolio

Jay Pestrichelli's book Buy and Hedge https://amzn.to/3hcYkm3

Derek Moore's book Broken Pie Chart https://amzn.to/2SB2Y34

SPACs or Special Purpose Acquisition Companies 2021 growth has outpaced even 2020's record year. So, what are SPAC companies? Are SPAC companies good or bad? What are some famous SPAC companies?

SPAC Special Purpose Acquisition Companies

SPAC timeline from creation to IPO of new company

What Happens if the SPAC cannot find an acquisition target?

SPAC companies have record 2021 with over $100billion raised.

SEC looking at SPAC companies according to WSJ

What am I buying with a SPAC?

Why do they call SPAC companies "black check companies"?

Virgin Galactic and DraftKings famous SPACs

SPAC companies on CNBC

How SPAC Mergers work

Mentioned in this Episode:

Athletes and Celebrities join SPAC boom https://news.crunchbase.com/news/athletes-and-celebrities-join-the-spac-boom-sec-takes-notice/

Beware the SPAC https://seekingalpha.com/article/4397498-beware-spac-how-work-and-why-are-bad

How SPAC mergers work https://www.pwc.com/us/en/services/audit-assurance/accounting-advisory/spac-merger.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

Many investors saw a rise in rates causing negative returns on bonds in Q1 of 2021. Many were surprised. How is risk heightened due to low interest rates? Duration vs Maturity in understanding bond rate risk. Plus, how have US Treasuries performed by decade.

10 Year US Treasury Returns by Decade

Duration vs Maturity to Determine Interest Rate Risk

Coupon Payments Time to Capture Principle

Call Provisions in US Treasuries?

Comparing different 30 Year Treasuries Current Market Value

Decade by Decade Comparison of Total Return on 10 Year US Treasuries

More risk with low yields

How much more negative can bond yields go?

Mentioned in this Episode:

Marcel Benjamin on High Yield Bonds https://directory.libsyn.com/episode/index/show/brokenpiechart/id/18776195

Trouble with Treasuries: Bonds have one of worst starts to year since… https://zegafinancial.com/blog/us-treasuries-third-worst-start-to-year-since-1830-market-reaches-new-highs-while-many-big-names-in-correction-territory

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