Broken Pie Chart Derek Moore

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial are back with a Fed meeting day edition where they break down the new end of year interest rate dot plots and Jay Powell’s press conference. Plus, they riff on Harry Dent’s latest prediction saying Nvidia is going down 98% and why the doom and gloom crowd are harmful to investors. Later discussing Apple’s breakout after their AI announcement at WWDC conference and the reaction to the CPI inflation print. All this and more!
 
Apple’s AI WWDC announcement reaction by the stock market
Apple vs Nvidia vs Microsoft for the title of largest market cap
Buy the Rumor Sell the News Buy the News on Apple
Post Fed Meeting announcement reaction
Fed newest Dot plots and what they say for the year end target for interest rates
The fed funds futures moves intraday
How to calculate the implied fed funds rate
Inflation print comes in light but year over year numbers still above Fed’s target
How the CPI Supercore is still running over 4.8% year over year
Harry Dent says markets are going to crash but has said the same thing over and over again
Why doom and gloom predictions are harmful for investors
Reviewing some past Harry Dent prognostication
Harry Dent says Nvidia may go down 98% while the Nasdaq will see a -92% crash
Battle for the largest market cap between Apple, Nvidia, and Microsoft gets interesting
 
 
Mentioned in this Episode
 
Harry Dent predicts Nasdaq to crash 92% https://www.livemint.com/market/stock-market-news/boy-this-is-over-economist-harry-dent-predicts-98-crash-in-nvidia-92-drop-in-nasdaq-heres-why-11718162529764.html
 
CBS News article “Harry Dent and the chamber of poor returns” https://www.cbsnews.com/news/harry-dent-and-the-chamber-of-poor-returns/
 
 
GameStop Option Bets | S&P Too Top Heavy? | Nvidia Passes Apple | Upcoming Banking Problems from Mortgages? https://podcasts.apple.com/us/podcast/gamestop-option-bets-s-p-too-top-heavy-nvidia-passes/id1432836154?i=1000658371572
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com
 
www.zegafinancial.com

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial look at some what seem like crazy options trades in GameStop. Plus, examining Nvidia passing Apple as the second largest stock in the S&P 500, and can it pass Microsoft for #1? They also talk about whether it’s a problem the top 4 stocks in the S&P 500 make up such a large percentage of the weighting and comparing it to the last time it was this high. Later they take some listener questions including whether the data shows cracks in the regional banks due to mortgage delinquencies, what happened in the unemployment report, and more.
 
Unemployment reaches 4%
Top 4 companies in the S&P 500 Index highest since the 1960’s
Comparing the contribution to returns S&P 500 Index top 496 vs the top 3 and Nvidia
Residential mortgage delinquencies and effect on regional banks
FDIC quarterly data on the health of banks
Nvidia passes Apple for #2 as its market cap exceeds Apples but will Microsoft be next?
1964 vs 2024 top 4 company weighting in the S&P 500 Index
Now the top 4 companies today are a lot more diverse business
GameStop options trading
Looking at the 128 calls open interest, volume and probabilities next 2 weekly expirations
Volatility in the GameStop option chain
 
Mentioned in this Episode
 
Mortgage Bankers Association data on residential mortgage delinquencies https://usreop.com/mba-chart-of-the-week-seriously-delinquent-rates-by-loan-type-conventional-fha-va-may-17-2024/
 
Delinquency rates on commercial real estate loans from FRED https://fred.stlouisfed.org/series/DRCRELEXFACBS
 
CNBC piece on potential cracks in the banking system https://www.cnbc.com/2024/03/19/where-cracks-in-the-banking-sector-may-appear-without-more-ma.html
 
Crazy VIX Bets Due to Election? | Market Reversal | Home Ownership Affordability Today | Shiller PE
https://podcasts.apple.com/us/podcast/crazy-vix-bets-due-to-election-market-reversal-home/id1432836154?i=1000657610266
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com
 
www.zegafinancial.com

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial review some interesting VIX option trades around the election and around inauguration day in 2025 compared to the next few months options action. When young people say home ownership dreams are dead is that true? Surprising numbers to compare inflation adjusted costs. Plus, on Friday the market swung from down over 1% to up almost 1% as we continue to be in a buy the dip regime. Later discussing the evolving Fed rate cut expectations and why it shouldn’t be a surprise. Finally, they go bring up container shipping costs rising again and what that means for inflation, the Presidential election market cycle, history of interest rates, and more.
 
Looking at VIX trades far out of the money around election and inauguration day
Are retail investors making bets on a rise in volatility due to the election?
Why trading VIX options can be frustrating and may be misused by retail traders
Home ownership dreams dead for young people?
Comparing a monthly mortgage payment today on an inflation adjusted basis to historical
Home prices compared on an inflation adjusted basis
History of interest rates over 5000 years
Container shipping costs on the rise
Share buybacks at highest level over the last couple years and what that means for earnings
Friday’s huge market reversal going from down to up in the last hour
Fed rate cut expectations through the end of 2024 down from 7 cuts to 1 cut
4th year of the Presidential cycle and the S&P 500 Index
What Shiller Cape ratio means for returns over the next 10 years
Cape PE ration and Price to Free Cash Flow
 
Mentioned in this Episode
 
History of Interest Rates book by Sidney Homer and Richard Sylla https://amzn.to/3V3TNEJ
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com
 
www.zegafinancial.com

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial talk about Nvidia’s earnings report and how they are catching up to Apple in total market cap. Will they cash Microsoft? Then they note the percentage of companies mentioning AI on earnings calls. What does that mean for CAPEX spending on semiconductor chips? Later they look at how housing prices after a small drop are now growing YoY despite higher interest rates and higher payment per median home price. The gold rally now one is noticing in 2024. A little Japan 10-year bond talk as rates hit 1%. Finally, Jay and Derek talk about how rates are staying higher for longer and the market might need to get over it while the “threat” of lowering rates might help markets.
 
Earnings mentions of AI on earnings conference calls surge
Nvidia is catching up to Apple in market cap
What is market cap and how to compute it?
Surprising market cap size for one semiconductor company.
Comparing S&P 500 Index market return paths since 1990
Is 2024 the new 1995 for S&P 500 returns?
Nvidia stock price growth vs income and revenue growth last 10 years
Now investors don’t thing there is a chance for a recession
Investor sentiment or likelihood of recession being high might be contrarian indicator
University of Michigan inflation expectations over next 5 years surges
Historical asset class by year returns
Gold still rallying but does anyone care?
One family home sales median price year over year price change growth
Charting monthly mortgage payment on purchasing a median priced home
Japanese 10 year bonds hit 1%
Why investing for longer means your win probability gets really high
 
Mentioned in this Episode
 
Roaring Kitty Tweets and Gamestop rises and falls
https://open.spotify.com/episode/5PtbYzdRunB7UPJRWQaXYK?si=OkMXUjOnQRGaJ2OZY-y8YQ
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com
 
www.zegafinancial.com
 
 
 

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial start by looking at GameStop’s (GME) call option open interest and activity in the days prior to Roaring Kitty tweeting . They notice the increase in options activity ahead of the surge in the stock’s price and volume spike and whether the options market led the stock market on GME. Then they comment on another new all-time high by the S&P 500 Index and how according to a BofA chart 90% of the time markets are not in a recession or in stagflation since 1948. Later Derek and Jay bring up the CPI Supercore trending higher while car insurance rates are soaring. What does this mean for the Fed and rates? Finally explanation of when covered calls get called away early.
 
Roaring Kitty comes out of hibernation to tweet.
Looking at GameStop options activity prior to Roaring Kitty’s tweet
Did the options activity prior to the stock activity mean people knew the tweet was coming?
Are we in for a GameStop meme stock part 2?
Why retail investors should use caution in trading GameStop.
Looking at the implied volatility on GameStop options to understand expected volatility.
CPI Supercore continues to rise YoY and what that means for interest rates and the Fed
Car insurance rates are surging 20%+ and rising
How long it takes the S&P 500 to go up each 100 point increment
According to a Bank of America graph 90% of the time since 1948 no recessions or stagflation
Enough about the Fed and rates?
When do covered calls get called away early and assigned?
Understanding dividends vs time value in deciding when covered calls get assigned
Early assignment for options
What implied volatility says about what the options market expects a stock to move
GameStop 300% implied volatility is massive and how expensive the ATM straddle is
 
Mentioned in this Episode
 
PPI comes in hotter than expected click below to read the PPI report release
https://www.bls.gov/news.release/ppi.nr0.htm
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com 
 
www.zegafinancial.com

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial discuss the idea that the stock market is in a Goldilocks period based on sustained higher margins and earnings growth. Then, they discuss how out of the headlines the Fed has already started easing by reducing their balance sheet runoff each month. Why reducing the Overnight Reverse Repo usage (RRP) isn’t restrictive but rather was a reaction to demand for short term treasuries by money markets. Later they talk about how interest rates are below long run averages despite what everyone tells you on CNBC and why high rates may not be a problem. Finally, they look at corporate earnings and profit margins for the S&P 500 Index and how they’ve growth over the years, gold prices vs oil prices as a predictive model, and yes some shipping container inflationary commentary.
 
Growth in S&P 500 earnings per share analyst projections
How net profit margins for the S&P 500 Index companies has growth over the years
Why this might be a hated bull market despite some goldilocks market aspects
What could derail this market?
Why profit margins continue to be higher and why they do or don’t have to revert to the mean
The Fed balance sheet explained
How the Fed is going to be reducing the amount of bonds running off the balance sheet.
How the Fed is restrictive and easing at the same time
Explaining what the Overnight Reverse Repo Market (RRP) is
Why the Fed reducing the balance of Overnight Reverse Repos isn’t restrictive policy
The order of how the Fed may ease (hint, it may not start with interest rates)
The 1990s bull run with higher interest rates and lower profit margins
Maersk container shipping operating hints at higher costs due to capacity, fuel, and congestion
What does higher container shipping costs mean for inflation and prices?
Do Gold prices project out what oil prices will do in the next 19 months?
Explaining the cost of hedging and how it is very cheap to put on downside hedges right now
The cost of a 1 year 10% out of the money put option
The cost of a 1 year ATM at-the-money put option
Using low or no cost collars to hedge the downside
Using long put spreads to hedge or buffer the downside
 
 
 
Mentioned in this Episode
Explaining High Dividend ETFs and Stocks and How Reinvesting Dividends Works to Build Share Count and Compound Returns
https://podcasts.apple.com/us/podcast/reinvesting-high-dividends-deep-dive-unemployment-the/id1432836154?i=1000654585450
 
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
 
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
 
 
Contact Derek derek.moore@zegafinancial.com
 
www.zegafinancial.com