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Recently John Hussman put out a piece that the expected value of a 60/30/10 stock and bond portfolio over the next 12 years would be -5%. Future projections can be wrong or right, but what he explained that the option value of cash or a hedged equity approach may be more suited. So how does hedged equity play into this? How Deal or No Deal game show explains the expected value calculation. And why...

Watch CNBC for more than 5 minutes and you are bound to hear discussion around is inflation coming? Are rising interest rates going to sink the stock market? But what has the stock market done historically during periods of rising rates? You might be surprised to find out. Take a look back at S&P 500 Returns in rising rate environments, rising inflation, rising unemployment, and more.       Once a...

Recently financial news media mentioned that bearish short bets against the US Dollar were the highest since 2011. But what is the dollar index and is it the best measure? What is the Trade Weighted US Dollar Index? What is the good and bad of a strong vs week US Dollar?     US Dollar Index Trade Weighted US Dollar Index Pros and Cons Strong Dollar Pros and Cons Week Dollar Short US Dollar positio...

Interest rates made a historic move higher last week as the treasury bond market sold off. But is this spike in interest rates previewing a higher move in inflation in the short term? What are breakeven inflation rates saying? Is the FED owning 30% of the TIPS bond market skewing inflation expectations?     What is duration risk in bond portfolios? How does lower rates extend duration risk in bond...

Bonds prices are a function of current interest rates compared to their present value of cash flows and return of capital (baring defaults) at maturity. So, with interest rates so low around the world, is this a period of higher risk in bonds (fixed income)? How much more sensitivity to interest rate changes do we currently see in the sector? How do callable bonds mute the positive effects of redu...

This week Jay Pestrichelli and Derek Moore are back to discuss whether Bitcoin or Gold are good hedges. What the appeal of cryptocurrencies are? How just being long the market while have a hedged floor in the portfolio allows investors to be in the historically best inflation adjusted return asset.   Appeal of Bitcoin How Inflation is hurting the dollar's purchasing power Gold as an inflation hedg...

This week we follow up on or episode last week covering what the Gamestop short squeeze was all about. Are hedge funds naked shorting stocks? How margin accounts cause risk to brokerage firms like Robinhood. Why didn't Gamestop do a secondary offering selling shares when the price was high? Why short sellers don't ruin companies outright.   Naked Short Selling Failure to Deliver Shares Reports FTD...

The Wall Street Bets community executed a short squeeze through Reddit on stocks like GameStop and AMC Theatres this week. But what is a short squeeze? How did they and others buying stocks and options cause the stock to go up at least in the short term? Is short selling bad? Why potentially some brokers had to halt trading in certain names? A look back to the late nineties when internet chat room...

Lately things like the Universal Basic Income (UBI) and Social Security are debated on TV. Commentators throw around numbers and whether a program can be paid for. Plenty of debate on each side but why not understand for yourself where all these numbers are coming from. In this episode Derek Moore covers what makes up the Federal Budget, Tax Revenue, Interest Payments on Debt, and how much somethi...

With this month's increase in US Treasury interest rates the talk about inflation came up quite a bit in the financial news. But what causes inflation? What are the different types of inflation? How is inflation measured?   Different causes of inflation Cost Push Inflation Demand Pull Inflation Hyperinflation Structural Inflation   CPI Index Hedonic Adjustments to CPI Substitutions in CPI measurem...

Recently there have been many discussions on the valuation of the S&P 500 based on forward earnings multiples. But what role do bond yields have in that evaluation? Does the implied P/E ratio of the Baa bond yield or US 10 Year Treasury yield imply that stocks have more room to run? In any case, why not just buy but hedge as a strategy?   S&P 500 Index earnings yield Inverse of P/E ratio is the E/...

Derek Moore and Jay Pestrichelli team up once again to discuss how probabilities are used to understand where to sell short options to generate premium. Discussed in this episode are who is on the other side of the short volatility trade, how changes in implied volatility impact expected multiple standard deviations of expected movement, and how value at risk VAR impacts option premiums. Plus, the...

Lately some high-profile companies have gone public using the IPO process. But how does it work and what are the differences between a traditional IPO listing and a Direct Listing IPO? Is Bill Gurley right when he says companies are leaving too much money on the table?   AirBnB IPO price pop IPO Process – Investment banks and selling syndicate Direct Listing IPO Greenshoe IPO provision Bill Gurley...

Some investors wonder whether it would be better to have bad returns early or bad returns late? Surprisingly unless someone is withdrawing funds or bringing in money it does not matter. But when does it matter? It can be quite a significant different during the withdrawal stage. Learn about how the sequence of returns comes into play depending on what phase you are in.   Is it better to have bad i...

Viktor Nebehaj guests on the episode to discuss how app-based brokerage Freetrade is looking to help millennials break down barriers and costs to make investing a habit. How technology has reduced friction in helping them get started. Why they and others like Robinhood have been able to acquire investors even though the legacy brokers offer the same or more. How do companies like his make money wh...

The Wall of Worry pertains to investors always worrying as markets climb higher. So what are some of the bull and bear cases on the markets, valuations, inflation, interest rates, stocks and bonds? Jay Pestrichelli is back on the program to discuss all these and hedging strategies as alternatives.     What is the Wall of Worry for investors? Are Bonds even worth it given such low interest rates? P...

Clean your garage this weekend to find something to sell on EBAY to fund your investment account. Where to go to open an investment account. How to buy fractional shares of companies. Should I buy a fund or individual stocks when starting out? Schwab vs Robinhood?   Schwab and Fidelity stock slices for fractional share purchases How to buy your first stock Dollar cost averaging periodic investment...

Spencer Wright of Halbert Wealth Management joins the podcast to talk through the various Senate and Presidential races. What are the polls saying? What about the hidden Trump vote? Likely scenarios for the electoral college.     Review of key senate races and predictions The electoral college landscape in key states Why Michigan, Pennsylvania, and Arizona may decide the 2020 election   Reliabilit...

Given the varies stimulus plans in 2020 the national debt has risen to new records. Yet, this political season we've heard little to nothing about it. How to understand the national debt, debt to GDP, debt held by the public. Plus, what does the CBO (Congressional Budget Office) say the debt to rise to? Will the interest payments exceed the cost of social security and all of defense before long? •...

Whether owning a home or owning stocks creates strong opinions on both sides. But what would be a way to evaluate the differences? Historically how have returns of homes vs the S&P 500 Index compared? What homeowners miss about gains in the price of their home.   Historical annualized returns housing vs the stock market Is your house an asset or a liability? How to think about your total true cost...

Rates jumped 30% in the US Treasury 5-year maturities this past week! Off course they only went from .25% to .33%, but why are some analysts on CNBC saying the next 10 years bonds may not return the same amount? What are the risks in bonds should interest rates rise? Do bonds offer a negative real return after inflation?   End of the Bull Market in Bonds? Bonds sensitivity to interest rate changes...

Your starting to hear about the options market pricing in huge volatility for November. This week, there was talk about the December contract getting bid up in case of a contested election. What does that mean? And how did volatility react during the Bush vs. Gore Florida recount and supreme court decision in the 2000 Presidential Election?   VIX Futures VIX before and after Bush v Gore 2000 elect...

As October is here naturally the stories start to appear around volatility and historical market returns. Many people assume October is the worst month for the stock market. Is October the most volatile? What is the average stock market returns by month? In this episode we will review and answer those questions. Plus, is it more important for the market to expect volatility in the "implied volatil...

Jay Pestrichelli co-hosts this episode with Derek where they discuss the continued talk around Robinhood Traders buying deep out of the money options to force market makers to buy stock. Plus, they discuss the reported $4 Billion spent buy Softbank to purchase option positions in some tech names. How do market makers hedge and the challenges with short term deep out of the money call option buying...

Lately you have probably heard analysts going on CNBC saying given where interest rates are valuations are or are not overstretched. But how do interest rates, and low interest rates, affect stock valuations? How to they affect the cost of capital and the ROIC or return on invested capital? How do you discount down future earnings based on a discount rate?   Why interest rates matter to investors...