Broken Pie Chart

See what factors determine how an option is priced. Whether on a stock index or underlying stock, time, implied volatility, interest rates, dividends, and distance in or out of the money all play a role. Known as the Black-Scholes model, Derek breaks down the inputs and which ones are more significant not only to option premium levels but also changes in price.   Explaining the option greeks Delta...

There are now over $12.5 Trillion dollars outstanding of negative yielding bonds. That's right, theoretically you are paying some country to lend them money. In reality you don't write a check twice a year. The idea of a negative yielding bond may not make much sense. Derek Moore will explain how negative yielding bonds work and how much more sensitive (and therefore risk) they are to changes in i...

Want a Bond refresher? Derek Moore talks about how bonds work, what effects prices and rates, and how to look at corporations and their debt.     How do bond ratings work and what do they mean? What is the interest coverage ratio? What is the corporate debt ratio? Differences between government and corporate debt How interest rates effect bond prices What is the yield to maturity? What is the yiel...

Broken   Pie   Chart   |   Episode 31 With   Derek   Moore   Is The Federal Reserve Really That Bad At Long Range Economic Forecasts?   Show   Summary:   In this episode Derek Moore discusses how the Federal Reserve economic survey projections have been off, especially for long run economic forecasts. He also clarifies the difference between the Fed Funds Rate, Discount Rate, and IOER or Interest...

In this episode Derek Moore helps to clarify the difference between a real return (adjusted for inflation) and a nominal return. This is especially important when looking to increase your purchasing power. Plus, Derek simplifies the difference between taking a simple average and a geometric average. The difference may surprise many people.       What is a real return versus a nominal return? What...

Jay Pestrichelli is back to join Derek Moore in a discussion around options. Particularly myths around options investing. Why we don't do individual stock analysis and picking. How someone with low-cost basis in a concentrated stock position can hedge. And are coconut's more dangerous than sharks?   • Why use Broad Index Exchange Traded Funds for diversification • Why we don't do complex individua...

Often investors notice that after an earnings announcement a stock has the potential to move depending on the news. But what type of volatility or movement was expected before the announcement? Using implied volatility, we can look at how option premiums are pricing in potential expected moves. Derek Moore explains how the numbers work and how you can see what a one standard deviation expected mov...

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...

Derek Moore and Jay Pestrichelli are back with part 2 of their discussion around the myths prevalent in the 60/40 portfolio. This week they highlight how bonds with low yields may have even more potential interest rate risk than investors think. Plus, they elaborate on why some diversification strategies fail touching on increased risk of the All-Weather Portfolios and Risk Parity Strategies. Fina...

You've probably heard about the so called "Unicorn" IPOs or Initial Public Offerings on CNBC. With Lyft already public and Uber, Pinterest, Air B&B, and more on the way, everyone will finally get a glimpse of the financials for all these names. Do they make money? How much or if they lose money, how big is the loss? For those looking forward to finally getting a look inside these companies it can...

For years you've been told that to get better risk adjusted returns you should diversify with some percentage in stocks and some in bonds. Yet when you look at the inflation adjusted annualized returns, is the idea of a 60/40 portfolio to manage downside risk more of a myth? In this interesting conversation Derek Moore and Jay Pestrichelli discuss why bonds may not offer much of a real return give...

The yield curve has inverted. Well it did at certain points last December already. Now that the 3-month Treasury Bill yield went above 10-year yields, historically what does that mean? Has the yield curve inversion predicted every recession and if so how long in advance? Plus, calculated annualized returns doesn't need to be that complicated right? Learn the differences in annualizing using simple...

You'll often hear things like "The US Dollar is losing purchasing power". But what exactly does it mean when the dollar loses value? In this episode Derek Moore will explain how to calculate dollar purchasing power over time and how to adjust for inflation the costs of good and services. Plus, why inflation is so hurtful to investors.   • How does inflation affect retirement investors? • How do yo...

Have you ever watched CNBC or Bloomberg and wondered what commentators are talking about with earnings and valuations on individual stocks? Derek Moore explains common financial metrics and ratios to help listeners become informed and how to interpret things like PE Ratios, Earnings, EBITDA, and more. Plus, hear what back testing is and pros and cons of it. Key   Takeaways: • What is the differenc...

In this episode Derek Moore explains the one benefit most investors overlook as a very important benefit of using a hedged equity strategy. The benefit of reinvesting avoided losses or hedging profits to pick up more shares while markets are lower. Key   Takeaways: • If you lose this much, how much is needed to get back to breakeven level? • Benefits of using a hedged equity strategy • How hedged...

In this episode Derek Moore discusses situations where investors might own a concentrated position in one stock or more with low cost basis. These present difficulties as selling would incur tax consequences however owning non-diversified positions pose significant single stock downside risk. Key   Takeaways: • What is a concentrated stock position? • What are the risks of single stock holdings ve...

In this episode Derek Moore discusses what Modern Portfolio Theory (MPT) and Efficient Frontier Investing means and how traditional investment risk rely heavily on standard deviation and variance to determine where a portfolio fits into a risk metric. Plus, Derek comments on how positive upside returns can actually increase traditionally used investment ratios like Sharpe. Key   Takeaways: • What...

In this episode Derek Moore discusses the various ways the Federal Reserve through its FOMC committee utilizes interest rates, buying or selling bonds, and the banks reserve ratios to increase or decrease the money supply. Plus, when pundits on CNBC, Blooomberg, or Fox Business talk about probabilities of future rate decisions, how do they come up with those and where to find them. Key   Takeaways...

In this episode Derek Moore is joined by Jay Pestrichelli, Founder of ZEGA Financial and author of Buy and Hedge: The 5 Iron Rules For Investing Over the Long Term, to discuss how if a bear market materializes clients using a hedged equity strategy have already planed for it and have defined downside floors in portfolios. While not predicting themselves what markets will do, Jay and Derek discuss...

Welcome to the Broken Pie Chart Podcast Episode 15. In this episode Derek Moore discusses the often-misunderstood target date funds prevalent in many workers 401k accounts and whether they are a good or bad idea especially given their drawdowns during the 2008 financial crisis. Key   Takeaways: • What are target date funds? • How did target date funds do during the 2008 market? • What was performa...

In this episode Derek Moore discusses the concept of Risk-Adjusted Returns, Standard Deviation of Returns, Sortino Ratio, Risk Free Interest Rates. Plus, how to compare two investment returns against one another on a risk adjusted basis and why many investors might be using the wrong investor benchmarks against their portfolios. Key   Takeaways: • What are risk adjusted investment returns? • What...

Welcome to the Broken Pie Chart Podcast Episode 13. In this episode Derek Moore is joined by ZEGA Financial Founder Jay Pestrichelli to discuss volatility as an asset class, implied volatility, the VIX Index and more. Key   Takeaways: • What is the VIX Index? • Volatility Indexes for the Nasdaq 100 VXN and the Russell 2000 Index RVX • How is the VIX Volatility Index constructed? • What is implied...

Welcome to the Broken Pie Chart Podcast Episode 12. In this episode Derek Moore discusses why diversification alone may not reduce systematic material stock market risk using the backdrop of the 2008 Financial Crisis. Plus, potential solutions using real hedging in portfolios. Key   Takeaways: • What are the two main types of stock market investment risk? • What is single stock or concentrated sto...

Welcome to the Broken Pie Chart Podcast Episode 11. In this episode Derek Moore discusses how changes in interest rates affect not only obvious things like car loans and home loans but also potential stock market and stock valuations. How does a higher discount or interest rate change the present value of earnings? Key   Takeaways: • How Do Higher Interest Rates Potentially Affect Stock Valuations...

Welcome to the Broken Pie Chart Podcast Episode 10. In this episode Derek Moore discusses some economic indicators that matter to investors. Many people hear the terms GDP, Inflation, Unemployment, and the Fed Funds Rate but aren't exactly sure what they really mean. We look to deconstruct these popular indicators and show how they are important to investors. Key   Takeaways: • What is Inflation a...