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Too Focused on Fed Rates?| META Earnings Implied Volatility | NAV Erosion Myth

By Derek Moore

Show Summary:

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss the Fed and Powell press conference market reaction. Plus, they look at META and Apple option’s implied volatilities did or didn’t predict the post earnings moves. 1994-95 experience in Fed rates and bond yields compared to today. Later, they set the record straight on what NAV erosion is, why the Shiller PE may not be predictive of markets, low response rates to economic surveys, and correlation between CPI and shipping container rates. 

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Topics Include:

  • Fed Meeting Powell press conference roiled markets for all of 1 day
  • Who is right, the bond market or the stock market on rates?
  • Typical moves in bond yields around fed meetings and outside of fed meetings
  • The Fed Funds rate and the 10-year treasury bond yield aren’t as related as you think
  • Looking back at the 1994-95 Fed rate hiking and easing cycle
  • META blows out earnings and adds the most market cap ever in one day
  • Looking at META options implied volatility pre-earnings to see if it got it right
  • Reviewing Apple’s ATM straddle, implied volatility, and post earnings move
  • Confusion around what the meaning of NAV erosion is
  • Total return which includes dividends vs price return. 
  • Correlation between CPI year over year change and container shipping rates
  • JOLTS Job Openings Less Turnover Survey response rates drop
  • How economic surveys sample small amounts to gauge total economy
  • Shiller PE CAPE Ratio and predictive power

Mentioned in this Episode:

1994-95 All Over Again in Markets? 

BLS Bureau of Labor Statistics January 2024 employment report 

Jay Pestrichelli’s book Buy and Hedge 

Derek’s new book on public speaking Effortless Public Speaking 

Derek Moore’s book Broken Pie Chart 

Contact Derek derek.moore@zegafinancial.com 

Did you miss last week’s episode where Jay and Derek covered:

Explaining Telsa Implied Volatility | Bitcoin Selloff Post Spot ETF | What History Tells Us About Election Year Returns

Listen Here: