Market Outlook for July 28, 2024

[@Joshuaa.z]

"Selling put is easy, finding the right underlying is the hard part." -Mark Meldrum

[@SomeOne-gi2gp]

I think walking through a financial model on Excel is more appropriate for a walkthrough as you could easily demonstrate how the assumptions and inputs fit in the model, highlight relationships between certain figures by breaking down the calculation of the output, have a clear visual of the trend over time of some key drivers etc. I think that would tie it all together and we'd understand why an element is important to the valuation and the strategy. Also, you wouldn't need to build a model that is too complex, nor to forecast. You'd just make a point by demonstrating through a model, and maybe that can be an opportunity to teach aspiring analysts a real-world practice when analysing target companies.

[@thebicyclenoob]

Excellent update as always - in your upcoming financial modelling module for the applied series, will you cover modelling fixed income securities/bonds? Thought it may be useful, especially as some lower rated credit may be looked at favourable vs the same company’s equity in the current rate environment

[@jon_190_]

What Beta do you use for portfolio management in applied series? Yahoo finance shows 5year monthly, Schwab shows an entirely different number. Want to make sure I’m using the same as you when thinking in $ Beta terms for position sizing

[@l2amzZ]

Thanks for your effort in restructuring the 10-K review. It would also be great to jump to the paragraph in the 10-K if a notion or information is not understandable by reading the section once. This would make us more sensible about hidden facts in the reports that an inexperienced reader would miss

[@farzad_tahamtani]

Hi Prof. Meldrum I’m super excited for the new 10-k walkthroughs and thanks for doing this new approach. In recent years there has been many false alarms when it comes to Macroeconomics. How do you filter them from true structural shifts that are actually happening? Many headlines amplify fear and bearishness but in reality things turn out pretty good. I know the debt problem is a real one that needs addressing but many other issues seems to me that they are just doomsayer having the opportunity to gain attention.

[@DaTryHardCamper]

16:50 you say that spending from debt is coming from savings. But doesnt this disregard fractional reserve banking and the increase of the money supply through lending to the private sector by banks? Not all debt is backed by reserves?

[@B_CDowntown]

Regarding the financial modeling series, would you think it would be more beneficial if you could start a financial modeling series on the industries that are not frequently analyzed or well-understood from a particular early-career, young analyst perspective? For example, the financial modeling of banks.

[@j.d.s.1.9.9.4]

Are you shorting IWM on the basis that the fed takes too long to cut rates, you mentioned earlier in the video that Fed should be cutting rates and the data shows that they can act now yet knowing their cautionary approach they wont start cutting to at least September, do you run the risk on the fed cutting rates Wednesday and the short going against you? how do you see that move long term if the fed does start cutting rates since you also said small caps do well when rates are being cut?

[@andreaviola8898]

Hi Mark! Thanks a lot for your great job. Regarding sub- industry to be included in the sector study , I would be interested in the Renewable energy industry (especially solar co-located with battery storage) and data centers.

[@har_d_rocks9987]

Hi Mark, What key factors do you consider when deciding to invest in a stock? Do you focus more on financial metrics like P/E ratio and earnings growth, or do you prioritize other elements such as industry trends, company management, or macroeconomic conditions?

[@WheresMyPolenta]

Waymo was a terrible experience for me but I believe such technology will make the roads a safer and more efficient space. Already better than a lot of drivers lol.

[@Slayer17606]

Thank you for the great outlook 1) the new 10k seems interesting but I would also prefer the highlighted 10k that you share is also a great resource to learn, maybe if you can share the 10k notes to go through as homework before watching the video would be a great resource 2) I also loved your portfolio construction and management section, I loved that section and with the new positions section coming up on the applied level, do you think you will be continuing with the old format of the section?

[@eh-tz8ji]

Mark - you mentioned Aristotle being one of your favourite philosophers. What do you think of his proposed three life’s? The life of pleasure, life of virtue and life of contemplation. I have always thought of the transition from pleasure to virtue as a sort of enlightenment. One acts according to the virtues, that makes sense to me. Where I don’t completely follow is the life of contemplation. What is your interpretation of the life of contemplation?

[@Shivastorm88]

This aged well, it seems ON got great results, up 11.5% by EOD on Monday

[@danielcastro1705]

Great addition with the new 10k walkthroughs!

[@thomasfallows7060]

Proper update per usual. In your live Sunday night you mentioned your style of trading is not not aimed to be “day trading”. I am a student who will be enrolling in trading competitions therefore I am wondering if you had 1-2 days to trade how would one run such an account? (Assume any asset class/instrument and margin is available make up a notional amount if needed.)

[@pranavmoorthi8532]

Hi Mark, Id like to know where you find the expectations for these indicators. I watch your update videos, but I'd like to start tracking them myself. I find that my understanding of the economy is not as in depth as I'd like it to be. I think a good way for me to fix this is by starting to track the relevant metrics. Thanks!

[@SomeOne-gi2gp]

When closing a profitable trade, do you set aside the taxable portion or do you reinvest it even though you could run the risk of losing that amount of money that could have gone to paying the income tax? P.S: Looking forward to the new 10-k walkthrough format. Exciting news!

[@Chris-inv]

You bought ABR calls with a strike price of $17.50. That's a BEP with approximately a 25% increase. Are you planning to exercise them or sell the calls if the stock reaches the BEP? Or do you expect ABR to trade well above $17.50 (considering it's a financial stock and would be trading significantly above its book value)?

[@GWBN1]

Where did Paul Jacobson say the 1bn share target was for this year? In reading the transcript that target seemed like a general goal with no timeline attached.

[@whitleyparrish]

For accounts with less than $100k sometimes it can be tough to use a laddering strategy with options because there’s also a need to diversify. From your experience which strategy do you think is better, waiting to see if the stock drops to the bottom of our target range even if it means possibly missing out, or jumping in and starting to buy now? And for the second question, why does ABR use the unpaid principal balance to calculate assets on its balance sheet but then use the average carrying value to figure out revenue in the income statement? Thanks.

[@hector_nieva]

Hi Mark, when you say you have a short ES position to construct a long extension portfolio, do you consider the beta decomposition into different factor exposures? I find it challenging to use a short ES position to manage portfolio risk when the short beta exposure is, in reality, a concentrated bet against large-cap growth and momentum factors. The dollar-delta-beta calculation may be insufficient to effectively capture the nuance you need to hedge a portfolio composed of individual value-oriented stocks.

[@Floober903]

dang the economic calendar daily fx URL is no longer available to US residents lol. for 2 years now.

[@Slayer17606]

Hi Mark, Quick question how do you value oil stocks like OXY, you recently mentioned you look at oil inventory reports drawdown which supports oil prices. Can you elaborate a bit on this

[@robaustin3013]

Mortgage periods in the US are 15 and 30 year? Is there a more favourable tax system in the US for a greater percentage of discretionary income to end up in venture capital funds? Why are Canadians stuck with 5 year mortgage renewal rates. Is it also the case in the US mortgage interest is tax deductible on first home?

[@brunopoles6311]

Mark I have a question regarding portfolio construction. What is a sizing % in your portfolio given your conviction? Also do you set limits on investment themes, given that some might be correlated?

[@mitchellault]

On your LW, have you considered rolling those deep ITM 72.5 puts further into the future? Would there be any benefit to rolling as opposed to getting them put to you?

[@Slayer17606]

Hi Dr. Mark, you might've repeated it several times but I still had a few question on applied level series, 1) what is the price of applied level for cfa enrolled candidates after 1st of august 2) would there be any difference between the access to the content if bought before 1st aug

[@NarutoUzumaki-w5w]

"Drill baby drill" could help to reduce Russia's oil revenues which in turn contributes to slowing the Russian war machine. Of course it takes more than 24 hours

[@AlphaBay14]

Thanks for all your content. I am a full subscriber and I was wondering if you planning to do softs commodities in your sector studies section? Thanks

[@WesleyYappy-n1m]

16:21 - 17:28 21:02 - 24:18 24:52 - 25:50 54:58 - 1:08:08

[@martiantaylor]

Hi Mark, 1. As a Canadian trading on IBKR, I can't find a Canadian equivalent of 3 months T-Bills to park my CAD cash. What do you use? I looked at CBIL ETF, but it has a 0.1% management fee. 2. For selling puts, does it matter if I sell a put with a regular expiry date v.s. non-regular expiry date? Is this more important, or is managing DTE more important? 3. For a beginner, to manage liquidity for my short-put positions, should I keep the margin requirement in cash, put it in a 3-month T-bill, or use it to buy other stocks? What if I am waiting for it to be put to me? 4. Do Canadian residential REITs move closely with the Canadian 10-year yield? If so, any good way to find/chart the Canadian yield curve on IBKR? Thank you!

[@Slayer17606]

DR Mark, you mentioned Soma reduced by 3.7 billion but fed bs reduced by 2.7 billion, does it mean that the fed is actually easing its quantitative tightening. I have trouble understanding its interpretation

[@Foss98]

on TLT, if we assume 3 rate cuts by the end of the year (a price target of 106 from Altavista Research). Is there any downside in setting 93p to fund 93 calls (both at say 100 to 200 day expirations). or even just buying 93 calls. Is it worth considering?

[@vancouvergirl4653]

Hi Dr Mark. Wondering on your thoughts on whether to change some or all of my SPY etf to an equal weighted ETF as it has had such a run up and I feel some of the companies are so overvalued? I appreciate no one can know what will happen for sure but your insight is always valuable. Also as a Canadian how much of a portfolio do you think should be invested in the US stock market? BTW I signed up for one of your applied courses which I am looking forward to so maybe this will be covered there. Thank you.

[@SomeOne-gi2gp]

At the beginning of the sector study videos, I'm not really sure what I am looking at as I am not familiar with publicly exchanged financial instruments. Can you explain what it is you walk us through and why it's important? I see screenshots of lists of industry groups usually followed by a table showing new names for labels and I'm not sure I follow the why.

[@MrBluey19]

Perhaps by "drill baby Drill" Trump means the number of oil rigs, not oil volume? According to Tradign Economics last count was 482 - not elevated levels relative to time series

[@cainrizwan9607]

Ahead of the fed meeting, 170 put on dhi 16 aug, breakeven being 166.5, would you move out or stay in

[@Rusty_101]

Hi Mark any opinion on the earnings of Stellantis? Net income down 48% QoQ, 1.3B in restructuring cost. Also they announced to continue to buy back stock and pay the dividend. Do you see the restructuring as beneficial as it could improve the second earnings this year?

[@CurtisSmith115]

How are you thinking about your BWA position? Pretty positive earnings report

[@waleeds7550]

Could CAPREIT's stock price surpass its record high of $62 in the next year or so? I would assume given the rate cutting cycle has started by the BoC, the continued housing shortage that exists, and the record levels of immigration that Canada continues to see could cause CAPREIT's price to surpass $62. What are your thoughts? Am I being aggressive with the rate cuts?

[@rusinoe8364]

In the Live Q&A today, you said that a YC inversion is caused by short rates going up and long rates going down because longerterm market doesn't think rates will stay high. So now that the YC is uninverting, shouldn't the long rates (20y) not charge much, given that market already priced in a that the rates would come down longer term? So TLT should mostly trade sideways, no?

[@LiamCheung-sk4hn]

Hi Mark, I am a beginner in macroeconomics. For EIA Crude Stocks change, why is a draw of 3.741M when compared to a draw of 2.05M "better than forecast", which is indicated by the up arrow next to the figure? As I thought a lower drawdown or even a build indicates less use/export of resources, therefore a positive for the economy? Same goes for EIA Gasoline Stocks change. Could you explain why a draw of 5.572M is "better than forecast", than a forecast draw of 0.9M? I am confused as to why a larger drawdown is deemed as "better than forecast"?

[@FineTrak]

Does short term options lead to capital gains/losses in the US? Are they affected by wash sale rules?

[@Obolix101]

Do you think from a regulatory point of view Tesla could actually buy GM?

[@chorimaverick1853]

Hello Mark, Although you are selling the COPX puts ITM, I assume you expect them not to be put to you, right? With inventories spiking in July and demand slowing down it its a matter of time that copper loses the $4. Do you have any target price in the short term? Also I saw that you stopped selling the puts on FCX and changed to COPX in spite of lower liquidity and IV, this is for diversification or something else with FCX?

[@Chris-inv]

How do you know if an option has a good premium? Do you annualize the premium based on the days until expiration?

[@yojmb9]

Is it really the case that USD/CAD rate differentials can't get worse? What if Canada goes into recession (isn't it already?) and US stays strong?

[@SomeOne-gi2gp]

Is the analysis process shown in the company analysis the same for a professional analyst, or is it more of a retail investor approach?

[@gertrudes666]

Utilities, Copper, Duration -> name a better trio

[@parmindermalik6130]

can you please explain the Interest rate differential on USD.CAD, CAR.UN call will give your right to buy so how is it selling at 52.70? TIA

[@farzad_tahamtani]

Will this new format be used to replace previous 10-k walkthroughs that you already done?

[@Obolix101]

It's interesting that you're shorting small caps while also thinking the Fed should cut rates as this could lead to an obvious move against you have you thought about hedging this position with some calls? I know you tend to hedge more on a portfolio level in the sense that your beta plays in this case would do some of the lifting. I feel like the market mentality has shifted in recent years to price in events ahead of time, which I remember you were quite critical of. Do you think there's too much "dumb money" in the market now, with passive investments in ETFs distorting asset prices? It seems like everything is so expensive. I often agree with your rationale for shorting certain stocks, but it feels like swimming against a rip current. To play on Warren Buffet's metaphor, the tide never recedes, so you can't tell who's swimming without shorts. I've always wanted to be a long/short investor, but it seems like without a major macro catalyst, stocks just keep going up unless they have a significant idiosyncratic issue.

[@JPtheKid15]

Mark - drove in a Waymo this weekend. Unreal. This companies technology is so far ahead of Tesla. Live in SF, LA, Arizona and expanding. The future is exciting.

[@cainrizwan9607]

Have you made any changes to Fcx and your position in enbridge. Also why are you planning on holding ON if you see it as a risk

[@Anon123454]

16:50 - An increase in consumer debt is not the same as a reduction of aggregate savings because bank lending = money creation, right?

[@rohanlansakara9650]

Are you watching Olympics, if so, what's your favorite event?

[@lawrenceg7341]

Hi Mark , what’s your view on Berkshire post Buffett era?

[@cainrizwan9607]

Can you please explain the IV on the tlt screen that you do, went from 49 to 65, what does this mean and why does it matter

[@depankarlaldas2161]

IJS or IWM considering rate cut environment?

[@oleksandrbidnyk4238]

Hello! I am writing a thesis about activist investors. I wanted to ask here, maybe someone has a free source where you can find data about such corporate events as the purchase of a company by activist investors (company, date, investor). I will be grateful for the information.

[@albano2910]

much better

[@Annon-7788]

Hi Dr Meldrum, Apologize for seeking clarification in this manner. Q. Arbitrage activity will most likely be higher in securities markets: A. with no restrictions on short selling. B. that are efficient. C. with high information acquisition costs. It is explained in your videos' that with less restriction(ie. on short selling) the market will be more efficient. Thus, i ruled out A & B as it indicate a more efficient market which is adverse for Arbitrage activities. May i know why is the answer A?

[@miketschudy5343]

Thanks for all you do. Question for you; say the lag in effect from a rise in interest rates is x months. I agree there will be a lag i when interest rates go down, but would you expect the lag to be shorter than X because consumers have the ability to refinance, thus getting the benefit of lower rates sooner? Similar in theory to the increase in prepayments when rates rise. Side note-tried maple syrup instead of cream in my coffee. Total game changer!

[@dignaga69]

Is it too late to chase XHB?

[@Shivastorm88]

Looks like Kaufman sold some shares, I am not taking that as a good sign

[@MarkMeldrum]

Read footnote 1. Shares sold by Arbor, not Kaufman. To satisfy taxes owed. This was probably planned months ago.

[@Shivastorm88]

Got it. Thanks. That's what I get for reading on the go.

[@geordieppp]

I have passed CFA level 1 but I am not yet registered for the level 2 exam. I previously purchased the applied level and currently have access to it. Do I need to make an additional purchase to keep accessing the applied level content after the 31st July? Many thanks for all you do on this channel, you have changed my view of investing and thus my future in a hugely significant way, I can't thank you enough.

[@MarkMeldrum]

No need to buy anything more. You are all set.

[@geordieppp]

@MarkMeldrum Thanks Dr Meldrum.

[@bluper8]

I have no position in ABR I’m going to load up on $17 calls and finance in part with the $2.50 puts

[@ConiferousCapital]

What is the timeframe for your small-cap shorts? Are you looking for a reversal of the last 2 weeks of movement? Do you see this space favourably over a longer time frame (6-12 months)? Thanks

[@Oikwtm]

Can you talk about how you decide to put a stock into a theta bucket vs an income factory bucket?

[@cainrizwan9607]

Are you planning on doing the financial modelling tutorial next month?

[@chakavak2015]

What if the long-end increases in fact if the FED cuts? That is something that I think makes FED worried about cutting rates…

[@nshs1234]

iOS vs. Android and Apple vs. Samsung... what are your thoughts?

[@tjloehnert]

Why is there emphasis among investors on the 50 day ma and the 200 day ma as opposed to say a 10 day ma or 100 day ma?

[@jaredtarabocchia6331]

Marky mark

[@cainrizwan9607]

First