Market Outlook for Sep 1, 2024

[@normadgurl]

Happy belated birthday Mark!!🎉

[@Shivastorm88]

Very glad that you moved market positions to the paid website, I already derived a lot of value from the added details in your explanations. Thank you!

[@tkvunani2832]

Hi Dr Meldrum. Would you consider doing an update to your "The ICE Age is far from Over..." video given the recent boom in EV production in China and comment on the importance of semiconductors in the pace of the ICE to EV transition. Thanks.

[@owl-eyed]

Happy Birthday Mark!🎂 Your work really makes difference and I'm really grateful to have you as a teacher.🖤

[@rv6016]

Belated Happy birthday Mark! Blessed to have learned from you and your videos! Thanks for all the teachings and wishing you a long and healthy life ahead! Cheers

[@SamWell-Y28]

Dr. Meldrum, Thanks again for answering my questions in previous weeks. I recently listened to Ed Yardeni - probably you mentioned it too- who said that every recession before started due a credit crunch following the curve inversion. This could be because something broke as a result of the lagged effect of the rate hike cycle. But the Fed had not discovered QE, or was wise not to use such measures. Is it possible that, recession or not, we will not see a sustained drawdown in the indices ever again since the Fed stands ready to rein in with impunity and flood the markets with liquidity? I wonder if Bernanke introduced QE in 2009 as a stopgap measure to rescue the economy, but the Fed has continued to abuse it since then. Your thoughts? If this is the status quo, can one just buy TQQQ (3x qqq) and sit pat? TQQQ is up 357% since 2019 and 16000% since its inception in 2009. Thanks,

[@CurtisSmith115]

Do you exclude interest bearing debt and cash when calculating working capital? i.e. only include operational assets and liabailites

[@AWR-zx2sr]

Hi Dr. Mark, Thank you for the insightful video. Would you please be able to elaborate on how you came to the 200bps cut in the 1yr. I know you explained it but didn't quite understand it. Thank you!

[@binghugh]

Dr. Mark. Are SOFR3 rates purely derived from Fed. Funds futures, as a forward rate "3 month forward, X month from now". Or additional credit default spreads are priced in as interbank rates come with some default risks? And if so, would that make the SOFR3 futures more sensitive to the rate expectations than same expiration Fed. Funds futures?

[@ConiferousCapital]

Looking to simplify my portfolio and allocate a large portion to passive index ETFs inside a TFSA. I have a long time horizon (25+ yrs) and risk tolerance & ability to push through volatility. Would you recommend a mix of ETFs that track S&P 500/NASDAQ 100/Long Bonds? Thanks

[@lastcrime1]

Could you elaborate on the payoff of the recent banks play? Using BMO as an example, you've setup a covered call so you'll earn the premium as long as it doesn't go above 118, but then you're also selling ATM puts meaning you think the stock will stay above 110? Is that correct?

[@suman2kb]

Dr. Mark what's your views on Goldman sachs report on Copper and Oil? FCX took a hit on Tuesday. time to buy?

[@sdfergf]

I am curious to get your views on overall liquidity and the potential for increased inflows into equity markets. Based on my understanding of the changes in the Fed's balance sheet since QT, bank reserves have increased while tapering has only impacted RRP. Reductions in RRP would appear to directly go into Tbills which is a source of funding that would not otherwise be available to buy treasuries and creates more incremental funding for other risk assets. My view is that as long as RRP is in the $300-$400 billion range, there will be an ample liquidity backstop that should support risk assets. And with the Fed hinting at reducing balance sheet runoff + 6 trillion+ in money market funds, I just cannot see a bear case for stocks even at the 20+ p/e levels on the SPX. Thoughts?

[@teejay_9]

Unrelated to the market outlook: How do you actually execute a carry trade? Could you possibly show us on the IBKR terminal? i cant understand one part- When you short JPY, do you have to pay the yield? Or are you betting that it will appreciate and the price is your return?

[@cristianbojacapenate8352]

Mr Meldrum, how do you balance your view of short term USD strength and MXN long. Do you reduce the MXN long ?

[@raghavbhatia2400]

Hi mark Is rho of any interest right now as fed will be cutting the rates? Is there a way we can be long rho and increase profit chances

[@shohruhuktamov5097]

Good day Dr. Mark and thank you for all your efforts! 2 questions: 1. In applied level, new positions, was wondering if would be possible to provide updates on your positions change in the middle of the week as well? Maybe not detailed but short summary would be great. 2. Given GS cuts copper price forecast, did your views on copper and copper companies (fcx) changed? Or do you see fcx bottoming as opportunity to buy more? Thank you!

[@Kels_Calderon]

Hi Mark, how can we predict if market has already priced in the interest rates cuts, or know if a Stock has its earnings expectations priced, maybe before an earnings report?

[@Nanas82]

Instructive as always. Thank you Dr M. Damn. I missed the grandfathering for the new positions video. Bummer.

[@SomeOne-gi2gp]

Got 3 questions about your financial modelling course: - When you say it’ll run 12-16 weeks, do you mean videos will be gradually added over the course of 12-16 weeks? (English is a 2nd language) - Is the Excel side of the course presented separately or would it be all in one video? - When applying for a job you recommend showing a financial model we’ve built. Do you mean a printed version, or the excel file? I suppose they might want to have a look at how the model is actually constructed, with which functions etc. Really excited about this course. Thanks a lot for all the knowledge you’re sharing!

[@MarkMeldrum]

Q1: yes Q2: Separately Q3: Yes. Bring your laptop, or bring a printed version, I don't think it really matters (Live version would be better if it were me)

[@owl-eyed]

On September 3rd, stocks such as FCX, ON, and NVDA experienced sharp price declines. However, IV did not increase significantly. Why might this happen, and how is it possible that IV doesn’t reflect the price drop, considering that you would typically expect investors to seek more protection through hedging during selloff?

[@srh80]

Hi Mark, do you know off the top what is the methodology for consumer confidence. Is it a average or median? Meaning, can excessive confidence by some few participants skew the expectation?

[@SomeOne-gi2gp]

Question 1: I am a CFA L2 candidate subscribed to your CFA material and applied level, and a junior analyst on the work side of things. Having worked as a PE analyst and Corporate Development analyst (with private companies still), I have only worked in private markets and have never traded any publicly listed securities or analysed any. As I want to make the career jump to the public markets, how would you recommend I use the Applied Level and CFA to prepare myself to achieve that goal? What daily habits should I develop, in terms of following market news and data etc? Question 2: You previously talked switching from being employed, to managing your own money and I aim to do the same at some point. You said you used to worked very long hours while being employed. To get a feel for what it's like managing your own money, how many hours do you put in daily (excluding all the CFA and KZbin work)?

[@Brotherhood1924]

Hi Mark, how do you see the potential mid- to long-term return of the TLT trade for a European investor? Currently every gain in TLT is countered by a weaker USD. Mid- to long-term I see the ECB cutting rates at least as much as the Fed, and I also see the US economy outperforming Europe, which should favor the USD, which means the trade should still work well under these assumptions. But I would still like to hear your opinion about it, if I have some error in my conclusions.

[@AugustoLucarelli]

I shorted the 97 put dec24 on the tlt for 3$. We’ll see…nice summary.

[@mranderson3817]

@MarkMeldrum: You probably repeated this many times, to get the new positions, I just need to buy the "Portfolio Construction/Management" module? Does anyone know?

[@owl-eyed]

1) During a market selloff (like on 3rd Sep), how do you determine when to sell puts as a volatility play versus a directional bet for building an allocation? For example, on FCX's 6.5% pullback, I sold October puts but considered selling January puts due to their higher Vega (although IV was not that high and there were no significant volatility skew change on FCX). What factors should I consider when deciding which month's contract to sell and when? Is heightened IV and volatility skew a must for selling puts as volatility play? 2) Regarding my FCX position: I don't mind owning FCX at an effective price of $40, but I realize I may have overextended myself today (3rd Sep) by selling 120 put contracts in total at strike prices of $42, $43, and $44 on FCX drop, resulting in a $400,000 beta delta dollar exposure within my €1MM experimental portfolio. How can I determine the optimal quantity of puts to sell without taking on excessive risk? What criteria or tools can I use to assess whether I'm assuming too much risk before committing to the trade?

[@aperson1181]

Prof. Meldrum, thank you for posting a new video about your positions. The sound volume is pretty low, my speaks are all the way up.

[@shusi2023]

Hello Dr. Mark Please add Yield curve trading strategies in the applied series. Can you please give a 2 minute discription of those stategies in this Q/A. I am very excited for this. Thanks

[@hk-ny7fi]

Can you ask CeriFi to make bug fixes to the app? I know others have also mentioned in comments before but very often the app will log you out randomly or delete all the downloads you have made

[@chad_miller_]

Hi Mark, can you please reiterate how you calculate the rate cut probability weightings?

[@slimetime7698]

He gets it from CME fed watch tool

[@chad_miller_]

@@slimetime7698 Thank you, forgot about that

[@Jakesobieski]

Hey happy birthday mark, what does that 757 billion treasury figure mean?

[@gertrudes666]

Could the back-end of the US curve move higher as the fed cuts rates, driving TLT further down?

[@wonnicholas5200]

Hi Mark, would like to know is the new position videos available in applied level if I subscribe now?

[@MarkMeldrum]

It would not be. However, on Sep 10, current and past MM.com subscribers will be getting an e-mail extending the all-included Applied Level pricing to Sep 30, since a few have mentioned they received notice of the July 31 deadline. So, we will grant that same extension to subscribers from Aug 1. So while you may not get access to the Positions video today, if you subscribe, you would be upgraded to an all-included subscription on or around Sep 10.

[@SomeOne-gi2gp]

The two companies you will use in the financial modelling course will be publicly traded companies, but I assume the course is just as relevant for analysts working on Private Equity deals, right?

[@MarkMeldrum]

Basically yes. Only the valuation would be different. Private companies typically have lower multiples, and EBITDA is usually the key valuation metric.

[@steverodgers1067]

Can someone remind me the name of the website from the opening of the video

[@evanlebzu1]

15:55 6.26T is in MM, where and how much is the rest? where can we see that?

[@gofwallstreet]

hey dr.mark can you explain the difference between GDP per and GDP 2nd estimate and annualized GDP thx

[@nabeeletx]

Hey Mark, TSLA sales in China have gone up. Does this change anything for your short? China consumer spending is starting to pick back up. What you think about China recovery?

[@MarkMeldrum]

3% y/y - hardly worthy of a 70-80 forward multiple. GM has higher y/y sales, so I don't see that as affecting my short position.

[@camdavignon954]

Are there any potential legal implications of you disclosing your positions? Obviously you’re not telling the audience to copy you, but you’re a highly respected figure, and if someone does copy a trade that happens to go south, I wonder if you could face litigation.

[@Dawood-v1q]

Hi Mark. Just had a question about the applied series. So for Muslims, Futures trading or options trading is not entirely permissible due to the speculation involved and because there is no actual possession of the underlying to make the trade. Whereas for a stock I actually become a part-owner in the company if I buy the stock. Do you think if I were to get the applied series, there would be enough value for me to be able to become a better retail investor if I did not go through the matter on derivatives or options? I'm asking this because I looked at the overview and found most of the stuff was related to options trading.

[@ronitsahoo4488]

1.will the financial modelling course be helpful for building models for indian companies,like whatever you do just can be exactly replicated for indian companies or do i have to keep something in mind? 2.is the economics taught in cfa curriculum is enough for finance, even when you want to achieve mastery in finance (like have a deep understanding and studying and praticing finance),,,or do i have to read more? 3)what is the real difference between a US company annual reports and an indian company ?

[@Steam1901]

If you could wave a magic wand and have every company adopt either IFRS or US GAAP, which would you pick? Or would you keep both?

[@chorimaverick1853]

Good day Mr. Meldrum! Perfect day for some FCX shopping, whats on your basket?

[@MarkMeldrum]

FCX, ON, NFLX maybe, GM, all cautiously since I do expect some folow through on the selling.

[@financewithsamson]

Do you think it is possible that the consumer feels that they are healthier than they actually are ? This seems to be evidenced by higher spending than income and higher consumer confidence despite negative outlooks from key discretionary companies such as Home Depot and Lowes

[@amaanmashooq1127]

With chinese domestic demand under massive stress and the reluctance of the govt towards fiscal stimulus and debt relief programs for local level govts, there is a risk that we could run into a risk of plunging commodity prices, seeing that China accounts for ~60% of total demand for most major commodities like Cu, steel, Al, coal and ~20% for crude oil. Do you think if a chinese weakness materializes, we could see this commodity price plunge? Also, Happy Belated Birthday! You have brought so much value into so many lives!!! You are a beautiful human being!

[@AndrewFlenders]

Hey Mark. I struggle with the pricing construction of TLT. I know TLT represenrs 20/30 year treasuries, and that it has a durarion of around 16: 100 bps drop in the long term yields should result in a 16%'ish increase in TLT pricing. However, TLT is also publicly traded like all ETFs, so it is subject to the forces of offer and demand. So... what is it? Does TLT move as a mathematical derivative of changes in the long end of the curve, or does it move based on offer/demand like all other securities?

[@MarkMeldrum]

It will not deviate far from its NAV. If it does, authorized participants have an arbitrage opportunity with the ETF sponsor. Therefore, you can consider this as nothing more than an actual portfolio of UST.

[@Obolix101]

why does a curve uninverting (potentially?) result in a recession?

[@karanrucks]

I have just purchased the applied level after completing the L3 in August. The positions videos are locked in the applied level for me as I only purchased it in Sep 24. Did I miss the cutoff date to get this?

[@arishah2884]

Do you think Canada will go back to close to zero as well to lower the debt and stimulate a stagnant economy? Jobs, retail sales, all reports are pretty lacklustre for the last few years.

[@srh80]

I am thinking of reasons why curve flattening while rate reducing cycle usually precedes a recession. The easy scenario is, If something naturally breaks in economy then recession has happened due to prolonged high level of rates and fed will aggressively cut rates. In other scenario where prolonged high rates have not yet caused a recession, capital sees that economy would likely perform at long term average growth rate and current long end of curve is more attractive lock in. They rush to it, reducing liquidity that could be otherwise be deployed in economy and reduced liquidity exposes the fragility of system which was weakened by prolonged high rates and triggers a recession.

[@moneyness1]

Mark, what happened to dailyfx econ calendar?

[@MarkMeldrum]

Use this: www.fxstreet.com/economic-calendar

[@SamWell-Y28]

Dr Meldrum, I'm an Engineer and not a finance guy. You mentioned that we should maintain a theta = MV * 0.001. Is this same as the theta found on the portfolio page of my IBKR? My account has a MV of 117K. The portfolio page shows SPX delta = -116, Vega = 2063, and theta = -92. Please help me interpret this info. I have applied level. Do you cover useful info on IBKR? Thanks,

[@accountantguy2]

I don't think Mark noticed the negative sign on your theta number. The negative means you're a net BUYER of options and you're paying $92 per day to maintain the options positions you have on. The negative delta means you probably bought puts, and the positive vega means your options will gain value as implied volatility increases. You're all set should the market have a big selloff!

[@SamWell-Y28]

@@accountantguy2 Thanks for the clarification.

[@aliiisalama]

On which comparison "you pay more attention to" in Economic Data - the Previous to Actual or Forecast to Actual... I personally feel the Actual to Previous is far more important, particularly in the long run. For instant reaction, it seems that often the comparison to Forecast makes the instant move (same with earnings too), but in the long run who cares what the Forecast number was x months ago. The Forecast is just a made up number, usually with a wide margin of error.

[@norieatssushi-n6n]

Do you tink you're too early for the copper trade? Copper price is heavily dependent on the Chinese economy and with the chinese slowdown it won't support higher copper prices for long

[@owl-eyed]

Sounds like Goldman’s report on Copper. Would be interesting to hear what MM will say. But in the longer term, there is definitely lack of supply to meet growing demand.

[@mitomito9718]

Hi, What time Q A starts?

[@MarkMeldrum]

7:15 pm ET

[@mitomito9718]

Thanks. This is 1:15am in my country. I have to schedule well to be there. Hopefully next week

[@mitovpn5392]

@@MarkMeldrum Hi, because Im in Africa, at this time, it is 1:15am. I will try to participate (I missed the last one :( )Thank you

[@M.2000-v2g]

The AI hype is done. I'm calling it rn. Once people realize, there will be stagnation or sell off with nvidia and other AI players.

[@IamnotJokic]

lol it’s clearly not hype at this point. Look at the data instead of tired narratives. NVDA is raking in cash

[@M.2000-v2g]

@@IamnotJokic That's not what I mean. AI is here to stay, but don't you think people are overestimating its value rn? The hype is and will cool down and bring nvidia to reasonable price point.

[@okok-w7v]

1.how can i be a really good trader(want to trade in us and indian market),where to start from, like from scratch what to know what to focus on,plz give a road map.? 2.there are lot of trading books written by different authors have you gone through them do you think it is useful,should i go through them? 3.i always see lot of experts come to different news channels and give their opinions are they worth listening to or they are just fools?

[@Shivastorm88]

I know that you don't follow Canadian data that much, but our Q2 GDP really wasn't that good of a print. On the surface, it seems to be very good. If you look under the hood, not so much. I didn't calculate the data myself, but based on RBC's analysis, 80% of GDP growth came from government spending. And from a per capita perspective, GDP declined again this quarter. We are now at the fifth quarter in a row that GDP per capita comes in lower. Granted, the velocity of decline is slowing, but still, 5th quarter in a row. "Details are not as strong as the headline number, by our count a surge in government spending accounted for 80% of the Q2 GDP increase. And controlling for rapid population growth, per-capita output continued to decline for the 5th consecutive quarter (and 7th of the last 8)." Source: Canadian GDP growth higher than expected in Q2 but details are soft report (the link is way too long to post in a KZbin comment)

[@WesleyYappy-n1m]

✅

[@Aussie11]

On the day of NVDA earnings release I sold 0dte SPY options. At market closing time my 20 delta options still had a lot of value. Even seconds before 16:15 pm did not decay and they were actually increasing in value. I understand that NVDA is a big component of SPY but why did that happen?

[@tjloehnert]

Responding to your answer to my question about determining the accuracy of the forward P/E on the S&P 500: To get a forward P/E you of course have to estimate forward earnings, then use the (closing) price of SPY for a given date (say January 2, 2024) and divide that by the estimated forward earnings to get the forward P/E. Fast forward to a point in time where we can look at what actual earnings turned out to be (as opposed to estimated earnings) and use the actual earnings in the denominator to calculate the true P/E using the closing price on SPY for January 2, 2024, then compare that to the forward P/E calculated from the same date. Obviously, the forward P/E will not be the same as what the actual P/E turned out to be. However, if we do this repeatedly and find that estimated forward earnings are consistently very different from actual earnings, then at some point wouldn't investors begin to question the usefulness of estimating the forward earnings for all 500 companies and valuing the market based off the multiple calculated from those earnings? Maybe I'm thinking about this wrong and if so, where am I going wrong in my thinking? Or maybe a better question would be, how are forward earnings for the S&P 500 determined?

[@rdd743]

you mentioned multiple times that if Trump wins, he will get rates lower quickly and perhaps replace Powell if he does not do what he wants. your tone in this video has shifted a lot and now you referring more to the currency and possible tariffs if Trump wins. How your current view supports your previous one knowing that you mentioned over the longer run whether H or T wins, Fed will lower rate due to elevated debt levels.

[@AugustoLucarelli]

The deficit is the net fiscal transfer into the private sector. I do not agree with this fear mongering about the debt. I guess the confusion stems from considering a sovrani nation like a corporation. The ir do not put any pressure to anything. This not a gold standard anymore. I like your analysis when it comes to companies. When it comes to macro you have it backwards. I’m not liberal and I don’t follow labels. Take a look at the treasury statements both daily and monthly.

[@dailydoseofnews4828]

Thanks

[@hk-ny7fi]

Can you ask CeriFi to make bug fixes to the app? I know others have also mentioned in comments before but very often the app will log you out randomly or delete all the downloads you have made