The hosts discuss various topics including the current state of the market, bonds and yield curves, volatility predictions, gasoline and oil prices, the Magnificent Seven trend, misconceptions about hedge fund actions, the changing relationship between oil prices and the US dollar, hedging strategies, and casual conversation about horror movies and running abilities.
Paying high multiples for stocks can be dangerous, even if the underlying company is strong.
The relationship between commodities and the US dollar is complex, with factors like supply and demand dynamics influencing oil prices.
Deep dives
When the time comes to buy, you won't want to
Walter Deemer discusses how investors often ask if it's the right time to buy during a market correction. When he told them it wasn't, they kept asking, and he came up with the classic line, 'When the time comes to buy, you won't want to.'
Pay attention to valuation
Walter Deemer discusses the importance of not overpaying for investments. He shares an example of McDonald's stock, which was trading at 75 times earnings in 1973, but despite strong future earnings growth, the stock was cut in half. This highlights the danger of paying high multiples for stocks, even if the underlying company is strong.
The Changing Relationship Between Oil Prices and the US Dollar
Oil prices and the US dollar used to have an inverse relationship, but that has reversed in recent years. Now, a strong dollar is correlated with strong oil prices. This can be attributed to the significant size of the oil market and its impact on economic cycles. The relationship between commodities and the US dollar is complex, and while currency influences oil prices, other factors, such as supply and demand dynamics, can also play a role.
Hedging Currency Risk in a Portfolio
Hedging currency risk in a portfolio involves using tools like currency options or futures to offset potential losses caused by fluctuations in exchange rates. The most cost-effective option depends on various factors, such as the magnitude of the risk you want to hedge and the desired level of protection. It is important to consider the specific requirements of your portfolio and consult with a financial advisor to determine the best hedging strategy.
Understanding Manipulation of the Market Tape
Market manipulation, also referred to as 'bullying' the tape, can occur when large players attempt to influence the price or movement of an asset. This can be done for various purposes, such as achieving a specific outcome or creating a certain impression in the market. Signs of manipulation can include abnormal price movements that are not price-sensitive or attempts to execute trades quickly without seeking the best price. Market manipulation is illegal but can be difficult to detect and prove.
There is no guest wisdom this week, so Patrick and Kevin take an extended stab at Talking Chart’s, where they take an in-depth look at stocks such as Crude and Uranium. We announce how folks can be wined and dined by Kev, after he lost Skin in The Game the previous week…
