Musings on Markets

JANUARY 24, 2024

Government Bond/Bill Rates in 2023 I will start by looking at government bond rates across the world, with the emphasis on US treasuries, which suffered their worst year in history in 2022, down close to 20% for the year, as interest rates surged. 4.50%, by the end of the year.

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

Musings on Markets

FEBRUARY 11, 2023

In this section, I will begin measures of country default risk, including sovereign ratings and CDS spreads, before moving to more expansive measures of country risk before concluding with measures of equity risk premiums for countries, a pre-requisite for estimating the values of companies with operations in those countries.

Risk Premium 76

Risk Premium Start-ups Equity Marketability 76

Musings on Markets

MAY 6, 2022

It is precisely because we have been spoiled by a decade of low and stable inflation that the inflation numbers in 2021 and 2022 came as such a surprise to economists, investors and even the Fed.

Risk Premium 92

Risk Premium Treasury Start-ups Equity 92

Musings on Markets

OCTOBER 4, 2023

We started the year with significant uncertainty about whether the surge in inflation seen in 2022 would persist as well as about whether the economy was headed into a recession. The Markets in the Third Quarter Coming off a year of rising rates in 2022, interest rates have continued to command center stage in 2023.

Marketability 104

Marketability Start-ups Risk Premium Treasury 104

Musings on Markets

JULY 1, 2022

In 2022, as bond rates have risen, stock prices have fallen, and crypto has imploded, even true believers are questioning what the bottom for markets might be, and when we will get there. That pullback has had its consequences, with equity risk premiums rising around the world.

Marketability 88

Marketability Risk Premium Start-ups Equity 88

Musings on Markets

JANUARY 30, 2023

If 2022 was an unsettling year for equities, as I noted in my second data post, it was an even more tumultuous year for the bond market. That is good advice in most years, but 2022 was not one of those years. Since inflation was 6.42% in 2022, the real return on a US 10-year treasury bond was -22.79%.

Treasury 74

Treasury Start-ups Risk Premium Equity 74

Musings on Markets

MARCH 19, 2022

Note, though, that while sovereign CDS spreads increased almost 51% between January 1, 2022 and March 16, 2022, in these countries, the overall riskiness of the region remains low, the average spread at 1.30%.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

FEBRUARY 8, 2022

In the first few weeks of 2022, we have had repeated reminders from the market that risk never goes away for good, even in the most buoyant markets, and that when it returns, investors still seem to be surprised that it is there.

Risk Premium 67

Risk Premium Beta Start-ups Equity 67

Musings on Markets

JANUARY 21, 2023

It is the nature of stocks that you have good years and bad ones, and much as we like to forget about the latter during market booms, they recur at regular intervals, if for no other reason than to remind us that risk is not an abstraction, and that stocks don't always win, even in the long term. at the start of that year.

Equity 70

Equity Risk Premium Start-ups Dividends 70

Musings on Markets

JANUARY 17, 2024

While stocks had their ups and downs during the year, they ended the year strong, and recouped, at least in the aggregate, most of the losses from 2022. Energy, one of the few survivors of the 2022 market sell-off, had a bad year, as did utilities and consumer staples. The solid comeback in stocks, though, came with caveats.

Risk Premium 77

Risk Premium Start-ups Equity Treasury 77

Musings on Markets

FEBRUARY 15, 2023

As I have argued in all four of my posts, so far, about 2022, it was year when we saw a return to normalcy on many fronts, as treasury rates reverted back to pre-2008 levels, and risk capital discovered that risk has a downside.

Equity 52

Equity Start-ups Risk Premium Risk-free Rate 52

Simply Treasury

AUGUST 2, 2022

The definition of "net equity" is as follows: equity of the company = sum of subscribed capital, share premiums, revaluation reserves, reserves and retained earnings, minus the tax value of the company's holdings in associated companies and the tax value of its own shares. risk premium if the company is an SME as defined by European law).

Equity 52

Equity Risk Premium Banking Finance 52

Musings on Markets

JANUARY 20, 2021

Note that nothing that I have said so far is premised on modern portfolio theory, or any academic view of risk premiums. It is true that economists have researched risk aversion for centuries and concluded that investors are collectively risk averse, and that the level of risk aversion varies across age groups, income levels and time.

Risk Premium 52

Risk Premium Risk-free Rate Equity Dividends 52

Musings on Markets

JULY 17, 2023

In my second data update post from the start of this year , I looked at US equities in 2022, with the S&P 500 down almost 20% during the year and the NASDAQ, overweighted in technology, feeling even more pain, down about a third, during the year. That pessimism was not restricted to market outlooks.

Marketability 95

Marketability Risk Premium Start-ups Treasury 95

Musings on Markets

JANUARY 27, 2022

By the end of 2021, it was clear that this bout of inflation was not as transient a phenomenon as some had made it out to be, and the big question leading in 2022, for investors and markets, is how inflation will play out during the year, and beyond, and the consequences for stocks, bonds and currencies.

Risk-free Rate 84

Risk-free Rate Treasury Price to Book Start-ups 84

Musings on Markets

AUGUST 15, 2023

With this investment, you face price risk , since even though you know what you will receive as a coupon or cash flow in future periods, since the present value of these cash flows, will change as rates change. For an investment to be risk free then, it has to meet two conditions. and the reverse will occur, when risk-free rates drop.

Risk-free Rate 80

Risk-free Rate Treasury Risk Premium Start-ups 80

Musings on Markets

FEBRUARY 27, 2023

An Optimizing Tool In my second and third data posts for this year, I chronicled the effects of rising interest rates and risk premiums on costs of equity and capital. But as I noted in my data post on interest rates, the last year (2022) has been a most unusual one, in terms of interest rate moves, in developed markets.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

JANUARY 6, 2023

When valuing or analyzing a company, I find myself looking for and using macro data (risk premiums, default spreads, tax rates) and industry-level data on profitability, risk and leverage. I do report on a few market-wide data items especially on risk premiums for both equity and debt. Debt breakdown 2.

Risk Premium 52

Risk Premium Dividends EBITDA Start-ups 52

Musings on Markets

JANUARY 5, 2024

Beta & Risk 1. Equity Risk Premiums 2. I also have implied equity risk premiums (forward-looking and dynamic estimate of what investors are pricing stocks to earn in the future) for the S&P 500 going back annually to 1960 and monthly to 2008, and equity risk premiums for countries. Buybacks 2.

Dividends 98

Dividends Risk Premium Equity Book Value 98

Musings on Markets

JANUARY 26, 2023

Tesla's rise is summarized in the graph below, where we look at the company's revenues and earnings over time, with earnings measured in gross and operating terms, and EBITDA capturing operating cash flows: 2022 numbers updated to reflect 4th quarter earnings call on 1/25/23 Between 2010 and 2020, Tesla grew revenues from $117 million to $31.5

Start-ups 80

Start-ups Marketability Risk Premium Equity 80

Musings on Markets

FEBRUARY 2, 2023

Finally, my starting cost of capital of 10.15% reflects the reality that the riskfree rate and equity risk premiums have risen over 2022, and my ending number of 9% is an indication that I expect Tesla to become less risky over time. and 10.9%.

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Marketability 99

Musings on Markets

JULY 25, 2023

In 2022, North America and Western Europe scored highest on the democracy index, and Middle East and Africa scored the lowest. For three decades, I have wrestled with measuring this additional risk exposure and converting that measurement into an equity risk premium, but it remains a work in progress.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

Musings on Markets

MAY 11, 2021

With stocks, I compute this pre-personal tax return at the start of every month, using the current level of index and expected cash flows to back out an internal rate of return; this is the basis for the implied equity risk premium. It is one more reason that blindly using historical risk premiums can lead to static and strange values.

Dividends 52

Dividends Start-ups Risk Premium Treasury 52

Musings on Markets

JULY 22, 2021

I will assume a partial bounce back to 22% of GOV , starting in 2022, but the presence of Amazon Food will prevent a return to higher values in the future. Revenue Share : While the market share and total market yield the gross order value for Zomato, the company posts only its share of these orders, as revenues.

Marketability 86

Marketability Start-ups Equity Price to Book 86

Musings on Markets

MARCH 28, 2022

In the last week of February 2022, in the immediate aftermath of this crisis, there were a few ESG supporters who argued that ESG-based investors were less exposed to the damage from the crisis. billion invested in Russian equities on February 23, 2022 , almost all of which was wiped out during the next few weeks.

Start-ups 113

Start-ups Alpha Marketability Risk Premium 113