Musings on Markets

MARCH 25, 2021

The first quarter of 2021 has been, for the most part, a good time for equity markets, but there have been surprises. The first has been the steep rise in treasury rates in the last twelve weeks, as investors reassess expected economic growth over the rest of the year and worry about inflation. for 2021 and inflation of 2.2%

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

Musings on Markets

JANUARY 20, 2021

If, on the other hand, investors are risk neutral, the price of risk will be zero, and investors will buy risky business, stocks and other investments, and settle for the risk free rate as the expected return.

Risk Premium 52

Risk Premium Risk-free Rate Equity Dividends 52

Musings on Markets

JANUARY 8, 2022

Those measures took a beating in 2020, as COVID decimated the earnings of companies in many sectors and regions of the world, and while 2021 was a return to some degree of normalcy, there is still damage that has to be worked through. Louis, FRED , which contains historical data on almost every macroeconomic variable, at least for the US.

Risk Premium 91

Risk Premium Start-ups Market Capitalization Corporate Finance 91

Musings on Markets

JANUARY 30, 2023

The rise in rates transmitted to corporate bond market rates, with a concurrent rise in default spreads exacerbating the damage to investors. That view has never made sense, because central banking power over rates is at the margin, and the key fundamental drivers of rates are expected inflation and real growth.

Treasury 74

Treasury Start-ups Risk Premium Equity 74

Musings on Markets

FEBRUARY 15, 2023

The first is to see how the increase in inflation in 2021 and 2021 has played out in profitability for companies, since inflation can increase profits for some firms, and lower them for others. the returns you can make on investments of equivalent risk, and that game became a lot more difficult to win in 2022.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

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.

Equity 70

Equity Risk Premium Start-ups Dividends 70

Musings on Markets

NOVEMBER 9, 2021

In 2021, looking at the company, I feel more convinced than I was a few years that it is, at its core, an automobile company, and while it will continue to derive revenues from batteries and perhaps even software, its pathway to becoming a trillion dollar market cap company still runs through the "car company" story.

Start-ups 99

Start-ups Dividends Marketability Market Capitalization 99

Musings on Markets

JANUARY 12, 2021

pm (New York time) All three classes start on February 1, 2021 and end on May 10, 2021. Discount rates in intrinsic valaution have to change to reflect current market conditions, and can be expected to change over time. The class times for the coming semester are below: Corporate Finance: Mondays & Wednesdays, 12.30

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

FEBRUARY 8, 2022

Relative Risk Measures Before we embark on how to measure relative risk, where there can be substantial disagreement, let me start with a statement on which there should be agreement. By the same token, Embraer and TCS are global firms that happen to be incorporated in Brazil and India, respectively.

Risk Premium 67

Risk Premium Beta Start-ups Equity 67

Musings on Markets

JANUARY 5, 2024

Employee Count & Compensation I nvesting Principle Financing Principle Dividend Principle Hurdle Rate Project Returns Financing Mix Financing Type Cash Return Dividends/Buyback s 1. Beta & Risk 1. Equity Risk Premiums 2. Ratings & Spreads 2. Tax rates 4. Return on Equity 1. Debt Details 1.

Dividends 98

Dividends Risk Premium Equity Book Value 98

Musings on Markets

JANUARY 26, 2023

My last valuation of Tesla was in November 2021, towards its market peak, and given its steep fall from grace, in conjunction with Elon Musk's Twitter experiment, it is time for a revisit. In this section, I will begin by looking at the evolution of my Tesla value from 2013 to 2021, and then present my updated valuation of the company.

Start-ups 80

Start-ups Marketability Risk Premium Equity 80

Musings on Markets

MAY 24, 2021

As we approach the mid point of 2021, financial markets, for the most part, have had a good year so far. The graph below contrasts the expected inflation rates from the Michigan survey with the expected inflation rate from the treasury markets. Louis estimates for inflation rates exceeding 2.5%

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55

Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

Equity 79

Equity Book Value Start-ups Corporate Finance 79

Musings on Markets

FEBRUARY 2, 2023

A few of you did take issue with the fact that the growth rate that I used for the first five years dropped from 35%, in my November 2021 valuation , to 24%, in my most recent one. There is not much room to maneuver on either number, since half of all US companies have costs of capital between 7.3%

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Marketability 99

Musings on Markets

JULY 25, 2023

Equity Risk across Countries Default risk measures how much risk investors are exposed to, when investing in bonds issued by a government, but when you own a business, or the equity in that business, your risk exposure is not just magnified, but also broader.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52