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. billion.

Marketability

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

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

Musings on Markets

JULY 17, 2023

I am not a market prognosticator for a simple reason. I am just not good at it, and the first six months of 2023 illustrate why market timing is often the impossible dream, something that every investor aspires to be successful at, but very few succeed on a consistent basis.

Marketability

Musings on Markets

MAY 6, 2022

The nature of markets is that they are never quite settled, as investors recalibrate expectations constantly and reset prices. Clearly, we are not in one of those time periods, as markets approach bipolar territory, with big moves up and down.

Risk Premium

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. increase in market capitalization.

Risk Premium

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

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. The rise in rates transmitted to corporate bond market rates, with a concurrent rise in default spreads exacerbating the damage to investors.

Treasury

Musings on Markets

JULY 22, 2021

Zomato, an Indian online food-delivery company, was opened up to public market investors on July 14, 2021, and its market debut is being watched for clues by a number of other online ventures in India, waiting in the wings to go public.

Marketability

Musings on Markets

JANUARY 20, 2021

Investors are constantly in search of a single metric that will tell them whether a market is under or over valued, and consequently whether they should buying or selling holdings in that market. Note that nothing that I have said so far is premised on modern portfolio theory, or any academic view of risk premiums.

Risk Premium

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

Musings on Markets

JANUARY 5, 2024

Thus, looking at only the companies in the S&P 500 may give you more reliable data, with fewer missing observations, but your results will reflect what large market cap companies in any sector or industry do, rather than what is typical for that industry.

Dividends

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. per share in 2022. per share in 2022.

Start-ups

Musings on Markets

JANUARY 24, 2024

As we start 2024, the interest rate prognosticators who misread the bond markets so badly in 2023 are back to making their 2024 forecasts, and they show no evidence of having learned any lessons from the last year. 4.50%, by the end of the year.

Treasury

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

Musings on Markets

JANUARY 6, 2023

Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all. Data universe : In my sample, I include all publicly traded firms with market capitalizations that exceed zero, traded anywhere in the world.

Risk Premium

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. It was the reason that I argued at a $1.2

Start-ups

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.

Start-ups

Simply Treasury

AUGUST 2, 2022

The idea is not new to encourage companies to increase their capitalization and reduce their bank debt (partly through more recourse to the capital market - CMU project). The rate would be calculated based on a 10-year "risk-free interest" rate depending on the currency, increased by a 1% risk premium (1.5%

Equity

Musings on Markets

JANUARY 19, 2022

In a post at the start of 2021 , I argued that while stocks entered the year at elevated levels, especially on historic metrics (such as PE ratios), they were priced to deliver reasonable returns, relative to very low risk free rates (with the treasury bond rate at 0.93% at the start of 2021). The year that was.

Risk Premium

Appraiser Newsroom

JUNE 4, 2024

He is the Director of the Pepperdine Private Capital Markets Project (privatecap.org) and Executive Director for the Pepperdine Most Fundable Companies competition (pepperdine.edu/mfc). His teaching and research interests include entrepreneurial finance, private capital markets, and entertainment finance. Dr. Everett He holds a Ph.D.

Business Valuation

Musings on Markets

JULY 27, 2022

The market clearly had a very different view, as the stock premiered at ? At close of trading on July 26, 2022, the stock was trading at ? In this post, I will begin with a quick review of my 2021 valuation, then move on to the price action in 2021 and 2022 and then update my valuation to reflect the company's current numbers.

Risk Premium

Musings on Markets

JULY 1, 2022

As inflation has taken center stage, markets have gone into retreat globally, and across asset classes. 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.

Marketability

Musings on Markets

JANUARY 8, 2022

Happy New Year, and I hope that 2022 brings you good tidings! To start the year, I returned to a ritual that I have practiced for thirty years, and that is to take a look at not just market changes over the last year, but also to get measures of the financial standing and practices of companies around the world.

Risk Premium

Musings on Markets

JANUARY 28, 2024

In my last data updates for this year, I looked first at how equity markets rebounded in 2023 , driven by a stronger-than-expected economy and inflation coming down, and then at how interest rates mirrored this rebound.

Risk Premium

Musings on Markets

MARCH 19, 2022

As the world's attention is focused on the war in the Ukraine, it is the human toll, in death and injury, that should get our immediate attention, and you may find a focus on economics and markets to be callous. The increase in default spreads was not restricted to foreign markets, as fear also pushed up spreads in the corporate bond market.

Start-ups

Musings on Markets

JULY 25, 2023

The other is pragmatic , since it is almost impossible to value a company or business, without a clear sense of how risk exposure varies across the world, since for many companies, either the inputs to or their production processes are in foreign markets or the output is outside domestic markets.

Risk Premium

Musings on Markets

MARCH 28, 2022

That judgment may be harsh, but as the Russian hostilities in Ukraine shake up markets, the weakest links in the ESG chain are being exposed, and as the same old rationalizations and excuses get rolled out, I believe that a moment of reckoning is arriving for the concept. A Bloomberg Quint study of ESG funds uncovered that they had $8.3

Start-ups

Musings on Markets

FEBRUARY 27, 2023

Note that this framework applies for all businesses, from the smallest, privately owned businesses, where debt takes the form of bank loans and even credit card borrowing and equity is owner savings, the largest publicly traded companies, where debt can be in the form of corporate bonds and equity is shares held by public market investors.

Equity

Musings on Markets

MAY 11, 2021

Encourage savings/ capital formation : In an economy, where private capital is behind the bulk of economic investment and growth, governments are dependent up the health of capital markets (stocks and bonds) for continued growth. It is one more reason that blindly using historical risk premiums can lead to static and strange values.

Dividends

Musings on Markets

JULY 24, 2024

After the 2008 market crisis, I resolved that I would be far more organized in my assessments and updating of equity risk premiums, in the United States and abroad, as I looked at the damage that can be inflicted on intrinsic value by significant shifts in risk premiums, i.e., my definition of a crisis.

Risk Premium

Musings on Markets

JANUARY 17, 2025

In my last post , I noted that the US has extended its dominance of global equities in recent years, increasing its share of market capitalization from 42% in at the start of 2023 to 44% at the start of 2024 to 49% at the start of 2025.

Equity

Musings on Markets

MAY 3, 2025

I started the month on a trip to Latin America, just as the tariff story hit my newsfeed and the market reacted with a sell off that knocked more than $9 trillion in market cap for global equities in the next two days. of the overall market capitalization of all US companies at the start of 2025, lost $2.34

Marketability

Musings on Markets

JANUARY 28, 2025

It was an interesting year for interest rates in the United States, one in which we got more evidence on the limited power that central banks have to alter the trajectory of market interest rates. We started 2024 with the consensus wisdom that rates would drop during the year, driven by expectations of rate cuts from the Fed.

Banking

Musings on Markets

JANUARY 31, 2025

For those of you who have been tracking the market, the AI segment in the market has held its own since September, but even before the last weekend, there were signs that investors were sobering up on not only how big the payoff to AI would be, but how long they would have to wait to get there.

Start-ups

Equidam

APRIL 22, 2025

S ection 3: What Influence Do Markets Have on Startup Valuation? Valuing startups relies heavily on assumptions about future performance, interpretations of market trends, and the specific perspectives and risk appetites of the involved parties. [3] This exploration will cover: Section 1: What is Startup Valuation?

Discounted Cash Flow