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 97

Risk Premium Start-ups Equity Marketability 97

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 98

Marketability Risk Premium Start-ups Treasury 98

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 82

Risk Premium Start-ups Equity Dividends 82

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 123

Marketability Start-ups Risk Premium Treasury 123

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 97

Treasury Start-ups Risk Premium Equity 97

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

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 98

Risk-free Rate Risk Premium Treasury Start-ups 98

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

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 107

Dividends Risk Premium Equity Book Value 107

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 99

Start-ups Marketability Risk Premium Equity 99

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 Start-ups EBITDA 52

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 99

Risk-free Rate Treasury Price to Book Start-ups 99

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 52

Start-ups Equity 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

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

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 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

JULY 27, 2022

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. 46 in July 2022. 68746 (including short term investments) in March 2022.

Risk Premium 98

Risk Premium Start-ups Equity Marketability 98

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 99

Marketability Start-ups Equity Price to Book 99

Appraiser Newsroom

JUNE 4, 2024

He is a frequent presenter on valuation topics, and is currently a subject matter expert on the Appraisal Foundation’s working group preparing a Valuation Advisory on the Company-Specific Risk Premium. Michael is part of the industrial products industry group of the firm and co-head of U.S.

Business Valuation 59

Business Valuation Intangible Assets Appraisal Finance 59

Musings on Markets

JANUARY 8, 2022

Happy New Year, and I hope that 2022 brings you good tidings! In short, and at the risk of stating the obvious, having access to data is a benefit but it is not a panacea to every problem. Sometimes, less is more! It is also why I report only aggregated data on industries, rather than company-level data.

Risk Premium 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

JANUARY 28, 2024

Risk Differences across Countries In this final section, I will look risk differences across countries, both in terms of why risk varies across, as well as how these variations play out as equity risk premiums.

Risk Premium 122

Risk Premium Beta Start-ups Equity 122

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 100

Marketability Risk Premium Start-ups Equity 100

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

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

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 119

Start-ups Alpha Marketability Risk Premium 119

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

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

JANUARY 17, 2025

Computing the returns in real terms , by taking out inflation in each year from that year's returns, and recomputing the equity risk premiums: Download historical data Note that the equity risk premiums move only slightly, because inflation finds its way into both stock and treasury returns.

Equity 129

Equity Risk Premium Treasury Start-ups 129

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 78

Risk Premium Equity Start-ups EBITDA 78

Musings on Markets

MAY 3, 2025

While the first quarter continues to weigh the sector down, as was the case in 2022, the obituaries written for technology investing may have been premature. In the first few days of April, that trend continued as technology initially led the rout, losing an additional $1.78

Marketability 96

Marketability Start-ups Treasury Risk Premium 96

Musings on Markets

JANUARY 28, 2025

I will follow up by examining changes in corporate bond rates, across the default ratings spectrum, trying to get a measure of how the price of risk in bond markets changed during 2024. In 2022, the rise in rates was almost entirely driven by rising inflation expectations , with the Fed racing to keep up with that market sentiment.

Banking 71

Banking Treasury Risk Premium Start-ups 71

Musings on Markets

FEBRUARY 23, 2025

The default spread is a price of risk in the bond market, and if you recall, I estimated the price of risk in equity markets, with an implied equity risk premium, in my second data update. The first was whether companies would pull back from borrowing , with the higher rates, leading to a drop in aggregate debt.

Equity 78

Equity EBITDA Risk Premium Gross Debt 78

Musings on Markets

JANUARY 31, 2025

That said, the AI story broke out to the public on November 30, 2022, when OpenAI launched ChatGPT, and it made its presence felt in homes, schools and businesses almost instantaneously. The other is that the stock is overvalued, at its current price of $123 per share, even after the markdown this week.

Start-ups 134

Start-ups Marketability Technology Risk Premium 134

Equidam

APRIL 22, 2025

10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,

Discounted Cash Flow 64

Discounted Cash Flow Terminal Value Marketability EBITDA 64

Global Finance

OCTOBER 29, 2024

That’s the tightest since 2022. There are certain sectors that we think are offering better risk/reward. So, credit spreads have gotten so tight and so compressed that there’s not much of a cyclical risk premium. You’re not being rewarded as an investor for taking on that extra risk given how tight spreads have become.

Start-ups 98

Start-ups Finance Equity Private Equity Firm 98