Musings on Markets

APRIL 7, 2025

Not surprisingly, the markets opened down on Thursday and spent the next two days in that mode, with US equity indices declining almost 10% by close of trading on Friday. US equities had the biggest decline in dollar value terms, losing $5.3

Marketability

Global Finance

OCTOBER 29, 2024

Global Finance: What surprised you in 2024? 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. GF: How does it look for private equity firms? That’s a level we haven’t seen since 2005.

Start-ups

Musings on Markets

JANUARY 21, 2023

In this post, I will begin by chronicling the damage done to equities during 2022, before putting the year in historical context, and then examine how developments during the year have affected expectations for the future. Actual Returns Your returns on equities come in one of two forms. Stocks: The What?

Equity

Musings on Markets

JANUARY 17, 2024

Heading into 2023, US equities looked like they were heading into a sea of troubles, with inflation out of control and a recession on the horizon. Breaking equities down by sub-region, and looking across the globe, I computed the change in aggregate market capitalization, by region: While US stocks accounted for about $9.5

Risk Premium

Musings on Markets

JANUARY 5, 2024

Beta & Risk 1. Return on Equity 1. Equity Risk Premiums 2. Costs of equity & capital 4. Valuation Pricing Growth & Reinvestment Profitability Risk Multiple s 1. Valuation Pricing Growth & Reinvestment Profitability Risk Multiple s 1. Costs of equity & capital 1.

Dividends

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

Musings on Markets

OCTOBER 4, 2023

I looked at global equities, broken down by region of the world, and in US dollars, to allow for direct comparison: India is the only region of the world to post positive returns, in US dollar terms, in the third quarter, and is the best performing market of the year, running just ahead of the US; note again that of the $5.2

Marketability

Musings on Markets

JANUARY 24, 2024

In my last post, I looked at equities in 2023, and argued that while they did well during 2023, the bounce back were uneven, with a few big winning companies and sectors, and a significant number of companies not partaking in the recovery.

Treasury

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. Cost of Equity 1.

Risk Premium

Simply Treasury

AUGUST 2, 2022

DEBRA Proposal (« Debt-Equity Bias Reduction Allowance). In early May, the European Commission unveiled its proposal for a "DEBRA" (Debt-equity bias reduction allowance) Directive, aimed at encouraging companies to finance their investments with equity and capital contributions, instead of resorting to loans (bank or other).

Equity

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.

Start-ups

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

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. Equities: Storm Clouds gather (and dissipate)!

Marketability

Musings on Markets

JANUARY 28, 2025

We started 2024 with the consensus wisdom that rates would drop during the year, driven by expectations of rate cuts from the Fed. In this post, I will begin by looking at movements in treasury rates, across maturities, during 2024, and the resultant shifts in yield curves.

Banking

Musings on Markets

APRIL 20, 2025

For the market, it is often built on papers (or books) that look at the historical data on what equity markets have delivered as returns over long periods, relative to what you would have made investing elsewhere. Contrarian Investing: The Psychological Tests! In the abstract, it is easy to understand the appeal of contrarian investing.

Start-ups

Musings on Markets

JANUARY 31, 2025

A little over a year later, in September 2024, that question about AI seemed to have been answered in the affirmative, for most investors, and I posted again after Nvidia had a disappointing earnings report , arguing that it reflected a healthy scaling down of expectations.

Start-ups

Equidam

APRIL 22, 2025

2] Startups typically lack significant historical financial data, often operate with negative profits initially, rely heavily on private equity or venture capital rather than traditional bank loans, and face a much higher risk of failure. [1] This premium rises when perceived market risk increases. [27] 2] [15] [17].

Discounted Cash Flow

Equidam

APRIL 22, 2025

It determines the price per share, dictating how much equity founders concede in exchange for the capital raised. [3] 3] , [7] , [6] It sets a benchmark against which future fundraising rounds will be measured and helps investors assess whether the potential upside justifies the significant risks associated with early-stage ventures. [8]

Discounted Cash Flow

Reynolds Holding

MARCH 25, 2025

14] Investment Company Institute, 2024 Investment Company Fact Book , at 22-23. [15] 17] See [link] (showing the United States has among the lowest equity risk premiums in the world); Luzi Hail and Christian Leuz, International Differences in the Cost of Equity Capital: Do Legal Institutions and Securities Regulation Matter?,

Corporate Finance

Reynolds Holding

FEBRUARY 23, 2025

Strong empirical evidence shows the United States has a lower cost of equity capital than comparable countries and that this lower cost is attributable in part to an institutional design that protects the independence of securities regulators and assures strong enforcement. In the United States, the cost of capital is lower than elsewhere.

Systematic Risk

Musings on Markets

FEBRUARY 6, 2025

In this post, I will expand my analysis of data in 2024, which has a been mostly US-centric in the first four of my posts, and use that data to take you on my version of the Disney ride, but on this trip, I have no choice but to face the world as is, with all of the chaos it includes, with tariffs and trade wars looming.

Risk Premium