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).

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Risk Premium Risk-free Rate Start-ups Equity 80

Musings on Markets

MAY 6, 2022

There are three possible explanations for the divergence: Short term versus Long term : The consumer survey extracts an expectation of inflation in the near term, whereas the treasury markets are providing a longer term perspective, since I am using ten-year rates to derive the market-implied inflation.

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Risk Premium Treasury Start-ups Equity 92

Musings on Markets

JANUARY 21, 2023

The first is the dividends you receive, while you hold stocks, a cash flow stream that provides a measure of stability to investors who seek it. As with the yield to maturity for a bond, I solve for the discount rate (IRR) that makes the present value of cashflows on the index equal to the level of the index.

Equity 70

Equity Risk Premium Start-ups Dividends 70