Musings on Markets

OCTOBER 4, 2023

Thus, the equity risk premium of 4.84% on October 1, 2023, when added to the ten-year T.Bond rate of 4.58% on that day yields an expected return on equity of 9.42%, up from 8.81% on July 1, 2023. below the index value of 4288, confirming my base case conclusion.

Marketability 104

Marketability Start-ups Risk Premium Treasury 104

ThomsonReuters

JUNE 15, 2021

Additionally, private companies have options in a few areas—most notably use of IBR or risk-free rate–that public companies do not,” she said. There’s a lot that’s going to be required of people, process, and technology. Processes are going to change. You’re probably going to have to staff up.

Risk-free Rate 64

Risk-free Rate Equity Start-ups Book Value 64

Musings on Markets

JANUARY 8, 2022

Risk free Rates : While the US treasury bond rate is widely reported, I contrast its actual value with what I call an intrinsic measure of the rate, computed by adding the inflation rate to real growth each year at this link.

Risk Premium 91

Risk Premium Start-ups Market Capitalization Corporate Finance 91

Musings on Markets

FEBRUARY 15, 2023

Some of that variation can be attributed to different mixes of businesses in different regions, since unit economics will result in higher gross margins for technology companies and commodity companies, in years when commodity prices are high, and lower gross margins for heavy manufacturing and retail businesses.

Equity 52

Equity Start-ups Risk Premium Risk-free Rate 52

Musings on Markets

JANUARY 28, 2024

I use the data through the end of 2023 to compute all three measures for every company, and in my first breakdown, I look at these risk measures, by sector (globally): Utilities are the safest or close to the safest , on all three price-based measures, but there are divergences on the other risk measures.

Risk Premium 93

Risk Premium Beta Start-ups Equity 93

Musings on Markets

NOVEMBER 9, 2021

I would be lying if I said that I have had clarity about Tesla's story over the last decade, because it has so many tangents, distractions and shifts along the way, flirting with narratives about being a battery company, an energy company and a technology company. for mature markets.

Start-ups 99

Start-ups Dividends Marketability Market Capitalization 99

ThomsonReuters

MAY 6, 2021

The Codification often provides guidance on how to select a discount rate for a particular area of accounting. The Codification may require the use of a risk-free rate in some places and a risk-adjusted rate in others. Recent events have also impacted the components of the discount rate.

Discounted Cash Flow 52

Discounted Cash Flow Risk-free Rate Risk Premium Intangible Assets 52

Musings on Markets

JANUARY 12, 2021

The last decade, with it influx of user based companies and technology platforms forced me to think seriously about how to value a user, subscriber or rider and extrapolate from there to company value. Discount rates in intrinsic valaution have to change to reflect current market conditions, and can be expected to change over time.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

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 8, 2022

Download sector average betas ( US , Global ) Note the preponderance of financial service firms on the lowest risk ranks, but note also that almost all of them are substantial borrowers, and end up with levered risk levels close to average (one) or above. Technology and cyclical companies dominate raw highest risk rankings.

Risk Premium 67

Risk Premium Beta Start-ups Equity 67

Musings on Markets

JANUARY 26, 2023

Having watched Tesla reinvest and grow over the last few years, it is clear to me that the company's been able to generate its growth with far less money invested in plant and more in technology and R&D than a typical auto company. The Market : The US equity market in January 2023 looks very different from the market at the start of 2022.

Start-ups 80

Start-ups Marketability Risk Premium Equity 80

Musings on Markets

MAY 24, 2021

There are a few arguing that the shift to a technology-based economy has removed inflationary pressures permanently, pointing to the last decade where inflation fears never came to fruition. If inflation is higher than expected, you can expect interest rates to rise, pushing up the returns that both equity investors and lenders demand.

Treasury 55

Treasury Start-ups Risk Premium Price to Book 55