Musings on Markets

MAY 6, 2022

In most time periods, those recalibrations and resets tend to be small and in both directions, resulting in the ups and downs that pass for normal volatility. Clearly, we are not in one of those time periods, as markets approach bipolar territory, with big moves up and down.

Risk Premium 103

Risk Premium Treasury Start-ups Equity 103

Musings on Markets

FEBRUARY 8, 2022

Investors all talk about risk, but there seems to be little consensus on what it is, how it should be measured, and how it plays out in the short and long term. In closing, I will talk about some of the more dangerous delusions that undercut good risk taking. What is risk?

Risk Premium 93

Risk Premium Beta Start-ups Equity 93

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 NASDAQ also gave back gains in the third quarter, but is up 27.27% for the year, but those gaudy numbers obscure a sobering reality.

Marketability 123

Marketability Start-ups Risk Premium Treasury 123

Musings on Markets

FEBRUARY 11, 2023

By the same token, a country that is viewed as "first world" can lose that status, if people start perceiving the system as unfair, legal systems filled with delay and waster and a government that becomes capricious in its actions, or worse.

Risk Premium 97

Risk Premium Start-ups Equity Marketability 97

Musings on Markets

SEPTEMBER 27, 2022

In my early 2021 posts on inflation, I argued that while the higher inflation that we were just starting to see could be explained by COVID and supply chain issues, prudence on the part of policy makers required that it be taken as a long term threat and dealt with quickly. in the NY Fed survey. in the NY Fed survey.

Risk Premium 99

Risk Premium Treasury Start-ups Equity 99

Musings on Markets

JULY 17, 2023

At the start of the year, the consensus of market experts was that this would be a difficult year for markets, given the macro worries about inflation and an impending recession, and adding in the fear of the Fed raising rates to this mix made bullishness a rare commodity on Wall Street.

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. Stocks ended the year well, with November and December both delivering strong up movements, and while this left investors feeling good about the year, it was a rocky year.

Risk Premium 82

Risk Premium Start-ups Equity Dividends 82

Musings on Markets

JANUARY 30, 2023

Just as rising equity risk premiums push up the cost of equity, rising default spreads push up the cost of debt of companies, with the added complication of higher default risk for those companies that had pushed to the limits of their borrowing capacity in a low interest-rate environment.

Treasury 97

Treasury Start-ups Risk Premium Equity 97

Musings on Markets

JANUARY 20, 2021

In this post, I offer an alternative, albeit a more complicated, metric that I believe offers not only a more comprehensive measure of pricing, but also operates as a barometer of the ups and downs in the 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 52

Risk Premium Risk-free Rate Equity Dividends 52

Musings on Markets

AUGUST 15, 2023

I took this estimation process for granted until 2008, when during that crisis, I woke up to the realization that no matter what the text books say about risk-free investments, there are times when finding an investment with a guaranteed return can become an impossible task. 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 5, 2024

First, these categorizations were created close to twenty years ago, when I first started looking a global data, and many countries that were emerging markets then have developed into more mature markets now. Beta & Risk 1. Equity Risk Premiums 2. Return on Equity 1. Debt Ratios & Fundamentals 1. Debt Details 1.

Dividends 107

Dividends Risk Premium Equity Book Value 107

Peak Business Valuation

NOVEMBER 24, 2024

Get started today by scheduling your free consultation below! It can also speed up the legal process, helping both parties understand the business’s fair market value. At Peak , these factors help us determine the company-specific risk premium. As such, it is beneficial for solving disputes and misunderstandings.

Business Valuation 52

Business Valuation Fair Market Value Appraisal Discounted Cash Flow 52

Musings on Markets

FEBRUARY 18, 2025

I pointed to the flaw in the logic, but the comments thereafter suggested such deep confusion about what returns on equity or capital measure, and what comprises an efficient market, that I think it does make sense to go back to basics and see if some of the confusion can be cleared up.

Equity 52

Equity Book Value Marketability Start-ups 52

Musings on Markets

JANUARY 27, 2022

Inflation: Measurement and Determinants As the inflation debate was heating up in the middle of last year, I wrote a comprehensive post on how inflation is measured, what causes it and how it affects returns on different asset classes. Rather than repeat much of that post, let me summarize my key points.

Risk-free Rate 99

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

Musings on Markets

FEBRUARY 10, 2021

In this post, I will start by looking at the role that hurdle rates play in running a business, with the consequences of setting them too high or too low, and then look at the fundamentals that should cause hurdle rates to vary across companies. US , Europe , Emerging Markets , Japan , Australia/NZ & Canada , Global ) 2.

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Equilest

JANUARY 7, 2025

So let's get started and discover the keys to accurate valuation! It's like a financial health check-up, examining everything from sales patterns to asset quality. A high M-Score could indicate higher risk, warranting a higher discount rate and thus a lower valuation.

Business Valuation 40

Business Valuation Risk Premium Finance Start-ups 40

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. The Fed Effect: Where's the beef?

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

Musings on Markets

JANUARY 6, 2023

In my last post, I talked about the ritual that I go through every year ahead of my teaching each spring, and in this one, I will start on the first of a series of posts that I make at the start of each year, where I look at data, both macro and company-level. That is not true!

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Musings on Markets

JANUARY 26, 2023

Thus, almost everything I know and practice, when valuing young and start-up companies, I learned in the process of valuing Amazon in the 1990s. Just as impressively, the company finally started delivering on its promise of profitability, going from barely making money in 2019 to an operating margin of 16.57% in 2022.

Start-ups 99

Start-ups Marketability Risk Premium Equity 99

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. The Zomato IPO clocks in at 420 pages , much of it designed to bore readers into submission.

Marketability 99

Marketability Start-ups Equity Price to Book 99

Musings on Markets

JANUARY 9, 2021

The second was that, starting mid-year in 2020, equity markets and the real economy moved in different directions, with the former rising on the expectations a post-virus future, and the latter languishing, as most of the world continued to operate with significant constraints.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

NOVEMBER 9, 2021

As I have valued Tesla over the years, I have come to the realization that it is the most 'uncar-like" automobile company in the world, and its uniqueness shows up on two dimensions. Put simply, the company has been able to scale up more quickly, while reinvesting less in capacity, than any other automobile company.

Start-ups 101

Start-ups Dividends Marketability Market Capitalization 101

Equilest

APRIL 11, 2023

With limited features and formulas, it can be difficult to account for all the necessary parameters in a valuation, such as interest rates, equity risk premiums, and beta. It lacks interest rates, equity risk premiums, beta, and other important data. You can Sign up for free here.

Business Valuation 40

Business Valuation Beta Risk Premium Discounted Cash Flow 40

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 83

Equity Book Value Start-ups Corporate Finance 83

Musings on Markets

MAY 24, 2021

Looking at US equities, the S&P 500 is up about 11% and the NASDAQ about 5%, from start of the year levels, and the underperformance of the latter has led to a wave of stories about whether this is start of the long awaited comeback of value stocks, after a decade of lagging growth stocks.

Treasury 56

Treasury Start-ups Risk Premium Price to Book 56

Musings on Markets

FEBRUARY 15, 2023

To set the stage, I will start by laying out the differences measure of earnings that reported on an income statement: At the top of the profit ladder is gross income , the earnings left over after a company has covered the direct cost of producing whatever it sells.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Brian DeChesare

MAY 3, 2023

When I started offering financial modeling training , I never expected to get questions about a methodology like the Dividend Discount Model (DDM). It can be useful for certain companies, such as power and utility firms and midstream (pipeline) operators in oil & gas … …but it’s also much harder to set up and use than a standard DCF.

Dividends 64

Dividends Terminal Value Enterprise Value Equity 64

Musings on Markets

FEBRUARY 2, 2023

The first of the is as companies scale up, there will be a point where they will hit a growth wall, and their growth will converge on the growth rate for the economy. In short, I am assuming that the price cuts and cost pressures of the fourth quarter are more representative of what Tesla will face in the future, as competition steps up.

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Marketability 99

Equidam

APRIL 26, 2025

Instead of comparing to an average, it typically starts with a maximum potential pre-money valuation deemed achievable for a startup of that type in its region. Unlike the Scorecard, it doesn’t explicitly benchmark against competitors but focuses on the startup’s internal milestones and risk mitigation.

Discounted Cash Flow 59

Discounted Cash Flow Terminal Value Book Value Beta 59

Musings on Markets

JANUARY 12, 2021

I also start thinking about my passion, which is teaching, the spring semester to come, and the classes that I will be teaching, repeating a process that I have gone through every year since 1984, my first year as a teacher. Face up to uncertainty, rather than avoid or deny it : Uncertainty is a feature of investing/ business, not a bug.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

JANUARY 27, 2021

In my last post , I described the wild ride that the price of risk took in 2020, with equity risk premiums and default spreads initially sky rocketing, as the virus led to global economic shutdowns, and then just as abruptly dropping back to pre-crisis levels over the course of the year.

Start-ups 52

Start-ups Marketability Equity Treasury 52

Equilest

MARCH 17, 2022

We note that the higher the expected rate (in other words, the greater the risk is perceived as necessary, to the point of requiring a substantial "risk premium"), the lower the multiple that will apply and therefore the lower valuation: we buy cheaper which is less safe. 11% per year. 10% per year. around 1.5%). - Conclusion.

Business Valuation 40

Business Valuation EBIT Discounted Cash Flow EBITDA 40

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

JANUARY 28, 2024

Third, by making investing a choice between good (higher returns) and bad (higher risk), a message is sent, perhaps unwittingly, that risk is something to be avoided or hedged. micro uncertainties, into discount rates, and in the process, they end up incorporating risk that investors can eliminate, often at no cost.

Risk Premium 122

Risk Premium Beta Start-ups Equity 122

Musings on Markets

MARCH 19, 2022

The Lead In To understand the market effects of the Russia-Ukraine conflict, we need to start with an assessment of the two countries, and their places in the global political, economic and market landscape, leading in. Ukraine, a part of the Soviet Union, has had its shares of ups and downs, and its economic footprint is even smaller.

Start-ups 100

Start-ups Risk Premium Equity Market Capitalization 100

Musings on Markets

JULY 1, 2022

In this post, I will argue that almost everything that we are observing in markets, across asset classes, can be explained by a pull back on risk capital, and that understanding the magnitude of the pull back, and putting in historical perspective, is key to gauging what is coming next. Risk Capital: What is it?

Marketability 100

Marketability Risk Premium Start-ups Equity 100

Musings on Markets

JULY 27, 2022

In addition, the growth has come in fits and starts, and given Zomato's active acquisition strategy, it is not clear how much of the revenue growth is organic and how much is acquired. And no, you cannot add back stock based compensation and come up with an adjusted EBITDA to claim otherwise.)

Risk Premium 98

Risk Premium Start-ups Equity Marketability 98