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

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 96

Treasury Start-ups Risk Premium Equity 96

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 120

Marketability Start-ups Risk Premium Treasury 120

Musings on Markets

JANUARY 21, 2023

It is the nature of stocks that you have good years and bad ones, and much as we like to forget about the latter during market booms, they recur at regular intervals, if for no other reason than to remind us that risk is not an abstraction, and that stocks don't always win, even in the long term. at the start of that year.

Equity 93

Equity Risk Premium Start-ups Dividends 93

Musings on Markets

AUGUST 5, 2023

In short, the expected return on a risky investment can be constructed as the sum of the returns you can expect on a guaranteed investment, i.e., a riskfree rate, and a risk premium, which will scale up as risk increases. The risk premium that you demand has different names in different markets. 00254 + 1.4543 (.04)

Risk Premium 97

Risk Premium Equity Start-ups Treasury 97

Musings on Markets

JANUARY 20, 2021

If, on the other hand, investors are risk neutral, the price of risk will be zero, and investors will buy risky business, stocks and other investments, and settle for the risk free rate as the expected return. It is only fair that I go first.

Risk Premium 52

Risk Premium Risk-free Rate Equity Dividends 52

Musings on Markets

MAY 6, 2022

It is precisely because we have been spoiled by a decade of low and stable inflation that the inflation numbers in 2021 and 2022 came as such a surprise to economists, investors and even the Fed.

Risk Premium 102

Risk Premium Treasury Start-ups Equity 102

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 98

Start-ups Marketability Risk Premium Equity 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

SEPTEMBER 20, 2024

The second was the drop in the Fed Funds rate to close to zero percent, first after the 2008 crisis and then again after the COVID shock in the first quarter of 2020. While the Federal Open Market Committee controls the Fed Funds rate, there are a whole host of rates set by buyer and sellers in bond markets.

Banking 122

Banking Treasury Start-ups Marketability 122

Musings on Markets

FEBRUARY 11, 2023

It is also the aspect of country risk, where there is the longest history of measurement, and there are widely used measurement tools. Through time, these defaults have led to consequences that range from mildly negative to catastrophic, with some defaults triggering invasions and political revolutions.

Risk Premium 96

Risk Premium Start-ups Equity Marketability 96

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 Risk Premium 99

ThomsonReuters

JUNE 15, 2021

ASC 842, Leases , a substantially new accounting standard that public companies have already adopted but goes into effect in 2022 for private companies. 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. Lease Accounting.

Risk-free Rate 64

Risk-free Rate Equity Start-ups Book Value 64

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

Musings on Markets

JANUARY 5, 2024

Thus, when computing my accounting return on equity in January 2024, I will be dividing the earnings from the four quarters ending in September 2023 (trailing twelve month) by the book value of equity at the end of September 2022. will reflect the most recent quarterly accounting filing.

Dividends 105

Dividends Risk Premium Equity Book Value 105

Musings on Markets

JANUARY 28, 2024

Using the updated numbers for the risk free rate (in US dollars), the equity risk premiums (for the US and the rest of the world) and the default spreads for debt in different ratings classes, I computed the cost of capital for the 47,698 companies in my data universe, at the start of 2024.

Risk Premium 117

Risk Premium Beta Start-ups Equity 117

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. The mechanism that allows for the discount rate adjustment to reflect currency is the risk free rate, with currencies with higher expected inflation carrying higher risk free rates.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

Musings on Markets

JANUARY 17, 2025

As rates have risen, though, the difference has narrowed, and at the start of 2025, the earnings yield exceeded the treasury rate.

Equity 126

Equity Risk Premium Treasury Start-ups 126

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. Put simply, with or without the Fed, rates would have been low during the period.

Banking 69

Banking Treasury Risk Premium Start-ups 69