Musings on Markets

JANUARY 19, 2022

If equity markets surprised us with their resilience in 2020, not just weathering a pandemic for the ages, but prospering in its midst, US equity markets, in particular, managed to find light even in the darkest news stories, and continued their rise through 2021. The year that was.

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

JULY 25, 2023

The other is pragmatic , since it is almost impossible to value a company or business, without a clear sense of how risk exposure varies across the world, since for many companies, either the inputs to or their production processes are in foreign markets or the output is outside domestic markets.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

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. In that post, I noted that if inflation subsided quickly, and the economy stayed out of a recession, stocks had upside, and that is the scenario that played out in 2023.

Risk Premium 79

Risk Premium Start-ups Equity Treasury 79

Musings on Markets

SEPTEMBER 27, 2022

By the start of 2022, the window for early action had closed and for much of this year, inflation has been the elephant in the room, driving markets and forcing central banks to be reactive, and its presence has already induced me to write three posts on its impact.

Risk Premium 99

Risk Premium Treasury Start-ups Equity 99

Musings on Markets

JANUARY 26, 2023

My last valuation of Tesla was in November 2021, towards its market peak, and given its steep fall from grace, in conjunction with Elon Musk's Twitter experiment, it is time for a revisit.

Start-ups 99

Start-ups Marketability Risk Premium Equity 99

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 52

Treasury Risk Premium Start-ups Risk-free Rate 52

Musings on Markets

JANUARY 6, 2023

Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all. Data universe : In my sample, I include all publicly traded firms with market capitalizations that exceed zero, traded anywhere in the world.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Musings on Markets

AUGUST 15, 2023

Expected returns for Risky Investments : The risk-free rate becomes the base on which you build to estimate expected returns on all other investments. For instance, if you read my last post on equity risk premiums , I described the equity risk premium as the additional return you would demand, over and above the risk free rate.

Risk-free Rate 98

Risk-free Rate Treasury Risk Premium Start-ups 98

Musings on Markets

JANUARY 8, 2022

To start the year, I returned to a ritual that I have practiced for thirty years, and that is to take a look at not just market changes over the last year, but also to get measures of the financial standing and practices of companies around the world. Happy New Year, and I hope that 2022 brings you good tidings!

Risk Premium 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

JANUARY 5, 2024

Thus, looking at only the companies in the S&P 500 may give you more reliable data, with fewer missing observations, but your results will reflect what large market cap companies in any sector or industry do, rather than what is typical for that industry.

Dividends 105

Dividends Risk Premium Equity Book Value 105

Musings on Markets

FEBRUARY 15, 2023

billion in gross profit in the last twelve months leading into 2023, but operating income drops off to $6.4 Finally, I look at the aggregated values across all companies on all three income measures, across all global companies, again broken down by sector: Collectively, global companies reported $16.9 billion and need income is only $4.3

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Musings on Markets

FEBRUARY 27, 2023

In this post, I will focus on corporate debt in 2023, keeping in mind that it was a year where the tradeoffs changed, as interest rates rose to pre-2008 levels, and putting at risk those firms that had borrowed to capacity, or even beyond, at low interest rates.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

FEBRUARY 16, 2024

Deconstructing Risk While we may use statistical measures like volatility or correlation to measure risk in practice, risk is not a statistical abstraction. Its impact is not just financial, but emotional and physical, and it predates markets. 4 & 5 Uninsurable Risk.

Risk Premium 76

Risk Premium Start-ups Beta Marketability 76

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 80

Equity Book Value Start-ups Corporate Finance 80

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. and 10.9%. It was the reason that I argued at a $1.2

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Risk Premium 99

Simply Treasury

AUGUST 2, 2022

The idea is not new to encourage companies to increase their capitalization and reduce their bank debt (partly through more recourse to the capital market - CMU project). The rate would be calculated based on a 10-year "risk-free interest" rate depending on the currency, increased by a 1% risk premium (1.5%

Equity 52

Equity Risk Premium Banking Finance 52

Appraiser Newsroom

JUNE 4, 2024

He is the Director of the Pepperdine Private Capital Markets Project (privatecap.org) and Executive Director for the Pepperdine Most Fundable Companies competition (pepperdine.edu/mfc). His teaching and research interests include entrepreneurial finance, private capital markets, and entertainment finance. Dr. Everett He holds a Ph.D.

Business Valuation 59

Business Valuation Intangible Assets Appraisal Finance 59

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 121

Risk Premium Beta Start-ups Equity 121

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 127

Equity Risk Premium Treasury Start-ups 127

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 75

Risk Premium Equity Start-ups EBITDA 75

Musings on Markets

JANUARY 10, 2025

In corporate finance and investing, which are areas that I work in, I find myself doing double takes as I listen to politicians, market experts and economists making statements about company and market behavior that are fairy tales, and data is often my weapon for discerning the truth. Equity Risk Premiums 2. Buybacks 2.

Risk Premium 119

Risk Premium Dividends Start-ups Corporate Finance 119

Musings on Markets

JANUARY 31, 2025

I first posted about AI in the context of valuing Nvidia , in June 2023, when there was still uncertainty about whether AI had legs. As the number of potential applications of AI proliferated, thus increasing the market for AI products and services, another part of the story was also being put into play.

Start-ups 133

Start-ups Marketability Technology Risk Premium 133

Musings on Markets

JANUARY 28, 2025

It was an interesting year for interest rates in the United States, one in which we got more evidence on the limited power that central banks have to alter the trajectory of market interest rates. In 2022, the rise in rates was almost entirely driven by rising inflation expectations , with the Fed racing to keep up with that market sentiment.

Banking 69

Banking Treasury Risk Premium Start-ups 69

Global Finance

MARCH 5, 2025

The main attraction of full dollarization is the elimination of the risk of a sudden, sharp devaluation of the countrys exchange rate, the IMF writers point out. This may allow the country to reduce the risk premium attached to its international borrowing. in 2023, according to World Bank data. by 2006 and was 24.1%

Banking 59

Banking Finance Risk Premium Marketability 59

Musings on Markets

FEBRUARY 6, 2025

The Indian and Chinese markets cooled off in 2024, posting single digit gains in price appreciation. The Indian and Chinese markets cooled off in 2024, posting single digit gains in price appreciation. I converted all of the market capitalizations into US dollars , just to make them comparable.

Risk Premium 67

Risk Premium Start-ups Enterprise Value Equity 67

Musings on Markets

FEBRUARY 23, 2025

Corporate control : There are companies that choose to borrow money, even though debt may not be the right choice for them, because the inside investors in these companies (family groups, founders) do not want to raise fresh equity from the market, concerned that the new shares issued will reduce their power to control the firm.

Equity 75

Equity EBITDA Risk Premium Gross Debt 75

Musings on Markets

MARCH 15, 2025

Thus, my estimates of equity risk premiums, updated every month, are not designed to make big statements about markets but more to get inputs I need to value companies. Many of these hiring firms have supply chains that stretch across the world and sell their products and services in foreign markets.

Start-ups 130

Start-ups Risk Premium Marketability Equity 130