Musings on Markets

JANUARY 26, 2023

It is worth noting that year 10 in that valuation would be 2023, and Tesla's revenues in 2022 were not that far off at $73 billion, albeit with more potential for growth.) The Market : The US equity market in January 2023 looks very different from the market at the start of 2022.

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. The Fed Effect: Where's the beef?

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

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

AUGUST 5, 2023

As part of that obsession, since September 2008, I have estimated an equity risk premium for the S&P 500 at the start of each month, and not only used that premium, when valuing companies during that month, but shared my estimate on my webpage and on social media. The risk premium that you demand has different names in different markets.

Risk Premium 98

Risk Premium Equity Start-ups Treasury 98

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

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. Lowering revenue growth to 15% in 2023 and raising it to 33% in 2024 will deliver almost the same value for the company, as what I get with my smoothed-out values.

Start-ups 99

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

Musings on Markets

SEPTEMBER 20, 2024

The answer is recognizing that market-set rates ultimately are composed of two elements: an expected inflation rate and an expected real interest rate , reflecting real economic growth. There is some basis for this argument, and especially during market crises, where timely actions by the Fed may alter market mood and momentum.

Banking 124

Banking Treasury Start-ups Marketability 124

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 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).

Risk Premium 99

Risk Premium Risk-free Rate Start-ups Equity 99

Musings on Markets

JULY 25, 2023

For three decades, China has won this battle, but in 2023, the battleground seems to be shifting in favor of India, but it is still too early to make a judgment on whether this is a long term change, or just a hiccup. in my July 2023 update) and apply this scalar to the default spread, to arrive at a country risk premium.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

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. Globally, health care has the highest percentage of money-losing companies and utilities have the lowest.

Risk Premium 121

Risk Premium Beta Start-ups Equity 121

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 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

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. At this stage, you may be ready to bail on stocks, but I have one final card to play.

Equity 127

Equity Risk Premium Treasury Start-ups 127

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. They made a mild comeback in 2023 and that recovery continued in 2024.

Banking 69

Banking Treasury Risk Premium Start-ups 69

Equidam

APRIL 22, 2025

10] , [23] , [2] Discount Rate: The rate used to discount future cash flows is typically the cost of equity, calculated via the Capital Asset Pricing Model (CAPM): Cost of Equity = Risk-Free Rate + Beta * Market Risk Premium. [23] 23] Risk-Free Rate: Tied to government bond yields (e.g.,

Discounted Cash Flow 52

Discounted Cash Flow Terminal Value Marketability EBITDA 52

Equidam

APRIL 22, 2025

Discount Rates / Risk Premiums: The discount rate used in DCF analysis (often the WACC) incorporates elements sensitive to market conditions. [21] 21] [22] [24] [27] The cost of equity component includes the market risk premium the excess return investors expect for investing in the broader market over a risk-free rate.

52

52

Musings on Markets

FEBRUARY 6, 2025

I aggregated the market capitalizations of all stocks at the end of 2023 and the end of 2024, and computed the percentage change. I am no expert on exchange rates, but learning to deal with different currencies in valuation is a prerequisite to valuing companies.

Risk Premium 67

Risk Premium Start-ups Enterprise Value Equity 67