Musings on Markets

JULY 17, 2023

Exacerbating the pain, corporate default spreads rose during the course of 2022: While default spreads rose across ratings classes, the rise was much more pronounced for the lowest ratings classes, part of a bigger story about risk capital that spilled across markets and asset classes.

Marketability 98

Marketability Risk Premium 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

JANUARY 9, 2021

Challenge rules of thumb and conventional wisdom : Investing has always had rules of thumb on how and when to invest, ranging from using historical PE or CAPE ratios to decide if markets are over valued, to simplistic rules (eg. buy stocks that trade at less than book value or trade at PEG ratios less than one) for individual stocks.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

FEBRUARY 27, 2023

Note that this framework applies for all businesses, from the smallest, privately owned businesses, where debt takes the form of bank loans and even credit card borrowing and equity is owner savings, the largest publicly traded companies, where debt can be in the form of corporate bonds and equity is shares held by public market investors.

Equity 52

Equity EBITDA Start-ups Net Debt 52

Musings on Markets

JANUARY 10, 2025

Thus, as you peruse my historical data on implied equity risk premiums or PE ratios for the S&P 500 over time, you may be tempted to compute averages and use them in your investment strategies, or use my industry averages for debt ratios and pricing multiples as the target for every company in the peer group, but you should hold back.

Risk Premium 115

Risk Premium Dividends Start-ups Corporate Finance 115

Musings on Markets

FEBRUARY 6, 2025

The Risk Effect There are emerging markets that have delivered higher returns than developed markets, but in keeping with a core truth in investing and business, these higher returns often go hand-in-hand with higher risk. The answers, to you, may seem obvious, but I find it useful to organize the obvious into buckets for analysis.

Risk Premium 67

Risk Premium Start-ups Enterprise Value Equity 67

Musings on Markets

FEBRUARY 23, 2025

The table below computes debt to capital ratios, in book and market terms, by sector and sub-region: I would begin by separating the financial sector from the rest of the market, since debt to banks is raw material, not a source of capital. Data Update 4 for 2025: Interest Rates, Inflation and Central Banks!

Equity 75

Equity EBITDA Risk Premium Gross Debt 75