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The Price of Risk: With Equity Risk Premiums, Caveat Emptor!

Musings on Markets

If you have been reading my posts, you know that I have an obsession with equity risk premiums, which I believe lie at the center of almost every substantive debate in markets and investing. That said, I don't blame you, if are confused not only about how I estimate this premium, but what it measures.

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Data Update 4 for 2022: Risk = Danger + Opportunity!

Musings on Markets

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?

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Data Update 3 for 2023: Inflation and Interest Rates

Musings on Markets

The rise in rates transmitted to corporate bond market rates, with a concurrent rise in default spreads exacerbating the damage to investors. As a result of these rate changes, the term structure which started the year as upward sloping, ended the year downward sloping, giving rise to the usual talk of an imminent recession.

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Marking Time: A new year, a fresh semester and its class time!

Musings on Markets

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.

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Data Update 3 for 2024: Interest Rates in 2023 - A Rule-breaking Year!

Musings on Markets

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?

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In Search of Safe Havens: The Trust Deficit and Risk-free Investments!

Musings on Markets

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. What is a risk free investment?

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Data Update 1 for 2023: Setting the table!

Musings on Markets

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!