Musings on Markets

MAY 6, 2022

Note that in all three cases, it is not the Fed that is driving rates, but what is happening to inflation. Since 2020, though, inflation has become a key story line in almost every post that I write about the overall market, and I have had multiple posts just on the topic.

Risk Premium 102

Risk Premium Treasury Start-ups Equity 102

Musings on Markets

FEBRUARY 11, 2023

In this section, I will begin measures of country default risk, including sovereign ratings and CDS spreads, before moving to more expansive measures of country risk before concluding with measures of equity risk premiums for countries, a pre-requisite for estimating the values of companies with operations in those countries.

Risk Premium 97

Risk Premium Start-ups Equity Marketability 97

Musings on Markets

FEBRUARY 10, 2021

The answer, to me, seems to be obviously yes, though there are still some who argue otherwise, usually with the argument that country risk can be diversified away. In that post, I computed the equity risk premium for the S&P 500 at the start of 2021 to be 4.72%, using a forward-looking, dynamic measure. as mature markets.

Risk-free Rate 52

Risk-free Rate Risk Premium Start-ups Equity 52

Musings on Markets

JANUARY 5, 2024

Employee Count & Compensation I nvesting Principle Financing Principle Dividend Principle Hurdle Rate Project Returns Financing Mix Financing Type Cash Return Dividends/Buyback s 1. Beta & Risk 1. Equity Risk Premiums 2. Ratings & Spreads 2. Tax rates 4. Return on Equity 1. Debt Details 1.

Dividends 105

Dividends Risk Premium Equity Book Value 105

Musings on Markets

JANUARY 24, 2024

A Ride to Nowhere - US Treasury Rates in 2023 It was undoubtedly a relief for bond market investors to see US treasury markets settle down in 2023, though there were bouts of volatility, during the course of the year.

Treasury 52

Treasury Risk Premium Start-ups Risk-free Rate 52

Musings on Markets

JANUARY 26, 2023

As I noted in my last post , rising risk free rates and equity risk premiums have pushed up the costs of equity for all companies, and Tesla is not only no exception but is perhaps even more exposed as an above-average risk company.

Start-ups 99

Start-ups Marketability Risk Premium Equity 99

Musings on Markets

NOVEMBER 9, 2021

Risk : When I valued Tesla last in early 2020, I used a cost of capital of 7%, reflecting a risk free rate of 1.75% and an equity risk premium of 5.2% for mature markets.

Start-ups 101

Start-ups Dividends Marketability Market Capitalization 101

Musings on Markets

FEBRUARY 15, 2023

the returns you can make on investments of equivalent risk, and that game became a lot more difficult to win in 2022. To explore differences in profit margins across industry groups, I broke stocks down into 94 industry groups, and sorted industries, based upon operating margin, from highest to lowest.

Start-ups 52

Start-ups Equity Risk Premium Risk-free Rate 52

Musings on Markets

FEBRUARY 2, 2023

To fill in the missing pieces, I redid the valuation picture, adding the revenue growth rate, by year: Download spreadsheet As you look at the sheet, it is worth emphasizing a few estimation details that you may have missed in my original post: First, the revenue growth rate , at least for me, is a means to an end, not an end in itself.

Start-ups 99

Start-ups Risk-free Rate Market Capitalization Marketability 99

Musings on Markets

JANUARY 12, 2021

Last week, was my data week, where I download and analyze data on all publicly traded companies, listed anywhere in the world, and I will post extensively on what the numbers look like after a most tumultuous year. Investors need to reassess their expected returns to reflect risk free rates & current ERP & default spreads.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

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

JANUARY 28, 2024

Risk Differences across Countries In this final section, I will look risk differences across countries, both in terms of why risk varies across, as well as how these variations play out as equity risk premiums.

Risk Premium 121

Risk Premium Beta Start-ups Equity 121

Musings on Markets

JULY 25, 2023

Equity Risk across Countries Default risk measures how much risk investors are exposed to, when investing in bonds issued by a government, but when you own a business, or the equity in that business, your risk exposure is not just magnified, but also broader.

Risk Premium 52

Risk Premium Equity Start-ups Risk-free Rate 52

Musings on Markets

JULY 27, 2022

The effects of inflation show up first as higher risk free rates , across currencies, and next in higher risk premiums, with both equity risk premiums and default spreads rising. As a company with the bulk of its business in India, Zomato again is more exposed to these developments.

Risk Premium 98

Risk Premium Start-ups Equity Marketability 98

Musings on Markets

JANUARY 8, 2022

Risk Premiums : You cannot make informed financial decisions, without having measures of the price of risk in markets, and I report my estimates for these values for both debt and equity markets. I extend my equity risk premium approach to cover other countries, using sovereign default spreads as my starting point, at this link.

Risk Premium 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

MARCH 25, 2021

for the year are at war with its concurrent promise to keep rates low; after all, adding those numbers up yields a intrinsic risk free rate of 8.7%. The Stocks Story As treasury rates have risen in 2021, equity markets have been surprisingly resilient, with stocks up during the first three months.

Equity 52

Equity Risk-free Rate Treasury Start-ups 52

Musings on Markets

JANUARY 17, 2025

Download historical data Across the 97 years that I have estimated annual returns, stocks have had their ups and downs, delivering positive returns in 71 years and negative returns in the other 26 years. Historical Context To assess stock returns in 2024, it makes sense to step back and put the year's performance into historical perspective.

Equity 127

Equity Risk Premium Treasury Start-ups 127

Musings on Markets

JANUARY 28, 2025

At the start of 2024 , the ten-year treasury rate stood at 3.88%, unchanged from its level a year prior, but the 3-month treasury bill rate had climbed to 5.40%. That should come as little surprise, since the forces that cause investors to spike up premiums (fear) or bid them down (hope and greed) cut across both markets.

Banking 69

Banking Treasury Risk Premium Start-ups 69

Musings on Markets

FEBRUARY 6, 2025

I am no expert on exchange rates, but learning to deal with different currencies in valuation is a prerequisite to valuing companies. The logical step in looking across countries is measuring risk in countries, and bringing that risk into your analysis, by incorporating that risk by demanding higher expected returns in riskier countries.

Risk Premium 67

Risk Premium Start-ups Enterprise Value Equity 67