The hottest Finance Substack posts right now

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January 2018 Data Update 8: Debt and Taxes

Musings on Markets • 0 implied HN points • 29 Jan 18
💰 Finance Debt Management Tax policy Capital Structure Corporate Finance Investment Strategies
  1. The U.S. tax code has favored debt financing, giving businesses tax advantages for taking on debt rather than using equity. This has encouraged many companies to load up on debt for growth.
  2. Recent tax reforms have reduced the benefits associated with debt, leading companies to rethink how much debt they carry. This could lower overall borrowing and help stabilize businesses.
  3. As companies adjust to these new tax rules, we may see a trend of firms paying down debt and reconsidering their capital structures, which could lead to less volatility in their financial performance.

January 2018 Data Update 6: A Cost of Capital Primer

Musings on Markets • 0 implied HN points • 26 Jan 18
💰 Finance Investments Corporate Finance Valuation Risk management Capital Structure
  1. The cost of capital is a critical concept in finance, representing the return an investor requires from a business investment. It's best understood as an opportunity cost, not just the cost of borrowing money.
  2. It's important to use appropriate rates for different risks when making investment decisions, as applying a single cost of capital to varying investments can lead to poor choices.
  3. Estimating the cost of capital involves understanding both equity and debt and considering market values. Having a clear method can help make better financial decisions.

January 2018 Data Update 5: Country Risk Update

Musings on Markets • 0 implied HN points • 25 Jan 18
💰 Finance Risk Assessment Investment Strategies Market Analysis Economic Indicators
  1. Country risk affects a company's equity risk. It's important to look at where a company operates instead of just where it's based.
  2. Different countries have different levels of investment risk. Higher risks usually require higher returns to make them worthwhile.
  3. Companies' cost of capital should vary based on the geographic locations of their projects. So, a project in one country might have a different hurdle rate compared to another.

January 2018 Data Update 2: The Buoyancy of US Equities

Musings on Markets • 0 implied HN points • 09 Jan 18
💰 Finance Investing Stocks Bonds Data Analysis Economic Trends
  1. US stocks had a strong performance in 2017, achieving a 21.65% return, which surprised many experts. This shows that the equity market can thrive even with various economic and political concerns.
  2. Despite a good year for stocks, the fundamentals improved, with earnings and dividends rising. This suggests that the stock prices are supported by healthier financials.
  3. Looking ahead, there's potential for Treasury bond rates to rise, which could impact equity performance. Investors need to watch changes in tax laws and overall economic conditions as these factors may influence the market.

January 2018 Data Update 1: Numbers don't lie, or do they?

Musings on Markets • 0 implied HN points • 05 Jan 18
💰 Finance Market Data Investment Analysis Corporate Finance Risk management Financial Metrics
  1. Collecting and analyzing data from a large number of companies helps in gaining a better perspective for making investment decisions. It allows for comparison against industry and geographic averages.
  2. It's important to question common investing rules of thumb and understand whether they still hold true in today’s market. Examining actual data can reveal if these rules are outdated.
  3. Trends and changes in corporate finance can significantly impact investors and the economy. It’s useful to track how companies evolve over time and how that affects various financial metrics.
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A Tale of Two Markets: Politics and Investing!

Musings on Markets • 0 implied HN points • 06 Jun 17
💰 Finance Market Analysis Investment Strategies Risk management Economic Indicators Behavioral Finance
  1. There is a big divide among investors about the current market. Some think a crash is coming while others believe a new bull market is starting.
  2. People are showing different feelings about risk. For some, the market seems stable, but others see a lot of uncertainty in economic policies.
  3. Consumer confidence is up, but spending hasn't followed. Both consumers and businesses feel good about the future, but they aren't investing as much as expected.

A Valeant Update: Damaged Goods or Deeply Discounted Drug Company?

Musings on Markets • 0 implied HN points • 23 Mar 17
💰 Finance Investing Market Analysis Business strategy Pharmaceuticals
  1. Valeant's past business model involved heavy debt and questionable pricing tactics, which damaged its reputation and led to significant financial losses. This shows how a company's ethics can affect its long-term success.
  2. The future of Valeant may lead to three outcomes: it can continue as a struggling company, become an acquisition target, or be sold off in parts to recover value. Each option has its challenges.
  3. It's important for investors to recognize their mistakes and make informed decisions. Holding onto bad investments out of fear can lead to bigger losses, so it's crucial to evaluate whether to continue investing or to cut losses.

Explaining a Paradox: Why Good (Bad) Companies can be Bad (Good) Investments!

Musings on Markets • 0 implied HN points • 09 Mar 17
💰 Finance Investing Management Valuation Market Analysis Company performance
  1. Good companies can be bad investments if they are overpriced. It's important to consider both the company's quality and its market price when investing.
  2. Management quality doesn't always reflect how well a company performs. A poorly managed company might make good investment decisions at the right price.
  3. Investing successfully means looking for mismatches between what a company is worth and what it costs. This helps identify opportunities to buy undervalued stocks.

January 2017 Data Update 9: Dividends and Buybacks

Musings on Markets • 0 implied HN points • 06 Feb 17
💰 Finance Investing Corporate Finance Dividends Stock Buybacks Market Trends
  1. Companies often decide on dividends based on what cash is left over after making other investments. Ideally, they should focus on their overall financial health first before determining how much to return to shareholders.
  2. Many companies are shifting from paying dividends to doing stock buybacks, meaning they are buying their own shares back instead of distributing cash directly to shareholders. This is becoming common in many markets around the world.
  3. The cash that companies hold can be a sign of either financial prudence or poor management. While having cash can protect a company during tough times, too much cash held back might mean that managers are not returning wealth to shareholders effectively.

January 2017 Data Update 8: The Dark and Light Sides of Debt

Musings on Markets • 0 implied HN points • 01 Feb 17
💰 Finance Corporate Finance Debt Management Investment strategy Risk Assessment Financial Analysis
  1. When companies decide how much debt to take on, it’s really important to think about both the good and the bad sides of debt. Debt can help a company save on taxes and keep managers in check, but it also increases the risk of financial problems.
  2. There are real benefits to using debt, like tax savings, but many people get distracted by myths about debt being better for returns. It's crucial to understand that higher debt can also raise costs, especially if companies run into trouble.
  3. Different industries handle debt in various ways. For example, companies in technology tend to use less debt, while capital-heavy industries, like trucking and telecom, often carry more. Understanding this can help investors see the bigger picture.

January 2017 Data Update 6: A Cost of Capital Update!

Musings on Markets • 0 implied HN points • 26 Jan 17
💰 Finance Investment Corporate Finance Valuation Equity Debt
  1. The cost of capital is a key number in finance that helps companies decide if they should invest. It's important because it serves as a hurdle rate, a discount rate, and influences how much to return to investors.
  2. Calculating the cost of capital involves understanding both equity and debt. The cost of equity reflects what investors expect to earn, while the cost of debt shows how much it costs to borrow money.
  3. The cost of capital can vary by country and industry due to factors like risk and tax rates. Analysts often focus too much on refining these numbers, while the real challenge lies in accurately estimating earnings and cash flows.

January 2017 Data Update 5: A Taxing Year Ahead?

Musings on Markets • 0 implied HN points • 25 Jan 17
💰 Finance Taxation Investment Corporate Finance Economic Policy Cash Flow
  1. Taxes greatly impact a business's value because they affect cash flows after taxes and the cost of capital. Companies must consider their tax burden when planning finances.
  2. The U.S. has a high marginal tax rate, and its tax policies can lead to situations like trapped cash, where companies hold large amounts of unremitted foreign income to avoid hefty taxes.
  3. Changes in tax law can create winners and losers among companies, depending on how the new regulations affect their effective tax rates and financial structures. This could shift where and how companies choose to operate.

January 2017 Data Update 2: The Resilience of US Equities!

Musings on Markets • 0 implied HN points • 13 Jan 17
💰 Finance Investing Equities Market Analysis Economic Trends Risk management
  1. US stocks showed resilience in 2016 despite initial fears of a market bubble due to economic concerns. Investors were surprised by the market's recovery after significant drops early in the year.
  2. The expected return on stocks for 2017 is estimated at around 8.14%, which is higher than the historical average. However, there are concerns about companies paying out more cash than they're earning, which isn't sustainable in the long term.
  3. Interest rates are likely to rise in 2017 due to economic growth and inflation. This could impact stock prices if earnings don't keep pace, but there's also a chance that rising earnings will support the market.

Active Investing: Seeking the Elusive Edge!

Musings on Markets • 0 implied HN points • 28 Dec 16
💰 Finance Investing Market Analysis Risk management Portfolio strategy Economic Trends
  1. Active investing is struggling because most active investors don't perform better than passive options. This is mainly due to high fees and transaction costs that eat into returns.
  2. Many active investors lack a clear investment philosophy, causing them to jump between strategies instead of sticking to one approach. This inconsistency leads to poor performance.
  3. To succeed in active investing, it's important to have a strong investment philosophy and find a unique edge that sets you apart from others in the market.

Active Investing: Rest in Peace or Resurgent Force?

Musings on Markets • 0 implied HN points • 14 Dec 16
💰 Finance Investing Market Trends Economic Theory Fund management
  1. Passive investing is growing quickly and becoming more popular than active investing. Many people now prefer index funds and ETFs because they are easier and usually cheaper than actively managed funds.
  2. Active investors are struggling because, on average, they don't perform better than passive investors. Most active money managers end up losing money for their clients after costs are considered.
  3. There aren't many consistent winners among active investors. Even famous investors have a hard time staying at the top over time, which makes it tough for regular investors to rely on them for good returns.

Myth 5.5: The Terminal Value ate my DCF!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Investing Valuation Cash Flow
  1. A high terminal value in a DCF isn't a flaw; it's typical for stock valuations. Most investor returns come from price appreciation, making terminal value a large part of the overall valuation.
  2. Just because the terminal value is prominent doesn't mean your growth assumptions are unimportant. In fact, those assumptions critically impact your terminal value.
  3. When evaluating a company, especially a high growth one, don't ignore the early cash flows or growth period. They're essential in calculating a reliable terminal value.

Myth 5.3: Growth is good, more growth is better!

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investing Corporate Finance Economic Growth Financial Analysis
  1. Growth isn't always good. It often comes with costs and needs to be carefully managed.
  2. The value of a company is more about how efficiently it can grow, not just how much it grows.
  3. When estimating future value, it's important to consider reinvestment and returns on investment, as they affect both cash flow and growth potential.

Myth 5.1: If you don't believe in forever, you cannot do a DCF

Musings on Markets • 0 implied HN points • 30 Nov 16
💰 Finance Valuation Investment Market Analysis Financial Models Asset management
  1. You don't need to believe cash flows last forever to do a discounted cash flow (DCF) analysis. There are ways to estimate cash flows that make sense even if the asset doesn't last indefinitely.
  2. Terminal value is very important in DCF calculations, so you can use methods like annuities or liquidation value to estimate it. These options can provide a realistic view of an asset's worth without assuming it will last forever.
  3. One common mistake is using market multiples for terminal value, which can skew the true value of a business. It's better to focus on cash flows and intrinsic value rather than just market pricing.

The Trump Effect on Markets: A Financial (not a Political) Analysis!

Musings on Markets • 0 implied HN points • 11 Nov 16
💰 Finance Market Analysis Investment Strategies Economic Policy Risk management Financial trends
  1. Market reactions to big political events can be surprising and unpredictable. After the election, there were initial drops but then the markets bounced back, showing that how investors react can change quickly.
  2. Expert predictions are not always reliable. In this case, many experts predicted doom, but the market's actual response showed that the public often trusts their instincts over expert advice.
  3. Stories can influence outcomes more than statistics. The narratives around Brexit and the Trump election resonated with many voters, suggesting that emotional connections can sometimes matter more than hard data.

Myth 4.5: DCFs break down with near-zero risk free rates!

Musings on Markets • 0 implied HN points • 04 Nov 16
💰 Finance Valuation Interest Rates Investment strategy Risk management Market Analysis
  1. Lower risk-free rates can increase the value of future cash flows in discounted cash flow (DCF) models. This means that when interest rates go down, it can make companies look more valuable.
  2. It's important to adjust growth rates and risk premiums alongside changes in risk-free rates. If you change one factor without looking at the others, your valuation might be way off.
  3. Using historical data for risk premiums while ignoring current rates can lead to misvaluations. As rates change, you need to rethink the risks associated with investments.

Keystone Kop Valuations: Lazard, Evercore and the TSLA/SCTY Deal

Musings on Markets • 0 implied HN points • 06 Sep 16
💰 Finance Valuation Mergers Banking Investment Corporate Governance
  1. The Tesla and SolarCity deal raised serious concerns about potential conflicts of interest. Elon Musk was heavily involved in both companies, which made people worry about whether he was making decisions that were best for shareholders.
  2. The investment banks involved in valuing the deal, Lazard and Evercore, faced challenges in justifying the merger. They had to convince both sets of shareholders that the deal was a win for everyone, which is often a tough balancing act.
  3. The valuations provided by the banks were criticized for being poorly constructed and based on questionable assumptions. It seemed like they relied too much on management's cash flow forecasts without proper scrutiny, which raised doubts about their thoroughness and ethics.

Mean Reversion: Gravitational Super Force or Dangerous Delusion?

Musings on Markets • 0 implied HN points • 31 Aug 16
💰 Finance Investing Market Analysis Statistics Data interpretation Behavioral Finance
  1. Mean reversion is the idea that extreme results will return to the average over time. This is seen in sports and investing, but it can lead us to make wrong assumptions about future performance.
  2. There are two types of mean reversion: time series mean reversion, which looks at past average values over time, and cross-sectional mean reversion, which compares values against the average of similar items. Both have their own risks and assumptions.
  3. Structural changes in the economy or companies can disrupt mean reversion, meaning trusting it too much could lead to poor investment decisions. It's important to stay aware of these changes and not just rely on historical data.

May you live in "exciting" times! An Updated Picture of Country Risk

Musings on Markets • 0 implied HN points • 22 Jul 16
💰 Finance Investing Market Analysis Economic Indicators Risk management
  1. Investing in different countries has varying levels of risk. Factors like political stability, legal systems, and violence affect how risky a country is.
  2. There's a difference between market measures and non-market measures when assessing risk. Market measures can change quickly, while non-market measures can be slower and less clear.
  3. Understanding country risk is important for businesses operating globally. The risk isn't just based on where a company is located, but also on where it does its business.

Icahn exits, Buffett enters, Whither Apple? Value and Price Effects of Big Name Investing

Musings on Markets • 0 implied HN points • 06 Jun 16
💰 Finance Investing Stock Market Valuation Financial Analysis Market Trends
  1. The entry or exit of famous investors, like Carl Icahn or Warren Buffett, can influence how people perceive the value of a stock. Their actions might suggest they have special insights about the company’s future.
  2. There are different types of investors, such as insiders, activists, traders, and value investors, and each one can impact stock prices and perceptions in different ways. Knowing who is buying or selling can help you understand the market dynamics better.
  3. It's important to trust your own investment judgment rather than just following what big name investors do. Confirmation bias can lead you to only see evidence that supports your beliefs, so staying true to your analysis is key.

DCF Myth 3.2: If you don't look, its not there!

Musings on Markets • 0 implied HN points • 23 May 16
💰 Finance Valuation Investing Risk management Statistical Analysis
  1. Using simulations for financial valuations helps capture uncertainty. Instead of just using one guess for numbers, you can use a range to see different possible outcomes.
  2. Probability distributions are important in understanding risks and making better financial decisions. They can show how likely different outcomes are, which is essential for planning.
  3. Modern tools like Excel add-ons make simulations easier to run. You can use programs that help visualize the potential values of an investment based on various inputs.

DCF Myth 3.1: The Margin of Safety - Tool for Action or Excuse for Inaction?

Musings on Markets • 0 implied HN points • 03 May 16
💰 Finance Investing Valuation Risk management Market Analysis Financial Theory
  1. The Margin of Safety (MOS) is a way to protect your investments by ensuring you buy assets at a price lower than their actual value. It helps investors feel safer by providing a buffer against mistakes or market fluctuations.
  2. MOS isn't a one-size-fits-all strategy. Different investments should have different levels of MOS based on how risky or certain they are. For example, a steady utility company may need less margin than a startup with uncertain prospects.
  3. Using MOS doesn't mean you can skip careful valuations. Good investing requires solid value judgments and understanding what you're buying, rather than just relying on a safety margin to make choices.

DCF Myth 3: You cannot do a valuation, when there is too much uncertainty!

Musings on Markets • 0 implied HN points • 02 May 16
💰 Finance Valuation Investment Market Trends Risk management Behavioral Finance
  1. You can still do valuations even when there's a lot of uncertainty. It's actually common to face unknowns in investing.
  2. Uncertainty can lead to bad decision-making like inaction or relying too much on others' opinions. Being aware of how uncertainty affects you is key.
  3. Having a clear story or narrative about a company helps during uncertain times. It can guide your decisions and make valuations feel more grounded.

Valeant: Information Vacuums, Management Credibility and Investment Value

Musings on Markets • 0 implied HN points • 20 Apr 16
💰 Finance Investment Market Analysis Corporate Finance Stock Valuation Risk Assessment
  1. Valeant experienced rapid growth by acquiring other companies and raising drug prices, which attracted many investors. However, this model was risky and heavily relied on debt.
  2. The company's troubles began when it faced scrutiny over its pricing strategies and financial practices, leading to a significant drop in stock value. Without financial transparency, investors became concerned about its future.
  3. Valeant's management credibility waned amid delays in financial reports and legal issues, making it clear that the previous business approach could not be sustained. Investors now have to tread carefully, as the company's future is uncertain.

Negative Interest Rates: Impossible, Unnatural or Just Unusual?

Musings on Markets • 0 implied HN points • 11 Mar 16
💰 Finance Interest Rates Investing Economics Monetary Policy Financial Markets
  1. Negative interest rates are a real phenomenon, where borrowing costs can drop below zero. This happens when people expect prices to fall and aren't willing to wait to consume.
  2. Central banks can't just force interest rates to stay negative; they influence rates through market signals and buying bonds. If people don't trust these banks, rates may not behave as expected.
  3. Negative rates can hurt the real economy since people might avoid investing. This uncertainty can lead to higher risk in financial markets as investors chase after returns.

January 2016 Data Update 7: Dividends, Potential Dividends and Cash Balances

Musings on Markets • 0 implied HN points • 27 Jan 16
💰 Finance Investment Corporate Finance Dividends Market Analysis Economic Trends
  1. Dividends are an important part of investing, as they represent the cash that companies return to their shareholders. A company's ability to pay dividends often depends on its cash flow and investment opportunities.
  2. Many companies are now using stock buybacks, along with dividends, to return cash to shareholders. This trend has become popular globally, especially in the US.
  3. Companies' cash balances can show how dividend policies are affecting their financial health. Some companies might hold a lot of cash instead of paying dividends, which can lead to inefficiencies or missed opportunities.

January 2016 Data Update 6: Debt, the double edged sword!

Musings on Markets • 0 implied HN points • 25 Jan 16
💰 Finance Corporate Finance Debt Management Investment strategy Economic Trends Market Analysis
  1. Debt can be a double-edged sword for companies. It offers tax benefits and can encourage better project decisions, but it also increases the risk of default and conflicts with lenders.
  2. Different companies have various levels of debt based on their industry and region. Some sectors, like real estate and commodities, tend to have higher debt ratios, while tech companies often borrow less due to uncertainty.
  3. In good times, debt can boost company value, but in bad times, it can lead to financial trouble. It's important to carefully assess how much debt a company has before investing.

January 2016 Data Update 4: The Costs of Capital

Musings on Markets • 0 implied HN points • 14 Jan 16
💰 Finance Corporate Finance Valuation Investment Analysis Risk management Economic Indicators
  1. The cost of capital is crucial for businesses as it helps determine where to invest. Companies need to know the minimum returns needed to justify their investments.
  2. It plays a key role in deciding the mix of debt and equity a company should use. Understanding this mix can optimize financial performance.
  3. Different sectors have varying costs of capital due to risk factors. It's important to use a cost of capital that reflects the specific risks of investments being considered.

January 2016 Data Update 2: Interest Rates, Exchange Rates and Currencies

Musings on Markets • 0 implied HN points • 08 Jan 16
💰 Finance Interest Rates Exchange rates Corporate Finance Investment decisions Macroeconomics
  1. Interest rates and exchange rates are key players in finance because they affect investment returns and company earnings. Trying to predict changes in these rates can lead to mistakes.
  2. There is no one-size-fits-all risk-free rate; it varies by currency and country. To find a risk-free rate, you need to account for local factors like government bond rates and default risks.
  3. When dealing with different currencies, it's important to stay consistent in your valuations. This helps make sure that changes in inflation and risk are accounted for fairly across different currencies.

The Compressed Tech Life Cycle: The Investor Challenge

Musings on Markets • 0 implied HN points • 21 Dec 15
💰 Finance Investment Valuation Market Analysis Financial Metrics Corporate strategy
  1. Tech companies often look expensive when they're young and cheap when they're old, which can confuse investors. It's important to use the right methods for valuing these companies, instead of using outdated approaches.
  2. Just because a tech company seems good today doesn't mean it will still be a good investment tomorrow. Investors should regularly re-evaluate their tech stocks and sell if they become overvalued.
  3. Dividends might not be the best way for tech companies to return cash to shareholders. Stock buybacks can be more suitable for their changing needs and financial situations.

Valuing Country Risk: Pictures of Global Risk - Part II

Musings on Markets • 0 implied HN points • 29 Jul 15
💰 Finance Investment Risk management Valuation Economic Analysis Market Trends
  1. Investors need to adjust cash flows based on country risk, which means recognizing how risks in different countries can affect expected earnings and cash flows.
  2. An alternative way to deal with country risk is by increasing the required return on investments to reflect the higher risk, which also lowers the asset's value.
  3. It's important to avoid double counting risks when making adjustments and to ensure that any changes made for country risk are clear and understandable to others.

Groundhog day in Greece, Hijinks in Brazil and Market Chaos in China: Pictures of Global Risk - Part I

Musings on Markets • 0 implied HN points • 15 Jul 15
💰 Finance Market Dynamics Economic Trends Political Risk Investing Strategies
  1. Countries have different levels of risk based on their political, economic, and legal situations. For example, emerging economies are often more unstable than developed ones.
  2. Economic concentration can make a country more vulnerable. If a nation relies heavily on one industry or commodity, it faces greater risks than those with a diverse economy.
  3. Political events can greatly affect business risks. Factors like corruption, political violence, and the legal system are crucial to consider when investing in different countries.

Cash, Debt and PE Ratios: Cash is an upper and debt is a downer!

Musings on Markets • 0 implied HN points • 03 Jun 15
💰 Finance Investing Debt Management Stock Valuation Corporate Finance Market Analysis
  1. Cash balances can improve a company's price-to-earnings (PE) ratio, making it look more attractive. This is especially true when interest rates are low.
  2. On the other hand, having a lot of debt can lower the PE ratio, making a company seem riskier. So, companies with high debt might not be as appealing despite good earnings.
  3. It's important to consider both cash and debt when evaluating a company's financial health. Just looking at the PE ratio alone can be misleading.

The Value and Pricing of Cash: Why low interest rates & large cash balances skew PE ratios

Musings on Markets • 0 implied HN points • 27 May 15
💰 Finance Valuation Investing Market Analysis Cash Management Corporate Finance
  1. Cash is often misunderstood in company valuations. It should be simply valued without complex models, but many investors mishandle it.
  2. Low interest rates and high cash balances impact price-to-earnings (PE) ratios. When cash makes up a large part of a company's value, it can distort their financial ratios.
  3. We need to separate cash from operational value when evaluating companies. This helps create a clearer picture of their actual performance and worth.

Dealing with Low Interest rates: Investing and Corporate Finance Lessons

Musings on Markets • 0 implied HN points • 03 Apr 15
💰 Finance Investing Economics Corporate Finance Interest Rates Central Banks
  1. Low interest rates are a global issue, and they can create confusion for investors and businesses. It's important to understand that these rates are affected by factors like inflation and economic growth, not just central bank policies.
  2. Central banks do influence interest rates, but they don't completely control them. Instead, real fundamentals of the economy play a much bigger role, so investors should focus on those instead of solely following central bank actions.
  3. When dealing with low interest rates, investors should adapt their strategies. Instead of longing for 'normal' interest rates from the past, they need to base their decisions on the current market conditions and remain flexible with their assumptions.

Illiquidity and Bubbles in Private Share Markets: Testing Mark Cuban's thesis!

Musings on Markets • 0 implied HN points • 20 Mar 15
💰 Finance Market Analysis Investing Venture Capital Economic Trends Risk management
  1. Not all rising tech stock prices mean there's a bubble. Current tech companies are more solid compared to the bubble of the 1990s because their market values match their actual revenues and profits.
  2. Private markets are not as liquid as public ones, but that doesn't mean they're always less stable. Some private markets have improved in terms of liquidity, and both types can struggle when investors lose interest.
  3. Bubbles can happen in both public and private markets, but the impact of a bubble burst may be less severe in private markets if the investors involved are wealthy. They are more likely to absorb the losses without causing wider financial harm.