Musings on Markets

Musings on Markets covers finance, investing, and business. It discusses financial education, company valuation, market trends, economic risks, and corporate governance. Posts analyze specific companies like Tesla, market phenomena like big tech's impact, and broader economic issues such as inflation and country risk.

Finance Education Company Valuation Market Trends Economic Risks Corporate Governance Tech Industry Investment Strategies

The hottest Substack posts of Musings on Markets

And their main takeaways

The Corporate Life Cycle: Managing, Valuation and Investing Implications

1438 implied HN points • 20 Aug 24
💼 Business Corporate Finance Valuation Investment Strategies Management Economic Trends
  1. Businesses, like people, go through life cycles. They start as new ideas, grow, and eventually decline if not managed properly.
  2. Companies age differently, impacting their strategies and financial health. Younger companies often focus on growth, while older ones need to defend their position or manage decline.
  3. The skills and qualities needed in leadership change with a company's age. A startup needs a visionary leader, while a declining company may require a pragmatic approach to manage its downsizing.

Country Risk: My 2024 Update

959 implied HN points • 24 Jul 24
💰 Finance Risk Assessment Investing Market Analysis Economic Factors Global trends
  1. Investing in a country is riskier depending on its political structure, level of violence, corruption, and property rights. Democracies can be unstable, while autocracies might promise consistency but can change suddenly.
  2. External factors like reliance on a single commodity, economic growth stages, and climate change can increase a country's risk. Countries tied to one resource are vulnerable to market shifts.
  3. Understanding country-specific risk is important for businesses and investors. Different countries have different costs of capital due to their risk levels, impacting investment decisions.

The Seven Samurai: Big Tech to the Rescue!

1538 implied HN points • 09 Feb 24
💰 Finance Investment Analysis Stock Market Economic Trends Company Valuation
  1. The 'Magnificent Seven' stocks, which include major companies like Apple and Amazon, significantly boosted the US market in 2023. They contributed to over half of the market's growth, highlighting their importance in investing.
  2. These companies have shown strong performance not just recently, but over the past decade. If investors didn't include these stocks, they likely missed out on significant gains.
  3. Despite their past success, investors should be cautious. Valuations for these companies are high now, and prices may drop if they don't meet the high expectations set by the market.

The School Bell Rings: Time for Class

1778 implied HN points • 11 Jan 24
🚌 Education Teaching Learning Finance Curriculum Professional development
  1. Learning finance can be accessible! You don’t need a fancy background, just some curiosity and a bit of effort.
  2. Understanding the basics, like how money flows in businesses and what financial terms mean, is super important. It sets you up for success in finance classes.
  3. There are different ways to learn. You can choose free online classes or paid ones, depending on what fits your time and budget best.

Big Risks: Catastrophic Risk in Investing and Business

1139 implied HN points • 17 Feb 24
💼 Business Risk management Investment strategy Valuation Methods Market behavior Financial Analysis
  1. Catastrophic risks can come from many sources like natural disasters, hacks, or changes in laws. They can seriously threaten a business's survival and impact its value.
  2. It's crucial for business owners to understand how these risks affect their financial situation. They can either be insurable or uninsurable, and knowing this helps in making better decisions.
  3. People often react emotionally to risks, sometimes ignoring them until it's too late. Understanding these reactions can help in making smarter investments and preparing for the worst.
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Data Update 1 for 2024: The Data Speaks, but what is it saying?

1099 implied HN points • 05 Jan 24
💰 Finance Investing Valuation Data Analysis Corporate Finance Market Trends
  1. All companies are included in data analysis to get a full picture, not just big ones. This helps avoid bias and shows a more accurate view of industries.
  2. The data covers many financial variables that help understand company decisions about investment, financing, and dividends. It also uses unique ways to calculate statistics for more accurate insights.
  3. The statistics are updated regularly to reflect the latest available information. Users should utilize the data wisely and be aware of any changes in accounting standards or currency issues.

Data Update 2: A Stock Comeback - Winning the expectations game!

919 implied HN points • 17 Jan 24
💰 Finance Stock Market Investment Strategies Economic Analysis Market Trends Earnings Reports
  1. The stock market showed a strong comeback in 2023, recovering most losses from the previous year. However, the recovery was uneven, with a few big companies driving much of the growth.
  2. Investor expectations have shifted positively for 2024, with forecasts indicating controlled inflation and a soft landing for the economy. But, this positive sentiment poses challenges for equity investors as they must meet heightened expectations.
  3. Current stock valuations suggest that the market may be slightly overvalued. Investors should be cautious and consider potential risks when making decisions, as the future remains uncertain.

Tesla in November 2023: Story twists & turns, with value consequences!

1238 implied HN points • 01 Nov 23
💼 Business Investing Market Analysis Company Valuation Automotive Industry Innovation
  1. Tesla has faced ups and downs in its stock price lately, dropping below $200 after some tough weeks. This shows how quickly the market reacts to Tesla's news.
  2. Three big stories are influencing Tesla's future: price cuts to stay competitive, advancements in their self-driving technology, and the highly-anticipated Cybertruck launch.
  3. Valuing Tesla is complex because it has multiple business areas. Right now, the estimated value per share is around $180, but it can change depending on how their stories develop.

Invisible, yet Invaluable: Valuing Intangibles - The Birkenstock IPO

1139 implied HN points • 06 Oct 23
💼 Business Finance Investing Valuation Market Trends Accountability
  1. Intangible assets, like brand names and management quality, are really important for a company's value but are often overlooked in accounting. Companies today get much of their worth from things you can't physically see.
  2. The way we value companies has changed a lot, especially with tech firms now leading the market. Investors need to think about future potential instead of just past performance, especially for newer companies.
  3. Birkenstock's upcoming IPO highlights how a strong brand and a loyal celebrity customer base can boost a company's value. The success of its stocks may depend not just on numbers but also on how the market feels at the moment.

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

599 implied HN points • 25 Jan 24
💰 Finance Interest Rates Bond Markets Corporate Finance Economic Indicators
  1. Interest rates in 2023 showed little change, challenging the idea that the Fed is solely responsible for their movements. It's more about market dynamics and inflation.
  2. An inverted yield curve has traditionally been seen as a warning sign for recessions, but recent events in 2023 suggest it isn't always accurate. The economy remained stable despite the inversion.
  3. Looking forward, inflation will play a key role in determining interest rates in 2024. If inflation continues to drop, long-term rates might go down too.

Putting the (Insta)cart before the Grocery (horse): A COVID Favorite's Reality Check!

1059 implied HN points • 19 Sep 23
💼 Business E-commerce Entrepreneurship Market Analysis Financial trends
  1. Instacart's upcoming IPO shows that its value has dropped significantly since the peak days of the pandemic. What was once thought to be worth over $50 billion is now expected to be valued around $9 to $10 billion.
  2. The grocery business is generally slow-growing and has very low margins. This affects how much Instacart can charge for its services and makes it tough for them to grow dramatically.
  3. Instacart now faces tough competition from grocery stores that have started their own online services. This competition is likely to limit Instacart's market share and growth in the future.

Data Update 5 for 2025: Profitability - The End Game for Business?

479 implied HN points • 31 Jan 24
💼 Business Corporate Finance Profitability Investment strategy Market Analysis
  1. Businesses should focus on profitability as their main goal, not just growth. It's important to make money to cover expenses and create value for the future.
  2. Measuring profitability can be tricky because different measures tell different stories about a company's health. Companies need to be compared properly to understand their true performance.
  3. Most companies struggle to earn profits that exceed their costs of capital, showing it can be tough to succeed in the business world today. Even in a competitive market, many companies fall short.

Data Update 4 for 2024: Risk enters the Equation

479 implied HN points • 28 Jan 24
💰 Finance Risk Analysis Investment Strategies Market Trends Corporate Finance Economic Factors
  1. Risk is not just a bad thing; it's a mix of danger and opportunity. To succeed, you sometimes need to embrace the right risks instead of avoiding them.
  2. Different types of risks exist, like economic and estimation uncertainties. It's important to identify and categorize them to make better investment decisions.
  3. Risks can vary significantly between companies and countries. Understanding these differences can help investors assess potential returns and make smarter choices.

Good Intentions, Perverse Outcomes: The Impact of Impact Investing

859 implied HN points • 12 Oct 23
💰 Finance ESG Social Impact Market Analysis
  1. Impact investing aims to make money while helping society, but it can sometimes backfire. Sometimes the good intentions of investors lead to negative outcomes because their investments fail to create real change.
  2. There are three main methods of impact investing: inclusionary, exclusionary, and evangelist. Each has its strengths and weaknesses, but they all rely on understanding which companies truly contribute positively to society.
  3. Despite the money invested in green energy, our reliance on fossil fuels hasn't significantly decreased. It shows that while impact investing tries to solve societal problems, it might not be working as effectively as intended.

AI's Winners, Losers and Wannabes: Valuing the AI Boost at NVIDIA

1179 implied HN points • 23 Jun 23
💼 Business Investing Market Trends Stock Valuation Technology impact Corporate strategy
  1. The semiconductor industry has seen cycles of growth and maturity, with significant changes in who the biggest players are over time. Companies like NVIDIA have found success by targeting profitable niche markets.
  2. AI technology is currently a hot topic, with companies like NVIDIA and Microsoft seen as leaders. However, investors should be careful as many companies may falsely claim to be AI-focused, leading to potential losses if the wrong ones are chosen.
  3. When investing in AI-related companies, it's important to remember that not all will succeed. Past technological changes show that disruptive innovations can create a few big winners but also many failures.

Toys for Billionaires: Sports Franchises as Trophy Assets!

879 implied HN points • 25 Aug 23
💼 Business Finance Investing Asset Valuation
  1. Sports franchises are now seen as trophy assets, where owners often care more about the prestige of ownership than making a profit. This trend makes buying teams feel more like collecting than investing.
  2. The prices for sports teams have skyrocketed in recent years, often without clear ties to their financial performance or success on the field. This disconnect means teams can be seen as overpriced compared to their actual value.
  3. As ownership of teams shifts to extremely wealthy individuals, the dynamics of sports may change. Owners might prioritize star players for their fame, reshaping how teams are built and how fans experience the games.

The Difference Makers: Key Person(s) Value!

579 implied HN points • 10 Dec 23
💼 Business Valuation Management Finance Entrepreneurship Investment
  1. Key people can significantly impact a business's value, whether it's a small practice like a doctor or a large company like Tesla. Even at bigger companies, certain individuals can make a big difference in how the business performs.
  2. Understanding who key people are in a company is crucial. These can include founders, top management, or even important employees at different levels who contribute unique skills.
  3. Companies can take steps to manage the risks that come with relying on key people, like using insurance or succession planning. These strategies can help ensure that the loss of an important individual does not as heavily affect the business.

A Business Upended: The Streaming Disruption of the Movie & Broadcasting Business

759 implied HN points • 12 Sep 23
💼 Business Entertainment Streaming Media Finance Television
  1. The rise of streaming services like Netflix has drastically changed how we consume movies and shows. Many people are moving away from cable TV and preferring the convenience of streaming platforms.
  2. The movie industry may face a fate similar to the music industry due to streaming disruptions. Just as music labels struggled to adapt, traditional movie companies might find it hard to survive without significant changes.
  3. Streaming has led to increased content production but also rising costs. While there's more choice for viewers, the quality can sometimes suffer, leaving many overwhelmed by the options available.

Market Bipolarity: Exuberance versus Exhaustion

739 implied HN points • 04 Oct 23
💰 Finance Market Analysis Investment Strategies Economic Trends Risk Assessment Financial Data
  1. Interest rates are rising, affecting both stocks and bonds. This change can make it harder for investors to predict market movements.
  2. Only a few big tech companies are driving market gains, which shows the performance isn't shared evenly across all stocks. If you didn’t invest in those top companies, your returns might not be great.
  3. There are still uncertainties about inflation and the economy, making it hard to predict what will happen next. Investors continue to swing between hope and worry.

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

759 implied HN points • 05 Aug 23
💰 Finance Equity Investing Risk management Market Analysis Corporate Finance
  1. Equity risk premium (ERP) is the extra return investors expect from risky investments compared to risk-free ones. Understanding this helps investors make better decisions about stocks.
  2. Different methods to measure ERP can give very different results. It's important to understand why and how these estimates change over time.
  3. Using a consistent and logical approach to estimating ERP is crucial for making informed investment choices. Each method has its pros and cons, and what works best may depend on your investment goals.

Market Resilience or Investors in Denial: The Market at Mid-Year 2023

799 implied HN points • 18 Jul 23
💰 Finance Market Analysis Investment Strategies Economic Trends Stock Market Risk management
  1. The first half of 2023 surprised many investors who expected a tough year, as markets unexpectedly improved despite fears of inflation and recession.
  2. Tech companies, especially big names like Apple and Microsoft, drove the stock market's gains, while some sectors like energy struggled.
  3. Overall, it's important to stay humble in investing because predicting market trends is extremely difficult, and what goes up can also come down.

Country Risk: A July 2023 Update

739 implied HN points • 26 Jul 23
💰 Finance Risk Assessment Investment Analysis Economic Factors Global Markets
  1. Country risk factors include political systems, corruption, legal protections, and violence, which all affect how safe it is to do business in different countries.
  2. Democratic countries often have continuous risks from changing governments, while authoritarian regimes can present sudden and severe risks, making it tricky for businesses to decide where to invest.
  3. Corruption adds hidden costs to businesses operating in affected regions, making it crucial for companies to understand both the visible and hidden risks in their chosen markets.

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

599 implied HN points • 15 Aug 23
💰 Finance Investments Market Trends Risk management Economic Indicators Corporate Finance
  1. Risk-free investments aren't always truly safe, especially during financial crises. Events like the 2008 crisis showed that even government bonds can carry risk.
  2. Inflation and real interest rates play a big role in determining risk-free rates, meaning they can change based on economic conditions. A higher expected inflation usually leads to higher risk-free rates.
  3. The trust in governments to honor their debt has declined over time, leading to uncertainty about using government bonds as risk-free investments. This loss of trust makes it essential to reassess what we consider safe investments.

Earnings, Cash Flows and Free Cash Flows: A Primer

1538 implied HN points • 31 Oct 22
💰 Finance Investing Valuation Cash Flow Equity Market Analysis
  1. Free cash flow (FCF) is a crucial metric that shows how much cash a company generates after covering its expenses and investments. It's often misused in finance, so it's important to know the real meaning behind it.
  2. When valuing a company, understanding its free cash flow helps in predicting future performance. Different methods are used based on whether you're looking at equity or the whole business.
  3. As companies age, their financial characteristics change. Younger companies usually have negative free cash flows while older, established companies tend to produce positive cash flows and return money to shareholders more consistently.

Breach of Trust: Decoding the US Banking Crisis of 2023

839 implied HN points • 06 May 23
💰 Finance Banking Investments Economics Regulations Market Trends
  1. The recent banking crisis in the US started with the sudden collapse of Silicon Valley Bank, which was unexpected and quick, leading to a series of other bank failures. This raises concerns about whether the crisis will impact the larger economy like the 2008 crisis did.
  2. Understanding what makes a bank strong or weak is essential. Key factors include how sticky their deposits are, the amount of equity they have to absorb losses, and the quality of their loan portfolios.
  3. The market's reaction to the crisis has been mixed, with larger banks holding up better than regional ones. However, the crisis may push more consolidation within the banking industry, affecting competition and overall bank profitability.

Good (Bad) Banks, Good (Bad) Investments: An Investing Perspective

819 implied HN points • 07 May 23
💰 Finance Investing Banking Valuation Market Analysis Risk management
  1. Good banks tend to have stickier deposits, which help them maintain stability. Buying a good bank at a high price might actually lead to losses compared to buying a bad one at a low price.
  2. Valuing banks is tricky because their cash flows and risks are different from other businesses. Instead of using traditional methods, one should often use a dividend discount model or a free cash flow to equity model.
  3. The price of a bank's stock can differ significantly from its actual value. Understanding both the intrinsic value and market price is key to making smart investment decisions.

Tesla in 2023: A Return to Reality, The Beginning of the End or Time to Buy

839 implied HN points • 26 Jan 23
💼 Business Investing Valuation Market Trends Corporate strategy
  1. Tesla has grown rapidly, becoming a significant player in the auto industry, especially in electric vehicles. Its revenue jumped from $117 million in 2010 to $31.5 billion in 2020, showing strong growth potential.
  2. The company's success is closely tied to its founder, Elon Musk, whose vision drives Tesla forward. However, his dominant presence raises questions about the company's future if he steps back.
  3. The business landscape is changing, and even a successful company like Tesla must face traditional rules of business, like the need for investment and risk management, which is becoming more evident as competition increases.

Data Update 2 for 2023: A Rocky Year for Equities

839 implied HN points • 22 Jan 23
💰 Finance Stock Market Investment Risk Economic Trends Portfolio Management Market Analysis
  1. 2022 was a tough year for stocks, with the S&P 500 dropping about 18%. Negative years are common in the stock market, reminding us that investing carries risks.
  2. Inflation was a major factor in the market's decline, impacting returns on stocks. Higher costs of living affected investors' expectations and how companies performed.
  3. Looking forward to 2023, expected returns on stocks are higher, around 9.82%. However, market conditions can change, making it important for investors to stay informed and adjust their strategies.

A Return to Teaching: The Spring 2023 Edition

859 implied HN points • 21 Dec 22
🚌 Education Teaching Learning Philosophy Finance Business
  1. Preparation is crucial for teaching. Being ready for class helps make the learning experience better for everyone.
  2. Respect and empathy towards students are important. Treating students as capable individuals fosters a positive learning environment.
  3. Classes should be engaging and fun. Enjoying the teaching process makes learning more meaningful and impactful for students.

Data Update 1 for 2023: Setting the Table

779 implied HN points • 07 Jan 23
💰 Finance Data Analysis Investment Strategies Corporate Finance Market Trends Valuation Techniques
  1. Having too much data can be overwhelming and lead to distractions. It's important to focus on the most relevant information when making decisions.
  2. Data should not be seen as the only answer; personal judgment and reasoning are essential in analysis. Relying solely on data can hinder good decision-making.
  3. Data can be biased and subjective, even though many think of it as purely objective. It's crucial to be mindful of how data is presented and used.

Meta (Facebook) Lesson 1: Corporate Governance

779 implied HN points • 07 Nov 22
💼 Business Corporate Governance Investment Strategies Market Analysis Tech industry Financial Performance
  1. Corporate governance focuses on how companies are run and who gets to make decisions. It's important because when management and shareholder interests do not align, it can result in poor decisions that harm the company.
  2. Facebook's stock has dropped significantly because of issues like the slowdown in online advertising and reputational damage. These challenges highlight the need for better governance to adapt to changing market conditions.
  3. Investors often give up their voting power when companies use dual-class shares, which can limit their ability to influence management. This trend can make it harder to make necessary changes when a company's leadership is not effective.

Data Update 3 for 2023: Interest Rates and Bond Returns

599 implied HN points • 31 Jan 23
💰 Finance Interest Rates Bonds Investment Market Analysis Economic Trends
  1. In 2022, both stocks and treasury bonds saw very bad returns, with treasury bonds performing the worst in historical terms. Investors lost significant money as interest rates rose sharply, which was unexpected for a market often seen as safe.
  2. Interest rates increased due to rising inflation and not just the actions of the Federal Reserve. As inflation went up, so did investor expectations, which led to higher rates across the board.
  3. Corporate bonds were also hit hard, especially lower-rated ones, leading to increased costs for companies. As a result, many companies may struggle to pay back debt, especially if the economy weakens.

Control, Complexity and Politics: Deconstructing the Adani Affair!

559 implied HN points • 05 Feb 23
💼 Business Corporate Finance Market Analysis Investment strategy Economic Trends Corporate Governance
  1. The Adani Group has rapidly grown in value, but much of this rise is supported by heavy debt. This heavy borrowing raises concerns about their financial stability.
  2. Investors are worried about potential financial manipulation and the use of shell companies by the Adani family. These practices could undermine trust and lead to serious consequences.
  3. Family businesses in India, like the Adani Group, can struggle with control issues that may harm overall growth. It's important for these companies to seek outside management talent to thrive.

Reaping the Whirlwind: A September 2022 Inflation Update

699 implied HN points • 27 Sep 22
💰 Finance Inflation Interest Rates Investment Market Trends Economic Impact
  1. Inflation has returned strongly in 2022 after a long period of stability. Many businesses and investors were caught off guard as they hadn't adjusted their strategies for high inflation.
  2. Rising inflation is leading to higher interest rates, which can impact the economy and market investments. This has caused a shift in investor behavior, making them more cautious.
  3. Higher inflation also makes the future of economic growth uncertain. Investors are nervous, and their outlook on the economy has worsened, affecting their investment decisions.

Facebook (Meta) Lesson 2: Accounting Inconsistencies and Consequences

619 implied HN points • 10 Nov 22
💼 Business Accounting Finance Investing Corporate Governance Valuation
  1. Accounting mistakes can misclassify expenses, affecting a company's reported profits and overall valuation. When money is wrongly categorized, it can look like a company is performing worse than it actually is.
  2. Correctly categorizing expenses like R&D can show a company’s true financial health. For example, treating R&D as a capital expense can increase reported profits and the value of the company.
  3. Understanding these accounting practices is important for investors. If investors misjudge a company due to these accounting errors, it may lead to undervaluation, making the company look cheaper than it really is.

Data Update 5 for 2023: Pathways to Profitability

439 implied HN points • 16 Feb 23
💰 Finance Profitability Investments Market Trends Economic Analysis Capital Structure
  1. A company's main goal is to make money, not just grow. Even businesses that do good need to be profitable to survive.
  2. Profit margins differ across industries and countries. Some sectors, like tech or energy, often show higher profits, while retail and airlines typically struggle.
  3. It's important for companies to earn more than their costs of capital. Many businesses are failing to meet this goal, meaning they need to rethink their financial strategies.

Facebook (Meta) Lesson 3: Tell me a story!

539 implied HN points • 18 Nov 22
💼 Business Valuation Investing Corporate Governance Market Analysis Financial Reporting
  1. A good business valuation combines numbers with a compelling story. The story helps make sense of the numbers and gives them context.
  2. Storytelling is important for investors because it makes a business memorable and helps communicate its potential. However, numbers are crucial to maintain credibility and accountability.
  3. As market conditions change, so must a business's story. Companies like Facebook need to adapt their narratives to remain relevant and regain investor trust.

From Google Blogger to Substack: Coming Soon!

899 implied HN points • 25 Mar 22
💼 Business Finance Investing Economics Publishing Blogging
  1. The author started blogging in 2008 and has written over 600 posts on finance topics since then. This blogging experience has helped him rethink his views and develop new ideas.
  2. He is moving his blog from Google Blogger to Substack because it allows him to easily transfer his old posts and offers a better format for readers.
  3. Both platforms will continue to host his posts, and he encourages readers to choose between them while assuring that the experience will remain similar.

Data Update 7 for 2023: Dividends, Buybacks and Cash flows

359 implied HN points • 08 Mar 23
💰 Finance Corporate Finance Investment Strategies Cash Management Dividend Policy Market Trends
  1. Buybacks are becoming more common than dividends for companies to return cash to shareholders. Companies find buybacks more flexible and less of a commitment than regular dividend payments.
  2. Dividends should be one of the last steps in a company's financial decisions. If a company has no good investments, it should consider paying dividends or buybacks as a way to return cash to owners.
  3. There are tax differences between dividends and buybacks that may influence shareholder preferences. Although dividends used to be taxed more heavily, the gap has narrowed in recent years.

Data Update 4 for 2023: Country Risk - Measures and Implications

379 implied HN points • 12 Feb 23
💰 Finance Risk Assessment Investment Analysis Market Trends Economic Indicators
  1. Country risk affects investments everywhere, not just in emerging markets. Every country has its own level of risk, which is important for investors to understand.
  2. Investors need to look beyond just company performance and consider how a country's situation influences their investments. Government actions and country stability matter a lot.
  3. Assessing country risk involves looking at different factors like political stability and economic conditions. Measures like sovereign ratings and CDS spreads help evaluate this risk.