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

Data Update 6 for 2023: The Upside and Downside of Debt!

359 implied HN points • 28 Feb 23
💰 Finance Debt Management Corporate Finance Investment strategy Risk Assessment Economic Trends
  1. Debt can be a useful tool for businesses to fund growth, but it also comes with risks. Finding the right balance of debt and equity is important for long-term success.
  2. There are good reasons to borrow, like taking advantage of tax benefits, and bad reasons, such as chasing higher returns that aren't real. It's crucial to understand the real costs.
  3. Companies often stick to past borrowing habits or follow what others in their industry do. This inertia can lead to too much or too little debt, which isn't always the best for their financial health.

Dissent and Debate: The Pushback on my Tesla Valuation

379 implied HN points • 03 Feb 23
💰 Finance Investing Valuation Market Analysis Economic Forecasting Corporate Finance
  1. There are strong opinions on both sides regarding Tesla's future value. Some believe it's undervalued, while others think it's overvalued, showing how divided people are about the company's potential.
  2. Revenue growth estimates are tricky; as companies get bigger, it's harder to keep high growth rates. The idea is that Tesla will reach a certain revenue and then grow slowly, like many large companies.
  3. Cost of capital is an important factor in valuing a company. For Tesla, using a realistic cost of capital helps in understanding its financial potential, even if different viewpoints exist on what that number should be.

Elon's Twitter Play: Valuation Question or Political Rorschach Test?

719 implied HN points • 21 Apr 22
🇺🇸 U.S. Politics Political Dynamics Corporate Governance Media influence Investment Strategies Public Perception
  1. Elon Musk's involvement with Twitter raises questions about the platform's current value and management. Some believe his takeover could bring needed changes, while others worry about his unpredictable nature.
  2. Twitter's business struggles are evident despite its vast user base and cultural impact. The platform has failed to convert engagement into significant revenue growth, leading to disappointing stock performance.
  3. Political beliefs heavily influence opinions on Musk's bid for Twitter. Supporters view it as a chance for free speech, while opponents worry about concentrated ownership and influence in media.

In Search of a Steady State: Inflation, Interest Rates and Value

679 implied HN points • 11 May 22
💰 Finance Inflation Interest Rates Investment Economics Market Trends
  1. Inflation has become a major issue for the economy, causing instability in markets with unpredictable effects on stock prices. Understanding inflation's impact is important for making investment decisions.
  2. As inflation rises, interest rates also climb, leading to increased borrowing costs and affecting how risky investments are perceived. This creates uncertainty for investors about how to respond.
  3. There are different potential outcomes for the economy based on inflation trends, ranging from a quick stabilization to severe recession risks. Investors need to adapt their strategies depending on which scenario seems more likely.

An Inflation Follow Up: The Disparate Effects on Companies

659 implied HN points • 20 May 22
💰 Finance Investing Markets Economics Asset Classes Risk management
  1. Inflation affects companies differently, with some benefiting and others struggling. Investors are on the lookout for companies that can handle high inflation better.
  2. Companies with strong pricing power, low costs, and stable earnings tend to perform better during times of inflation. It's important for these companies to keep debts low and have short-term investment options.
  3. Historical trends show that small-cap and value stocks often outperform in high inflation periods. In 2022, stocks with solid cash flows and dividends have held their value better than riskier, money-losing companies.
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Risk Capital and Markets: Temporary Pull Back or Long term Retrenchment?

579 implied HN points • 02 Jul 22
💰 Finance Investing Market Trends Risk management Capital Markets Economic Factors
  1. Risk capital is money invested in risky assets, while safety capital is for safer investments. Finding the right balance between these two is important for a healthy economy and market.
  2. Market changes in risk capital can lead to higher risk premiums and impact the pricing of both stocks and bonds. When risk capital is scarce, default spreads increase for riskier investments.
  3. The current market may be facing a long-term pullback in risk capital due to factors like inflation, which can affect stock prices and investors' willingness to take risks.

Country Risk: The Mid-year Update for 2022

519 implied HN points • 14 Jul 22
💰 Finance Investment Analysis Capital Markets Economic Indicators Sovereign debt
  1. Country risk varies significantly between different nations. Countries with stable economies and strong political systems are generally safer for investments than those with instability or violence.
  2. Corruption and legal protections are vital factors influencing country risk. High corruption levels can increase costs for businesses, while strong legal systems provide better support for contracts and property rights.
  3. Recent global events, like the conflict in Ukraine, have raised risk levels across many countries. This has resulted in higher costs of capital for investors and increased equity risk premiums globally.

A Zomato 2022 Update: Price, Value and the Gap!

399 implied HN points • 27 Jul 22
💰 Finance Stock Market Valuation Investing Economic Factors Company analysis
  1. Zomato's stock price was initially high after its IPO but has now dropped significantly due to a mix of poor earnings results and macroeconomic factors. This shows how momentum can affect stock prices.
  2. Despite the challenges, Zomato is still growing and has a strong market share in India's food delivery sector. They have a good amount of cash from their IPO to help them in tough times.
  3. The company is exploring new areas like grocery delivery, but it raises questions about their profitability and strategic focus. Investors need to keep an eye on what's next for Zomato.

Blogger to Substack

499 implied HN points • 25 Mar 22
💼 Business Finance Economics Blogging Communication Marketing
  1. The author has been blogging since 2008, sharing insights on finance and evolving their views on markets along the way.
  2. They decided to move their blog from Google Blogger to Substack because it offers a better experience for readers and is easy to manage.
  3. The content will still be free. The author encourages readers to choose their preferred platform without any changes to the writing style.

Beat your Bot: Building your Moat against AI

2 HN points • 28 Aug 24
🕹 Technology AI Computing Data Disruption Automation
  1. AI is getting better at doing mechanical tasks, but it struggles with intuitive ones. This means jobs that rely on creativity and adaptability are safer than those that are purely formulaic.
  2. Jobs that follow strict rules can be easily replaced by AI, while those that need human judgement and understanding of principles will be harder for AI to take over. This shows the value of being skilled in areas that require more complex thinking.
  3. To protect your job from AI, be a generalist instead of a specialist, practice telling stories around your work, and try not to rely too much on technology for reasoning. This can help you stay unique and valuable in a changing job landscape.

ESG's Russia Test: Trial by Fire or Crash and Burn?

379 implied HN points • 28 Mar 22
💰 Finance Investment Market Trends Corporate Governance Risk management Sustainability
  1. ESG might not be as helpful as it claims. Many companies that invested based on ESG ratings still lost money when Russia invaded Ukraine.
  2. There are three groups within the ESG movement: revisionists who think ESG can fix everything, expansionists who want to add more criteria, and utopians who still believe in its potential despite issues.
  3. The way ESG is measured and its goals can be unclear. This confusion can lead to companies just pretending to be good instead of actually improving their practices.

Russia in Ukraine: Let Loose the Dogs of War!

179 implied HN points • 19 Mar 22
💰 Finance Market Analysis Investment Strategies Economic Impact Risk Assessment
  1. The Russia-Ukraine conflict has caused a lot of instability in financial markets, affecting bond and equity prices. Many investors are worried about defaults and have pulled back from investing.
  2. Commodity prices, especially oil and gas, have surged due to the ongoing conflict, further impacting inflation expectations. This rise in prices can strain economies globally.
  3. Consumer confidence has dropped significantly, with people feeling more uncertain about the economy. If consumers spend less, it could lead to slower economic growth in the US and Europe.

Data Update 5 for 2022: The Bottom Line!

119 implied HN points • 27 Feb 22
💼 Business Profitability Corporate Finance Market Trends Economic Impact Financial Analysis
  1. Profitability is key for business success, but it's important to dig deeper than just revenue growth. Companies need to focus on actual earnings and how well they can sustain profits in the long run.
  2. Different metrics help measure a company's profitability, including gross profit and net income. Understanding these can provide insights on how companies are doing across various sectors.
  3. Growth isn't always good; it requires careful investment that might affect immediate profits. Companies need to balance reinvestment with delivering returns to their investors.

Back to Earth or Temporary Setback? Revisiting the FANGAM Stocks

59 implied HN points • 12 Feb 22
💰 Finance Investing Stock Market Valuation Financial Analysis Market Trends
  1. The FANGAM stocks have been key players in the US stock market, but their recent performance has been mixed. Companies like Netflix and Facebook saw big drops, while Amazon and Google surprised with strong results.
  2. Valuations of these companies suggest that Facebook is the most undervalued, as it struggles with its story and user numbers. In contrast, Netflix appears overvalued as it grapples with slowing growth and high content costs.
  3. Companies like Microsoft and Apple managed to stay out of controversies and continued to grow. Microsoft's recent acquisition of Activision shows its ambition, while Apple is benefiting from being seen as a privacy protector.

Data Update 3 for 2022: Inflation and its Ripple Effects!

39 implied HN points • 27 Jan 22
💰 Finance Inflation Interest Rates Asset Classes Investment Strategies
  1. Inflation has been high for a while, affecting how investors view the market. People are worried it won't just go away and are trying to figure out its impact on stocks and bonds.
  2. How we measure inflation can change depending on what we look at. What's important is how the market expects inflation to behave in the future, rather than just focusing on what's already happened.
  3. Interest rates and inflation are closely linked. If inflation expectations rise, it can push interest rates up, and this also affects how different investments perform, particularly when inflation is unexpected.

Data Update 2 for 2022: US Stocks kept winning in 2021, but…

39 implied HN points • 19 Jan 22
💰 Finance Stock Market Investment Economic Trends Risk management Market Analysis
  1. US stocks did really well in 2021, continuing a strong climb from the previous year. This makes investors feel good, but it also raises concerns about whether stocks are becoming too expensive.
  2. Different sectors performed differently; energy and real estate were the winners in 2021, unlike the tech stocks that led in 2020. This shows how market trends can quickly change and impact returns.
  3. The risk of investing in stocks has shifted, and the expected returns are lower than in the past. Investors need to rethink how much they expect to earn from the stock market in the future.

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

19 implied HN points • 09 Feb 22
💰 Finance Investment Risk management Market Analysis Corporate Finance Economic Theory
  1. Risk is both danger and opportunity. Taking big chances can lead to rewards, but it also comes with the possibility of losing money.
  2. It's important to balance between risk and reward. If you don't expect a good return from a risky investment, you might be wasting your time.
  3. Real risk comes from not knowing the future, not just bad outcomes. It's about the uncertainty of what may happen next.

Data Update 1 for 2022: It is Moneyball Time!

19 implied HN points • 08 Jan 22
💰 Finance Data Analysis Investment Strategies Market Trends Company Valuation Economic Indicators Corporate Finance
  1. Having a lot of data isn't always helpful. Sometimes, too much information can make it harder to make good decisions.
  2. Just because everyone thinks something is right doesn't mean it is. Crowds can be wrong, so it's important to think critically about popular opinions.
  3. Using data effectively requires understanding and skill. Knowing how to read the data properly can help you make better investment choices.

Back in the Classroom: Time to Teach!

19 implied HN points • 15 Dec 21
🚌 Education Teaching Methods Online Learning Investment Strategies
  1. Online teaching can come very close to the experience of being in a classroom, so it's important for teachers to offer something special to keep students engaged.
  2. Some subjects work better in an online format and will continue to be taught that way even after the pandemic, making it essential to adapt teaching methods.
  3. While teaching online has its perks, there's a unique energy and connection in a physical classroom that many teachers miss and cherish.

Managing across the Corporate Life Cycle: CEOs and Stock Prices!

19 implied HN points • 10 Dec 21
💼 Business Management CEOs Corporate strategy Investing
  1. There isn't a one-size-fits-all for great CEOs. The right skills depend on what stage the company is in, from start-up to decline.
  2. Mismatches between a CEO and the company's needs can happen when boards hire someone who doesn't fit the current phase of the company, which can hurt the business.
  3. Investors should be cautious with founder-led companies because founders might not always have the skills needed as the company changes and grows.

Tesla's Trillion Dollar Moment: A Valuation Revisit!

19 implied HN points • 09 Nov 21
💰 Finance Valuation Investing Market Trends Corporate strategy Automotive Industry
  1. Tesla is primarily an automobile company, but it's unique because it has expanded its story beyond just cars. Despite the different angles like batteries and tech, cars are still at its core.
  2. Tesla is not like other car companies. It has higher profit margins and less capital investment, helping it grow quickly while spending less, a big change compared to traditional car makers.
  3. External factors like climate policies and the rise of electric cars have helped Tesla thrive. Its strong leadership under Elon Musk also significantly influences how people view the company.

The Billionaire Tax: The Worst Tax Idea Ever?

19 implied HN points • 25 Oct 21
🇺🇸 U.S. Politics Tax policy Wealth Inequality Legislation Political Economy Economic Justice
  1. The billionaire tax targets a very small number of rich people, but taxing such a small group can lead to unpredictable results and lower revenue. It's better to have broader taxes that apply to more people.
  2. This tax includes taxing unrealized capital gains, which means taxing increases in asset value that people haven't actually sold for cash. This creates challenges, as people need cash to pay taxes even if they haven't sold anything.
  3. The new tax may inadvertently affect other areas, like estate taxes, because it changes how asset values are assessed. This could lead to less tax revenue in the future instead of more.

Triggered Disclosures: Escaping the Disclosure Dilemma

19 implied HN points • 19 Oct 21
💼 Business Corporate Finance Accounting Regulation Investment Market Analysis
  1. Corporate disclosures have become very long and confusing, making it hard for investors to find important information. This complexity can confuse rather than inform potential investors.
  2. Instead of having a one-size-fits-all approach, disclosure rules should be tailored to fit the unique needs of different companies. This would help make disclosures clearer and more useful.
  3. The definition of materiality needs to change from focusing on past earnings to considering how information affects future company value. This would encourage companies to provide information that truly matters to investors.

The Indian Smartphone Revolution: Paytm's Coming of Age IPO!

19 implied HN points • 04 Oct 21
💼 Business Startups Finance Technology Investing Market Trends
  1. Smartphone usage in India has skyrocketed, making it the second largest market after China. This surge has opened up big opportunities for mobile payments.
  2. Paytm has grown alongside this smartphone boom, expanding its services significantly. Yet, it struggles with making profits while focusing mainly on gaining users.
  3. The company's future success hinges on balancing user growth with revenue generation. Investors should be cautious due to uncertainties around management's ability to pivot towards profit.

The ESG Movement: The "Goodness" Gravy Train Rolls On!

19 implied HN points • 14 Sep 21
💼 Business Finance Corporate Governance Sustainability Investment Strategies Market Trends
  1. Measuring goodness in businesses is really hard. Different people have different views on what is 'good,' making it tough to agree on what counts.
  2. Being a good company might help some businesses make more money, but it can also hurt others. The proof that being good pays off is still unclear.
  3. Trusting companies to be good for society isn’t enough. It’s important for individuals to make their own choices and not just rely on businesses to solve social issues.

China's Tech Crackdown: Its about Control, not Consumers or Competition!

19 implied HN points • 01 Sep 21
💼 Business Tech industry Market Analysis Government Influence Company Valuation Investment strategy
  1. China's tech crackdown focuses on control by the government rather than protecting consumers or fostering competition. This means the government wants to maintain power over tech companies and the data they possess.
  2. Chinese tech companies have seen significant changes in their market value due to increased government regulations. Investors are now reassessing their expectations and pricing based on the new reality of government control.
  3. The success of Chinese tech companies stems from their ability to adapt to the local market needs and not just copying foreign models. However, their dependency on domestic growth makes them vulnerable to government actions.

The Zomato IPO: A Bet on Big Markets and Platforms!

19 implied HN points • 22 Jul 21
💼 Business Market Analysis Investment Finance Tech Companies Food Delivery
  1. Zomato is a food delivery service in India that aims to grow as more people eat out and order food online. Investors are hopeful about its future, even though the company currently has low revenues and is experiencing losses.
  2. The Indian food delivery market is still small compared to countries like China and the U.S., mainly due to lower incomes and different dining habits. As incomes rise and digital access improves, this market could expand significantly.
  3. Zomato's success will depend on its ability to compete with other companies and adapt to changing market conditions. It may face challenges from competitors like Swiggy and Amazon Food as consumer preferences evolve.

Value Investing I: The Back Story

19 implied HN points • 23 Oct 20
💰 Finance Investment Market Trends Behavioral Finance Valuation Methods Risk management
  1. Value investing does not have a single definition; different investors have their own ways of approaching it. Some focus only on low price-to-earnings or book value, while others consider management quality and market conditions.
  2. There are different styles of value investing like contrarian investing, where you buy stocks that have dropped in price, or activist investing, where you aim to change company management to unlock value. Each has its own strategy for finding value.
  3. The belief that value investing is the best way to achieve long-term success comes from both success stories and academic support. Many investors follow this philosophy because it combines strong principles and practical results.

Sounding good or Doing good? A Skeptical Look at ESG

19 implied HN points • 21 Sep 20
💼 Business Corporate Finance Investment Strategies Social Responsibility Market Trends
  1. ESG, which stands for Environmental, Social, and Governance, is a popular business approach, but its actual benefits are unclear. Some argue it makes companies better, while others believe companies that do well just appear more socially responsible.
  2. Measuring social goodness is complicated because different services often give very different scores to the same company. This inconsistency makes it hard to agree on what makes a company 'good' or 'bad.'
  3. Investors should be cautious with ESG investments. Sometimes, focusing on social responsibility might not lead to higher profits. It's important to look at the bigger picture and not just rely on ESG ratings.

A Do-it-yourself (DIY) Valuation of Tesla: Of Investment Regrets and Disagreements!

19 implied HN points • 07 Feb 20
💰 Finance Investing Valuation Market Analysis Financial Modeling Stock Market
  1. Value of Tesla can change based on different factors like growth, profitability, investment, and risk. Each of these areas can greatly influence how much the company might be worth in the future.
  2. Investors should research and make their own estimates for Tesla's future. It's important to look at company performance and market trends to form a realistic view.
  3. Disagreements about Tesla's value are normal and part of investing. Investors should stick to their own valuations and beliefs without getting swayed by market noise.

IPO Lessons for Public Market Investors

19 implied HN points • 11 Oct 19
💰 Finance Investing Market Analysis Stock Performance Valuation
  1. IPOs are more about pricing than true value. Investors often focus on trends and momentum rather than the real financial health of the company.
  2. Estimating how much to pay for a new public company can be tricky. Many lack a solid peer comparison and only have past funding rounds to guide them.
  3. Many young companies have unstable share counts, which can lead to major miscalculations in their market value. Always double-check the number of shares when valuing an IPO.

January 2019 Data Update 5: Hurdle Rates and Costs of Financing

19 implied HN points • 24 Jan 19
💰 Finance Corporate Finance Investment Analysis Risk management Valuation
  1. Hurdle rates are important because they help companies decide whether to invest in a project. They reflect the risks involved and the expected returns for different funding sources.
  2. Businesses face various types of risks like business, financial leverage, country, and currency risks. Understanding these risks helps in accurately calculating the cost of capital.
  3. It's crucial to maintain consistency in currency analysis, adjusting for inflation and risk, as it affects investment evaluations. Choosing a currency should not change the project's perceived risk or outcome.

January 2019 Data Update 4: The Many Faces of Risk!

19 implied HN points • 21 Jan 19
💰 Finance Investing Risk Analysis Market Trends Portfolio Management Valuation
  1. Investing in stocks comes with various risks. It's important to see risk as a spectrum rather than just something that is present or absent in investments.
  2. Different types of risks can affect a company, and it's crucial to understand where these risks come from. Making smart investment choices often involves tackling the risks that seem the hardest.
  3. The way you measure risk matters and depends on how you invest. You might choose different metrics for assessing risk based on whether you're a long-term investor or a short-term trader.

January 2019 Data Update 3: Playing the Numbers Game!

19 implied HN points • 09 Jan 19
💰 Finance Market Analysis Data Trends Valuation Investment strategy Risk Assessment
  1. In 2019, a lot of companies around the world are included in the data analysis, and their classifications are based on geography and industry. This helps in understanding market trends more clearly.
  2. The U.S. firms are still the largest in terms of market value, but the emerging markets have a significant number of companies, highlighting diverse risks and opportunities.
  3. When analyzing financial data, it's important to remember that the numbers can change and may take time to update, so always verify information and be aware of timing issues.

January 2019 Data Update 2: The Message from Bond Markets!

19 implied HN points • 07 Jan 19
💰 Finance Bond Markets Interest Rates Economic Growth Investment Risk Market Trends
  1. Bond markets give hints about future economic growth and inflation. It's important to watch these markets to understand the economy better.
  2. In 2018, the bond yield curve flattened, meaning short-term rates increased. This change often gets people worried about potential recessions.
  3. Both bond and stock markets reacted similarly in 2018, with investors feeling more cautious and demanding higher prices for taking risks.

January 2019 Data Update 1: A reminder that equities are risky, in case you forgot!

19 implied HN points • 03 Jan 19
💰 Finance Investing Market Trends Equities Risk management Economic Analysis
  1. Investing in stocks comes with risk, and it’s important to remember that not every dip in prices is a chance to buy. Stocks can lose value, and there are reasons why they usually offer higher returns than safer investments.
  2. The equity risk premium, which tells us how much investors are being paid to take on the risk of stocks, has increased recently. This might suggest that stocks are undervalued compared to historical norms.
  3. Looking ahead, market conditions could be challenging with potential slowdowns in economic growth and global crises. Understanding these risks helps investors make more informed decisions.

Investing Whiplash: Looking for Closure with Apple and Amazon!

19 implied HN points • 03 Dec 18
💰 Finance Investing Market Analysis Valuation Risk management Behavioral Finance
  1. When investing, it's smart to set rules to avoid emotional decisions, like using limit orders to fight against personal biases.
  2. Intrinsic value of stocks can change over time, influenced by both company performance and broader market conditions.
  3. Investors should be flexible in their strategies, being willing to sell sooner if prices align with their valuations, even if it means not holding forever.

Share Count Confusion: Dilution, Employee Options and Multiple Share Classes!

19 implied HN points • 26 Jul 18
💰 Finance Valuation Equity Options Capital Markets Corporate Governance
  1. Young companies often face expected dilution, which means they will need to issue more shares to raise money. This can affect their value per share, as more shares mean the value is spread thinner.
  2. Stock-based compensation (SBC) can complicate valuations because it adds shares into the mix, affecting overall value. It's important to account for both past options and future grants to get a clear picture of share value.
  3. When companies have different types of shares that carry different voting rights, it can create confusion in valuations. Each share type must be valued separately to accurately determine their worth.

Stock-based Employee Compensation: Value and Pricing Effects

19 implied HN points • 13 Feb 14
💰 Finance Financial Analysis Corporate Finance Accounting Valuation
  1. Stock-based compensation is an expense that affects a company's earnings. It should be counted and not ignored because it represents a real cost to the business.
  2. Adjusting financial metrics like profits to remove stock-based compensation can be misleading. It can make a company look more profitable than it really is, especially when comparing with others that don’t do the same.
  3. The way companies handle stock-based compensation can impact their valuation. Analysts need to account for this properly to get an accurate picture of a company's worth.

First thoughts

39 implied HN points • 17 Sep 08
💰 Finance Corporate Finance Valuation Market Trends Investment Analysis
  1. The author has mixed feelings about starting a blog but wants to share their thoughts on finance regularly.
  2. They plan to discuss daily news and how it relates to corporate finance and valuation.
  3. The author intends to explore key finance themes and occasionally highlight specific companies for valuation discussions.