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

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A Viral Market Meltdown VI: The Price of Risk

0 implied HN points • 08 Apr 20
💰 Finance Market Analysis Risk Assessment Investment Strategies Economic Trends
  1. The stock market has been very volatile recently, but there was a slight calm where prices only changed by small amounts, which felt stable compared to earlier weeks.
  2. Investors are worried about risks, which has made them demand higher returns on both stocks and bonds. This means that the price of risk is rising across the board.
  3. The pandemic is making it vital for companies to regularly update their estimates of risk and returns instead of relying on old data, as the market is shifting rapidly.

A Viral Market Update IX: A Do-it-Yourself S&P 500 Valuation

0 implied HN points • 04 Jun 20
💰 Finance Market Analysis Valuation Methods Equity Research Investment strategy Risk Assessment
  1. Stock prices can rise even when the economy is doing badly. This happens because companies can still make money, which keeps investors interested.
  2. The market doesn’t always reflect the current situation. Sometimes, it takes time for stock prices to catch up with economic changes.
  3. Investors should have a clear story or a plan about why they think the market will go up or down. It’s important to avoid getting mad when the market doesn’t match their expectations.

Apple's Crown Jewel: Valuing the iPhone Franchise

0 implied HN points • 29 Aug 12
💼 Business Market Analysis Corporate strategy Valuation Methods Financial Performance Investment Trends
  1. The iPhone makes a lot of money for Apple, generating $100 billion in sales and $21 billion in profits last year. It's a big part of why Apple is so valuable.
  2. Apple has a strong position in the growing smartphone market, selling about 20% of all smartphones while making 43% of the money in that market because of its higher prices.
  3. The iPhone has a short life cycle, meaning customers often wait for the next version. This puts pressure on Apple to keep improving and innovating to keep customers coming back.

A Viral Market Update XI: The Flexibility Premium

0 implied HN points • 02 Jul 20
💰 Finance Market Analysis Investment Strategies Corporate Finance Risk management Economic Trends
  1. Flexibility is key for businesses during tough times. Companies that can quickly adapt their operations are often more successful.
  2. Investment, operating, financing, and cash return flexibilities are important factors. Companies that manage these well are more likely to thrive.
  3. However, focusing on flexibility can have trade-offs like shorter business lifecycles and social costs. It's crucial to balance flexibility with long-term stability.

Illusion, Perception and Reality: Stock Splits and Index Inclusions

0 implied HN points • 01 Sep 20
💰 Finance Stock Market Investing Valuation Market Trends Behavioral Finance
  1. Stock splits and index inclusions may seem unimportant, but they impact market behavior. They can cause prices to move even without changes in a company's real value.
  2. Value events, gap events, and pricing events are all different types of stock market occurrences. Each type changes prices in different ways, whether by affecting value, closing price gaps, or changing investor sentiment.
  3. Traders often react to stock splits and index changes to capitalize on market momentum. However, long-term investors should focus on fundamentals instead of getting swayed by these temporary market changes.
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It's time: A new semester begins.. and you are welcome to join in...

0 implied HN points • 01 Feb 13
🚌 Education Online Learning Corporate Finance Valuation Student Engagement
  1. The new semester for corporate finance and valuation classes starts soon, and everyone is welcome to join, either live or through recorded sessions.
  2. Participants can choose from various platforms like a personal website, Lore, iTunes U, and Symmynd to access course materials and lectures.
  3. To help with the busy lives of students, the classes will have flexible content availability, shorter lecture versions, and online quizzes to keep learners engaged and assess their understanding.

A Violent Earnings Season: Pricing and Value Perspectives

0 implied HN points • 08 Feb 16
💰 Finance Investing Market Analysis Earnings Reports Valuation Financial trends
  1. Price and value are not the same. Price is what people are willing to pay, while value is based on a company's ability to make money.
  2. Earnings reports can heavily influence stock prices. Companies can see big swings up or down depending on whether they meet or miss expectations.
  3. Understanding the whole picture in earnings reports is important. Looking at various numbers is better than just focusing on earnings per share.

Parent versus Consolidated financial statements

0 implied HN points • 03 Jun 10
💰 Finance Accounting Investing Valuation Financial Statements Corporate Finance
  1. Parent company statements show only the parent’s results, while consolidated statements combine both the parent and its subsidiaries' financials. This can affect how investors view a company's worth.
  2. Consolidated statements leave out transactions between the parent and subsidiaries, giving a clearer picture of overall performance. This means some revenues might be excluded, which can look different from parent-only reports.
  3. When valuing a company, using parent company statements allows for flexibility across different businesses, while consolidated statements are helpful for understanding the whole group. The choice depends on how similar the parent and subsidiaries are.

Interest Rates, Earning Growth and Equity Value: Investment Implications

0 implied HN points • 25 Mar 21
💰 Finance Investment Interest Rates Stocks Economic Growth Market Trends
  1. Interest rates have risen significantly, which affects how investors view stocks. Higher rates can lead to lower stock values, but it depends on whether the rise is due to economic growth or inflation.
  2. Different types of companies react differently to interest rate changes. Young growth companies, which rely more on future earnings, can be hurt more than mature companies during times of rising rates.
  3. The performance of the stock market has been uneven, with some sectors thriving while others struggle. The ongoing shifts highlight the complex relationship between interest rates, economic growth, and stock performance.

Twitter IPO: Why a good trade be a bad investment (or vice versa)?

0 implied HN points • 10 Oct 13
💰 Finance Investing Trading Market Analysis Valuation Risk management
  1. There’s a big difference between price and value. Price is what people are willing to pay, while value is what the actual worth of the asset is supposed to be.
  2. Traders focus on price movements and market trends to make quick profits. Investors look for long-term value and often ignore short-term price changes.
  3. Both trading and investing are important in markets. Traders create opportunities for investors by moving prices, while investors help stabilize the market.

Fama-French and the Proxy Wars

0 implied HN points • 21 Feb 09
💰 Finance Investing Risk management Market Analysis Financial Models Investing Market Trends Corporate Finance
  1. Fama and French found that traditional models like CAPM don't explain stock returns well, especially over long periods. They looked for other factors that might explain differences in returns better.
  2. They discovered that smaller companies and those with low price-to-book ratios tended to have higher returns. They saw these factors as signs of risk rather than market inefficiencies.
  3. In deciding between using CAPM or their proxy models, it often depends on your goal. For evaluating past performance, proxy models work well, but for future return predictions, sticking with CAPM is usually better.

What is debt?

0 implied HN points • 07 Mar 09
💰 Finance Debt Management Corporate Finance Investment Analysis Valuation Techniques Risk Assessment Debt Management Corporate Finance Valuation Investment Analysis Risk Assessment
  1. Debt involves fixed payments that must be made regardless of a company's financial situation. If a company doesn't make these payments, it risks losing control over its assets.
  2. Interest payments on traditional loans and bonds are usually clearly defined, making them straightforward to classify as debt. However, items like accounts payable are trickier because their costs are often included in broader categories without clear interest rates.
  3. Lease commitments are considered debt because they involve contractual obligations and can have legal consequences if unpaid. For many companies, lease payments represent a significant portion of their overall debt.

A DIY (Do-It-Yourself) Valuation of Zomato

0 implied HN points • 03 Aug 21
💰 Finance Valuation Investment Market Analysis Company analysis Financial Metrics
  1. Valuation is more about common sense than expertise. Anyone can learn to value a company by understanding the basics and using a straightforward approach.
  2. Investing requires personal responsibility. You should make your own decisions based on your evaluation rather than just following what others say or do.
  3. Gather diverse opinions and stay open to feedback. Engaging with different viewpoints can improve your understanding and lead to better investment decisions.

Value in the eye of the storm: Why you should welcome uncertainty!

0 implied HN points • 19 Nov 13
💰 Finance Investment Valuation Market Analysis Risk management Economic Theory
  1. Valuing companies during uncertain times can actually give you an edge over others. When everyone else is scared, you can find opportunities others might miss.
  2. If you wait for all the uncertainties to clear up before making your investment decisions, you might lose out. Act when things are messy, as your insights are most valuable then.
  3. If many investors are saying something can't be valued, that's when you should jump in and try. There might be hidden potential in areas others overlook.

A Teaching Manifesto: An Invitation to my Spring 2020 classes

0 implied HN points • 19 Dec 19
🚌 Education Teaching Methods Online Learning Investment Strategies
  1. The Spring 2020 classes will be available online for free, allowing anyone to watch the sessions and access materials at their convenience. You can choose to take the classes in real-time or catch up later with the recorded videos.
  2. There is a free online version of the classes that offers shorter, 12-15 minute videos for easier viewing. These are designed to fit better into people's busy lives compared to the longer, full-length sessions.
  3. NYU now offers a paid certificate version of the classes, which includes quizzes, projects, and live sessions with the instructor to help deepen understanding and ensure learning. This version is different from the free classes and has additional requirements.

What's in a name? Of Umlauts, The Alphabet and World Peace!

0 implied HN points • 09 Sep 15
💼 Business Marketing Corporate strategy Branding Consumer behavior Business valuation
  1. Changing names can help businesses escape negative associations, like when Philip Morris became Altria to distance itself from tobacco.
  2. Sometimes a name change reflects a shift in focus or values for a company, like when Apple dropped 'Computer' from its name as it began selling more phones and tablets.
  3. Names matter in marketing and can influence a company's value, as shown by how stock prices react to name changes, even if the business itself doesn't change much.

Dream Big or Stay Focused? Lyft's Counter to Uber!

0 implied HN points • 19 Oct 15
💼 Business Valuation Investment Market Analysis Corporate strategy
  1. Lyft focuses on the US market, while Uber aims for global reach. This difference defines their business strategies and growth potential.
  2. Uber has a larger valuation compared to Lyft due to its big narrative, drawing investor attention and funding. Lyft, though smaller, may offer better investment value at its current price.
  3. Both companies face significant losses as they compete, but Lyft's focus could help it avoid the high costs and distractions associated with a broader global strategy.

Deutsche Bank: A Greek Tragedy at a German Institution?

0 implied HN points • 06 Oct 16
💰 Finance Banking Investment Regulations Market Analysis Risk management
  1. Deutsche Bank has experienced a significant drop in its stock price and market value, which has raised concerns among investors regarding its stability and future prospects.
  2. The bank's recent troubles are attributed to a mix of bad investment decisions and regulatory challenges, especially after facing a large fine from the US Department of Justice.
  3. Despite the current perception of risk, some investors see an opportunity as the stock may be undervalued, but it's important to recognize the risks associated with such investments.

Runaway Stories and Fairy Tale Endings: The Cautionary Tale of Theranos

0 implied HN points • 12 Nov 15
💼 Business Startups Healthcare Venture Capital Corporate Governance Entrepreneurship
  1. Theranos started with a great story of innovation, aiming to make blood tests cheaper and less painful, which attracted a lot of excitement and investment.
  2. However, the company faced major issues when it was revealed that their technology didn't deliver reliable results, leading to a decline in trust and support.
  3. It's important for investors and journalists to look beyond a compelling narrative and question the science and governance behind a company to avoid being misled.

The Yahoo! Chronicles! Is this the End Game?

0 implied HN points • 07 Dec 15
💼 Business Corporate strategy Mergers & Acquisitions Investor Relations Tech Companies Market Valuation
  1. Yahoo has struggled to find its place in the tech world after losing the search engine battle to Google. Most of its value comes from investments in Alibaba and Yahoo Japan, not from its own business.
  2. Marissa Mayer, Yahoo's CEO, faced a tough challenge because she had little control over the company's most valuable assets. Many thought she could turn things around, but the odds were against her from the start.
  3. Instead of taking massive risks to try and save the company, experts suggest Yahoo should focus on selling off its operating business and return value to shareholders. This could mean changing its focus to just being a holding company for its more successful investments.

Preferred Stock: Fish or Fowl?

0 implied HN points • 21 Mar 09
💰 Finance Investing Stocks Capital Economics Market Analysis Stock Market Capital Structure Dividend Policy Corporate Finance
  1. Preferred stock is tricky because it behaves differently in the U.S. compared to other countries. In the U.S., it mainly gives fixed dividends, while in places like Brazil, it acts more like common stock with variable dividends.
  2. When figuring out a company's cost of capital, preferred stock can be confusing. If it makes up less than 5% of the company's value, it's easier to ignore; if it's more, you need to treat it as a separate source of funding.
  3. Although preferred stock is like expensive debt without tax benefits, some companies still use it to raise money. The reasons for this will be discussed in more detail later.

Apple and Amazon at a Trillion $: Looking Back and Looking Forward!

0 implied HN points • 19 Sep 18
💼 Business Companies Finance Investing Market Analysis Valuation
  1. Apple and Amazon both faced tough times on their way to becoming trillion-dollar companies. They dealt with challenges and used those experiences to grow stronger.
  2. Apple's success mainly comes from the iPhone, but it's now a mature company with slower growth. In contrast, Amazon continues to aim for high growth, even if it means waiting for profits.
  3. Apple generates lots of cash flow and returns it to shareholders, while Amazon focuses on reinvesting for growth. This difference shapes how investors see and value each company.

Race to the top: The Duel between Alphabet and Apple!

0 implied HN points • 15 Feb 16
💼 Business Market Analysis Corporate Finance Investment strategy Economics
  1. Apple's recent earnings show mixed results, with record profits but lower iPhone sales. Investors reacted negatively, suggesting concerns about future growth.
  2. Alphabet's earnings surpassed expectations, highlighting strong revenue growth and profit margins. The company's core business remains robust, keeping it ahead in market valuation.
  3. When comparing as investments, Apple might be seen as a safer bet due to its strong value at low growth expectations, while Alphabet relies on consistent high growth to maintain its price.

The future of the MBA

0 implied HN points • 27 Apr 09
💼 Business Education Finance Economics Management Market Trends Education Finance Management Market Trends Employment
  1. The demand for MBA programs is decreasing, especially as the financial services sector struggles. Many students might think twice before leaving their jobs to enroll.
  2. Business schools need to learn from recent financial crises and adjust their teaching methods. It's important to improve education rather than defensively hold on to outdated strategies.
  3. Professors in business schools should focus on their unique skills and advantages. If their teaching is too standard, it won't justify the high costs for students.

The Disruptive Duo: Amazon and Netflix!

0 implied HN points • 17 Feb 16
💼 Business Investing Valuation Technology Market Trends E-commerce Streaming services
  1. Amazon and Netflix are changing the market game. Some people think their stocks are too expensive, while others believe they are just getting started with their growth.
  2. Both companies are willing to invest heavily now, betting that they will make profits in the future. They are focusing on growing internationally to attract more customers.
  3. Traditional accounting makes it look like these companies aren’t very profitable. But if we shift how we think about their spending, they could actually appear much more valuable than many realize.

Checkmate or Stalemate? Valeant's Fall from Investing Grace

0 implied HN points • 11 Nov 15
💼 Business Investing Pharmaceuticals Market Analysis Financial risk Corporate strategy
  1. Valeant's growth strategy focused on buying other companies to quickly boost revenues. This approach worked for a while but relied heavily on acquisitions rather than innovation.
  2. The rise and fall of Valeant shows how important ethical practices are in business. Many investors were drawn to Valeant's pricing strategies but faced backlash when those practices were exposed.
  3. The company's complex structure and accounting methods led to confusion and skepticism among analysts and investors. This complexity ultimately contributed to its rapid decline as trust eroded.

Management Matters: Facebook and Twitter!

0 implied HN points • 19 Feb 16
💼 Business Finance Management Investing Technology Marketing
  1. Facebook has shown strong growth by successfully monetizing its vast user base and adapting quickly to mobile. This adaptability, coupled with strategic acquisitions, has positioned Facebook as a market leader in online advertising.
  2. Twitter, on the other hand, has struggled to turn its large user base into profits. Despite having many users, its approach to attracting advertising has not worked well, leading to declining stock values.
  3. The management strategies of these companies can greatly impact investor confidence and company performance. Good decisions lead to success like Facebook's, while poor decisions can hinder companies like Twitter.

No Mas, No Mas! The Vale Chronicles (Continued)!

0 implied HN points • 26 Sep 15
💰 Finance Investing Valuation Stock Market Corporate Finance
  1. Valuing companies in tough situations, like Vale, can give investors better returns if done right. Even when the market is uncertain, having a value estimate can still be useful.
  2. Political and country risks can have long-lasting effects on investments. Inconsistent political situations can make it harder to predict investment outcomes.
  3. The amount of debt a company holds can worsen its financial problems. High debt levels can limit a company's ability to recover from market downturns, making cautious investment essential.

Lazarus Rising or Icarus Falling? The GoPro and LinkedIn Question!

0 implied HN points • 23 Feb 16
💼 Business Investment Stock Market Social media Technology Companies
  1. GoPro's stock has dropped significantly due to slower sales and increased competition. Investors are unsure if it can bounce back or if its best days are behind it.
  2. LinkedIn has seen different trends with more stability in revenue growth. It generates most of its income from subscriptions and matches, not just ads, which helps it stand out.
  3. Valuing companies like GoPro and LinkedIn involves considering their products and market positions. Both have unique challenges but show different paths for future success.

The Fed, Interest Rates and Stock Prices: Fighting the Fear Factor

0 implied HN points • 04 Sep 15
💰 Finance Interest Rates Stock Markets Central Banks Economic Policy Market Trends
  1. The Federal Reserve doesn't directly set all interest rates. They mainly control the Fed Funds rate, which doesn’t affect most people directly.
  2. Low interest rates are not solely because of the Fed. They reflect low inflation and slow economic growth, not just central bank actions.
  3. High stock prices don't only result from low interest rates. They also depend on company earnings and cash flows, which are currently under pressure.

Stock versus Flow: My thoughts

0 implied HN points • 09 Apr 10
💰 Finance Investing Financial Analysis Corporate Finance Accounting Valuation Investing Accounting Corporate Finance Financial Analysis Valuation
  1. Balance sheets show a company's financial position at a specific time, but they can be misleading. Numbers like debt and cash can change significantly over time, making it hard to trust a single balance sheet.
  2. Flow statements, like the income and cash flow statements, show money coming in and going out over a period. These are generally more reliable for understanding a company's performance.
  3. To get a clearer picture of a company's financial health, look at quarterly balance sheets and current numbers instead of just year-end figures. This helps catch any manipulation or changes in financial status.

Buffett: Man or Myth

0 implied HN points • 02 Mar 09
💼 Business Investing Finance Corporate Governance Market Strategy Value investing Investing Management Finance Economics Corporate Governance
  1. Warren Buffett is a successful investor known for his philosophy of buying businesses rather than stocks. This approach has helped him make smart investment choices over the years.
  2. Buffett prefers investing in well-managed, mature companies and avoids being an activist investor. He values companies with strong leadership and tends to stick to his area of expertise.
  3. People often misunderstand Buffett's approach to risk. He does consider risk when investing, using conservative cash flow estimates to guide his decisions, so it's important to not ignore risk in your own investing.

Currency Choices in Valuation

0 implied HN points • 16 Apr 10
💰 Finance Valuation Currency Risk Investment Analysis Valuation Currency Risk management Investment Analysis Financial Statements
  1. You should value a company in the currency that is easiest for you to access information in. It shouldn't matter which currency you choose because the company's value should stay the same.
  2. Your discount rate is influenced by the currency you select, especially the risk-free rate, which varies with inflation. Always ensure your cash flows and discount rate are in the same currency.
  3. To avoid currency confusion, you can analyze in real terms, using real discount rates and cash flows. It's important to stick with your initial currency choice throughout the analysis.

DCF Myth 2: A DCF is an exercise in modeling and number crunching!

0 implied HN points • 08 Aug 15
💰 Finance Valuation Investing Corporate Finance Financial Analysis Market Dynamics
  1. Valuation is not just about numbers; it's about the story behind those numbers. A good valuation connects a company’s narrative to its financial data.
  2. In early-stage companies, the narrative drives value more than the numbers. As companies mature, the focus shifts to actual financial performance.
  3. Investors should look for significant changes in a company's narrative rather than just details like revenue or earnings per share. A strong story is essential for understanding a company's value.

Decoding Currency Risk: Pictures of Global Risk - Part IV

0 implied HN points • 30 Jul 15
💰 Finance Valuation Inflation Investment Analysis Market Dynamics
  1. When valuing something, it's important to match the currency of your cash flows with your discount rate. This is because different currencies have varying expected inflation rates, which can affect both the cash flows and the discount rates.
  2. You should be careful when estimating expected growth rates and cash flows, as they need to reflect the same inflation assumptions used for discount rates. If they don't match, you might miscalculate a company's value.
  3. It's essential to separate your views on currency movements from your company valuations. A well-run company should be worth the same regardless of the currency used, as long as the valuation methods are consistent.

Alternatives to Regression Betas

0 implied HN points • 15 Feb 09
💰 Finance Risk Assessment Investment strategy Market Analysis Statistical Methods Investment Risk Assessment Market Analysis Valuation Methods Financial Metrics
  1. You can use relative standard deviations instead of regression betas to measure risk. This method looks at how a stock's volatility compares to the average volatility of other stocks.
  2. Option-based methods provide a forward-looking estimate of risk by using prices from traded options. However, this approach only works for companies with those options and bonds available.
  3. Accounting betas are calculated by looking at changes in a company's earnings compared to the overall market. They can be a stable alternative, especially for private companies, but their lagging nature can be a drawback.

Pricing Country Risk - Pictures of Global Risk - Part III

0 implied HN points • 29 Jul 15
💰 Finance Investing Risk Assessment Valuation Market Analysis Financial Metrics
  1. Country risk should be considered in investment strategies. Riskier countries generally have lower price-to-earnings (PE) ratios compared to safer ones.
  2. Comparing different equity multiples can help find good investment opportunities. However, you must be careful as some outlier countries can skew the results.
  3. Using enterprise value multiples can be less affected by country risk, but may still not fully account for it. A good approach is to value and price companies together to make informed investment choices.

Is your CEO worth his (her) pay? The Pricing and Valuing of Top Managers!

0 implied HN points • 29 Apr 15
💼 Business Corporate Governance Market Dynamics Performance Metrics
  1. CEO pay has increased significantly over the years, often rising faster than employee wages, and is often tied to stock performance.
  2. Many CEOs are compensated based on market trends rather than their actual performance, which can lead to overpayment.
  3. Good corporate governance is needed to ensure that shareholders can effectively influence CEO compensation decisions.

The Search for Investment Serenity: The Look Back Test!

0 implied HN points • 20 Apr 15
💰 Finance Investing Valuation Behavioral Finance Market Analysis Risk management
  1. Investors should regularly review their past investments to make better decisions. This means questioning whether to buy, hold, or sell based on current valuations.
  2. It's important to be open about mistakes and avoid emotional decision-making in investing. Being transparent can help you learn and improve your strategy.
  3. Having a balanced approach to investing is key. Too much faith can lead to ignoring potential issues, while too little can cause you to abandon good investments too soon.

Stockholder democracy...

0 implied HN points • 22 May 09
💼 Business Corporate Governance Finance Investments Market behavior Stock Markets Investments Corporate Governance Regulation
  1. Shareholder democracy is complicated. While it might seem simple to let shareholders propose board members, different shareholders have different interests that can conflict.
  2. Some investors may actually benefit if the company fails, like those involved in credit default swaps. This can lead to them nominating directors who might hurt the company.
  3. It's hard to decide who can be a 'good' shareholder. Since everyone's interests differ, trusting voters to make good choices is important, even if those choices vary widely.