Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

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Musings on Markets

FEBRUARY 15, 2023

As I have argued in all four of my posts, so far, about 2022, it was year when we saw a return to normalcy on many fronts, as treasury rates reverted back to pre-2008 levels, and risk capital discovered that risk has a downside.

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Profit and Loss Investments Hurdle Rate Accounting 52

Musings on Markets

FEBRUARY 27, 2023

In this post, I will focus on corporate debt in 2023, keeping in mind that it was a year where the tradeoffs changed, as interest rates rose to pre-2008 levels, and putting at risk those firms that had borrowed to capacity, or even beyond, at low interest rates.

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Musings on Markets

FEBRUARY 8, 2022

Risk and Hurdle Rates In investing and corporate finance, we have no choice but to come up with measures of risk, flawed though they might be, that can be converted into numbers that drive decisions. In corporate finance, this takes the form of a hurdle rate , a minimum acceptable return on an investment, for it to be funded.

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Musings on Markets

AUGUST 15, 2023

In every introductory finance class, you begin with the notion of a risk-free investment, and the rate on that investment becomes the base on which you build, to get to expected returns on risky assets and investments. What is a risk free investment?

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Musings on Markets

JANUARY 12, 2021

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

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Musings on Markets

JANUARY 9, 2021

To illustrate, consider a practice in valuation, where analysts are trained to add a small cap premium to discount rates for smaller companies, on the intuition that they are riskier than larger companies. In closing, I also want to dispense with the notion that data is objective and that numbers-focused people have no bias.

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Musings on Markets

JANUARY 27, 2021

Currency Pricing : Currencies are priced against each other, with the prices taking the form of "exchange rates". You could argue that this divide has existed from its creation in 2008, both in terminology (you mine for bitcoin, just as you do for gold) and in its design (an absolute limit on its numbers, creating scarcity).

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Musings on Markets

JANUARY 5, 2024

The numbers that I computed opened my eyes to how much perspective on the high, low, and typical values, i.e., the distribution of margins, helped in valuing the company, and how little information there was available, at least at that time, on this dimension. Aggregate operating numbers 3. Ratings & Spreads 2. Tax rates 4.

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Musings on Markets

MARCH 8, 2023

The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business. in 2011 (a 20% capital gains rate + 3.8%

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Hurdle Rate Corporate Finance Investments Finance 91

CFO News Room

NOVEMBER 8, 2022

” look at the Monte Carlo simulations, look at what is the hurdle rate. So, last year, valuations were high, interest rates were low. And so, that can move the numbers, as well. We’re using these very low interest rates…or return rates.” Where do you derive your numbers from?

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Barry Ritholtz

FEBRUARY 21, 2023

We’ve always been a virtual company, just used to be through the mail and 1-800 number when I joined. And that app has gone way past the satisfaction ratings, client satisfaction ratings of the past one. So that’s a number I hadn’t seen before. Number one, you put it back into the business.

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Leadership Investments Profit and Loss Technology 107

Musings on Markets

JANUARY 6, 2023

Mean reversion : I am not a knee-jerk believer in mean reversion, but the tendency for numbers to move back towards averages is a strong one. Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all.

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Barry Ritholtz

MAY 9, 2023

He co-chairs a number of the asset management investment committees. So I interviewed with a bunch of banks, got a number of job offers by the end of the week, and joined Goldman Sachs in October 1998. I ended up being hired onto the high yield desk as a research analyst and did that for a number of years, a couple of years.

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Barry Ritholtz

NOVEMBER 8, 2022

His latest book could not be more timely, “The Price of Time: The Real Story of Interest,” it’s all about the history of interest rates, money lending, investing speculation, funded by banks and loans and credit. I’ve read the other stuff, Kindleberger got rate [ph] and that sort of stuff. There’s a shortage.

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Musings on Markets

JANUARY 20, 2021

The failures of the signal have been variously attributed to low interest rates, accounting mis-measurement of earnings (especially at tech companies), and by some, to animal spirits. One explanation is that the bond market beliefs that the worst of the crisis is over and that default rates will return quickly to pre-COVID levels.

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Musings on Markets

JULY 25, 2023

That risk can show up as costs (of buying protection or insurance) or as uninsurable risks that drive up the rates of return investors and businesses need to make, in order to operate. Sovereign Ratings The most widely used measures of sovereign default risk come from a familiar source for default risk measures, the ratings agencies.

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Barry Ritholtz

DECEMBER 26, 2023

And 00:06:38 [Speaker Changed] Door number one was much better than door number three in, in the circumstances. It’s about a 50% fail rate, something like that. I rely on our analysts ratings at the firm. When we talk about breadth, we’re talking about the numbers of advancers versus decliners.

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