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Musings on Markets's Blog

Mean Reversion: Gravitational Super Force or Dangerous Delusion?

August 31, 2016 Comments (0)

In my last post on the danger of using  single market metric to time markets, I made the case that though the Shiller CAPE was high, relative to history, it was not a sufficient condition to conclude that US equities were over valued. In the comments that followed, many disagreed. While some took issue with measurement questions, noting that I should have looked at 10-year correlations, not five and one-year numbers, others argued that this metric was never meant for market timing and...

Superman and Stocks: It's not the Cape (CAPE), it's the Kryptonite(Cash flow)!

August 24, 2016 Comments (0)

Just about a week ago, I was on a 13-hour plane trip from Tokyo to New York. I know that this will sound strange but I like long flights for two reasons. The first is that they give me extended stretches of time when I can work without interruption, no knocks on the door or email or phone calls. I readied my lecture notes for next semester and reviewed and edited a manuscript for one of my books in the first half on the trip. The second is that I can go on movie binges with my remaining time,...

The Bonfire of Venture Capital: The Good, Bad and Ugly Side of Cash Burn!

August 19, 2016 Comments (0)

In my last post on Uber, I noted that it was burning through cash and that this cash burn, by itself, is neither unexpected nor a bad sign. Since I got quite a few comments on what I said, I decided to make this post just about the causes and consequences of cash burn. In the process, I hope to dispel two myths held on opposite ends of the investing spectrum, the notion on the part of value investors, that a high cash burn signals a death spiral for a business and the equally strongly held...

The Ride Sharing Business: Is a Bar Mitzvah moment approaching?

August 17, 2016 Comments (0)

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Investing and Valuation Lessons from the Renaissance

August 15, 2016 Comments (0)

I just got back a few days ago from a two-week family holiday in Italy, where we spent the bulk of the second week in Florence, which we used as a springboard to see Tuscany. I kept away from work through much of the period, though I did check my emails once in a while and even tried answering a few on my iPhone, where my awful typing skills restricted me to one-sentence responses. So, if you were one of those people that I responded to, I apologize if I seemed brusque. That said, I am also...

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

July 23, 2016 Comments (0)

About a year ago, I completed my first  update of a paper looking at all aspects of country risk, from political risk to default risk to equity risk, and wrote about my findings in three posts, one on how to incorporate risk in company value, the second on the pricing of country risk and the last one on decoding currencies. The twelve months since have been interesting, to say the least, and unsettling to many as markets were buffeted by crises. In August 2015, a month after my...

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

July 22, 2016 Comments (0)

About a year ago, I completed my first  update of a paper looking at all aspects of country risk, from political risk to default risk to equity risk, and wrote about my findings in three posts, one on how to incorporate risk in company value, the second on the pricing of country risk and the last one on decoding currencies. The twelve months since have been interesting, to say the least, and unsettling to many as markets were buffeted by crises. In August 2015, a month after my...

Tesla: It's a story stock, but what's the story?

July 14, 2016 Comments (0)

The last few weeks have tested Tesla’s shareholders and frustrated short sellers in the stock. Shareholders have had to weather a series of bad news stories, ranging from a failure to meet its shipment targets in the last few months to a fatality with a driver using its autopilot function to a surprise acquisition of Solar City. While each of those stories has created pressure on the stock, the price has held up surprisingly well, frustrating long-time short sellers who have been waiting for...

The Brexit Effect: The Signals amidst the Noise

June 29, 2016 Comments (0)

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Icahn, Buffett and Apple: Big Name Investors, Value and Price!

June 6, 2016 Comments (0)

In my last post, I looked at Apple, arguing, with a Monte Carlo simulation, that the stock was a good investment at the prevailing market price ($93 at the time of the analysis). I appreciate the many comments that I got on the analysis, some taking issue with the distributions that I used for profit margins and revenue growth and some taking me to task for ignoring the fact that big name investors were either entering and exiting the stock. Those who felt that my valuation was optimistic...