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Musings on Markets's Blog

Discounted Cashflow Valuations (DCF): Academic Exercise, Sales Pitch or Investor Tool?

July 29, 2015 Comments (0)

In my last post, I noted that I will be teaching my valuation class, starting tomorrow (February 2, 2015). While the class looks at the whole range of valuation approaches, it is built around intrinsic valuation, reflecting my biases and investment philosophy. I have already received a few emails, asking me whether this is an academic or a practical valuation class, a question that leaves me befuddled, since I am not sure what an academic value is.  As some of you who have read this blog...

The Dance of the Disrupted: Observations from the front lines

July 29, 2015 Comments (0)

Teaching is my passion, writing gives me joy and finance is my playground. While I am blessed in being able to immerse myself in all three, my activities put me in three businesses, education, publishing and financial services, that are begging to be disrupted. In fact, as disruption starts to challenge the status quo in all three businesses, I have a front row seat to observe how they react to these changes and perhaps add to their discomfort.  The targets of disruption As technology...

The X Factor in Value: Excess Returns in Theory and Practice

July 29, 2015 Comments (0)

There are lots of reasons why we try to start and run businesses. Some of them are emotional but the financial rationale for starting and staying in business is a simple one. It is to not just to make money, but to make more than what you would have made elsewhere with the capital (human and financial) invested in the business. Of course, your competitors, the government and sometimes the entire world seems to conspire against you (or at least it seems that way) to prevent you from making...

Putting the D in the DCF: The Cost of Capital

July 29, 2015 Comments (0)

If there were a contest for the most measured number in finance, the winner would be the cost of capital. Corporate finance departments around the world compute it as an integral part of investment analysis. Appraisers estimate it as a step towards estimating intrinsic or discounted cash flow value. Analysts spend disproportionate amounts of their time working on it, though not always for the right reasons or with the right inputs. Since I have spent a significant portion of my life, writing...

The Tax Story in 2015: Myths, Misconceptions and Reality Checks

July 29, 2015 Comments (0)

Each of us believes that we pay our fair share in taxes and that it is other people that do not, and not surprisingly, we find evidence to back up our priors. I find that the only way to at least partially offset my own biases is to look at the data. I have done it before, as in this post last year, but with the new data in hand, I thought it is worth an update. Corporate Tax Rates across CountriesI believe that the US tax code is full of perverse incentives for corporations to borrow too...

An ERP Retrospective: Looking back (2014) and Looking forward (2015)

July 29, 2015 Comments (0)

At the beginning of 2014, the expectation was that government bond rates that had been kept low, at least according to the market mythology, by central banks and quantitative easing, would rise and that this would put downward pressure on stocks, which were already richly priced. Perhaps to spite the forecasters, stocks continued to rise in 2014, delivering handsome returns to investors, and government bond rates continued to fall in the US and Europe, notwithstanding the slowing down of...

Country Risk, Return and Pricing: The Global Landscape in January 2015

July 29, 2015 Comments (0)

Advance warning: I apologize. I went a little over-the-top with heat maps in this post. They are neat, though, since you can hover over a country (with your mouse or clicker) and you should be able to see the data for that country. If you prefer your data in old-fashioned tables, they are available as links at the bottom of the post. I am happy to say that I am done with my data updates for 2015. While I like analyzing data, I am glad that I will not have to work with really big and...

Decline and Denial: Thoughts on Blackberry Endgame and Microsoft as Value Trap

September 24, 2013 Comments (0)

The last few days have been filled with reminders for me of both the destructive and the redemptive powers of Life. The weekend started with a family outing to a Yankee game. As a fan, it was wrenching to see Mariano Rivera and Andy Petite, two players who I have watched for almost two decades, pitch for the final time in Yankee stadium, but it was redeemed at least partially by a young Yankee pitcher, Ivan Nova, pitching a complete game on Saturday. Yesterday was my birthday, a joyous day...

Twitter announces IPO: The Pricing Game begins

September 18, 2013 Comments (0)

I have a Facebook account, but I almost never post. I also have a Linkedin account, but it is a not premium, largely because I am not that interested in finding out who is looking at my profile or endorsing me (often for skills I don't have). I do have a Twitter account and while I don’t post very often, I just like the ease with which it lets me bug thousands of people. All of this is of course a lead in to the story that I am sure will dominate the financial news for the next few weeks:...