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Introduction to QuantLib Development with Luigi Ballabio - London, September 19-21st, 2016 -

Musings on Markets's Blog

Big Markets, Over Confidence and the Macro Delusion!

August 28, 2015 Comments (0)

In early October of 2013, I was sitting in the waiting room at CNBC, waiting to talk about Twitter, which had just filed its prospectus (for its initial public offering). I was sharing the room with an analyst who was very bullish on the company, and he asked me what I thought Twitter was worth. When I replied that I had not had a chance to value the company yet, he suggested that I should save myself the trouble, and that the stock was worth at least $60 a share. Curious, I asked him why,...

Another Market Crisis? My Survival Manual/Journal!

August 26, 2015 Comments (0)

I would be lying if I said that I like down markets more than up markets, but I have learned to accept the fact that markets that go up will come down, and that when they do so quickly, you have the makings of a crisis. I find myself getting more popular during these periods, as acquaintances, friends and relatives that I have not heard from in years seem to find me. They are  invariably disappointed by my inability to forecast the future and my unwillingness to tell them what to do...

My Valuation Class: The Fall 2015 Model Preview

August 24, 2015 Comments (0)

It is almost September and as the academic clock resets for a new year,  I get ready to teach a new valuation class. With three hundred registered students, it is about as diverse a class as any I have every taught, with a mix of full-time  and part-time MBA students, law and engineering graduate students and a few dozen undergraduates. And with a market meltdown framing discussions, it will be interesting to see how the class plays out. As always, I cannot wait for the class to...

Beijing Blunders: Bull in a China Shop!

August 21, 2015 Comments (0)

I have generally steered from using my blog as a vehicle for rants, not because I don't have my share of targets, but because I know that while ranting makes me feel better, it almost always creates more costs than benefits. It is true that I have had tantrums (mini-rants) about the practice of adding back stock-based compensation to EBITDA or expensing R&D to get to earnings, but the targets of those tend to be harmless. After all, what can sell-side  equity research analysts or...

Storied Asset Sales: Valuing and Pricing "Trophy" Assets

August 15, 2015 Comments (0)

Pearson PLC, the British publishing/education company, has been busy this summer, shedding itself of its ownership in two iconic media investments, the Financial Times and the Economist. On July 23, 2015, it sold its stake in the Financial Times for $1.3 billion to Nikkei, the Japanese media company, after flirting with Bloomberg, Reuters and Axel Springer. It followed up by selling its 50% stake in the Economist for $738 million, with 38% going to Exor, the investment vehicle for the Agnelli...

Narrative Resets: Revisiting a Tech Trio (Apple, Facebook and Twitter)

August 12, 2015 Comments (0)

In a post in August 2014, I examined the importance of narratives in valuation and how shifts or changes in those narratives can affect value, using Apple, Twitter and Facebook to illustrate my point. Since all of these companies have reported earnings in the last few weeks, I revisited my valuations of these companies, with the specific intent of seeing whether there is a need to update the narratives (and values) for these companies and whether, as an investor, I need to act. AppleI have...

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

August 8, 2015 Comments (0)

Most people don't trust DCF valuations, and with good reason. Analysts find ways to hide their bias in their inputs and use complexity to intimidate those who not as well versed in the valuation game. This may surprise you, but I understand and share that mistrust, especially since I know how easy it is to manipulate numbers to yield almost any value that you want, and to delude yourself, in the process. It is for this reason that I have argued that the test of a valuation is not in the...

The Invisible Hand or Government Edict!

August 3, 2015 Comments (0)

I have heard from lots of you about the irrationality of investors and why it is therefore appropriate for the government to step in and save us from ourselves. Let me say at the outset that I agree with you that investors sometimes behave irrationally. They are short term, overreact to news and often panic. However, I am not sure that any of this supports the notion of governments wielding a heavy hand. After all, it is the same human beings who foul up the market mechanism that make up our...

Decoding Currency Risk: Pictures of Global Risk - Part IV

July 30, 2015 Comments (0)

In my last three posts, I have looked at country risk, starting with measures of that risk and then moving on to valuing and pricing that risk. You may find it strange that I have not mentioned currency risk in any of these posts on country risk, but in this one, I hope to finish this series by looking first at how currency choices affect value and then at the dynamics of currency risk.   Currency Consistency A fundamental tenet in valuation is that you have to match the currency in...