tag:blogger.com,1999:blog-8152901575140311047.comments2024-03-18T10:18:19.736-04:00Musings on MarketsAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger8668125tag:blogger.com,1999:blog-8152901575140311047.post-8706226245279399412022-01-29T11:53:55.345-05:002022-01-29T11:53:55.345-05:00Dear Prof.Ashwath,
the second half of your post r...Dear Prof.Ashwath,<br /><br />the second half of your post reminded me of Prof.Jayanth Varma's class on Forward Rates and currency valuation. I could actually visualize myself teleported and sitting in his class as I read aloud your post.I adore both of you and vastly respect your art and knowledge.<br /><br />I must congratulate and thank you for your clinical approach in slicing out each topic and taking a scientific and nuanced approach instead of a soothsayers one.<br /><br />I love your posts and look forward to them eagerly. Would you care to write a post on the current IPO boom and the subsequent dampener that took place recently in the Indian stock markets? How do you analyze the same?<br /><br />Thanks & Regards,<br /><br />Manas MehrotraManas Mehrotrahttps://www.blogger.com/profile/13642367474819763793noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-50019696341285922762022-01-29T10:39:43.943-05:002022-01-29T10:39:43.943-05:00Hi Professor - in your Riskfree Rate graph, why is...Hi Professor - in your Riskfree Rate graph, why is the 10-yr bond rate (red line) lower than the intrinsic risk free rate (black line)? I think I inherently don't understand how the intrinsic rate is being calculated. thank you!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-23781704051702233812022-01-26T01:15:39.873-05:002022-01-26T01:15:39.873-05:00Many thanks for this spreadsheet and the analysis/...Many thanks for this spreadsheet and the analysis/ discussion.<br />I'm mentally preparing for flatish earnings in 2022 and 2023 combined with higher equity risk premium due to rising volatility. My changes lead to something like 3300-3500 being intrinsic value.Anonymoushttps://www.blogger.com/profile/00656175123136533736noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-72715562277718944862022-01-21T08:49:13.992-05:002022-01-21T08:49:13.992-05:00Hi professor, thanks for the update. I noticed you...Hi professor, thanks for the update. I noticed you added the intrinsic CAPE p/e since prior updates, you may consider inflation adjusting past years' earnings to 2022 dollars to be more fair to those early years (ie 2010's 87 in earnings would be around 112 today), otherwise it results in the artificially high CAPE p/e as presented. I believe Schiller makes this adjustment as well. Thanks again for everything you do!!!Mark Gnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-34456159858508316802022-01-10T07:48:55.726-05:002022-01-10T07:48:55.726-05:00Dear Professor, it seems that not all link are wor...Dear Professor, it seems that not all link are working properly - e.g. "Macro Data" paragraph, 1. Risk Premiums. Then if you try to open the link for the "implied premium" it does not open.<br /><br />Thanks a lot for the data and the effort you are putting in!<br /><br />BestVladimir T. Georgievhttps://www.blogger.com/profile/12391117665449708680noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-86079511348383032952021-11-10T12:22:37.725-05:002021-11-10T12:22:37.725-05:00Rivian pleaseRivian pleaseAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-39061643068656159792021-11-10T11:21:47.684-05:002021-11-10T11:21:47.684-05:00Hello Professor,
thank you very much for your val...Hello Professor,<br /><br />thank you very much for your valuation and explanation. I would like to add some colour on how Tesla bulls (like me) justify the higher price expectations through a Sum-of-parts valuation:<br /><br />I have valued Teslas core automobile business with the same approach as you (making my own choices in each category) and ended up at 612 USD per share.<br /><br />Subsequently I add the present value of each of the following scenarios (each is in a separate cashflow model), weighted by my subjective probability of the realisation scenario:<br /><br />- Tesla Energy (100 %)<br />- Tesla Insurance (80 %)<br />- Full-Self-Driving (70 %)<br />- Robotaxi-Fleet (50 %)<br />- Dojo as a Service (30 %)<br />- Tesla Bot (20 %)<br /><br />While I don't want to go into the detail of the explicit assumptions I make, this approach hopefully explains what else we Tesla Bulls see in the company and how it might afffect our perception of Tesla's future potential.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-4420748765754852172021-11-10T08:26:27.773-05:002021-11-10T08:26:27.773-05:00Koffi Olomide Hercule Mp3 Download. The music act,...Koffi Olomide Hercule Mp3 Download. The music act, Koffi Olomide teams up with Ninho to unleash this top notch hit titled Hercule. <a href="https://kayfmusic.com/koffi-olomide-hercule-ft-ninho/" rel="nofollow">koffi olomide mp3</a>Anonymoushttps://www.blogger.com/profile/08008768712917289135noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3975186193381327202021-11-01T06:23:49.734-04:002021-11-01T06:23:49.734-04:00This is an idiotic argument, most billionares don&...This is an idiotic argument, most billionares don't pay taxes, that is the issue. Our best years has been when we had higher tax rate. You never provided any solutions how for billionares to pay fair share of their taxes. Most of the microtargeting is from billionares who used monopoly to gain wealth so the microtargeting is justified. Sure capital gains taxes are volatile buts its better than billioanres paying 0 percent Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-83727090446404883862021-10-31T11:13:49.329-04:002021-10-31T11:13:49.329-04:00How about funding the IRS on a rolling 10 year bas...How about funding the IRS on a rolling 10 year basis so that it can rehire/hire the people and experts required to audit the rich since that ability was decimated by clinton and republicans . <br />How about creating better trust legislation so the rich cannot skip paying taxes.<br /><br />How about taxing any "loan" the rich take out that is collateralized by their unrealized gains in assets? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-83935384141540115242021-10-27T14:23:40.140-04:002021-10-27T14:23:40.140-04:00" If paying the billionaire tax changes the t..." If paying the billionaire tax changes the tax basis for assets, as it should since they are being marked to market, and taxed, that will also mean that when these stocks are inherited, and ultimately sold, there will be less capital gains taxes collected. "<br /><br />The basis is stepped up when inherited. So any adjustment in basis before that point would have no impact on the tax that the heir would pay if they decide to sell the asset at a later date. What they're really doing (or proposing to do) is closing the stepped-up-basis loophole for a few very wealthy people. This annual valuation thing is an added complication that, while perfectly fair, has a big administrative burden and honestly I doubt they'll ultimately enact it. I think it's just a lot more straightforward to get rid of or limit the stepped up basis loophole as the president proposed to do and continue to allow people to defer tax on unrealized gains until death. But in their defense the few people they're aiming to tax here are financially sophisticated enough to handle something like this. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-61986195708383820862021-10-27T09:07:24.709-04:002021-10-27T09:07:24.709-04:00Professor. I am a huge fan of your work, but in th...Professor. I am a huge fan of your work, but in this case, I can't help but feel like your assessment is disingenuous. Your argument can be summarised as "don't tax billionaires because it's hard and they have the resources to fight any proposal to tax them". <br /><br />This is the underlying argument of your entire article, but you explicitly make this argument under the heading "micro targeting". I quote: "you should also recognize that these individuals also have the most resources to find ways to minimize the impact of these laws." This just means we should try harder. The fact that they are rich does not justify not even trying to tax them.<br /><br />Are the rich shirking their tax responsibility? The data you cherry picked <br />in the first part of your article is quite obviously flawed. <br /><br />As you point out the federal tax rate is not relevant - one must include all taxes - but you still presented it as though it's a relevant fact. <br /><br />Secondly, if inequality is soaring the share of tax paid by the wealthy ought to increase as it is a function of that. <br /><br />I offer two alternative (more relevant) data points that clearly demonstrate that the rich and powerful have used their might to pass on the tax burden to everyone else:<br /><br />1) The NYT has a great visualisation showing the effective tax rate on the wealthy over the last 70 years: https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html<br /><br />2) The ProPublica leak explicitly shows how some of the wealthiest people in the US pay close to zero tax. "Amazon founder Jeff Bezos paid no income tax in 2007 and 2011. Tesla founder Elon Musk’s income tax bill was zero in 2018. And financier George Soros went three straight years without paying federal income tax, according to a report Tuesday from the nonprofit investigative journalism organization ProPublica." See: https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax<br /><br />It is indisputable that something needs to be done to rectify this steady slope. So while you shot down the idea of a wealth tax or Capital gains tax I'm keeping an eye out for an article on your blog that outlines alternatives,. Because I think we can all agree that "it's too hard to tax them" is a bad argument.MZhttps://www.blogger.com/profile/10806978899808450340noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-28472700083392614132021-10-26T08:26:09.857-04:002021-10-26T08:26:09.857-04:00Any chance the unrealized losses, if taxed, result...Any chance the unrealized losses, if taxed, result in a massive government giveaway if markets tank? Ken Davenporthttps://www.blogger.com/profile/16650861190973873519noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-89232528518786399292021-10-26T08:19:19.444-04:002021-10-26T08:19:19.444-04:00I agree with most of this but my understanding of ...I agree with most of this but my understanding of current estate tax is that all assets are "marked to market" at inheritance time which is actually estate tax's biggest flaw.<br />PenguinOpushttps://www.blogger.com/profile/11659182174532299383noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-10437966640011046862021-10-26T06:25:27.239-04:002021-10-26T06:25:27.239-04:00"beginning with a recognition of increasing w..."beginning with a recognition of increasing wealth inequality"<br /><br />That's near entirely an artefact of the measurement system. If we went around complaining about the Gini for market income people would think we're idiots. It's post-tax, post-benefits that is of relevance. <br /><br />With wealth everyone looks only at the market numbers. The effects of what is already done to reallocate wealth are entirely - deliberately - ignored. To the point that a private, funded, pension is wealth and yet Social Security is not.<br /><br />We reallocate some $3 trillion a year in income. Capitalise that, as the Saez and Zucman paper does for private income streams, that's $60 to $90 trillion of wealth reallocation. In a country where household wealth is some $150 trillion that's quite a lot of reallocation.<br /><br />Before we do anything else we've got to get the measurement system right. Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-8018552592551213442021-10-25T20:00:00.340-04:002021-10-25T20:00:00.340-04:00I agree -- a terrible idea and one that will event...I agree -- a terrible idea and one that will eventually hit the rest of us, as the government needs to raise revenue in the future. But let's remember that the cause of this ultimately is the government's inability to raise taxes on the only group that has any money -- the very wealthy. The government can't raise marginal income taxes on this group for political reasons (i.e., plutocracy), so it's going about it another way. And no one else has any money (the working poor pay little to no taxes because the rich refuse to raise wages) and the middle class can't stomach higher taxes rates and continue at their modest standard of living.<br /><br />Tax rates on the wealthy are at historical lows in the U.S., at least at the federal level. And they'll keep doing everything in their power to keep them that way. Until the rest of us wise up and foist higher income tax rates on them, we'll continue to see the same backward policies as the government searches for new sources of revenue. <br /> Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-64496397209856204822021-05-25T06:04:57.376-04:002021-05-25T06:04:57.376-04:00Hi Professor, if I look at a time series of ROE...Hi Professor, if I look at a time series of ROE's, I see that (at least in the US) ROE's have averaged c. 12%, even in inflationary periods like the 1980s. To the extent, from your books, that growth = retention rate x ROE, it would seem that based on this data, even in inflationary periods, growth doesn't rise -- and is in fact relatively static, tied to ROE that is like an "equity's coupon" -- which would suggest that inflation, and rising nominal interest rates, will depress equity values as they have... if corporate america was able to grow earnings to offset inflation, higher inflation periods should have been characterised by higher ROEs -- but that isn't the case.... would you have any views on this comment?ARAhttps://www.blogger.com/profile/05824110004245259092noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-40506521413190649132021-01-22T11:51:57.867-05:002021-01-22T11:51:57.867-05:00Question on your assumption of growth for the inde...Question on your assumption of growth for the index; given that the stock indices are weighted towards fast growing tech stocks, aren't you penalizing your valuation of the index by having it trend towards global economic growth levels? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-17234826246336689242021-01-22T06:37:12.817-05:002021-01-22T06:37:12.817-05:00Dear Professor,
thank you for this insightful pi...Dear Professor, <br /><br />thank you for this insightful piece. I have a question regarding the market scenarios. I agree with the difficulty of earnings above expectations, but assuming these are eventually reality (+10%) in a low rate environment (1%), wouldn't there be the possibility of higher than expected inflation, particularly with new stimulus? While currently inflation is depressed, assuming a rise in inflation would mean the central bank could only allow the dollar to devalue against other currencies if they do not want to touch interest rates? Would this benefit companies in the long term, giving lower nominal corporate debt? <br /><br />Thank you for your time and for all the work you share. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-40228571091303147262021-01-21T16:04:18.857-05:002021-01-21T16:04:18.857-05:00Have you tried to look at the index including some...Have you tried to look at the index including some separation of S&P 495 vs S&P 5 (i.e. the big 5 tech stocks)? At over 20% of the index concentrated in those few stocks, I would think they must be skewing the valuation?<br />Further, if we could see the valuation of those 5 against the valuation of the rest, it might give a clearer view of whether the overall market is truly over or under-valued.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-31073422482800503042020-11-06T11:04:22.191-05:002020-11-06T11:04:22.191-05:00Dear Professor Damodaran
Could you explain your t...Dear Professor Damodaran<br /><br />Could you explain your thoughts on why the futures price for WTI oil went negative?<br /><br />To me it seems so bizarre that a commodity could go lower than 0 but then again i never thought nominal interest rates would go negative either, so from my understanding what happened there is the person who is selling the oil future will pay money to the person who is buying that oil future is that correct?<br /><br />Kind Regards<br />NathanNathan Thomasnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-34775078042335315192020-10-25T11:06:26.311-04:002020-10-25T11:06:26.311-04:00For the last 50-60 years stock winners have altern...For the last 50-60 years stock winners have alternated between growth and value outperforming. In the late 1960 to early 1970's, again in the 1990's and finally the last decade. Value outperformed in the mid-1970's to mid-1980's and again in the first decade of this century. <br /><br />I figure value's turn will come soon enough, but who knows exactly when? Predicting is perilous, but I think value will start outperforming within the next two years. Of course I have been thinking value would enjoy a resurgence for the last 2-3 years. Predicting is perilous. Anonymoushttps://www.blogger.com/profile/12192037008281324005noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-40965832429816244802020-10-25T03:30:12.565-04:002020-10-25T03:30:12.565-04:00Very good points Professor Damodaran as always.
I...Very good points Professor Damodaran as always.<br /><br />I have been utilising Value Investing as my investment philosophy for a number of years but there is no denying that if you stick to those strict principles you are missing out on some amazing growth companies and I have been looking to expand my investment philosophy to incorporate growth investing into my arsenal to evaluate shares. <br /><br />Thanks to your advanced valuation/investment philosophy class as well as your blogs and your own website, I am learning the tools that will give me the confidence to start evaluating growth companies.<br /><br />I have to agree with your characterisation that Value Investors are very arrogant, disrespectful and overconfident, when I was working at a fund manager that utilised Value Investing I had an argument with the head of research because he believed Technical Analysis was useless, when I pointed to the number of people who had used Technical Analysis to become very wealthy(Wealthier than him as I pointed out to him) he had no response. No surprise I didn't work there for very long and their fund has hugely underperformed the market.<br /><br />I do not believe that I can utilise Technical Analysis profitably because it doesn't suit my personality but that does not mean it does not work, I respect all investment philosophies and believe they can all be utilised to wield profits in the right persons hand and I think anyone who believes only their way of investing is the right way to profits is an absolute fool.<br /><br />Kind Regards<br />Nathan<br />Anonymoushttps://www.blogger.com/profile/08773278887440305347noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-55419451095658969032020-10-25T02:01:14.017-04:002020-10-25T02:01:14.017-04:00Awesome set of videos Prof! Thank you. Foundation ...Awesome set of videos Prof! Thank you. Foundation for a new book? 😉Anonymoushttps://www.blogger.com/profile/14761482835360466608noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-50803748696001819772020-10-24T14:59:42.739-04:002020-10-24T14:59:42.739-04:00Thanks a lot for the 3 articles on value investing...Thanks a lot for the 3 articles on value investing - I thoroughly enjoyed and learnt from them as well. I invest in both "growth" and "value" companies by your definitions. I am comfortable to do this, as I have a high risk tolerance due to my personal circumstances. However, I can imagine there are lower risk investors (e.g. retirees) who would prefer investing into companies with lower uncertainty. Due to this, they may be restricted to "predictable" companies, and as a result, miss out on some young and high growth companies. Hence, they might not match the market (S&P 500) return, but still make "reasonable" returns on an annual basis. <br /><br />A lot of your analysis seems to be based on getting excess market returns, which may be skewed over the last few decades due to a few very high growth / large companies (e.g. FAANGM). I think there are also a good amount of investors whos philosophy is to make "reasonable" returns (e.g. 5~15%) without having to face a lot of uncertainty. <br /><br />So, in conclusion, your analysis of value investing perfectly fits my investing style (medium-high uncertainty, high reward), but might not fit other styles such as low-medium uncertainty, medium reward (where a substantial amount of invested money comes from - retirees, pension funds, government sovereign funds etc.) Sharadhttps://www.blogger.com/profile/10089983710848735011noreply@blogger.com