21k and Rising: Record-Breaking Dow Jones

Exactly. For example the dot com stocks didn't start dropping till some started running out of money and this was well after the economy had turned negative and the rest of the stock market was dropping. For the real estate bubble we started getting defaults on subprime before a single payment had been made and that's what started the market downturn. Prices just got unsustainable.

That being said self fufilling situations can make legit economic impacts. As an example Reagan told america inflation was going to drop and Americans believed him and that had a huge effect on inflation expectations which is what drives inflation. For trump consumer confidence is higher than it has been in a long long time and it's already translating to people spending more money. If the market goes up people "feel" richer and can spend money and that by itself can improve the economy and wages.

 

Ah, maybe that is what float meant and I didn't get it.

 

I remember in 2008ish, when everyone felt bad about the economy and it was definitely a self-fulfilling prophesy that made the housing bubble hit even worse.

 

Yup. The world was ending

 

Seriously?

 

And value changes daily. A random walk down wall st by Malkiel is a strong read. Value theoretically impound all information, but that changes daily.

 

Uh...do what? The metric is generally irrelevant. It's generally about the risk / return tradeoff.

 

My blurb about cost of capital and expected returns weighed against risk was my mind working down that road.

I left the bit in about EBITDA because I was thonking about ways you might measure your value add through different periods of tax or capital spending. I think that EBITDA margin does help in measuring that value.

From the standpoint of expected returns I agree with the risk reward argument. But stock valuation goes well beyond that.

I assume your point about risk reward might be coming from where my mind was at with regard to the expected returns across various segments but I backed off of going that way because it didn't seem directly address the question of impact on company's value in a changing tax code.

 

the craziness about capex was baffling. Float was lost as a turkey and it didn't get better.

Earnings generating capacity takes on many forms and asset intensity is part of the debate, but valuation ignores it generally.

EBITDA as a measure is nice for equity valuation, but earnings, a la Wall St is more reliant on an Enterprise valuation, which impounds most cash flow streams, like repeatedly intensive capex.

There is no standard, but I couldn't get where you were going there.

 

Enterprise Value seems to be a effective metric for valuation. I'm learning this stuff so I only know so much. But it seems to give decent indications in the oil and gas space. It typically falls in a fairly defined range (EV per total production or EV per total reserves) with the difference in the range generally defined by operationally efficiency and luck/skill in the acquisitions space which is where the returns begin for these companies but thy generally end with how they can de-escalate their drilling and completion costs.

I've been on my first foray into the M&A space for the last month or so. I find the valuations end to be fun - mainly because I'm learning a lot. Also looking at a little real options evaluation, which makes my math head happy.

 

Most analysts theoretically put price targets based on discounted future cash flows or earnings. Of course the way their are projected is based a lot on opinion or even sometimes consensus. Are you getting your cfa charter? Just sounds similar to that coursework. I have mine and it is helpful for evaluation or stock picking, but I've found I get more subjective the older I get. I also focus far more on asset class and sector and country selection, than individual stock selection. Options pricing is a lot more fuzzy math than we'd like to admit too. I'm low on sleep so forgive me for babbling or not making sense.

 

I'm doing discounted cash flow analyses to guide our valuations where we are in data rooms with specific data on the field of interest. But, if instead you are looking more in the corporate space, EV seems to embed that fairly well for traded companies when just worried about high level grouping - better analysis would be needed if going any further than that.

I've been asked to consider either a CFA charter or an MBA. I don't want to go the charter route because I don't think I'll be working in the markets for more than the next 5 years. An MBA would be more useful in my next stop - even if that is back in R&D. But, I'm not sold on it either. I feel like I've already been in school a long time. I don't want to look like someone that only does school. I think it would be fine since I'd continue working during it. But it does concern me. I don't want to look like I'm degree collecting.

 

You ****ers are about two ocean depths above my head.

 

Well I'm in over my head as well. It's fun but I'm having to learn it all on the fly.

 

Business talk bores me to tears. Just not my thing.

 

I got my cfa while working which was one of the reasons I opted to that rather than an MBA. But yes a cfa has a somewhat narrow spectrum of fields where people properly vaue it. An MBA from a top 20 business school is definetely more versatile and more valuable. A cfa is more valuable in those fields than an MBA from a second tier business school. obviously a MBA is a lot more expensive to get too. If you aren't sure you want to be in the markets I'd definetely wait to start the cfa process. Most companies that require a cfa to advance will pay for it too.