Debate: A personal home is an investment My take : I agree it is an investment, but not a good investment always. Let me explain. If you are personally living in the home, you are consuming all your potential rental income. Consumption does not equal investment. If you save money on rent that you wouldContinue reading “Home Value”
Category Archives: Stocks
The Growth Valuation Formula
What is the value of a stock (price)? It comes from the earnings it generates! Let us first consider constant earnings and then growing earnings. Constant Earnings P = E/r , where P is the price of the stock determined by the earnings potential E. This formula follows from the definition of the expected rateContinue reading “The Growth Valuation Formula”
The Struggle of small/midcaps
This is not a full post. Just a quick note that connects some of the other recent posts for a broader picture. If we look at the late 1980s through early 2000s in the US, the small cap to mid-cap stocks did not do so poorly, often beating the larger stocks in price appreciation (trackedContinue reading “The Struggle of small/midcaps”
The Ground Rules of Fiscal Policy
The Ground Rules The way fiscal policy works is with the following ground rules: (i) Interest rates cannot be significantly lower than inflation in a stable economy unless the bank works to limit or choke the money supply. Constraining credit or money supply is never good for an economy. But why can’t interest rates beContinue reading “The Ground Rules of Fiscal Policy”
Cars and Physics 