Do Low Interest Rates Affect Stock Prices?
Episode description
Lately you have probably heard analysts going on CNBC saying given where interest rates are valuations are or are not overstretched. But how do interest rates, and low interest rates, affect stock valuations? How to they affect the cost of capital and the ROIC or return on invested capital? How do you discount down future earnings based on a discount rate?
Why interest rates matter to investors
The present value of future earnings
Interest rates and the WACC or weighted average cost of capital
How low rates may make it easier to achieve ROIC greater than WACC
Historical risk free rates in US Treasury Bonds and Bills
Mentioned in this Episode:
US Treasury Bonds Historical Yield Curve Site https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yield
Warren Buffett Indicator explained podcast and article https://razorwealth.com/the-buffett-indicator-explained/
Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr
Contact Derek www.razorwealth.com