Buffett and Munger, RIP a true giant of investing, are famously known for using a discount rate equal to their best guess of long-term risk-free rates. But they also tend to invest in what they believe are high quality companies with strong and durable advantages vs. competitors. They also tend to have slightly more predictable cash flows and growth.
In the current competitive investing environment with a Fed that seems genuinely interested in a soft or softish landing and targeting modestly higher inflation at 2%, is a blanket 10% still appropriate? Especially for the highest quality blue chips with a mature and large economy like the US?
The lowest quality bonds that aren’t investment grade have an average yield around 8% as a reference. What is appropriate for you?