-LSB-...] To Abandon Proven Models In Speculative and Fearful Markets: Why This Time Isn't Different, What
Record Corporate Profit Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Competition).
I've posted here regularly about the implications of mean reversion in elevated profit margins (see, for example, The Temptation To Abandon Proven Models In Speculative and Fearful Markets: Why This Time Isn't Different, What
Record Corporate Profit Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Competition).
Not exact matches
Underlying market conditions, such as rising earnings estimates, strong
corporate balance sheets and
record profit margins, remain favorable, he said.
Profit margins are at
records, as are
corporate profits, gross domestic product, and household net worth.
With
corporate taxes being cut to 21 % from 35 %,
corporate profit margins before the tax relief already near
record highs, and the window open to tax - efficiently repatriate foreign earnings, one would logically conclude that corporations should be in robust financial health.
Some astute investors (such as Hussman and GMO) have argued in essence that the combination of
record government deficit spending and unemployment levels has propped up
corporate revenues while lowering labor costs, thereby boosting
corporate profit margins by as much as 70 percent above historical averages.
For example,
corporate leverage is approaching
record highs, just as
corporate profit margins are beginning to stall.
Here are just a few good reasons: low inflation, zero interest rates,
record corporate profits and
record profit margins.