Japan's relatively low
corporate profit margins mean a given increase in revenues can have an outsized impact on earnings.
Raj Yerasi, a money manager based in New York, has taken on the unenviable task in the following guest post of arguing the case that the increasing influence of foreign earnings on
corporate profit margins means that the ratio in the chart overstates future mean reversion in earnings:
Not exact matches
The result would
mean significantly less spending and borrowing and this, in turn, would lead to lower GDP growth,
corporate profit margins and employee wages.
Corporate profit margins are presently 70 percent above the historical
mean going back to 1947, as I've discussed earlier (see, for example, Warren Buffett, Jeremy Grantham, and John Hussman...
Those posts sparked some intense debate in the comments and offline about the increasing influence of foreign
profits on
corporate profit margins, and how this change may have permanently shifted up the
mean for
corporate profits as a proportion of GDP.
Corporate profit margins are presently 70 percent above the historical mean going back to 1947, as I've discussed earlier (see, for example, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Competi
profit margins are presently 70 percent above the historical
mean going back to 1947, as I've discussed earlier (see, for example, Warren Buffett, Jeremy Grantham, and John Hussman on
Profit, GDP and Competi
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 Competi
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 Compet
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 Competi
Profit Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Compet
Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on
Profit, GDP and Competi
Profit, GDP and Competition).
The result would
mean significantly less spending and borrowing and this, in turn, would lead to lower GDP growth,
corporate profit margins and employee wages.