Mind The Margins—–Corporate Profits Are Due For A Fall

by Lance Roberts • March 25, 2015

Yesterday, I discussed the valuation report issued by the Office of Financial Research which contained several important statements about the risk to investors in overvalued markets. To wit:

“Markets can change rapidly and unpredictably. When these changes occur, they are sharpest and most damaging when asset valuations are at extreme highs. High valuations have important implications for expected investment returns and, potentially, for financial stability.”

There was one particular chart that really grabbed my attention which was the ratio of corporate profits to GDP.

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Thomas Jefferson

Shall these governments be dissolved, their property annihilated, and their people reduced to a state of nature, at the imperious breath of a body of men, whom they never saw, in whom they never confided, and over whom they have no powers of punishment or removal, let their crimes against the American public be ever so great? Can any one reason be assigned why 160,000 electors in the island of Great Britain should give law to four millions in the states of America, every individual of whom is equal to every individual of them, in virtue, in understanding, and in bodily strength? Were this to be admitted, instead of being a free people, as we have hitherto supposed, and mean to continue ourselves, we should suddenly be found the slaves, not of one, but of 160,000 tyrants, distinguished too from all others by this singular circumstance, that they are removed from the reach of fear, the only restraining motive which may hold the hand of a tyrant.