The Myth of Corporate Profits
As the debate over a possible double dip in the global economy intensifies, many optimists are taking heart from last year’s sharp revival in corporate profitability, which they clearly hope will sustain, if not global activity rates, then at least global share prices over the coming months.
Interestingly, the consensus explanation for the revival in profits (and the explanation that is repeated ad nauseam by countless equity brokers) is that companies, most notably in the USA but also elsewhere, were simply ruthless in reducing their labour costs last year and it is further suggested that this revival in profits will be able to continue almost regardless of top line growth trends. Some even go so far as to suggest that we are embarking on a new era of cost reduction and attendant profit growth that will support share markets 'come what may'.
Read the September comment from Tyndall in full.
Tyndall
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