> >than 1 percentage point during the past two years. However, to date,
> >rising business earnings expectations and declining compensation for
> >risk have more than offset the effects of this increase, propelling
> >equity prices and the wealth effect higher.
Expectations may be rising, but according to the Fed's own historical data charts, corporate profits as a percentage of GDP have topped out. After rising from the 7% range in the early Nineties to a peak of 10.09% in 1997, profits fell to 9.66% in 1998 and were pegged at 9.51% in the 3rd quarter of 1999 (this, despite pretty major interest rate relief). This suggests the business cycle is alive and well and about to render unto Bubble-land what the global rentiers have been rendering unto places like Thailand and Russia. Passengers are advised to fasten their seatbelts and salt their hard currencies away in euros for the duration of the (capital) flight.
-- Dennis