The tendency of earnings estimates to fall

Seth Ackerman SAckerman at FAIR.org
Wed Apr 4 11:43:58 PDT 2001


Doug Henwood wrote:


> U.S. corporate profitability peaked in late 96/early 97, and has been
> flat-to-down since. It makes you wonder where the alleged
> productivity boom is paying off.
. But the corporate profit rate stabilized at a very high rate; it hasn't plummeted. That does seem chonologically inconsistent with the New Economy story, which holds that '96 was the early days of a tech-driven productivity revolution. But it's not inconsistent with the 1996-2000 bull market in stocks: As long as you have a sustained high rate of return on invested capital, you should see a high rate of return on stocks, no? You don't need a constantly rising rate of profit.

Seth



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