Monday, June 9, 2014

Corporate Profits: What Could Possibly Go Wrong? (Musical Tribute)

The following chart shows corporate profits after tax (with inventory valuation adjustment and capital consumption adjustment) divided by disposable personal income.


Click to enlarge.

For those keeping track at home, the last two recessions took us well below the median. Thanks to the highly experimental and mostly untested (over the long-term) monetary policies of the Fed and the ongoing benign neglect of Congress, it can't ever happen again of course!



Shingles pain or no Shingles pain. How could I not post this chart? Good grief. Actually, it's all good. I really needed to resume a sense of normalcy in this abnormal economic world we find ourselves in. Balance is key. Special thanks to the economy for helping me out! Woohoo! Now where are my pain killers? Hahaha! Sigh.

Source Data:
St. Louis Fed: Custom Chart

19 comments:

Anonymous said...

Maybe its the new normal - businesses are consolidating, the big get bigger, and in an monopoly environment profits can stay high indefinitely?

PS: great to see you back!

Fred

Stagflationary Mark said...

Fred,

I saw a short interview with the CEO of some food company recently. He just keeps making acquisitions. Buys up the innovative little companies and folds them in.

I'm not sure I'm a believer in that prosperity theory over the long-term though. Seems like there could be an infinite supply of innovative little companies to buy. It could just end up being dilutive.

Perhaps I'm biased. My former company sure loved buying up innovative little software gaming companies. Then the layoffs and lousy morale began. In hindsight, it became a cluster@#$%. Sigh.

Such is the curse of companies getting too big for their own good. Some become too big to fail of course, but even then shareholders can become bagholders. Take Citigroup for example.

I don't think many companies are monopolies, and even ones I think might be might not be. I believe there is still plenty of competition out there.

Stagflationary Mark said...

I'm not sure how "back" I am yet. The pain level is still considerable and progress towards a more pain-free state seems to be slowing down.

I could survive this long-term and adapt if the pain continues, but I sure wouldn't want to.

Thanks for the kind words!

Stagflationary Mark said...

I think the #1 thing temporarily keeping us from returning to the median is the lack of recessions since the Great Recession by the way.

I also think there are plenty of new normals. I just don't believe the "lack of recessions" is one of them. Put another way, I do not believe that the USA has permanently put a stop to recessions (no matter what the Fed does or doesn't do).

Rob Dawg said...

Profits are the third most effective way to concentrate wealth. I vote for new normal.

Fatboy said...

Check into pain control techniques. It's been years since I have but I found success. You'll have to research, but I remember envisioning a red triangle within a blue square or something like that. Lol, I know, but pain isn't real, it's nothing more than a warning to tell you there is a problem. Best wishes!

CP said...

Wow, I wasn't sure if you would ever blog again! We had quite a treasury rally in your absence.

http://www.creditbubblestocks.com/2014/06/countries-with-lower-10-year-bond.html

CP said...

http://www.creditbubblestocks.com/2013/12/hussmans-ratio-of-margin-debt-to.html
http://www.creditbubblestocks.com/2014/02/update-to-hussmans-ratio.html

Stagflationary Mark said...

Thanks for the comments everyone.

I'm still hanging in there. I took a step back today. A tiny secondary infection appeared in one of the Shingles' hotspots (about the size of a pimple).

The good news is that I think the overall pain level is falling. I'm taking slightly less pain meds now.

As for the economy, I see a tunnel. There's a "sure thing" light coming from it. I hear a train. With margin debt so high, all aboard! Other than bagholder derailment, what could possibly go wrong? Woohoo and/or Choo-Choo, lol. Sigh.

Troy said...

http://research.stlouisfed.org/fred2/series/CP/

is a very curious thing, yes.

as is the 1:1 correlation with the S&P:

http://research.stlouisfed.org/fred2/graph/?g=Dna

over the past 10 years.

http://research.stlouisfed.org/fred2/graph/?g=Dnb

^ corporate profits over wages

I can make these charts but I don't pretend to understand what's going on now.

Ah, adding a 'labor slack' graph:

http://research.stlouisfed.org/fred2/graph/?g=Dnc

(red is 100 - participation rate aka 'the reserve army of unemployed')

shows the less over-employment we have, the higher corporate profits go.

I still don't understand that.

mab said...

Hey Mark,

Sounds like you've had quite a battle with shingles.

Speaking of battles, the Fed is fighting return to the mean battles on multiple fronts. It's like one giant D-day out there.

And we can really see the results of the Fed's efforts with so much widespread prosperity.

I can't wait until the lame st. media start talking in terms of the "point" 1 percent. It's long overdue.

Feel better!

Stagflationary Mark said...

I'm still hanging in there.

Got a blood test this week and will be getting a physical next week. Should have more then.

And speaking of battles, had a tree die in the front yard. Nothing beats chainsawing for hours (over 2 days) with Shingles pain. Woohoo!

In all seriousness, the trunk filled 3 wheelbarrows (which was given to the neighbors as free firewood) and the branches have filled 13 garbage cans so far. I'd say there's about 10 garbage cans left (still sitting in my yard).

I also have to deal with the stump. And don't even get me started on how far I am behind on the regular yard work. Prosperity baby, that's what I'm talking about, lol. Sigh.

That said, at least I am able to do yard work now. The pain level is finally down to mostly bearable (still high though). It does not appear that I will need any more Vicodin. And unlike last summer's fiasco with a seriously sprained ankle, I'm optimistic that I'll be hiking this year. :)

Stagflationary Mark said...

Priorities

1. Catch up on yard work.
2. Hiking.
3. Return to the blogosphere.

In theory, #2 and #3 can happen pretty much simultaneously.

Thanks to Shingles, I am *way* behind on #1 though. The backyard looks like a jungle (and I am very allergic to at least one of the weeds). It therefore may take some time before I'm posting fairly regularly again.

mab said...

Yard work builds character! It's all good in the "worker's paradise"!

Rising real personal income? Nope! Rising real personal debt levels! Yeah, baby! Now that's prosperity!

Stagflationary Mark said...

mab,

I apologized to a neighbor about the state of my yard a few days ago (and explained my ongoing health condition). He offered that landscaping services are available.

Money grows on trees in my neighborhood! And here I am, sawing those trees down!

I'd consider hiring someone to do my yard work for me of course. Just need Jeremy Siegel's mythical 3.5% long-term real yields to magically reappear again (thanks to explosive real growth reappearing again) first!

I just can't muster up enough optimism to hold my breath though, lol. Sigh.

Made a nice dent in the weed population today. I think that maybe, just maybe, my pain level even dropped a bit too. It actually wasn't all that uncomfortable doing it. That said, there's still plenty of pain right now (laying on the couch).

Nathan said...

Mark,

You might need to lend your shades to Bill McBride.

Stagflationary Mark said...

Nathan,

On a relative basis, the future is definitely bright.

The past is looking very dark. At midnight last night a traffic accident took down a telephone pole in my neighborhood. We were without power for 8 1/2 hours. I kid you not.

Other than regaining power when nearly all hope was lost, what makes the future so bright?

Based on the damage I saw to the pole, this could eventually potentially translate to 1 unexpected new auto sale for one of this country's nearly fully automated factories! Just think of the job creation!

Troy said...

http://research.stlouisfed.org/fred2/graph/?g=FHo

strangest FRED graph I ever did see.

though I guess to be expected, what with the sequester.

Stagflationary Mark said...

Troy,

That is one bizarre chart!