Tuesday, May 17, 2011

Corporate Profit Margins are Abnormally High

Corporate profits have commanded this large a share of national income only twice before: in 1929 and 2006. Those years preceded the past century's worst two financial collapses.
Corporate profit margins are strongly mean-reverting. What's your first instinct when you hear about a really profitable business? "I should do that, too." That's capitalism. Competition enters the market and drives down profit margins.

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