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Old 10-31-2013, 12:51 PM  
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For the Fed obsessed idiots (Teej and BEP in particular)

Corporate Profits After Tax

http://www.ritholtz.com/blog/2013/10...its-after-tax/

Billions of dollars, seasonally adjusted, after tax without inventory valuation (IVA) and capital consumption adjustments (CCAdj).

I have been trying to explain to some of my more Fed obsessed friends there are factors outside the central bank that matter also. One such factor is corporate profits.

As the chart from the Federal Reserve Bank of St. Louis shows, after tax Corporate Profits are at all time highs. And while the inclination is to say this is driven exclusively by programs like QE and ZIRP, the pre-crisis profit picture was also very rosy. (Rates were very low than also).

I am hard pressed to believe that corporate profits are due exclusively to ultra-low rates. There is no doubt that financing costs are lower, but that is offset by tightened credit. Demand for goods and services has been increasing only modestly. While private sector growth has been repsectable 3-4% the public sector continues to be a net negative drag on growth. State and municpality layoffs also have the effect of depressing demand.

The corporate sector is actually well positioned: Balance sheets are the cleanest in a long while. Companies are running very efficiently, with limited head count (we see evidence of this in stubbornly high unemployment rates). Productivity gains are hard to come by because productivity has risen so much over the past 20 years. Business Intelligence software is allowing firms to make changes on the fly it used to take several quarters before enough intel could be gathered to shift manufacturing or supply chain decisions. It now happens in real time.

~~~

Yes, the Fed is a factor in high corproate profits but its not the only factor.
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Old 11-01-2013, 07:27 AM   #31
KC native KC native is offline
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Quote:
Originally Posted by Taco John View Post
I think I read it just fine. You just aren't really saying much. You show a profit bubble being inflated, deflated quickly, and then re-inflated twice as quick, and then say that we shouldn't look at the man behind the curtain as the reason it's all happening. Then where should we look?

Does technology factor in? Well, duh. But Technology isn't so cheap, and it takes people to run the stuff. There's just not enough of them out there to fill all the jobs available. THAT right there is why corporate profits are soaring. They can't reinvest the stuff fast enough because the work force coming out of college is dumb as shit. We're entering a golden age of computing, and kids coming out of college don't know a SQL query from a NoSQL database. If they did, believe me, they'd be literally swimming in high paying jobs right now. Same goes in manufacturing.

You're right - the Fed isn't the only problem, but it's a pretty huge problem. The Federal Government is the problem. The constant need to pump dollars and screw with incentives is the problem. College curriculums aren't changing with the times because the money is easy out there for them. They can take in handfuls of student loan money and expand their campus infrastructures, without bothering to keep their curriculums competitive. But they're hearing about it from the employers though.

There is a LOT of money on the sidelines right now. But businesses aren't about to be stupid with it. They know that another bailout isn't coming if they screw it up. So they're being careful with their investments. But it can only last so long. We're quickly approaching another tech boom. The only question right now is where the people power will come from to fuel it in a global marketplace. As it is, about the only think most kids (but believe me, not all) coming out of college know to do with computers is video games and porn.
No, you didn't read it just fine.
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