Thursday, March 26, 2009

Nonfinancial Corporate Business: Profits After Tax (Chart)

There is a long lag in this chart, so its safe to assume after tax profits are still dropping.

I put this chart up for two reasons. First, if you look closely and think about it, you will see that after tax profits are falling back to the trend. Second, this chart shows how really wild and crazy things were in the period from 2004-2006.

You could infer further that a lot of business got done because of artificially low interest rates and readily available cheap credit. For example, several years worth of houses and cars were built and sold in a short period of time. This explains the oversupply right now. Much of what is going on is simple supply and demand. To much supply lead to a lack of current demand. In other words, the demand had already been supplied--and for years in advance.

If you look and think beyond the obvious, that is what this website is all about, you could conclude it is going to take a while to work off these excesses. It takes time. And, that is exactly what is happening--time.

Corporate after tax profits bear watching. The market will discount the bottom long before it they hit their lows and flatten. Once the bottom is in all comparative economic releases will begin to look good because we will be comparing the then current releases to the very low numbers of the past.
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Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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