Klipp från dagens Buttonwood's Notebook (The Economist) med en nygammal analys av företagens vinstandel av BNP och den eviga kampen mellan arbete och kapital. Slutsatsen är att vinstprognoserna ser lite för optimistiska ut.
Andrew Lapthorne, the SG strategist, points out that the market is expecting a further 19% profits rise in 2011 and another 11% in 2012. In other words, profits are expected to rise as a proportion of GDP.
But how likely is that, when corporate profits are already nearer their peak proportion of GDP in the last 50 years? (The peak was in 2006, a long way above the historic average.) Some of this will be down to the success of US companies overseas. But the recent sharp rise in the dollar against the euro will be denting the US's competitive position and reducing the dollar value of European earnings. History shows that profits have fallen in eight of the last 20 years.
Meanwhile, the corollary of the profits surge is that the wage share of GDP is at a 50-year low. Popular anger against the banks is well known and politicians are turning BP into a target after the oil spill. With governments needing to cut deficits, those juicy profits make a tempting target, especially if the industry can be portrayed as staffed by fat cats, price gougers or polluters. Bank levies are in the air and Dhaval Joshi of RAB Capital points out that Ireland has just imposed a windfall tax on power companies while Australia is taxing the miners. As Mr Joshi comments "If a new slowdown doesn't get (companies), then governments just might.""