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Minack n- On a higher plane

Might be a reason for that what the f@#$ rally from hell Lime Juice 2 opined in the post below.


 DUD110526.pdf (140.37K)

: 5

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Foreign-sourced earnings have pushed developed-market profits to above-average levels. Part of this reflects the growth in EM profits. For some markets – notably the U.S. – currency weakness exaggerates the growth in foreign-sourced income. Currency weakness also exaggerates returns.

Profit shares of GDP are high almost everywhere. More to the point, they appear to be in a higher range: profits over the past decade have been higher than the long-run average (see , 24 May). There are good reasons why profits in emerging countries that are liberalizing will not revert to a long-run average. Jonathan Garner, our head of EM equity strategy, estimates that listed profits now account for over 3% of GDP in emerging economies, compared to less than 1% in the late 1990s.

Such structural change can lead to a rising profit share in developed economies. If DM companies maintain a steady share of profits made in fast-growing emerging markets, then EM-sourced income can push profit shares higher in developed economies. Exhibit 1 shows the lift in listed corporate profits as a share of global GDP and US companies’ foreign-sourced profits as a share of US (business) GDP.

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