High Corporate Profits Explained

Well I know nobody knows
Where it comes and where it goes
I know it's everybody's sin
You got to lose to know how to win
--Aerosmith

In his weekly letter, John Hussman observes that the high corporate profits currently observed are a function of spending at both consumer and government levels. Building on a recent study done by GMO, Dr J notes "the primary way to boost corporate profits to abnormally high - but unsustainable - levels is for the government and the household sector to both spend beyond their dreams at the same time."

Seems a Keynesian's dream.

Unfortunately, following dreams comes the wake up.

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