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Podcast: Notes on the Week Ahead
Episode: Investing Beyond The Profit Squeeze
Description: Over the years, my standard approach to analyzing corporate profits has been to think of them as the last slice taken from a big national income pie. The growth of the pie itself is important. But so is the size of the other slices, such as labor costs, interest costs and corporate taxes. Once every one else has had their slice, what’s left over is corporate profits.
It’s a useful model for analytical purposes. However, it has one glaring flaw, namely that it assigns to corporations a purely passive role, meekly accepting the slice lef...