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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Michael Bakunin who wrote (71535)	12/7/1999 1:00:00 PM
From: Don Lloyd	Respond to of 132070

mb - [[Well, yes -- not profitability per se, which is usually measured by margins. But by increasing the size of the economic pie overall, productivity increases could underlie profit growth even at constant or (heaven forfend) shrinking margins. This is no excuse for dot com-style valuations, but at least provides a slim hope to equity bulls like BGR. ]] Profit margins grow if and only if the virtually inexorable fall of real prices for fixed products in freely competitive markets does not overwhelm the reduction of costs for those products. Margins can only be maintained at levels that provide return on capital above the risk-free rates if competitive advantages and barriers are continually maintained and renewed. The long term historical rising trend in absolute profits is not primarily the result of increasing productivity, but rather due to the long term expansion of market size, from births, lower mortality,immigration and the availability of global markets. Secondarily, the globalization of production produces improves dollar-based productivity by employing less productive labor sited in weak currency regimes with relatively few employment opportunities. Most of these trends have already harvested the low-hanging fruit and are weak arguments for future expectations. Regards, Don