Tuesday, May 4, 2010

the profit margin is peaking

The profit margin expansion story is over. PPI is going up quickly but CPI is not which means the profit is being squeezed. Labour cost is at the bottom and start to pick up as well. Interest rate will move up regardless fed's action. All these suggest the P/E expansion is over. If the market wants to go up, the earning has to go up another 10% next year. It is possible but unlikely.

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