Corporate earnings are expected to resume their rapid rise after the "summer soft spot." Zero Hedge recently published The Impossible Earnings Season Stepfunction which included this chart of profit growth expectations:
If we look at corporate profits, we notice they have skyrocketed since late 2009. Can they continue this trajectory into the stratosphere?
C orrelation isn't causation, but it probably isn't coincidence that profits rose as savings plummeted, consumer credit expanded and the dollar weakened. Here is another look at corporate profits. Note they shot to unprecedented levels in the 2000s as debt rose and the savings rate dropped to near-zero.
Corporate profits plunged in 2008 when savings jumped higher.
Household debt broke away from wages in the early 1980s, and the gap widened until 2009.
The debt was not evenly distributed; the bottom 95% loaded up on debt to compensate for stagnating earnings while the top 5% saw their relative debt burden fall as their earnings rose smartly.
Virtually all the earnings growth in the past 40 years flowed to the top 10% and the majority went to the top 5%, so the rise in wages shown in the above chart is deceptive: most of that increase flowed to the top 5%. (See Financialization and Crony Capitalism Have Gutted the Middle Class July 13, 2012)
As I have often noted, a weakening dollar greatly boosts the overseas profits of U.S. multinational corporations. One euro in profit in 2002 = 1 dollar of profit. A few years later, 1 euro in profit = $1.60 in profits when stated in dollars. That 60% increase was entirely the result of currency valuations.
Now that the dollars