Sunday, August 16, 2009
Corporate Earnings Are No Sign of Recovery - WSJ.com
Earnings are up.
Don't be deceived that it means anything for the U.S. economy...
Don't be deceived that it means anything for the U.S. economy...
Zachary Karabell explains in the Wall Street Journal:
"Companies are increasingly less constrained by any national economy, and their success is no harbinger of national economic growth or sustained economic health for the United States.
First, companies have been profiting because they can cut costs aggressively. It’s not as if demand in the U.S. or Europe has picked up. Take Starbucks, which reported a surprising surge in profits. Little of that was due to American consumers suddenly becoming comfortable with $5 grande mocha lattes. Instead, it was because Starbucks—faced with weak demand and sluggish sales—closed stores and laid off workers. That has been a trend across industries.
Second, many larger companies have been profiting because they can focus on where the growth is around the globe. Companies such as Intel, Caterpillar, Microsoft and IBM now derive a majority of their revenues from outside the U.S., with the dynamic economies of the Asian rim and above all China assuming an ever-larger role. Companies are thriving in spite of economic activity in the U.S., not because of it."
