Corporate profit increase pattern show an unsustainable rate of 23% leading to a stock market top
Mike Moran
Nov. 3, 2006

Every time stock markets have topped out in the last fifty years accompanies the topping action in earnings growth. There are several reasons why the profits rose 23%, led by Banks, Insurers. The same reasons are the leading cause for worry and a virtual collapse in corporate earnings.

The corporate profits increased extremely well over the last few years. The reasons were mainly cost cutting, outsourcing and above all manipulation of the corporations in accounting practices. Real revenue growth stories came from the financial services industry. Investment banks, brokers and above all the mortgage brokers created the biggest hoopla.

The corporate profit increase of 23% is definitely unsustainable. But what is causing serious trouble in the mind of smart money operators is that a clear technical sign is forming that is indicating a fall in the financial service sector. The top in earnings always accompanies the top in the stock market.

What is very dangerous for the stock market is the fact the earnings growth allowed the market to perform in spite of Fed rate hikes. Now the market is really vulnerable and can really collapse unless Fed reduces the rates very fast.

Corporate profit increase pattern show an unsustainable rate of 23% leading to a stock market top
Mike Moran
What is very dangerous for the stock market is the fact the earnings growth allowed the market to perform in spite of Fed rate hikes. Now the market is really vulnerable and can really collapse unless Fed reduces the rates very fast....
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