Grantham: corporate profits not sustainable

http://www.bloomberg.com/news/2011-11-28/grantham-calls-margins-freakishly-high-that-doll-says-are-here-to-stay.html U.S. companies are the most profitable in more than 40 years, and some of the best-known stock pickers are divided over how long that will last. Bob Doll, chief equity strategist at BlackRock Inc. (BLK), said low labor costs and cost-saving technology will allow companies to keep up... [more]

http://www.bloomberg.com/news/2011-11-28/grantham-calls-margins-freakishly-high-that-doll-says-are-here-to-stay.html U.S. companies are the most profitable in more than 40 years, and some of the best-known stock pickers are divided over how long that will last. Bob Doll, chief equity strategist at BlackRock Inc. (BLK), said low labor costs and cost-saving technology will allow companies to keep up their profitability. Jeremy Grantham, chief investment strategist of Boston-based Grantham, Mayo, Van Otterloo & Co., said margins will send stock markets tumbling when they eventually revert to their mean. “The implication for the stock market is ugly, because it means earnings are unsustainably high,” Grantham’s colleague Ben Inker, GMO’s director of asset allocation, said in a telephone interview. GMO, an investment manager that oversees $93 billion, puts the fair value of the Standard & Poor’s 500 Index at between 950 and 1,000, compared with the 1,158.67 level at which it closed last week. [less]