Profit margins reflecting internal yields on US corporate assets have increased in the last few years. According to what Andrew Smithers disparagingly refers to as “stock broker economics”, high rates of profit are good for stocks. The Austrian economist Jesús Huerta de Soto makes an under-appreciated point about profit margins and stock prices. Pervasively high or increasing rates of profit may show that the rate of time preference is increasing, implying that the capital stock is shrinking. If not time preference, then the perception of risk may be increasing, which would have a similar depressing effect on investment.
(bold mine)
This is from Austrian economist Robert Blumen explaining the impact of Say’s Law on the stock market at the Ludwig von Mises Canada website.
So when the mainstream crow about high profits as justifying high valuations, beware the "curse" in disguise.
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