US stock market flashes bubble warning – The Wall Street Journal

Ten years into the US stock market boom, some observers are starting to worry that things are not quite as rosy as they seem. While the companies in the S&P 500 seem to be minting money, a broader – and deeper – look at corporate profits paints a very different picture. According to The Wall Street Journal, it looks like US corporate profits may be being artificially inflated by tax dodges and tricky accounting manoeuvres. It also appears that the S&P figures are being goosed by big and highly profitable companies like Apple and Google. The picture in the rest of the economy is a lot gloomier. All of this adds up to a potentially worrying fact: Ultra-high stock valuations on US markets may not be backed by high and rising corporate profits. Instead, it may be that a combination of wishful thinking, accounting tricks, and the outsize influence of a handful of tech companies is blinding investors to the true health of corporate America. If that's the case, we could be looking at stock market bubble – and a sharp correction down the road. – Felicity Duncan– Felicity Duncan

Huge Disparity in Corporate Profits Hints at Something Amiss

By James Mackintosh

Are U.S. companies making more money than ever before, or are they mired in one of their longest profit slumps since World War II? Widely used measures have diverged in recent years, leaving many investors worrying that something is amiss.

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