August 19, 2016

Goldman Sachs Says It May Be Forced to Fundamentally Question How Capitalism Is Working

Source: Bloomberg

....

But what if margins stay elevated? That too is possible, and its implications could be unsettling.
Goldman wrote: "We are always wary of guiding for mean reversion. But, if we are wrong and high margins manage to endure for the next few years (particularly when global demand growth is below trend), there are broader questions to be asked about the efficacy of capitalism."

In other words, profit margins should naturally mean-revert and oscillate. The existence of fat margins should encourage new competitors and pricing cycles that cause those margins to erode; conversely, at the bottom of the cycle, low margins should lead to weaker players exiting the business and giving stronger companies more breathing space. If that cycle doesn't continue, something strange is taking place.

....

Read more: http://www.bloomberg.com/news/articles/2016-02-03/goldman-sachs-says-it-may-be-forced-to-fundamentally-question-how-capitalism-is-working


Wow, not often do the cracks and misalignments get highlighted this clearly.
(sorry 'bout having it in the wrong place first)