Economic Outlook: Indicators of the Marginal Product of Capital

Corporate profits per dollar invested were very high through 2008 Q2. Indicators of 2008 Q3 are coming out now:

NonFinancial Corporations

• IBM 3Q profit a positive sign for tech sector
• Coca-Cola's 3Q profit up 14 percent
• Hershey's 3Q profit doubles
• Continental Airlines posts 3Q loss on fuel costs
• Nokia 3Q profit falls 30 percent
• Economy stalls, but Google's 3Q profit still rises. This article offers zero evidence for the "economy stalls" part.
• Schlumberger revenues soar to $7.26 billion. Profit up 13% YOY
• Honeywell 3Q profit rises 16 percent.
• AMD narrows Q3 loss

Financial Corporations

• JPMorgan Chase beats estimates with an 84 pct profit drop, revenue is worse than expected. But they still have profits! And their profit drop didn't stop them from acquiring WaMu.
• Wells Fargo profit falls 25 percent. Again, they have profits. And their profit drop did not stop them from outbidding Citigroup for Wachovia.
• Citigroup posts another loss. They have losses. Interestingly, these losses (among the biggest in the industry) did not prevent them from bidding for Wachovia although, admittedly, they could not outbid Wells.
• Insurer UnitedHealth reports 3Q profit drop. Still have profits.
• Merrill 3Q loss widens.

I see no evidence here that a credit crunch is getting in the way of important business. In case you want to weight these items, note that total earnings for the quarter are $2.8 billion (IBM), $1.89 billion (Coke), $0.12 billion (Hershey), -$0.24 (Contin), $2.7 billion (Nokia), $1.35 billion (Google), $1.53 billion (Sch), $0.92 billion (Honey), $0.53 billion (JP), $1.64 billion (Wells), -$2.8 billion (Citi), $0.92 billion (UnitedHealth), -$5.2 billion (Merrill). I never said that it would be pretty for the FIRE industry!