Today’s video is from the 2007 Berkshire meeting, where Charlie Munger and Warren Buffett discuss the rise of corporate profits as a percentage of GDP’s rise from around 4% to over 8% as a reason “not to swing for the fences” at valuations then. Part of the rise in this ratio up to 2007 was due to the rise in financials, while more recently we might attribute it to the rise of high margin tech companies.
Here is a chart of corporate profits as a percentage of GDP, as plotted in this blog post:
