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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺ SILVER
SHREWD
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Number: of 22354 
Subject: Re: S&P Free Cash Flow growth
Date: 06/17/24 11:27 AM
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the composition of the S&P is quite a bit different in the past 30 years. More profitable, less capital intensive and scaleable businesses.

Sure. As mentioned, it could stay high. (though the reasons it's higher are more to do with interest rates and labour share of income. If you're talking net income rather than cash flow, also tax rates)

But you can't extrapolate that trend. To make a buck of free cash flow requires much more than a buck of sales, and always will. The operating margin can't keep rising indefinitely.

Since you're talking about the whole economy, not just a couple of firms with great economics, it will probably always require (say) $5 or more of revenue even millennia from now. Businesses have expenses. Not a lot of people work for free, especially CEOs.

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
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