Fourth quarter corporate profits headed south, like the mortgage market

Although you probably didn't hear this unless you really pay close attention to the financial news, the Commerce Department deported that corporate profits in the fourth quarter of 2006 kind of went south. Except for Wall Street. And domestic corporation operations abroad. Doesn't that sound optimistic?

Well, Paul Kasriel of the Northern Trust Company offers up both the bad news and probably as optimistic a view as you could find from this info:

The fourth-quarter contraction in corporate profits would have been worse had it not been for Wall Street's profits and profits of U.S. corporations earned abroad. Profits of domestic nonfinancial corporations declined 6.63% in the fourth quarter while profits of domestic financial corporations and profits earned from abroad increased 4.32% and 15.90%, respectively. The creation of mortgage-related financial instruments has been a money machine for Wall Street in this expansion. Now that mortgage credit growth is in a steep decline, Wall Street will have to find another money machine. I have complete confidence it will.

Pay particular attention to that "profits earned from abroad increased...15.90%. What do you think happens when the profit center of a corporation moves from the U.S. to its overseas operations? And why do you think such a thing would happen?

And do you share Kasriel's confidence that Wall Street will find another "money machine?" Especially when you realize that much of the previous money machine--mortgage-related financial instruments--is now credited with creating the mortgage default crisis that we now "enjoy?"

We seem to be approaching the end of stage one of globalization. Bet you can't wait to see how good stage two is.