The construction

Corporate profits after tax, with inventory valuation and capital consumption adjustments (BEA's CPATAX), divided by nominal GDP. Both series are raw inputs computed into the ratio here — this feature consumes no other feature's labels, tiers, or scores. The "with adjustments" concept is deliberate: it measures profits from current production, and its revision behavior differs materially from the unadjusted variant in exactly the stress quarters this page cares about.

The trend lens

Position is measured as distance from the share's own expanding log-linear trend, in units of that fit's residual scatter (sigma): at each quarter an ordinary least-squares line is fit through the natural log of every reading up to and including that quarter, and the reading's distance from the line is divided by the fit's standard error. A quarter is eligible once ten years of prior history exist (40 quarters); the first 24 eligible readings are treated as a stabilization window and excluded from historical summaries. The same mechanics power the CAPE and Buffett sigma-vs-trend indicators; the ±2σ anchor follows Grantham's two-sigma-from-trend definition. The full-history percentile is deliberately demoted to context: the share has sat above its 80th percentile for 88 of the last 91 quarters — an expanding percentile on this series describes a regime, not a signal.

The five-rung ladder

Readings map to five bands at ±1σ and ±2σ — the site's standard ladder and colors. Before adoption the ladder passed two pre-registered tests on this series' own history: occupancy (no single band may hold a majority of quarters — the widest, neutral, holds 48.0% of the 254 post-stabilization quarters; pale red 30.7%, deep red 9.4%, pale green 9.1%, deep green 2.8%) and outcome differentiation (adjacent bands' forward S&P distributions were compared side by side before the colors were kept). Colors state distance from trend, not a return forecast — the register is the only forward statement.

What the chart shows — and what an observer would have seen

The page's sigma series runs on today's revised data, labeled as such. That is not what a reader would have seen at the time: computing the same lens on only the data knowable at each date (true vintages begin December 1991) can tell a different story, and the largest divergence in the record is exactly where the mean-reversion claim lived. Through 1998–2000 the as-perceived reading ran +1.4σ to +2.1σ while today's revised series puts those same quarters near or below trend — a maximum gap of 1.74σ at 2000Q4 (the median absolute gap across all 140 vintage-true quarters is 0.33σ):

An honest observer of the late 1990s saw margins far above trend; today's data says they barely were. Revisions rewrote the story after the fact — which is why this page carries a trust dial and a revision panel, and why the tested claims below were scored on both bases.

The register and the dots

A band entry is the quarter the sigma reading's band differs from the prior quarter's; consecutive same-band quarters are one occupancy, and re-entry requires leaving first. Forward figures are S&P total return · Shiller monthly convention — dividends reinvested monthly (see "The total-return basis" on the Confluence methodology). Returns run from each entry quarter's end; a reader could only have known the band changed some two to three months later, when the quarter's profits printed — the register is conditional history, not a tradable signal.

The tested claims

Margin mean reversion — WATCHABLE. The claim that elevated margins revert to their historical mean was tested under a frozen pre-registration (elevation at the 80th expanding percentile, evaluated on as-known data at each quarter's first release; reversion = closing half the gap to the entry-date median at 1, 2, 3, and 5 years; scored on both today's data and the as-perceived record). Four episodes since 1991; the three post-2000 episodes never reverted at any horizon on either basis; the single pre-2000 episode reverted at long horizons on today's data only. Four episodes can neither validate nor kill a claim — it stands WATCHABLE, and the register accrues as new episodes complete.

Early recoveries are under-reported — VALIDATED, n=3. All three qualifying recoveries with true-vintage coverage (2001, 2009, 2020) were first reported weaker than they proved — episode revision medians of +1.09, +1.57, and +1.27 points of GDP share against an all-quarter median of +0.88. Three episodes is a small base; the claim is stated only that strongly, wherever it appears.

Revisions, September, and the vintage floor

Corporate profits are absent from BEA's advance GDP estimate: a quarter first prints with the second estimate (roughly two months after quarter end; three for fourth quarters), and each late September the annual update rewrites the level history — the 2008 profit record was still being rewritten in September 2023. This page's response is disclosure, not pretense: the revision panel's left anchors are frozen first prints while its right anchor is living; the September update triggers a disclosed re-baseline of the sigma series and its registers, documented each year; and everything labeled point-in-time uses only vintages available at that date. True vintages for the ratio begin December 1991 — the earlier history is shown on today's basis and never enters a point-in-time computation.

Why this number — the identity and the ladder, printed

The share of GDP on the current-read card is the Kalecki–Levy identity's eight signed legs, summed — CPATAX = A557 + A889 + DIVIDEND − PSAVE − FGDEF − SLDEF + NETFI − A030, each leg as a share of GDP — and the identity closed at $0.0B in every quarter since 1947 at the sources gate. So the card's expander prints columns that are exact by construction: share of GDP (each leg's level) sums to the share; this quarter (each leg's level now minus last quarter's) sums to the share's change; four quarters likewise, because the page already speaks in that horizon. There is no residual. The statistical discrepancy is one of the eight legs — a real, small term BEA publishes — shown as a named row, never a plug. The only difference from a printed figure is rounding: the card prints the share at 0.01, and BEA publishes each leg at $0.1B. The "why" line under the share is the this-quarter column in words: the largest movers in the change's direction, the largest against it, the rest as one net — an ordering of the arithmetic, not a ranking of what matters.

The read is rule-based, and the page prints it as one. The margins-vs-trend word is the five-rung house ladder over σ — the margin's distance from its expanding log-linear trend in the fit's residual sigmas — and the direction word compares σ now with σ four quarters ago (rising, falling or flat). The line under the three cards prints the rule that fired and the distance from each line that would change the read: facts about today's values; the page never says which way they move next.

+2.0 exactly is deep red, +1.0 exactly pale red, −1.0 exactly pale green, −2.0 exactly deep green (the house ladder's boundary semantics). The numbers on the why line and in the table wear their sign on the site's cell tokens — light below the bar, deep at or beyond it: 0.4 pp for a quarter's move and 0.9 pp for four quarters (the 75th percentile of the absolute moves of the eight legs over every quarter since 1947), one point of GDP for a level.