Already supportive of my thesis is the recent flattening of the yield curve, a lower absolute yield on the 10-year U.S. note (down by 12 basis points in last few weeks) and an apparent rollover in credit risk metrics. It remains my view that the 2013 real GDP in the U.S. will be (at best) +1.5% -- the CBO has just issued a forecast of +1.4% -- and that there are accumulating downside risks to economic growth in the form of the fiscal drag of policy (given that the half-life of the previous uber expansionary monetary policy of delivering zero interest rates is contracting). With inflation running low, sales and profits will be challenged. Business pricing power is limited, but costs are likely to trend higher (raw materials, interest rates, etc.). Meanwhile, productivity is starting to decline -- it was down -2% in fourth quarter 2012 -- and unit labor costs are rising. This spells a threat to unprecedented and high profit margins, which are not likely to be as stable (as many prognosticators expect) but are more likely to mean revert (over the many years ahead). Not only are fourth-quarter 2012 S&P profits disappointing but forward guidance is poor. As I previously wrote, last month about 56 companies in the S&P 500 issued first-quarter 2013 earnings guidance: 45 were negative, and 11 were positive. That rate of negative guidance (80%) is the worst since FactSet started to keep these numbers (in 2006) and above the previous high established in last year's third quarter (74%). Bottom line: Many market participants are inappropriately bullish on S&P profits and have ignored the recent downward profit revisions.