High Profit Margins Could Depress Stock when Reverting to the Mean

Vitaliy Katsenelson argues that stock valuation measured by PE or dividend yields in comparison to bond yields is not that cheap if you consider that corporate profit margins are close to the pre-crisis all-time-highs. The chart plots pre-tax corporate profits from 1945 until mid-2010 is clearly displaying the high margins in relation to the last 60 years. 

Although after WWII profit margins were shrinking when equities were soaring, we had a massive growth of GDP, which we cannot expect when consumers and governments need to deleverage and housing will be soft for years to come.
BCA Research's chart below paints a similar picture.

The weakened US Dollar could give US business a boost due to lower production costs in the short term as the low Euro gave a boost to German manufacturing in 2010.
To sum up, short term environment might be positive for equities although the end of QE2 is a drag. Long term, profits might shrink due to decreasing margins.