THIS time is different. It is one of the oldest mottos in the financial markets. When Japanese shares traded at intimidating multiples of profits in the late 1980s, sceptics were told that Western valuation methods simply did not apply to Tokyo stocks. During the dotcom bubble, bulls laughed at those who worried about the absence of profits, let alone dividends, at some of the hottest technology companies. The newkey metrics”, believers explained, were price-per-user or price-per-click.

Investors were relieved of their optimism and their cash on both of those occasions. But the old canard is being trotted out again. American profits are at a post-war high as a proportion of GDP (see chart). Given the cyclical nature of profits, a bit of caution about future growth might be in order. But analysts are forecasting that companies in the S&P 500 will achieve a further 10.9% growth in earnings per share in 2014.

There is an element of charade about this forecast. Analysts often start the year in optimistic mode and then revise down their numbers as they get guidance from the companies they cover. Take the third-quarter results season, which is now under way. Analysts solemnly report how many companies have beaten forecasts, an optimistic sign. But companies are beating forecasts that have already been revised lower. Back in May, says Zacks Investment Research, analysts were forecasting annual earnings growth of 5.1% in the third quarter; the outcome now looks like being a rise of just 2.1%. Compared with the second quarter of this year, earnings per share may be flat.

Even that number puts a gloss on the figures. In dollar terms, the profits of S&P 500 companies are set to fall, according to Zacks, from $260.3 billion in the second quarter to $255.2 billion in the third. But those earnings are divided among fewer shares thanks to the widespread use of share buyback programmes.

In other words, profit growth seems to have stalled. Whether it can start motoring again depends, in large part, on why profits are at such historic highs.

The most common explanation for the strength of profits is that economic power has moved in favour of capital, and away from labour. In a report issued earlier this year, Martin Barnes of BCA Research showed that the rise in profit margins is linked to the sluggish growth of unit labour costs. In the four years up to the first quarter of 2013, hourly pay rose at an annual rate of just 2.1%, compared with 3.4% in the previous four years. In real terms, compensation is stuck at 2008 levels.

Although productivity growth has been sluggish in the past three years, that was not true in the immediate aftermath of the recession, when there was a huge leap. As Mr Barnes points out, had pay kept pace with productivity in recent years, profit margins would be around their historic average, not close to a 50-year high.

Even if workers continue to lose out in their battle with capital, that does not mean profit margins will remain elevated. Other factors have played their part. The fall in the dollar has boosted the foreign earnings of American companies while sharp falls in interest rates have reduced corporate borrowing costs. The dollar’s future direction is anyone’s guess but interest rates are likely to turn from a tailwind into a headwind: bond yields have been edging higher and companies have been borrowing more, in part to buy back their shares.

Another reason why margins have been high in recent years is that business investment has fallen. As companies have put off replacing old equipment, software and so on, the depreciation charges they take against such assets in their profit-and-loss accounts have fallen. The effect of this is to flatter the bottom line. In his recent book, “The Road to Recovery”, Andrew Smithers, an economist, argues that share options have given bosses a strong incentive to favour buybacks over capital expenditure.

This may well have been the crucial factor in propping up profits. Normally, one would expect the existence of high profit margins in an industry to attract new companies to it, or to persuade established businesses to invest more. The resulting competition would then drive profits down. That has not happened this time round. But perhaps the revival in economic confidence might persuade executives that the time is right for expansion, and for more capital spending. Good news for the economy might then not be good news for investors. In a sense, that would be different, although not the sort of difference that bulls like.