Another weakening, along with sentiment, while the market sort of holds up. wednesday By Helene Meisler This week: note the market at a new high, but the new highs are below the level of last market high By Helene Meisler Define mcClellan Summation A common bias for investors is to assume that relationships between the market and economy in one phase must persist in the next. For example, since 2009 US firms have mostly grown profits by expanding margins i.e. cost-cutting. Hence, the logic runs that if wages start to rise, profit margins must fall, leading to weak profit growth, and hence lower equity prices. Implicit in this logic is an assumption that margins must drive profits. There is, of course another way: namely top-line growth. given recent news of chunky wage rises at big employers such as WalMart, the outlook for incomes appears to be brightening. Yesterdays strong home starts number for April certainly suggests the US consumer is still kicking. Moreover, the official household income data is produced with a big lag so it is necessary to look for other sources of guidance. Undervalued Research Underestimate the impact of Infotainment Underestimate the Shadow Baby Boomers influence Disappointing profits up 65% YOY. 18% avg. next 5 years Probably understated. Likely all new cars in 2020 will have on-screen infotainment 10-year Treasury at 2.29% as of 5/19 As business profits grow and capacity utilization moves above 80%, demand for loans picks up, followed by more jobs and more consumption. Recently its all about small caps China and Europe as bank lending becomes more confident