Good Morning,

U.S. stocks closed mixed Friday, the last trading day of the month, as encouraging earnings from major tech companies offset negative reports from some energy firms and a disappointing GDP report.

Friday's gross domestic product reading fell below even the low bar predicted by Wall Street. The 1.2 percent growth rate in the second quarter combined with a downward revision to the first three months of the year to produce an average growth rate of just 1 percent.

In total, it was far below the Wall Street forecast of 2.6 percent second-quarter growth and didn't lend a lot of credence to a Fed statement earlier this week that sounded more confident on the economy.

Our take: In a slow growth environment like this you need to focus on the growth individual stocks can provide. Focus on what you can control and let the rest float on by. In our modern world, the temptation is always to be doing something. Those who aren't constantly in motion seem behind the times. However, there are situations where the best possible action is to sit on your hands, stick to the businesses you understand and wait for favorable opportunities.

Thought of the Week

"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent." -Charlie Munger

Ideas from Logos LP

Logos LP’s performance for Q1 is in. Since December 31st 2015, Logos LP has returned 13.22% to unitholders (the S&P 500 has provided a total return of -3.02%: S&P 500 benchmark is converted into CAD. Although not a perfect benchmark, it reflects the largest US companies and is a relatively good temperature of the US economy. Performance data is from RBCCM and RBCDI.) and the fund is currently compounding at an annual rate of 19.96% since inception in 2014 (18.65% on a one-year basis).

If you would like to discuss these results or view our Quarterly letter please contact us.

Logos LP in the Press

Our Head of Strategy considers why most experts got the result of the Brexit vote wrong and teases out a lesson that can make us better investors especially at times when the market is range bound. The article was written for SeekingAlpha.

Stories and Ideas of Interest

What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession, but part of a permanent generational shift in tastes and spending habits? The Atlantic Magazine does an interesting expose in order to answer the question of why millennials appear to be the cheapest generation ever. The Great Recession is responsible for some of the decline. But it’s highly possible that a perfect storm of economic and demographic factors—from high gas prices, to re-urbanization, to stagnating wages, to new technologies enabling a different kind of consumption—has fundamentally changed the game for Millennials. In other news….Nine out of 10 Millennials say they eventually want a place they own, according to a recent Fannie Mae survey.

While we’ve jumped down the millennial rabbit hole, The Atlantic debunks the myth of the millennial entrepreneur as the only age group with rising entrepreneurial activity in the last two decades is people between 55 and 65. But what about the entrepreneurial start-up mentality we’ve all gotten used to hearing about? But apparently Canadian millennials are stuck in their parent’s basement- and things are getting worse with employment to population ration among youths falling.

FactSet highlights that Brexit hit eurozone sentiment strongly and elevated fears of a domino effect that would result in a eurozone break up in the long term. Sentix’s euro break-up index moved from a 12.27% probability at the end of May to a 27.18% likelihood post-Brexit. Increasing concerns over Grexit, Quitaly, and other movements can be seen in Sentix’s Exit Probability series for individual countries in the chart below:

Reality isn’t always pretty. But sometimes it is. Barry Ritholtz looks at “soaring crime” and “bad loans” to remind us that we need to protect our portfolios with eternal vigilance against misleading statistics, numbers without context and data massaged in the service of ideology.
Just when it seemed that negative yields could not spread any further, they did. Corporate bonds paying negative interest rates now account for about $512 billion of market value, bringing the world close to a total of nearly $10 trillion in securities with yields below zero. Most are government securities. Yet instead of looking at this phenomenon as an anomaly or as a harbinger of more sinister things to come Tyler Cowen for Bloomberg View suggests that perhaps the most overlooked point is that the supply of negative-yielding securities is not so large relative to total global wealth. Maybe it’s time we started thinking of negative securities as the equivalent of fire or earthquake insurance for that wealth. So negative yields might just be a sign that you should be less scared rather than more.
BUY THE DIP! Has this old adage been working in the tough market? Yes: buying the deepest stock dips in 2016 returned three times the S&P 500. In fact a strategy of trading ‘oversold’ shares is up 28 percent YTD…Could the “old school” be en vogue again?

Silicon Valley banks are handing out no-money-down mortgages. That could spell trouble if the intertwined tech and real estate bubbles burst.

All the best for a productive week,

Logos LP