Good Morning,

U.S. stocks closed lower on Friday, with energy falling more than 1 percent, as oil prices fell sharply while investors digested key manufacturing data, following two strong sessions.

Earlier this week, the Federal Reserve kept interest rates unchanged and hinted at a possible rate hike later this year. The central bank also lowered its economic forecasts for the next few years.

That said, three Fed officials dissented, expressing their desire for higher interest rates. Boston Fed President Eric Rosengren explained why he dissented on Friday, saying the sustainability of the economic expansion makes the case for raising interest rates compelling.

Equities in the U.S. rallied following the Fed's decision, with the Nasdaq posting back-to-back record-setting sessions.

The Bank of Japan also revamped its monetary policy earlier this week. Both central bank moves support a lower for longer trend. The financial markets seemed to have approved of the BOJ's paradigm shift on Wednesday, sending shares higher and the yen lower, but analysts called it a damp squib. Others suggested that the BOJ is experimenting at exactly the wrong time.

Our Take: Traders and pundits will spend far too much time obsessing over when the Fed will tighten next, yet at this point nothing matters more for share appreciation than strong growth in light of extremely optimistic earnings forecasts for 2017 and forward multiples that already stand close to record highs.

Could conventional wisdom be wrong? I was looking through Freakonomics by Steven Levitt this week and it got me thinking about conventional wisdom. Could conventional wisdom vis-à-vis monetary policy be wrong? Steve Williamson of the Federal Reserve Bank of St. Louis for the past three years or so has been trying to convince the macroeconomics world to consider a bold new theory -- that central bank policy works in reverse, and that low interest rates cause low inflation. This is an idea sometime referred to as Neo-Fisherism.

Recently, Williamson has challenged Bloomberg View columnist Narayana Kocherlakota, formerly of the Federal Reserve Bank of Minneapolis, in an extended blog and Twitter debate on the subject. The result has been the deepest, most illuminating exchange about monetary policy ever posted on the internet. Why do we cling to ideas that may clearly no longer be relevant? What tidbits of conventional wisdom are holding you back?

Thought of the Week

"Swim upstream. Go the other way. Ignore the conventional wisdom.” –Sam Walton

Logos LP in the Media

Our CIO is interviewed on the MoneyShow and presents two family owned businesses he likes as long-term investments: Cal-Maine Foods (CALM) and JM Smucker (SJM).

Stories and Ideas of Interest

Why you should stop worrying about a US recession. Deutsche Bank has detailed the case for optimism on the U.S. economy, suggesting the year 1986 might offer some reasons to be confident.

Canadian consumer confidence fell for the fourth week in a row based on fears that real estate values are softening.

Canadian Shadow lending is booming as banks have stepped back from riskier loans. Joe Shmos with $300K are chasing returns…While crowdfunding in the USA is helping house flippers raise record amounts of money…Yeehaw the debt fuelled real estate train grinds onwards and upwards.

Canada’s economy needs more diversification as it is moving towards becoming a real-estate nation. Interesting report from FactSet:

“While rising home prices benefit investors from an asset valuation perspective, and the accompanying wealth effect has saved the economy from severely dipping when other major sectors have disappointed, reliance on the real estate market poses a significant risk to the health of the Canadian economy. In this situation, it is crucial for the government to assess whether a policy mix focusing on limiting demand will alleviate the problem or lure the housing market into a sudden crash that could create immeasurable negative repercussions for the Canadian economy.”

The U.S. Government issued long-awaited rules self-driving cars must meet. 15 benchmarks were issued. Calls for flexibility from manufacturers were heeded.

The world economy remains in a "low-growth trap" and weaker conditions in advanced economies will persist into 2017, the OECD has warned, predicting global growth this year to expand by only 2.9%, the lowest rate since the financial crisis. The economic think tank also backtracked on its warning that the U.K. would suffer instant damage from a Brexit vote and has thrown its weight behind Theresa May's plans to provide fresh post-referendum support.

A risky assumption lurks in your portfolio. On the topic of conventional wisdom. Hiding in most portfolios is a big assumption about risk -- namely, that assets are uncorrelated (or at least less than highly correlated) to each other. So when one asset is down -- emerging-market stocks, for example -- a typical portfolio relies on some other asset to pick up the slack -- U.S. high-yield bonds, let’s say. Not so much anymore…

All the best for a productive week,

Logos LP