Our fundamental thesis is, market values are engineered by global central banks. The central banks recognize the global deflationary pressures and combat deflation with cheap capital to stimulate growth. The global deflation comes from third world countries entering the global marketplace where all the sovereign nations are competing for good jobs. But for this financial engineering to work, the central banks need to be involved and coordinated.

What we have seen recently is the central banks moving separately, when the Fed tightened and China moved to devalue their currency to better compete globally. What the Fed has overlooked by tightening is the lack of domestic inflation and has underestimated the deflationary impact of rising rates from 0% to 0.25%. The People’s Bank of China underestimated the impact of devaluing their currency and how quickly the new middle class would move their capital.

That being said, we believe the central banks recognize the need to coordinate to stabilize the markets or run the risk of economic armageddon. The central banks need to provide cheap capital to stimulate economic growth until the sovereign economies no longer need to be supported and inflation becomes a problem. In the 21st century, the competing global economy keeps inflation low both globally and domestically. For the US, a stronger dollar is also deflationary.

It is clear the Fed has moved too soon and too much and needs to maneuver back to more accommodative. We feel that a 5 to 10bp move, rather than 25bp move was more appropriate because coming off of zero interest rates, a small move has great impact and large moves have devastating impact.

Our purchases have been a recognition the central banks will coordinate and dial back their sovereign moves to avoid economic armageddon. Therefore, we expect more dovish talk out of the Fed and expect the PBOC to begin to support their currency and have a more long term outlook to their unprecedented growth.

We have been wrong about Europe, so Wednesday, January 13th we got out on the German Dax on the close at an equivalent index price of 9,950. Later that day, our methodology had us buy the DJI at an equivalent index price of 16,290 and that night, the morning in Tokyo on January 14th, we bought the Japanese Nikkei at an equivalent index price of 17,100. We are currently 75% invested.

In 2012 modeled performance (7 ˝ mo.) net of all fees was +12.46% with a 10% Hurdle rate
In 2013, modeled performance net of all fees was +19.73% with a 10% Hurdle rate
In 2014, modeled performance net of all fees was +56.42% with a 10% Hurdle rate
In 2015, modeled performance net of all fees is 72.02% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is -0.91% with a Graduated 10% Hurdle Rate

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Disclaimer:

The Unicorn Macro Fund, LP (“Fund”) operates under the SEC rules of 506(c) of Regulation D. This rule allows general solicitation as long as all purchasers of the Fund are accredited investors and the Fund takes reasonable steps to verify that purchasers are accredited investors. The 506(c) rule benefits funds that perform better than their peers, because for the first time, Regulation D funds can post their results publicly.

The Fund trades both long and short positions in a variety of global markets and its performance is not correlated to any one market. Performance of the model of the Fund is measured by Net Asset Value (NAV) which is net of all fees, is unaudited, and may include the use of estimates. Individual results will vary based on the timing of an investment and past performance is no guarantee of future results and there is a possibility of loss.

The modeled results are based only on capital appreciation from macro style trades. The results do not include dividend reinvestment or any other form of cash flow and are taxed as ordinary income. All trades have a risk/reward objective of at least 3 to 1 and each full position risks no more than 2% of assets. There will be times when market conditions may alter these objectives. Since the inception of the model our trading of the methodology has become more precise.