We continue to believe a weak dollar is bad for global asset prices and until the dollar strengthens we expect the global equity markets to be under pressure. The Japanese are faced with the greatest debt burden with their debt being 250% of annual GDP. The Eurozone debt debt levels are rising for the southern nations and without a strong US dollar both Asia and Europe are faced with slowing demand. On a global scale a weak US dollar is deflationary however we believe the Fed is trying to stimulate inflation domestically by using a weak dollar at the cost of adding to deflation globally.
To repeat, we believe in the 21st century deflation is the enemy of sovereign nations and the central banks. Adding to global deflationary pressures are the fiscal changes occurring in the United States and Great Britain. With Donald Trump most being likely the Republican candidate, the call for tariffs and isolationism will be loud and clear. The Brexit vote in 7 weeks adds to this call for global isolationism. These deflationary pressures will weigh on asset prices and drive long term rates lower.
We believe this deflationary scenario provides an opportunity for the Fed to begin to unwind the long end of their balance sheet while keeping short term interest rates low. This would enable the yield curve to widen, to support the banking system, while keeping short term interest rates near zero to stimulate investments. This would enable the Fed to begin to tighten without affecting economic growth. The widening differential in global long term interest rates would attract foreign capital to the US bond market and strengthen the US dollar.
On Tuesday, May 4th, on the close we covered our 10yr note short at an equivalent yield of 1.80%, yield moves in opposite direction of price. We are currently short the Japanese Nikkei and German 10yr bund and are 50% 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 +72.68% with an 8% Hurdle rate
In 2016, modeled performance net of all fees is +26.51% 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.