The recent strength in the Yen is disturbing in that it reflects the Bank of Japan’s inability to fight deflation and the central banks’ unwillingness to work together. To be clear, negative interest rates are deflationary because of the nonlinear parabolic formation at 0%, so the BOJ needs to get interest rates back to zero. Unless the BOJ fully communicated the economics, the market might misinterpret a move back to 0%, so the BOJ needs the Fed and Treasury to support $Yen. Currently, politically in the US this move is unlikely, leaving the Japanese to fight deflation without any ammunition left.
The challenge for the US markets is global deflation is weighing on Asia and Europe and US domestic is not growing fast enough to support global growth. To reiterate, we believe the Fed should move back to 0% short term interest rates and begin to the normalize their balance by selling their bonds at historic highs. Until, we hear a more dovish tone from the Fed, we think there is a risk US asset prices and long term interest rates continue lower.
Thursday, June 16th on the close we sold our $Yen long at 104.30 for loss. Currently, we are short the German Dax and are in a synthetic option in the S&P bias short and in the US 10yr bias long and are 32% 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 +42.39% with a Graduated 10% Hurdle Rate
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.