We are short global equities in Japan, and the US. In the Japanese Nikkei, we are bearish unless the Japanese Yen can appreciably weaken. In the DJI and S&P, we are long term bullish but short term bearish. We continue to expect US earnings to have relative value to low interest rates and expect US equities to stay firm as long as interest rates can stay low.
As the central banks’ balance sheets become bloated and fiscal deficits become unsustainable without economic growth, the likelihood long term interest rates stay low lessens. Deflation supports the local currency and therefore we expect the Yen and and the Euro to strengthen. For export economies this furthers deflationary pressure. So unless the US takes on a strong dollar policy, we are bearish both Asia and Europe.
As we wrote in our last email,
The challenge in a global economy is deflation due to sovereign nations competing for good jobs. Technology is used to make the worker more productive to support higher wages, however, the velocity of money has slowed as the outlook for good jobs has weakens. So without strong purchasing power there is more supply than demand, hence deflation. Consequently, the central banks need to move interest rates back to 0% where a near infinite amount of capital can be created due to the parabolic effect of leverage at 0%. This leverage has the capability to increase the velocity of money and add the multiplier effect of creating new jobs to the economy.
As we mentioned in our last email, “a higher close on the German Dax would cause us to cover our short.” We did just that on Thursday, July 25th at equivalent index price of 10,195. Currently we are short the Japanese Nikkei, DJI and S&P.
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 +29.87% 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.