Our US market thesis is, slow growth will keep interest rates low and equities firm on a relative basis. In Asia, specifically Japan, their battle with deflation needs the assistance of a strong US dollar. Otherwise, deflation will cause the Yen to strengthen and the economy to weaken. In Europe, the risk of the Euro experiment ending is keeping the Euro weak as the European Central Bank tries to reignite the Eurozone economies. Currently, global equity markets are trading firm on the strength of US equities markets.
US equities rallied on Friday with the unexpectedly strong employment numbers. When you look below the surface at the US employment, the increase is coming from less productive jobs. This lack of productivity is being generated by increased regulation which is not adding to economic growth. This is evidenced by the low GDP numbers for the US economy. Consequently, we do not expect the Fed to tighten any time soon but if they were to tighten, we would expect the yield curve to flatten, causing bond prices to rally. This tightening would also put pressure on US asset prices because of the deflation caused by higher short term interest rates.
As a Monetarist to prepare for the next crisis that is yet to come, the Fed has the unique opportunity to reduce its balance sheet by selling its bonds at historically high prices. This move would also strengthen the US dollar which would further strengthen global asset prices. However, we do not expect such a bold move from the Fed and therefore expect global asset prices to be under pressure as US asset prices deal with a slowing economy. During this slow growth struggle we expect US bonds to rally.
On Friday, August 5th on the close, we bought back our shorts on the DJI and S&P at an equivalent index price of 18,543.50 and 2,182.75 respectively. On Sunday, August 7th in the evening, we bought the US 10yr note at equivalent yield of 1.60% - yields move in opposite direction of price. We are currently, long US 10yr notes and short the Japanese Nikkei.
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 +28.14% 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.