As we wrote in our last email,
Our Fed thesis is Janet Yellen is recognizing the global economy and in so doing is recognizing the US economy is no longer isolated domestically. The exit strategy for the Fed and all the central banks is a robust economy that can pay off its debt. The role of the central banks is to stimulate economic growth before their balance sheets get too large and sovereign debt can’t be repaid. Therefore, the Fed and all central banks need to be accommodative until their economies reignite. Unless a currency is seriously devalued, inflation is no longer a problem. In fact, when the US$ begins to strengthen, lower commodity prices will be deflationary. Not until global economic demand outstrips supply will we have inflation. Domestically, full employment no longer leads to payroll inflation because workers have to compete globally for good jobs.
Exports account for less than 15% of the US economy. The economic engine of the US economy is consumer demand followed by the government and industry. Unfortunately, the economic engine for the global economy is also the US consumer. Therefore, unless the US$ is allowed to stabilize, global asset prices will be under pressure. We do believe the Fed is aware of global and domestic growth and the lack of domestic inflation. Therefore we expect Janet Yellen to maintain a dovish tone this Friday at Jackson Hole but threaten a hawkish move with strong economic data. In short, she recognizes the Fed is a major player in the global economy and can no longer afford to support domestic policies at the cost of global growth. Our hope is Janet Yellen warns negative interest rates are deflationary by recognizing the effect of monetary policy is non-linear and infact parabolic at 0%.
On Tuesday, August 23rd early morning we bought $Yen at 100. We are long $Yen and short the Euro$, we are 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 +30.39% 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.