We bought the S&P to unwind our hedge going into the US Presidential Election. Even though on the surface the hedge looks to be expensive, it did protect us when global markets were down more than 5% overnight. We bought the US 10yr to hedge our US$ positions with the expectation the Fed will not tighten in December. Currently, we are long the German Dax, $Yen and US 10yr and we are short the Euro$.

The 2016 Presidential Election will prove to be historic in that all three branches of the legislature are under one party with a leader who believes in creative destruction to make “America Great Again.” For Trump and America to be successful what is needed is full transparency and honesty on how fiscal, monetary and regulatory policy operate. Finally, America and the global economy need growth to reduce the enormous debt worldwide.

With that said, the Federal Reserve needs to be honest about their policy and communicate the truth that the Federal Reserve is pushing short term interest rates higher in the name of normalization rather than letting the Natural Equilibrium of Interest Rates for fed funds to settle at 0%. To reiterate, for the first time in modern history the supply of excess bank reserves is greater than demand. The Federal Reserve with the approval from congress in 2011, is pushing short term interest rates higher by paying interest on the excess supply of bank reserves by using the interest it receives from its for $4 trillion balance sheet. Rather than letting fed funds naturally settle at 0%, the Federal Reserve is tightening for fear of inflation which results in slowing down the economy. As an economist, we must remind ourselves, inflation is the demand for capital to purchase products. If the price of products go higher the demand for capital will increase. Without demand there is no pricing power. Therefore, in the Natural Equilibrium of Interest Rates not until the supply and demand of excess bank reserves is near 0 will we see demand create inflation. In short, the Federal Reserve can wait until excess bank reserves are near equilibrium before being concerned about inflation enabling the US economy to overheat and approach 5% growth with the support of cheap capital. Not until we see demand greater than supply for excess bank reserves we will see short time rates rise appreciably.

The Trump administration is ready to rebuild America using debt to pay for the projects but if short term interest rates are artificially high, consumption and debt servicing will be hindered. The academics at the Fed though reductio ad absurdum, reduction to absurdity have placed themselves in a box. The practitioners at the Fed must make everyone realize the when supply is greater than demand in excess bank reserves the competition to lend out cash drives interest rates to 0%. Meaning if central banks charge interest, negative interest rates or pays interest on excess bank reserves the Impact of Monetary Policy is deflationary.

Moving forward the ideal situation for the markets and the global economy is to keep short term naturally at 0%, the Bank of Japan and European Central Bank need to walk back from negative interest rates. With low interest rates and a strong US$ the global economy will see increased growth raising the standard of living for all. Productivity and global competition for good jobs will keep inflation low during this time of global growth and with the Natural Equilibrium of Interest Rates, we will not see higher inflation until demand outstrips supply.

On Wednesday, November 9th we bought back our short in the S&P at an equivalent index price of 2163.25 and bought the US 10yr note at an equivalent yield of 2.06%, yields move in opposite direction of price. Currently, we are long the German Dax, $Yen and US 10yr and we are short the Euro$.

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 +37.40% 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.