The challenge for the central banks is both Japan and Europe are trying to reignite their economies with quantitative easing and negative interest rates. As we have shown, Monetary Quantitative Policy is best used to provide capital to a market needing a buyer of last resort. While both Japan and Europe try to reignite their economies they need a low cost of capital which QE provides. However, we have shown the Impact of Monetary Policy of negative interest rates is deflationary. Both the Bank of Japan and the European Central Bank are charging interest on the oversupply of excess bank reserves rather than allowing the oversupply to cause the Natural Equilibrium of Interest Rates to be 0%.
Japan has made it near impossible to challenge the bond market as QE has no termination date. In Europe, the ECB has stated March 2017 for when QE will end unless further accommodation is needed. In Japan, the bond market is for one sovereign nation but in Europe it is collection of strong economies and weak economies making up multiple bond markets. Consequently, the US bond market affects individual european bond markets more than the Japanese market. In sum, for the global economy to have time to reignite, it would be most prudent, if the Fed were not to tighten further by paying more interest on the over $2 trillion of excess bank reserves. As stability leaves the US markets in the form of political anxiety and trades are unwound the global markets are at risk and we need strong central banks to keep the bond markets from selling off.
As we mentioned in our last email, a close below 2122 on the S&P would cause us to sell our long. On Tuesday, November 1st we did just that and sold the S&P at equivalent index price of 2,111.25 for a loss. On Wednesday, November 2nd we sold the Euro$ at 1.1120 and are left short.
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 +27.68% 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.