August 26, 2014 (Tuesday)

Since Inception - June 18

,
2014:
Equity/Futures Account: +2.50%
FX Currency Account: +12.56%

Benchmark: S&P 500: +2.11%








8/26/14 Commentary

8/20/14 Trade - USD/JPY cross has been on the radar for a while as it's been in a tight trading range since
February of this year. The position was initiated as it broke out of consolidation on Wednesday. Given how long
it has consolidated, it will retest and likely close higher above the previous high of 105.43. It is likely that this
move might be the next leg lower for the yen part of the larger macro move that has occurred since late
2011.

Fundamentally it was only a matter of time before the yen moved lower on the backdrop of dollar strength as
well as the divergence in central banks' policies -- they've been in different stages of easing for quite some
time now. The prospect of additional easing seems more likely to combat the continued lukewarm data points
in Japan. Kuroda may be publicly positive and appear to be excited about Japans growth prospects, but
inspiring confidence is part of his job as he is trying to amplify the effect of his policy being downbeat would
have the opposite impact.















1) Short EUR/USD it has been the most highly concentrated position since I began this trading simulation. The
position has always been large, but it has certainly grown in size with each technical level and data point
hurdle that it cleared that has made me comfortable enough to add more to the trade.

The short EUR/USD trade is one of the few macro trades where all elements of the trade (historical analysis,
policy analysis, economic data, trends/technicals and etc) all line up favorably to be short.

2) Long US Treasury continuing with the deteriorating Eurozone macro theme, in which the ECB will be
expanding its LTRO for the second time in three years, the difference in yield between the German Bund and a
lack of alternative for global investors has created a force large enough to push U.S. yields lower. Also,
emerging market central banks have bought U.S. treasuries in concert to keep their own economies stable by
keeping U.S. rates low. And finally, theres the likelihood that the U.S Federal Reserve will be dovish for a longer
period than people expect.

3) Short Gold golds reputation/status as a safe haven asset has suffered in recent years. Ive been bearish
when it broke the major support of $1600 in early 2013 and I believe gold still hasnt proved its purpose or
worth.

For one, it fails to be insurance when theres a geopolitical issue. Two, the U.S. dollars ascent on the backdrop
of the declining Euro will continue to be a headwind for gold. Third, gold doesn't yield anything thus in a
search-for-yield environment, gold is not attractive especially if Europe and other parts of the world show
signs of deflation. Fourth, on the other hand, if rates do normalize and Fed policy becomes more hawkish, gold
once again wont have a leg to stand because it doesn't yield anything.

4) Short German DAX (EWG) flipped the position from being long and shorted the DAX as insurance against
Putin (a peace deal where Putin washes his hands clean of Ukraine goes against all that I know about Russian
history and the man I studied in college) and against continuing deterioration in economic conditions in the
Eurozone. The bet is that it is more likely for the DAX to break 9000 than it is likely to hold the line.

5) US Equities (SPY) ???? I wrote a question mark because I don't have the answer, and am rather confused
about risk/reward nature of U.S. equity market. With my mind leaning more on the negative side, I have
initiated a small short position on the S&P 500. But overall, my view on equities as of today is a work-in-progress.

6) Long USD/JPY - it was only a matter of time before the yen moved lower on the backdrop of dollar strength
as well as the divergence in central banks' policies -- they've been in different stages of easing for quite some
time now. The prospect of additional easing seems more likely to combat the continued lukewarm data points
in Japan. Kuroda may be publicly positive and appear to be excited about Japans growth prospects, but
inspiring confidence is part of his job as he is trying to amplify the effect of his policy being downbeat would
have the opposite impact.

It is likely that this move might be the next leg lower for the yen part of the larger macro move that has
occurred since late 2011.


Positions:

1) Short Euro against U.S. Dollar (Spot)

2) Short Gold (via ETF: GLD)

3) Short equities via S&P 500 (ETF: SPY)

4) Long U.S. treasuries (via ETF: TLT)

5) Short German DAX (via ETF: EWG)

6) Long U.S. Dollar against Yen (Spot)

8/26/14 Platform Snapshot (Optimized for viewing on iPhone, iPad, or Android)


Trading Account Rules:
1) Starting Account Size:
a. Cash equities/futures/option: $10million
b. Forex: $10million

2) For the cash account (non-forex), macro views will be reflected using listed equity indexed ETFs with deep liquidity/volume
and net assets of $1 billion or greater in order to best represent the odds of the strategy being scalable (single-stock,
company specific stocks will not be traded)

3) Most of the speculative positions can also be accurately expressed using futures, but because the volume is more
constrained at different times and because the platform fails to take volume into consideration (hence the trades' impact
on the actual price), the use of futures will be limited. Positions that I deem to be core/longer-term would be better
expressed via equities. But for commodities such as crude oil, silver, copper, etc., they will solely be expressed through the
futures contract market due to contango/decay issues that most commodities ETFs suffer.

4) The overall goal is to identify attractive opportunities with goals of holding the positions for multi-week/month periods.
Importance will always be put on liquidity and risk exposure. Also, being able to realistically liquidate all positions by end of
trading day or vice versa, scale up risk, will be an advantage of the strategy.

5) Daily updates will be simple and short, as youll receive a time-stamped screenshot of the account summary where detailed
positions and P/L will be all within a single image.

6) Leverage for spot currency position will be used sparingly with average position being 2.5x the underlying cash value with
stringent risk management in mind.