1.20.15 Macro Trading SImulation

8/9/2019 1.20.15 Macro Trading SImulation

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January 20, 2015 (Tuesday)

Since Inception June 2014:

Equity/Futures Account: +16.88% ($11,688,519)

FX Currency Account: +62.25% ($16,225,130)

Benchmark: S&P 500: +3.32%

Equities/Futures

Year Jun2014 Jul Aug Sep Oct Nov Dec Jan2015 Feb Mar Apr May Tot. Ret

2014-

2015

+2.01% -1.02% +2.02% +6.28% -2.52% +4.29% -1.69% +6.73% +16.88%

FX Currency

Year Jun2014 Jul Aug Sep Oct Nov Dec Jan2015 Feb Mar Apr May Tot. Ret

2014-

2015

-0.15% +4.84% +7.24% +20.17% +6.01% +4.47% +5.58% +2.68% +62.25%


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1/20/15 This Weeks Trade Summary: From Grozny to Frankfurt

Grozny, Chechnya

The chance of a peace accord taking place between Ukraine and Russia went from slim to none this weekend. The fact that the leaders on both

sides need the conflict to continue or even escalate further to stay in power is quickly elevating the danger.

One turn of events that can deescalate the situation is if Grozny becomes a bigger problem for Russia, as it did during the Yeltsin era, than Ukraine is

at the moment. Chechnya is quickly becoming a hotbed for Islamic jihadist activity, and part of the resurgence is due to many of Russias military

and intelligence assets being shifted to the Ukraine front (or within Ukraine itself) and, secondly, the formation of ISIS and some factions of Chechen

Islamists pledging allegiance to al-Baghadi and fighters returning back to Chechnya from Syria/Iraq.

The severe rise in attacks on Russian security forces in the region combined with a heightened fear of a pan-European terrorist network following

the recent tragic events in France may lead cooperation between Western Europe and Russia. Russia may be one major terror attack on its own soil

away from experiencing a strategic shift towards the Caucus rather than the Crimea. It may be a long shot, but monitoring the events in Chechnya

and the Caucasus region, which no longer has the coverage it used to, perhaps will offer insight into how the Ukrainian conflict concludes in the

short-term. Further deterioration in Chechnya would may become a buy signal for Russian stocks as it puts Russia on the same page as the West.Such cooperation and mutual understanding occurred following 9/11 attack between Bush and Putin (Chechnya at the time was also in a period

of violent Islamic insurgency).

Euro and the Gold Trade

Current positions in the simulation have benefited from extreme currency volatility and a respective focus on money f low driving all short rates

low/negative. Im not a gold bug by any means but I do understand the importance of sentiment that comes with the basic belief that money

moves in search of the next perceived best thing. I was able to sniff out towards the end of last year that new highs in the dollar index didnt

correspond with lower gold prices, which made me realize that given the broader trend of the relative safety trade picking up, it would be only amatter of time before gold would find favor with investors as the list of alternatives kept getting shorter.

The short Euro trade benefited greatly from SNBs snap decision to remove the peg. The move has created an excitement for more downside

potential for the euro on the speculation that SNBs decision is toget in front of ECBs massive QE. As a result, the Euro has moved significantly

lower ahead of this weeks meeting on the 22ndreaching a 1.15-handle against the U.S. dollar.


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Even the most optimistic size of the quantitative easing might be already priced in, so the risk has gone up significantly of staying short ahead of the

ECB meeting on Thursday. A temporary counter-trend rally to 1.20-1.21 where the currency really breaks decade-long support is not out of the

realm of possibilitythis would probably be a great level to re-short the currency against the dollar.

The Devil Will Be in the Details

Assessment of how the market would fare immediately:

1) Below 500 billion euros and limited risk sharing

o Might as well consider it a one-way ticket to lower prices for most risk assets

2) Large size closer to 1 trillion and limited risk sharing

o Given that the size of the program still surprises, the market will overlook the latter

3) Large size and large risk sharing

o All out risk-on modeespecially in peripheral bonds and equities will never happenthe Bundesbank will not tolerate it.

4) Small size but large risk sharing (below 500 bill ion and below 50% risk share framework)o Tempered enthusiasm; slightly bullishunlikely as Germany will again object to generous risk sharing

5) Defers the decision to the next meeting

o Preserves the putoption, keeping the QE dream alive. Though risk assets would initially come down, as long as the QE

announcement is imminent, its difficult to short risk assets in Europeall in all, European equities have done quite well since

2011.

Questions as to who will share the risk, who will do the purchasing (ECB or NCB), the proportion of the risk sharing, distribution of purchases across

the curve, and rating restriction will determine the amount of faith the market will put in the program. All of this is crucial since the faith in CB is

quickly waning.

The size, the degree of restrictions and the risk sharing will come down to the degree of stringency the Bundesbank wants to impose and howcommitted Germany is to saving the Euro.

Furthermore, the way risk sharing is structured would also raise a lot of long-term questions. For instance, having the periphery NCBs buy their own

securities undermines the very construct of the single monetary unionas it is not an all for one, one forall type of commitment. I just dont


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know enough to answer whether the peripherals existing debt load can handle the increased debt, but I wonder whether that would increase the

possibility of restructuring or default and only make the long-term picture murkier.

When Exactly Is the Tipping Point?

Im not completely sold that the announcement of QE is imminent despite SNBs move to remove the peg. I cant help but wonder if Draghi would

really announce QE ahead of Greek election on the 25thwhen that could also be used as an acceptable reason to defer the decision until March. I

also believe that there is a vested interested in preserving the put option for as long as it can.

Conversely, my sense is that unless the announcement of QE closely resembles the #3 option above, it will most l ikely be a sell the news event.

The euphemism may just translate to a one-day pop or perhaps a multi-day rally. But the tragic irony, which the market is full of, leads me to

believe that the moment it has been all waiting for is the day the magic of QE almost immediately dies.

Whichever is the case, it would be foolish to not close related currency positions when it has already moved so much in anticipation. Not only is it

smart to lock in gains and reduce risk ahead of the meeting but I sincerely believe that flexibility will be rewarded more this time around than usual.

Actions Taken Going Into This Week:

1) Close out remaining EUR/USD position

2) Close out remaining USD/EUR position

3) Close out USD/KRW

4) Maintain long position in GLD and GDXJ

5) Maintain short position in EEM

6) Maintain short position in EWY

7)

Maintain small short position in SPY

8) Maintain small short position on Nikkei 225 Futures


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GLD:

VIX:


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1/20/15 P&L Breakdown for Equities/Futures Account


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Current Equity Positions (as of 1/20/15 - Tuesday)

iShares MSCI Emerging Markets ETF: -85,000 shares = $3,352,400

IShares MSCI Germany ETF: 0 shares = $0.00

IShares MSCI South Korea ETF: -60,000 shares = $3,372,000

Market Vetors Junior Gold Miners ETF: +95,000 = $2,657,600

SPDR Gold ETF: +32,000 = $3,974,080SPDR S&P 500: -10,000 = $2,020,300

Account Cash Value:$11,688,519, Total Exposure:$15,376,380, Leverage: 1.31x

Current FX Positions (as of 1/20/15 -Tuesday)

Euro/US Dollar: $0.00

US Dollar/Japanese Yen Spot: $0.00

US Dollar/Korean Won = $0.00

Account Cash Value:$16,225,130, Total Exposure:$0.00, Leverage:0


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1/20/15Platform Snapshot


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Changing Winds

(Written on Nov. 17th, 2014)

One subject of history that Ive really enjoyed since I was a kid was alternative history. What if scenarios intrigued me, such as wondering about

an alternate world in which the Battle of Stamford in 1066 never took place before the Battle of Hastings a month later. William of Normandy losing

to King Harold wouldve radically changed the trajectory of both English and European power. I believe global-macro is largely similar in the sensethat imagining a narrative and envisioning a world different from what we know to be true today requires the same mindset that derives joy from

such an exercise.

Chart 1 (US Dollar Index stretching back to 1985)


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Chart 1The charting software, wouldnt allow me to go back more than to 1985, but in actuality the trend shown has been intact since the 1970s,

when the U.S. formally moved away from the gold standard. If South Korea, China, Brazil and Mexico were to be included in the weighting of the

index, the breakout would have already occurred (not to mention, the euro and the yen make up 70% of the index weighting).

Chart 2 (Euro-Dollar dating back to 1999 when the currency was introduced)

Chart 2The Euro-Dollar breaking all support levels in the last 10 years is becoming a highly probability event which also happens to be the level

at which the Euro was introduced to the markets in January of 1999.


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Chart 3 (Dollar-Yen since 1985)

Chart 3Dollar -Yen has already broken out of the multi-decade slope.

Breakdowns or breakouts of this magnitude can trigger liquidation events, as anyone who has bought or sold within that vast t ime period could all

become underwater on their positions. Take the Euro-Dollar for example. Around 1.20, you are taking out every level of everyone who has boughtin the last ten years. As Japan trashes its own currency to support growth or blatantly monetizes its own debt, that will likely force others in the

region to devalue its currency in order to compete with the yen (South Korea - USD/KRW looks very interesting).


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An unwind of the decades-long carry trade in which people have borrowed dollars and bought assets abroadspecifically Asiacan have massive

ramifications when growth is already fragile in the region. Regardless, the U.S. dollar breakout is a high-probability event and it makes little sense

to be long Asian EM equities, including Japan. Its better to either short or avoid the second derivative trade of the current monetary policies of the

region (equities) and keep the trade simple by focusing on the currency aspect (as this simulation has done).

Finally, all roads lead back to the shiny stuff. I believe its very possible that gold will decouple from its traditional re lationship with the U.S. dollar,ironically due to the uncertainty and disruptions that are created as the dollar continues its ascent. The currency war among regional Asian nations

should also cause the demand for gold to rise in the region as the forced currency devaluation continues.

I laid out the case in the Nov. 3rd note that golds move has always been centered on financial stability. Golds move from $700 to $1900 (from

2008 to 2011) in my opinion was driven by the fear of financial instability and the perceived inability of central banks to calm the storm. Whether

its extreme inflation or deflation, start of a bubble or end of a bubble, the very existence of either extreme is a knock on the system and an erosion

of confidence in central banks. It wasnt until 2012, after several years of stock markets steady rise, that those fears were placated, which also

marked the top in gold. And I believe we are again setting up for an environment where gold should perform.

Positions (listed in reverse chronological order):

1) Short Emerging Markets (iShares MSCI Emerging Markets ETF initiated on 11/14)

Reasons detailed in Changing Winds

2) Long US Dollar/Korean Won (initiated on 11/14)

Reasons detailed in Changing Winds

3) Short MSCI South Korea (initiated 9/4/14)

Written on Sept 4th

There are three major headwinds for the country: 1) weaker yen 2) over-reliance on chaebol and the subsequent lack ofdiversification, and 3) demographic time-bomb.

Korea is a trading powerhouse. It derives 55% of its GDP from exports and is the seventh largest exporter in the world. The majority of goods that

fall into that export figure are electronic & electric equipment and automobile and transportation equipment. That puts South Korea in direct

competition with Japanese multi-nationals that play in a similar field (the likes of Sony, Toyota, and Honda) who are again getting a renewed boost


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from the yens weakness, likely to come at the expense of Korean rivals.

This exposes a structural issue within the South Korean economy. The chaebol system (chaebol refers to a family-controlled conglomerate) has

made South Korea the 12thlargest economy in the world but its also its biggest threat. In order to bring about quick modernization and economic

growth, since the 1960s, the South Korean government has groomed companies within certain sectors of the economy via protectionist policies and

state subsidies. This path has helped bring rapid growth to South Korea and allowed companies like Samsung, Hyundai, and LG to become giants onthe world stage.

The economy that was ultimately created was one dominated by very few players. Thus, the countrys reliance on too few compan ies to be its

drivers of growth gambles its economic fate in their hands. Subsequently, the over dominance by the chaebols stifles competition, creativity,

innovation and entrepreneurship (which is excruciatingly low for a country of its size) and although the effect of, lets say, lower creativity is difficult

to quantify, without a doubt the longer-term implications are negative.

To grasp how sorely the Korean economy is in need of diversity, one just needs to look at the components that make up the wei ghting of the KOSPI

Index. By industry, Electronic & Electric Equipment accounts for 29%, and KOSPI Transport Equipment accounts for 16%. In total thats 45%. The top

20 companies with the largest market cap amount to 49% of the KOSPI Index (Samsung alone accounts for 18%). If you break it down further by

chaebol ownership, for example, Samsungs Lee family controls 3 out of the 20. More comprehensively, 4chaebol families (Samsung, Hyundai, LG,

and SK) control 12 of the 20 largest companies, or roughly 40%.

Samsung Electronics recently reported disappointing shipment numbers for its flagship Galaxy smartphone. Q2 earnings were disappointing due to

declining smartphone sales (revenue declined from 57.46 trillion won to 52.35 trillion won) and the outlook for the second year is likely to be worse.

With the expected launch of the iPhone 6 in SeptemberApple going after the category of larger screens' turf that Samsung has dominated since

the launch of its Galaxy flagship line and other trinkets such as Apple iWallettheres a chance that Samsung will lose a tremendous amount of

market share.

That should serve as a reminder of how vulnerable South Korea is in terms of how concentrated its economy is around a few companies.

Technology is an extremely competitive space where an advantage or leadership can quickly turn on its head within a single cycle. Margincompression is the name of the game since all devices quickly become commoditized through competition and saturation. It's scary that Samsung

Electronics alone makes up 17.5% of the KOSPI or 21% of the assets in the ETF: EWY (Samsung as a holding company roughly accounts for one

quarter of South Koreas GDP).

As for the auto industry, South Korean companies such as Hyundai and Kia (Hyundai Motors and Hyundai Mobis account for 7% of the weighting in


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the index) have been able to gain market share in the last decade from their Japanese rivals through aggressive pricing that was partly aided by the

strengthening yen. But now the situations have reversed and Japanese carmakers should be able to compete better on price (every 1% weakening

in the yen boosts Japanese automakers operating profits by 2-6% - which is significant given that Toyota exports roughly 2 million vehicles that it

produces domestically).

As a society, the intense focus Koreans put on education produces far more negative outcomes for quality of life and demographics. It props up theinexcusably high suicide rate (the highest in the world 38.3 per 100,000) and fuels the corruption in its educational system. The intense

competition and structural education issues focused on entrance exams for its prestigious SKY universities have created an arms race where parents

are forced to spend additional disposable income on hours of private lessons outside of normal school hours. Its normal for Korean students

starting from 12 years of age to have an additional 6 hours of tutoring after school.

All of this fuels additional downward pressure on the birth rate on top of the usual pressures that take place in developed/developing countries.

The cost of raising a child in such a competitive environment is astronomical. Thus, South Koreas birthrate is actually lower than Japan and equally

South Koreas working age population is falling by 1.2% annually (the fastest decline among OECD) and it will see the biggest jump in its elderly

population compared to any other developed nations (61% of the population versus 10% today). In essence, South Korea sees Japan when it looks

into the mirrorin fact, one could make the case that the demographic issues of Korea are worse.

The breakdown of the weighting in the Korean indices and within what the instrument I have access to ETF:EWY (I hope to explore other ways of

expressing this bet), makes it a compelling longer-term short. But what makes the trade more attractive is that the country as a whole seems to be

oblivious to its problems and the image it sees in the mirror is eerily similar to Japan.

4) Long Gold (SPDR Select ETF:GLD and Junior Gold Miner ETF:GDXJposition initiated on 9/30) -

Written on Sept 29thIt may not feel like it in the last few years, but the world has become a more dangerous and fragmented place. As I wrote in

my analysis on the future of the European integration & geopolitics (8/28), since the financial crisis in 2008, there has been a reversal in the grand

march toward globalization/integration since the fall of the iron curtain two decades ago. Nationalism is starting to rear its ugly head again in globalhotspots, states are preoccupied with domestic issues and increasingly going back into their shell when it comes to broader international issues, and

finally, the unilateral framework of the world order established by the U.S. post-Soviet Union exhibits serious signs of falling apart under the current

structure without further restructuring or strengthened commitment by the western world (for which there is no appetite).

On the monetary side, the world is about to double the size of its sovereign debt load from 2007 supported by little more than half the growth


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when the debt load was half the size. And the final word has yet to be written on the unprecedented monetary policies in U.S., Europe, and Japan

and whether the world's largest economies are in fact playing musical chairs. If the threat of deflation is real, central authority will continue to rely

on the printing press to reflate.

Thus, perhaps the biggest risk to the market is when the music actually stops, when the realization sets in that the panacea isn't in financial

engineering and when the childlike innocence and trust in central banks' ability to fix problems shatters. Hope becomes the biggest enemy of themarket as it creates wild swings and extreme positioning. It's likely that each time hope is crushed the central planners will outdo the previous

method. Rinse, repeat.

Down the line, the insane debt levels all around the globe will do everyone in. Such a prognostication is excruciatingly gloomy. But I also accept that

within it, there will be market swings of excess in both directions and plenty of opportunity to make money in either direction.

5) Long USD/JPY (initiated 8/20/14)

Written on August 20thIt 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 policybeing downbeat would have the opposite impact.

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 and 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 yenpart of the larger macro move that has occurred since late 2011.

6) Short German DAX (short ETF:EWGinitiated 8/18/14)

Revised on Nov. 14thI still remain short EWG in part because I see l imited upside for the Eurozone (explanation offered on 8/27 update) but also I

still worry about Russias next move. Russia has largely been removed from investorsworry-list, investors have largely ignored the deep rooted

suspicion the Russian bear has towards the west since the Crimean War in 1853which officially marked the radical shift in European geopolitics as

the continent went from French containment doctrine to the one focused on containing Russia.


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Without firing a single shot, the West has inflicted an economic pain on the country and it has without a doubt has hurt the countrys ego.

That exactly is the source of my worry. Putins ego is essentiallya wild card. And I also worry that the West would take it too far to drive a point:

which is to remind Russia that theres no benefit in territorial expansion through force. But the risk of that message getting lost as the rouble

continues to tumble and as the country starts burning through its $400 billion reserve. Which seems like a lot, but given that half of the annual

budget (which is based on a $100/bbl) is dependent on oil revenues is certain to anger the Russian bear.

And that is bad news since history has long shown that over-punishing a nation can lead to unintended violent outcome.

7) Short EUR/USD (initiated 6/17/14)

Written on June 17thand edited on August 27thThe short euro trade has been the most highly concentrated (and the longest held) position since I

began this trading simulation.

I believe short EUR/USD trade has been 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.

From 8/27:

Good trades are often those that have multiple catalysts to push prices in the desired direction. But great trades are those that right or wrong, will

move in that direction anyway.

The short euro trade has been the most highly concentrated position since I began this trading simulation. The divergence in cent ral banks policies

(Fed vs. ECB) and the growing divergence in economic data points have been the main reasons for holding a negative view on the euro against the

U.S. dollar since May of this year. And that as the economic realities become worse, the chances of QE in the Euro zone will increase. On the

flipside, contrasting Fed policy will strengthen the U.S. currency, further fueling the weakness in the Euro.

Government policy is not providing the solution so the burden will only continue to disproportionately fall on monetary policy to somehow uncoverthe panacea for Europes woes. In my opinion, the future does not look bright. I see all of this as part of the larger macro trend that is moving

Europe away from the intended goal of integration.

The sovereign debt crisis in 2011 clearly drew the line between the haves and the have-nots. What is also ironic about the situation is that the event

left both sides bitter. The haves were upset because of the imposed financial obligation to help those who have less (or thos e who lied and abused


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the system) and the side on the receiving end felt they were being overly punished and bullied by those who have more. Those feelings still

continue to burn and run counter to a longer-term integration process.

Those grievances eventually manifested themselves in domestic politics. All across Europe, parties that have lost significant ground to their socialist

or center-left political adversaries for decades came back to the forefront of their respective domestic political stages in the first half of this year.

In France, the National Front won the nationwide election for the first time with nearly 25% of the vote, winning 118 council seats on a local level.

In the UK, the UK Independence party won 23 seats making it a first time in a century that neither the Conservative nor the Labour Party won the

election. In Finland, the newcomer Finns Party established itself as a legitimate third-party option after winning 13% of the vote. And the Five Star

Movement Party in Italy scored 21% of the votejust behind the ruling Democratic Party. Even Germany saw newcomers Alternative Party and a

neo-nazi party burst onto the political scene.

The narrative was much the same for Netherland, Hungary, and Greecethose who favored leaving the currency union did extraordinarily well.

This laundry list speaks to the political earthquake Europe experienced in its first major election after the sovereign crisis and to the growing

persuasion of the Euroskeptic platform.

Despite what the establishment and spin-doctors in Brussels may say, one could characterize the population as having one foot over the fence. One

final push over and they may never come back. The more radical tools imposed from Brussels to stave off disintegration may also be the stick that

knocks voters to the other side.

It took a great amount of effort in the decades following World War II to convince Europeans of the merits of European unity and the eventual path

toward integration. But in one single swoop, all of that has changed. The younger generation, which has fleeting ties and experiences to the Great

Wars and vague memories of the Iron Curtain of the Cold War, only knows the failures of the integration experiment.

The worry is that it may be too late to win back the hearts of voters. A further push for integration in order to save the union will produce even

more backlash and build on the momentum Europskeptic parties have already displayed in the recent election. But doing nothing will also produce

a similar outcome as recession, stagnation, high youth unemployment (and high unemployment in general) will see anger directed at Brussels. Its alose-lose situation.

There is also one other wild card that may push the euro even lower and that is the situation in Ukraine. Further escalation will punish the strongest

European economy, which does the most amount of business with Russia than anyone else on the continent. And the consequent safety trade will

be away from the Euro but into U.S. assets which is why EUR/USD pair makes the most sense to short.


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What makes the Ukraine situation dangerous is what made the First World War dangerousnationalismand the answer is once again found in

history. Ironically, the possession of Ukraine in WWII was fought between Germany and Russia. When Germany was finally defeated, Stalin subdued

all nationalism but that was especially the case in Ukraine. From ethnic cleansing (Tartar population in Crimea/Ukraine) to sending all dissenters to

the eastern corners of Sibera (never to be seen again).

In other words, the collapse of the Soviet Union made it inevitable that Ukrainian nationalism would reassert itself like a coiled spring. Ukrainian

statehood and nationalism has never been more embraced than it is now since its independence. Poroshenko is playing a very dangerous game by

branding the conflict as a fight for survival and matching Russias nationalistic war cry with one of Ukraine's own. Initially, I have largely written off

the impact of the conflict as a distraction. However, Poroshenkos rash pursuit of achieving complete military victory in Donetsk and Luhansk, has

made me somewhat fearful as head-on collision of nationalism often produces unfortunate outcomes.

In order to understand Russias actions, one need to look at what Ukraine historically meant to her. Kiev was in fact a capital for the early formation

of Russian identity. The word Russia derives from the name of the early kingdom, Kingdom of Rus and its capital of Kiev. West s condemnation of

Russias action in Ukraine only reinforces Russias long history of suspicion and the narrative of Russia against the world . One must look at the

events through the eyes of a Russian bear that has fought the European coalition time after time again throughout history as the foreign policy of

continental Europe shifted from containing France to containing Russia from 1800s onward. The most relevant war of them a ll was the Crimean

War in 1853 that Russia lost to a coalition of European superpowers. Thus, the expulsion of Yanukovych was the earliest reminder of this conflict,

the long-standing view that Russia is being contained and robbed of its possessions.

A lot of analysis that discounts Russias ability to be more of a menace based on potential economic hardship that Russia may or may not face is

essentially discounting the resilience and the loyalty of the Russian people.

Historically, the Russian Bear has been known for its ability to persevere . But beyond that, one should also realize that under Putin most Russians

have enjoyed a significant boost in their standard of liv ing. The chaos during the liberalization era under Yeltsin and the shame/shock Russians felt

when their empire suddenly fell were reversed (at least it felt that way) when Putin rose to power. And for that the Russian people will be far more

loyal than what voters in the West would be willing to tolerate under similar circumstances.

Going back to the main point, the aggressive nature in which Poroshenko is aiming for quick and total victory in Luhansk and Donetsk has made the

situation a dangerous coin-toss with serious ramifications. The more the conflict turns into a head-on match between two nationalistic forces, the

greater chance that it will escalate into a deadly struggle where only one remains standing. In that case, its another reason to avoid the euro and

another reason to own the U.S. dollar. But since that is the trade I already have on, it has geopolitical insurance (if there is such thing) built into it.


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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 limited to 2.5x the underlying cash

Leverage for equity/futures account will be limited to 1.3x the underlying cashwith net aggregate overnight risk exposure (net liquid

value)often falling well below that limit.

1.20.15 Macro Trading SImulation

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