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February 24, 2015 (Tuesday)

Since Inception – June 2014:

Equity/Futures Account: +13.12% ($11,312,544)

FX Currency Account: +58.23% ($15,823,104)

Benchmark: S&P 500: +7.97%

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% +1.07% +2.20% +13.12%

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% +0.37% -0.23% +58.23%

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2/24/15 Tuesday – Today was a profit-taking day. Took money off the table on all positions except for the gold short. The dovishness of Yellen made it unwise to stay short the treasuries and the utilities sector at least in the short-term. I also took profits in all equity index positions because pretty much all major equity indexes, US, Europe, and Japanese equities are all very much over-extended (the positions were placed on 2/6 – see page six) and believe it’s more prudent to reassess opportunities from the sidelines. 2/20/15 Friday – Took a short a position in gold (GLD) – testament to the idea that one should never get married to an idea/position or inanely disregard price action. 2/13/15 Friday – Took a small profit in RSX. 2/12/15 Thursday – The reversal in USD/JPY compelled me to flatten the position in the currency pair as well as cover the short position in the EWY (South Korean ETF). 2/11/15 Wednesday – The price action and the relative risk/reward setup of the positions placed last week (RSX, SPY, XLU, TLT, USD/JPY, Nikkei Futures) continue to be positive. Of the group, RSX has the most upside in the short/medium-term. First is the favorable price action and the technical risk/reward setup in the index. Second is the rally/stabilization in the oil market - which has been a positive catalyst for the index. And finally, the third is the possibility of a peace deal (accepting of a demilitarization zone) being inked brokered by Germany. What gives me hope is that troop movement on both sides have increased significantly and the fighting has intensified (with each side making advances) since the peace summit was announced. Military history has shown (the Korean War is a perfect example of this) that a peace deal is often preceded by frantic and daring military actions as it usually honors the territory gains up until the agreement. It’s also an indication of each side trying to gain as much leverage before sitting at the table to discuss terms. Historical parallels keep me hopeful that an unexpected peace deal would catch the market by surprise. Even if it doesn’t materialize, I expect the index to inch higher. However, I’m also ready to cut the position at the slightest hint of negative price action.

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Current Equity Positions (as of 2/24/15 - Tuesday) GLD - SPDR Gold ETF: -12,000 shares = $1,382,640 (Short) HEDJ – WisdomTree Europe Hedged ETF: +0 shares = $0.00 RSX - Market Vectors Russia ETF: +0 shares = $0.00 SPY - SPDR S&P 500: +0 shares = $0.00 TLT - iShares 20+ YR Treasury ETF: +0 shares = $0.00 XLU - Select Sector SPDR Utilities ETF: +0 shares = $0.00 Account Cash Value: $11,312,544, Total Exposure: $1,382,640, Leverage: 0.12x Current FX Positions (as of 2/24/15 – Tuesday) Euro/US Dollar: $0.00 US Dollar/Japanese Yen Spot: $0.00 Account Cash Value: $15,823,104, Total Exposure: $0.00, Leverage: 0.00x SPDR Gold Trust Shares (GLD) – 2/24/15

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Market Vectors Russia ETF – 2/24/15

S&P 500 SPY ETF – 2/24/15

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SPDR Select Utilities ETF (XLU) – 2/24/15

iShares Treasury ETF (TLT) – 2/20/15

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2/6/15 Friday – The trade for the S&P 500 since December has been selling the index into rallies in adherence to the trend already in place. But given the recent price action (reflected in the chart below), the risk/reward profile of that trade no longer offers much value. To gain clarity, upon reflection of the confusing trading month in January, I had taken risk exposure down significantly late last week. I also unloaded positions in gold and gold miners by 75% this week ahead of the jobs report. Friday’s job’s report gave birth to trades that I think have a great risk/return profile for the next few weeks. Immediately after the announcement of the job news, I shorted XLU (SPDR Utilities ETF) and TLT (US Bond ETF), and have added to the short Dollar/Yen (USD/JPY) position as well as taken a small long position in the Nikkei 225 Futures (/NKD). 2/5/15 Thursday –

1) The technical picture in the S&P 500 has changed from being slightly bearish to a rather bullish setup (please see the chart on the following page)

2) I’ve reduced the gold long position by almost 75% - as I wrote in the previous update, certain price actions taking place in the market place have been downright confusing, and since the last update, I’ve reduced exposure to the lowest point in more than three months. I realized over the years that whenever the mirror gets foggy, it’s always best to slow down and get rid of positions that I no longer feel confident in and keep things simple until trends become more identifiable and stories more coherent. As they say in poker, money saved is money earned.

3) Oil may be trying to find a bottom here, and if it does, a great derivative trade should still be the Russian equities (ETF: RSX - although I’ve been stopped out once before due to the unfortunate timing of the credit downgrade by S&P). I also think that about Canadian equities (ETF: EWC). I’ve taken a small position in both. I should be able to capture the upside of the stabilization of oil prices with half the volatility of the actual physical commodity.

1/23/15 Friday –

I don’t regret the decision to take profits by liquidating all currency exposure because I believe event risk should be avoided especially if one has built up a significant profit ahead of the event and if the outcome is heavily binary. Though it was difficult to see the euro fall another 2% against the U.S. dollar (missing out on the action), it wasn’t all a loss. The yen traded down to 117 against the dollar even hours after the ECB announcement so I was still able to get back on the long side against the yen without giving up too much of the upside. In the last few weeks, the Russian ETF, RSX, seems to have been carving out a bottom and has started to trade independently from the headlines

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coming out of the region. Like today, despite Ukrainian separatists taking over Donestk airport, that didn’t stem the rally in the ETF. I initiated a small long position in the ETF:RSX today (making up roughly 15% of the portfolio) with hopes that it can defiantly break $16.50 and establish an upward trend. On the downside, I plan to keep the initial position on a tight leash with $15 as the stop loss. 1/20/15 Tuesday – 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 Russia’s 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

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

potential for the euro on the speculation that SNB’s decision is to get in front of ECB’s massive QE. As a result, the Euro has moved significantly

lower ahead of this week’s meeting on the 22nd – reaching a 1.15-handle against the U.S. dollar.

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 possibility – this would probably be a great level to re-short the currency against the dollar.

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2/24/15 - Tuesday – Platform Snapshot

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Core Positions (listed in reverse chronological order):

1) Short EUR/USD (initiated 6/17/14) – Written on June 17th and edited on August 27th – The 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. Written on August 27, 2014: 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 central 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 uncover the panacea for Europe’s 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 those who lied and abused 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.

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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 vote – just 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 Greece – those 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. It’s a lose-lose situation. 2) On Hold (Currently Short) - Long Gold (SPDR Select ETF: GLD – position initiated on 9/30) – I laid out the case in the Nov. 3rd note that gold’s move has always been centered on financial stability. Gold’s 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

it’s 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 wasn’t until 2012, after several years of stock markets’ steady rise, that those fears were placated, which also

marked the top in gold.

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The world is on track to double the size of its sovereign debt load from 2007 supported by little more than half the growth 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 the market 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. 3) Long USD/JPY (initiated 8/20/14) Written on August 20, 2014 – 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. 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 yen – part of the larger macro move that has occurred since late 2011.

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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 you’ll 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 cash – with net aggregate overnight risk exposure (“net liquid

value”) often falling well below that limit.