July 27th, 2016

Investment Strategy Update July 2016

Black Swans Matter

The conditions we are to accept as our new normal continue to lurch
from one extreme to the next with such unexpected events as Brexit
sandwiched in between. Whether its Europe fracturing at the seams;
Presidential nominee Hillary Clinton being pilloried with Go to Jail chants
by fellow Democratic conventioneers; or hunting season being declared on
copsthere is nothing normal about these times we are in, least of all a
stock market that makes new highs on each new twist of absurdity. The
Land of Make Believe continues unabated and will likely continue until it
stops. Meanwhile through all of this our portfolio managed to lurch forward
enough to make new highs for this year with a June 2016 monthly net
return of approximately 37% and a year-to-date 2016 net return of
approximately 128%.
The high degree of monthly volatility continues to be derived from our
significant exposure to gold mining equities which has been our biggest
performer this year. As this exposure has grown to be a heavy weighting in
our fund, we have already earmarked this asset as a candidate to be exited

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and we are anticipating a significant liquidity event where our resources

from this sale will be re-deployed in other favored assets where we see
added opportunity and lesser volatility.
While we took the opportunity to profit from some of our long volatility
and short financial positions in the wake of the strong moves following
Brexit, we have since added to these positions and our technology shorts
anew at more favorable levels. While the short and volatility portion of our
portfolio have been a drag on our near term performance, we remain
confident that these positions will drive significant outperformance when
volatility returns to markets, and perceived economic headwinds undermine
lofty asset prices.
Surveying the economic and political landscape the view remains the
same, namely a lack of free markets and free market pricing in favor of an
unprecedented degree of central bank intervention. If you wonder why the
stock markets around the world make new high after new high in the face
of obvious negativity and uncertainty, look no further than Japans central
bank, better known as the BOJ. The BOJ currently is a top ten shareholder
in 90% of all publicly traded companies on the Tokyo Stock Exchange, so if
you are wondering which greater fool is busy buying stocks at these levels,
its the ones we have trusted with the conduct of global monetary policy
and the ones who simultaneously set the stage for The Land of Make
Believe formerly known as global free capital markets.
We remain steadfastly committed to an investment viewpoint that
positions itself contrary to this illusion of normal. The tactics being used by

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the central planners namely the artificial repressive cram down of interest
rates to zero, and even sub zero levels, carry with them the very seeds of
their own destruction. There is now evident a certain aroma of desperation
to these very central planning tactics whereby its continuation has to be
viewed as a strategy of managing the outbreak of catastrophic systemic
financial and political failure. Our Fund is amply positioned for this outcome
where probably 99% of our investment management peers are not, and we
are confident we will continue to generate positive returns while this
scenario unfolds.
As always, we are grateful and appreciative of your continued trust
and support.

Best Regards,
John and Juliani





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Important Disclosures: This letter contains forward looking statements, as defined by SEC Regulation D, and the Investment Act of 1940, which
are the original ideas and best judgments of the authors. The conclusions expressed herein are not guaranteed, and past performance is not
predictive or indicative of future results. All investments involve risk including the loss of principal. The Managers are expressing their views as
of the date indicated, and they may change their views or buy or sell a security at any time while having no obligation to provide updates to the
information expressed herein. This is not a recommendation or solicitation to buy or sell any security. Circular 230 Notice: Any written advice
provided herein (and in any attachments) is not intended or written to be used, and cannot be used, to avoid any penalty under the Internal
Revenue Code or to promote, market, or recommend to anyone, a transaction or matter addressed herein.

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