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ARTEMIS CAPITAL MANAGEMENT
Fall of the House of Money: Changes in Global Trade and Currency ExchangeCouncil of Supply Chain Management Professionals November 3, 2011
Christopher Cole, CFA
520 Broadway, Suite 350
Santa Monica, CA 90401
(310) 496-4526 phone
(310) 496-4527 fax
For Investment Professional Use. Not for Distribution
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1.INTROD
UCTIONTOCURR
ENCYD
YNAMICS
1Source: istockphoto.com
Fall of the House ofMoney
Global currency regime will likely face significant changes in the ensuing decade
Self-reinforcing cycle between Debtor-Developed and Emerging-Creditornations likely to unravel perhaps violently
European crisis may tip us into a second global recession
Global policy makers are out of stimulus options
Dollar hegemony may be challenged in the future
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1.INTROD
UCTIONTOCURR
ENCYD
YNAMICS
2
US Dollar has lost over 50% of its value since 1985 on a trade weighted basis
FRB Trade-Weighted Dollar is the Major Currency Index published by the Federal Reserve, with the USD
weighted by respective merchandise trade volume against EUR, JPY, GBP, CHF, AUD, CAD
Source: Federal Reserve & Shadow Government Statistics
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55
65
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105
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FRB Trade Weighted Dollar Index
(1985 to Present)
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1.INTROD
UCTIONTOCURR
ENCYD
YNAMICS
Global Currency Markets are like a Backwards Beauty Pageant
3
Like pageant contestants the value of one currency is
judged in relationship to another currency
However many contestants want to be the most ugly
currency to gain advantage in international trade and
to stimulate exports
Fiat currencies are backed only by faith in a
government beauty is in the eye of the beholder
Currencies are subject to laws of supply and demand
$USD to GB Pound
CHF (Swiss Franc) to Euro
$USD to Canadian Loony
Aussie to Japanese Yen
$USD to Mexican Peso
Chinese Renmembi to US Dollar
Examples of Currency Pairs
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Economic Data
Monetary Policy
Interest Rates
International Trade Flows
1.INTROD
UCTIONTOCURR
ENCYD
YNAMICS
The value of a currency (in relationship to another) is driven by a variety of fundamental andspeculative factors including:
4
International Investment Flows
Political Stability/Rule of Law/Taxes
Geopolitical Events
Human Perception
+GDP growth
High Interest Rates
Hawkish Monetary Policy
Low Government Debt to GDP
Sound Political System
Rule of Law
High Foreign Investment
Capital Inflows
High Current Account Balance
Strong Currency Weak Currency
Low GDP growth
Low Interest
Loose Monetary Policy
High Government Debt to GDP
Political Instability or War
No rule of law / high taxes
Low Foreign Investment
Lack of Capital Inflows
More imports than exports
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2.WORLD
WARCURRE
NCY
WORLD WAR URRENCY
5
Countries are artificially devaluing their currencies to generate competitive trade
advantages or to finance deficits
United States
Ultra-loose monetary policy (ZIRP & Quantitative Easing)
Massive government deficits and high debt levels
Unsustainable fiscal spending and entitlements
Japan
ZIRP and debt-GDP-ratios above 200%+
Japanese government intervened in foreign exchange markets for the 4th
time in over a year (selling yen and buying dollars & euros)
China
Yuan is pegged to the dollar and estimated to be as much as 40%
undervalued against the US dollar
China keeps buying dollars and printing Yuan to maintain this peg
Switzerland
Swiss Franc was a popular safe haven appreciating +28% against the Euro
and +50% against the dollar since 2003
SNB devalued Franc in September pegging it at 1.20x to the Euro
Brazil
Central bank cuts interest rates twice in the last quarter despite highest
inflation in six years
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
7
Debtor-developed countries
will need to DELEVERAGE
Emerging-creditor countries
maintain growth w/o currency pegs
despite slowdown in developed world
MASSIVE DEBT AND TRADE IMBALANCE
BETWEEN
High debt Low growth and inflation
Bad demographics
Low interest rates
Shrinking middle class
Low debt High growth & inflation
Positive demographics
Higher interest rates
Emerging middle class
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Current Account Balance (exports minus imports of goods and services)
8Source: IMF World Economic Outlook Database, April 2009
Debtor-Developednations are net importers and Emerging-Creditor Nations
are net exporters
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Debtor-Developednations are massively OVERLEVERAGED
9
Nations with public debt above 90% of GDP (grey line) grow 1.3% per year slower than
countries with lower debt ratios
USA at 107% not including social security and Medicare
Source: OECD, statistic regarding GDP growth from This Time is Different by CarmenReinhart & Kenneth Rogoff
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GovernmentDebtto
GDPRatio%
Government Debt to GDP %Developed Economies
United States
Japan
Greece
Germany
Euro area
OECD Countries
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Relationship between Developed-Debtor and Emerging-Creditor NationMechanics of Chinese Currency Peg
10
$1 USD = approx 6.35 Yuan
Estimated at 15-40% undervalued to $USD
Chinese manufactured goods bought by US consumer
$USD
Peoples Bank of China
print Yuan
buy $USDReinvest $3.2 tn excess reserves in:
US consumer buys
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Rates have nowhere to go but up
Interest rates in the developed world are at generational lows fueling leveraged carry tradesand increasing public and private debt
12
0%
5%
10%
15%
20%
25%
1962
1963
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1968
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2008
2009
2010
2011
Yield%
Effective Federal Funds Rate
(1961 to Present)
2%
4%
6%
8%
10%
12%
14%
16%
18%
1962
1963
1964
1965
1966
1967
1968
1969
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2011
Yield(%)
10 Year US Treasury Yield
(1961 to Present)
Source: Federal Reserve
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Global asset prices driven by the CARRY TRADE instead of economic fundamentals
End result is RISK-ON /RISK OFF dynamic
13
Developed World Risk Assets + Emerging Economies
Borrow at historically low
interest rates Reinvest in Risk Assets!
RISK ON!
safe haven currencies like the USD or Yen
RISK OFF!
safe haven currencies like the USD or Yen
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
Basics of the Carry Trade
14
Keys risk is depreciation of the AUD against the YEN (due to economic weakness)
Japan
Yen = Safety CurrencyAustralia
Aussie Dollar = Risk Currency
borrow 8,115 Yen @ 0.20% Convert to 100 AUD andreinvest @ 5.60%
+ 5.40% of positive carry
1 AUD =
81.15Yen
Safety or Funding CurrenciesAppreciate
US Dollar
Japanese Yen
Swiss Franc (until recently)
Risk CurrenciesDepreciate
Australian Dollar
New Zealand Kiwi
Brazilian Real
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
15
ASSET PRICE RISK = CURRENCY RISK
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15
25
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45
55
65
75
85
Feb-05
Jun-05
Oct-05
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
S&P500-21dayRollingCorrelationIndex Realized Correlation of 50 Largest Cap S&P 500 stocks(1 month rolling- 2005 to Present)
3338
43
48
53
58
63
68
73
78
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
S&P500IndexImpliedCorrelation
Implied Correlation of S&P 500 Index(12 month constant adjustement)
-80
-60
-40
-20
0
20
40
60
80
100
120
1 101 201 301 401 501 601 701 801 901 1001 1101 1201
21dayRealizedCorrelation
Ranking (Lowest to Highest)
Ranked 21 day Realized Correlations of 50 LargeCap Stocks in SPX
(2005 to Present)
9/7/2011 (Highest Correlation at 0.82)2008 Crash High (11/13/2008 - Correlation at 0.76)Bull Market Low (11/3/2006 - Correlation at 0.10)
0.05
0.15
0.25
0.35
0.45
0.55
0.65
0.75
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
S&P 500 Sector Correlation
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Country ETF Correlation
Source: Ivolatility & Artemis Capital Management LLC
Excess global liquidity has arguably led to the mostcorrelatedperiod in the history of modernmarkets rendering diversification futile
(correlation measures the propensity for assets to move in-tandem)
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3.GLOB
AL
TRADEIMB
ALA
N
CESAND
THECA
RRYTRADE
16
Mirror reflection: Stock Market Risk and the Carry Trade are now one is the same!! (e.g. JPY/AUD, USD/AUD, USD/NZD)
The marriage of volatility and currency is a worrisome development because itimplies risk in the stock market is not about company fundamentals but instead is a
function of global central banks fueling leveraged carry trades!
Source: Ivolatility & Artemis Capital Management LLC
0
20
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1200
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Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
JPY/AUD
VIXindex%
VIX (lhs) vs. Japanese Yen/Aussie Dollar(rhs)
Correlation = 0.85 since September 2008
Stock market volatility
perfectly mimics the
appreciation of funding
to risk currency pairs
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4.HE
GE
MONYOFTHEUSD
OLLAR
Hegemony of the US Dollar
17
The status of the US dollar as a GLOBAL RESERVE CURRENCY allows massive financial flexibility
$USD accounted for 62% of global currency reserve holdings
EUR #2 at 27% and GBP #3 at 4%
Commodities markets and derivatives are largely settled in US dollars
US dollar is the primary currency for cross-border trade and the global black-market
Premier Safe Haven currency and appreciates when market sell-off
Many currencies are pegged to the dollar (e.g. Chinese Yuan)
Despite these facts due to trade imbalances, excessive government debt, slow growth,
and unfavorable demographic trends the influence of the US dollar will likely face
SIGNIFICANT challenges over the next 10 to 20 years
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40
50
60
70
80
90
100
110
2003 2004 2005 2006 2007 2008 2009 2010
$100USDinForeignCurrency
$100 USD translated into Foreign Currencies
2003 to Present
4.HE
GE
MONYOFTHEUSD
OLLAR
18Source: www.forexrate.co.uk
The dollar has lost approximately 30% of its value against a weighted basket of currencies since2003 and over 50% since 1985
US Dollar Currency Appeciation/Depreciation
Swiss Franc Australian Dollar Canadian Dollar Euro Composite
1 year -8.09% -2.41% 0.35% -0.22% -2.59%
2 years -12.56% -12.40% -5.96% 8.34% -5.65%
3 years -18.00% -16.05% -0.49% 8.15% -6.60%
5 years -31.20% -26.45% -8.29% -5.82% -17.94%
8 years -37.42% -36.46% -27.34% -14.66% -28.97%
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4.HE
GE
MONYOFTHEUSD
OLLAR
RELATIONSHIP between US Dollar and Worldwide Shipping RatesUS dollar typicallystrengthens when shipping ratesfallconsistent with safe haven status
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0
2,000
4,000
6,000
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10,000
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Jan-00
Jun-00
Nov-00
Apr-01
Sep-01
Feb-02
Jul-02
Dec-02
May-03
Oct-03
Mar-04
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
FRBTradeWeightedD
ollarIndex(1985=100)
BalticD
ryIndex
Baltic Dry Index (lhs) vs. FRB Trade Weighted Dollar Index (rhs)
-0.54 correlation since 2000
Baltic Dry Index
FRB Trade Weighted
Dollar Index
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4.HE
GE
MONYOFTHEUSD
OLLAR
NO VIABLE ALTERNATIVES TO THE US DOLLAR
20
Special Drawing Rights (SDRS)
Weighted currency basket of four major currencies: the Euro, the US dollar, the
British pound, and the Japanese yen
SDRs can be exchanged for freely usable currencies
China is in favor of expanding the use of SDRs
IMF issued a report in early 2011 on possible replacements for the dollar as the world's reserve
currency in response to pressure from emerging economies
Russia is actively trying to develop energy markets in alternative currencies
China and Brazil are engaging in direct circumventing $USD
Gold
Pegging currency to the price of gold? you cannot print more gold
Removes monetary flexibility and money supply fluctuates with the supply of gold
1971 President Nixon cancelled direct convertibility of the United States dollar to gold
Other Currencies (Yuan, Euro, Yen) - either not liquid enough or structurally weak
China issuing Yuan-denominated dim-sum bonds in Hong Kong
Euro faces intense structural problems and may not even survive in its current form
Japan (Yen) is in worse financial shape than the United States
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4.HE
GE
MONYOFTHEUSD
OLLAR
21
US debt to GDP continues to climb higherand these numbers do not even include the $7.9 trillion of unfunded Social Security and $22.9
trillion of unfunded Medicare obligations
Source: http://www.whitehouse.gov/omb/budget/Historicals
0
20
40
60
80
100
120
0
2
4
6
8
10
12
14
16
1970
1971
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1981
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2004
2005
2006
2007
2008
2009
2010
2011
DebttoGDP
Ratio(%)
GrossFederalDe
bt($trillions)
US Government Gross Federal Debt and Debt to GDP
(1970 to 2011)
Debt to GDP Ratio
Gross Federal Debt
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4.HE
GE
MONYOFTHEUSD
OLLAR
22
US continues to run large government deficits as a percentage of GDP
.who is financing this?
Source: http://www.whitehouse.gov/omb/budget/Historicals
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
TotalGovernmentSurpl
us/Deficitas%ofGDP
Total US Government Surplus or Deficit as % of GDP
(1948 to 2010)
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4.HE
GE
MONYOFTHEUSD
OLLAR
23
During QE2 the Federal Reserve was purchasing approximately 70% of the new issuance of
US treasury bonds
Source: Federal Reserve & US Treasury
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Federal Reserve /
USA
China Japan United Kingdom Oil Exporters Brazil Carribean Banking
HoldingsofISTreasur
yDebt($bn)
Largest Holders of US Treasury Debt
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4.HE
GE
MONYOFTHEUSD
OLLAR
24
Can you fight deflation with more debt?
Source: Shadow Government Statistics
Policy Makers (e.g. Fed) are likely to counter further slowdowns with monetary stimulusbut with 0% rate we are out of policy bullets absent outright debt monetization (Quantitative Easing)
so what happens to your currency if you just keep expanding the money supply?
-10%
-5%
0%
5%
10%
15%
20%
25%
0
0.5
1
1.5
2
2.5
1970
1971
1972
1974
1975
1977
1978
1979
1981
1982
1984
1985
1987
1988
1989
1991
1992
1994
1995
1996
1998
1999
2001
2002
2004
2005
2006
2008
2009
2011
M1Growth%(YOY)
M1MoneySupply(trillions)
US Money Supply(1970 to present)
M1 Growth (YOY)
M1
Highest YOY M1 growth
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4.HE
GE
MONYOFTHEUSD
OLLAR
25Source: Economics of inflation by Constantino Bresciani-Turroni
Currency devaluation can create theillusion ofeconomic growth
1
10
100
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
1,000,000,000
10,000,000,000
100,000,000,000
1,000,000,000,000
10,000,000,000,000
100,000,000,000,000
0
20
40
60
80
100
120
January-18
April-18
July-18
October-18
January-19
April-19
July-19
October-19
January-20
April-20
July-20
October-20
January-21
April-21
July-21
October-21
January-22
April-22
July-22
October-22
January-23
April-23
July-23
October-23
Perfo
rmanceinpapermarks
Performanceadjustedforfixedrateofexchange
Performance of German Stock Market
during Weimar Republic Hyperinflaton
Adj. according to USD exchange rate
Adj. according to wholesale index numbers
In paper marks, Weimar
C d l i h ill i f i h
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4.HE
GE
MONYOFTHEUSD
OLLAR
26
Currency devaluation can create theillusion ofeconomic growth
Long-term US equity performance is atrocious when adjusted by the FRB trade weighted dollar-index
(S&P 500 index since 2000 = -20% nominal loss vs. -50% adjusted for dollar depreciation)
Source: Yahoo Finance & Shadow Government Statistics
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1985
1985
1986
1987
1988
1989
1990
1991
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1995
1996
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2007
2008
2009
2010
2011
S&P 500 index performance adjusted by Dollar-Index
S&P 500 Index
S&P 500 Index Adjusted by FRB Trade Weighted Dollar-Index
Is monetary policy working?
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4.HE
GE
MONYOFTHEUSD
OLLAR
27
Economic Cycle Research Institute on September 30: Our most reliable forward-looking indicators are now
collectively behaving as they did on the cusp of full-blown recessions, not soft landings.
(ECRI has a perfect recession prediction record with no false alarms)
Source: Economic Cycle Research Institute
Is monetary policy working?
-40
-30
-20
-10
0
10
20
30
40
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
ECRIUSWeeklyLeading
IndexGrowth9%)
ECRI Weekly Leading Index Growth & US Recessions
-10% Growth usually means Recession in 6-12 months
ECRI US Weekly Leading Index Growth
Recession (Peak to Trough)
?
QE2
by
FED
TARP/QE1
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4.HE
GE
MONYOFTHEUSD
OLLAR
28
Are commodities appreciating or is the dollar depreciating? Or both?
Commodities (e.g. Gold or Oil) typically climb when the dollar declines
Source: Bloomberg
0.45
0.95
1.45
1.95
2.45
2006 2007 2008 2009 2010 2011
Gold
$1 of Gold & Crude Oil vs. $USD Composite
Gold (GLD ETF)Crude Oil WTI - Cushing, Oklahoma
$USD Composite (CHF,AUD,EUR,CAD)
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Description Denomination Metal Value
Nickel
1982 to 20115 cents 5.40574 cents
Penny
1909 to 1982
(95% copper)
1 cent 2.37117 cents
Penny1982 to 2011
(97.5% zinc)
1 cent 0.502486 cents
4.HE
GE
MONYOFTHEUSD
OLLAR
29
Perhaps the best way to understand the true value of our currency is to melt down the coinsand sell the raw metal
Source: www.coinflation.com / metals data as of October 31, 2011
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5.CONCLU
SIONS
30
Global currency regime will face significant changes in the ensuing decade
Self-reinforcing cycle between Debtor-Developed and Emerging-Creditornations likely to unravel perhaps violently
European crisis may tip us into a second global recession
Global policy makers are out of stimulus options
Dollar hegemony may be challenged in the future
1. Prepare your business for the potential of a second global recession
2. $USD is historically strong when the economy is weak watch for reversal
3. Evaluate portfolio returns against a global basket of currencies and commodities
4. Diversify exposure during periods of dollar strength and deleveraging : Nations with healthy finances and commodity driven economies
(e.g. Canadian Dollar, Norwegian Krone, Australian Dollar) Tangible assets like real estate and metals (but not on leverage) Alternative asset classes (e.g. volatility and managed futures)
The Fall of the House of Money
How to protect yourself and your business
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SOURCES AND ADD ITIONAL READING
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6.SOURCE
SANDADD
ITIONALRE
AD
ING
Sources and Reference Material:
This Time is Different: Eight Centuries of Financial Folly Carmen Reinhart & Kenneth Rogoff,
Princeton University Press 2011
Dying of Money Lessons of the Great German and American Inflation Jens O Parsson,
Wellspring press 1974
The Ascent of Money: A Financial History of the World Niall Ferguson, Penguin Press 2008
Materials by the Presenter:
Fighting Greek Fire with Fire: Correlation, Volatility, and Truth Christopher Cole / October 2011
http://www.scribd.com/doc/67897176/Artemis-Capital-Q3-2011-Fighting-Greek-Fire-With-Fire
The Great Vega Short Christopher Cole / December 2010http://economiemagazine.fr/documents/ACM-The-Great-Vega-Short.pdf
Is Volatility Broken: Normalcy Bias and Abnormal Volatility Christopher Cole / April 2011
http://www.thetrader.se/wp-content/uploads/2011/04/artemis-volreport.pdf
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7.B
IOGRAPHYOFFUNDMANAGE
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Christopher Cole, CFA
Managing Partner & Portfolio Manager
Christopher R. Cole, CFA founded Artemis Capital Management after working in capital markets
and investment banking at Merrill Lynch. During his career in investment banking while in both
NYC and LA he structured over $6 billion in transactions for many high profile issuers. Mr. Cole has
since focused on systematic and quantitative trading of volatility. His research and volatilitycommentary has been quoted by publications such as the International Financing Review, CFA
Magazine, FT/Alphaville, and Forbes. His decision to form a fund came after achieving proprietary
returns of over 200% between 2008 and May 2009 (net of full pro-forma fees per NFA guidelines /
confirmed by independent auditor based on AICPA attestation standards). Mr. Cole holds the
Chartered Financial Analyst designation, is an associate member of the NFA, and graduated Magna
Cum Laude from the University of Southern California.
Artemis Capital Management, LLC
Artemis Capital Management LLC. is an investment management firm that employs systematic
trading models to generate alpha from the behavior of market volatility. ACMs quantitative
algorithms are intended to produce returns in a range of market environments and protect against
subjective or emotional bias. The fund seeks to generate excess returns above the market from
quantitative volatility trading, remain uncorrelated to traditional assets classes, and serve as a
vehicle for sophisticated investors to diversify their broader portfolio.
Artemis Capital Management is registered with the Commodity Futures Trading Commission
(CFTC) as a commodity pool operator (CPO) and with the State of California as an investment
adviser, and is a member of the National Futures Association ("NFA").
Artemis will offer theArtemis Fund LPfor qualified investors beginning in January 2012.
Note:Past returns are not indicative of future performance. Proprietary account performance verified by Rothstein Kass according to AICPA attestation standards. See accompanying notes in the disclosure section for important information. Past returns are not indicative offuture performance. The Principal of the General Partner, Christopher R. Cole, used the Proprietary Account as a vehicle to incubate the investment strategy of the Partnership with personal funds prior to the formation of ACI. The Proprietary Account was not subject to amanagement fee or performance allocation such as those to which the Fund is subject. Accordingly, the net returns presented above refle ct the deduction of (i) an investment management fee equal to 2% per annum of each investors capital account balance, chargedquarterly in arrears, and (ii) an annual p erformance allocation equal to 20% of all net profits allocated to each in vestor, subject to a high water mark. Detailed information on the verified performance history of the incubator fu nd is available upon reques t.
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8.CONTAC
TINFORMATION
Christopher Cole, CFA General Partner and Founder
Artemis Capital Management, L.L.C.520 Broadway, Suite 350
Santa Monica, CA 90401
(310) 496-4526 phone
(310) 496-4527 fax
www.artemiscm.com
Christopher Cole, CFA
Managing Partner
(310) 496-4526 phone
(310) 496-4527 fax(917) 434-0106 mobile
Contact InformationContact Information
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Contact Information
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9.LE
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Legal Disclaimer
THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN ARTEMIS CAPITAL
INVESTORS, L.P. or ARTEMIS VEGA FUND L.P. (THE FUND). ANY SUCH OFFER OR SOLICITATION WILL ONLY BE
MADE TO QUALIFIED INVESTORS BY MEANS OF A CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THE
MEMORANDUM) AND ONLY IN THOSE JURISDICTIONS WHERE PERMITTED BY LAW. AN INVESTMENT SHOULD
ONLY BE MADE AFTER CAREFUL REVIEW OF THE FUNDS MEMORANDUM. THE INFORMATION HEREIN IS QUALIFIEDIN ITS ENTIRETY BY THE INFORMATION IN THE MEMORANDUM.
AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. OPPORTUNITIES FOR
WITHDRAWAL, REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED, SO INVESTORS MAY NOT HAVE
ACCESS TO CAPITAL WHEN IT IS NEEDED. THERE IS NO SECONDARY MARKET FOR THE INTERESTS AND NONE IS
EXPECTED TO DEVELOP. NO ASSURANCE CAN BE GIVEN THAT THE INVESTMENT OBJECTIVE WILL BE ACHIEVED OR
THAT AN INVESTOR WILL RECEIVE A RETURN OF ALL OR ANY PORTION OF HIS OR HER INVESTMENT IN THE FUND.
INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN TIME PERIOD.
CERTAIN DATA CONTAINED HEREIN IS BASED ON INFORMATION OBTAINED FROM SOURCES BELIEVED TO BEACCURATE, BUT WE CANNOT GUARANTEE THE ACCURACY OF SUCH INFORMATION.
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9.LE
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General Disclosure Statement
An investment in the Partnership and strategies discussed in this document involve a number of significant risks. For a full list of potential risk factors please review the
Offering Memorandum. Prospective Limited Partners should read the entire Memorandum and the Partnership Agreement and consult with their own advisers before
deciding whether to invest in the Partnership. In addition, as the Partnerships investment program develops and changes over time, an investment in the Partnership may
be subject to additional and different risk factors. Prospective investors should also consult with their own financial, tax and legal advisors regarding the suitability of this
investment. Artemis Capital Management, L.L.C. does not guarantee returns and investors bear the risk of losing a substantial portion of or potentially their entire
investment.All 2009 performance numbers quoted within this document are derived from financial statements that were audited by Rothstein Kass. Proprietary trading results for
White Fox, LLC (the Proprietary Account) are presented within this document that were verified by Rothstein Kass. The Principal of the General Partner, Christopher R.
Cole, used the Proprietary Account as a vehicle to incubate the investment strategy of the Partnership with personal funds as well as those of c lose family members. Note
that no management or performance fees were charged to the Proprietary Account profiled. Accordingly, the Pro Forma Performance presented in this document includes
imposition of a 2% Management Fee and 20% Performance Allocation (in line with those charged against the Partnership).Past performance is not indicative of future
returns.
Commodity Pool Operator Disclosure Statement
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE
AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET
Y AFFECT YOUR
ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.
ARY FOR
ASSETS. THE
RETURN
TY POOL.
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THE OFFERINGMEMORANDUM, INCLUDING A
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED
OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT
OR DIMINISHED PROTECTIONS TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE
ENFORCEMENT OF THE RULES OR REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE
EFFECTED.
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