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Council of Supply Chain Management Professionals – November 3, 2011
For Investment Professional Use. Not for Distribution
Fall of the House of Money: Changes in Global Trade and Currency Exchange
Christopher Cole, CFA
520 Broadway, Suite 350 Santa Monica, CA 90401 (310) 496-4526 phone (310) 496-4527 fax firstname.lastname@example.org
Fall of the House of Money Global currency regime will likely face significant changes in the ensuing decade Self-reinforcing cycle between Debtor-Developed and Emerging-Creditor nations 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. INTRODUCTION TO CURRENCY DYNAMICS
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
1. INTRODUCTION TO CURRENCY DYNAMICS
FRB Trade Weighted Dollar Index (1985 to Present)
Source: Federal Reserve & Shadow Government Statistics
INTRODUCTION TO CURRENCY DYNAMICS $USD to GB Pound Examples of Currency Pairs Aussie to Japanese Yen $USD to Mexican Peso Chinese Renmembi to US Dollar CHF (Swiss Franc) to Euro $USD to Canadian Loony 3 .Global Currency Markets are like a Backwards Beauty Pageant 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 1.
The value of a currency (in relationship to another) is driven by a variety of fundamental and speculative factors including: Economic Data Monetary Policy Interest Rates International Trade Flows International Investment Flows Political Stability/Rule of Law/Taxes Geopolitical Events Human Perception 1. INTRODUCTION TO CURRENCY DYNAMICS Strong Currency +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 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 4 .
WORLD WAR €URRENCY Countries are artificially devaluing their currencies to generate competitive trade advantages or to finance deficits 2.20x to the Euro Brazil Central bank cuts interest rates twice in the last quarter despite highest inflation in six years 5 . WORLD WAR CURRENCY 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.
GLOBAL TRADE IMBALANCES AND THE CARRY TRADE 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 7 .MASSIVE DEBT AND TRADE IMBALANCE BETWEEN Debtor-developed countries … will need to DELEVERAGE Emerging-creditor countries …maintain growth w/o currency pegs despite slowdown in developed world 3.
Current Account Balance (exports minus imports of goods and services) 3. April 2009 8 . GLOBAL TRADE IMBALANCES AND THE CARRY TRADE Debtor-Developed nations are net importers and Emerging-Creditor Nations are net exporters Source: IMF World Economic Outlook Database.
statistic regarding GDP growth from “This Time is Different” by Carmen Reinhart & Kenneth Rogoff 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 9 . GLOBAL TRADE IMBALANCES AND THE CARRY TRADE Government Debt to GDP % Developed Economies Government Debt to GDP Ratio % 180 160 140 120 100 80 60 40 20 0 Source: OECD.3% per year slower than countries with lower debt ratios USA at 107% not including social security and Medicare 240 220 200 United States Japan Greece Germany Euro area OECD Countries 3.Debtor-Developed nations are massively OVERLEVERAGED Nations with public debt above 90% of GDP (grey line) grow 1.
GLOBAL TRADE IMBALANCES AND THE CARRY TRADE People’s Bank of China “print” Yuan “buy” $USD Reinvest $3.35 Yuan Estimated at 15-40% undervalued to $USD 3.2 tn excess reserves in: US consumer buys $USD Chinese manufactured goods bought by US consumer 10 .Relationship between Developed-Debtor and Emerging-Creditor Nation Mechanics of Chinese Currency Peg $1 USD = approx 6.
Yield% Yield (%) 10% 12% 14% 16% 18% 2% 4% 6% 8% 15% 20% 25% 10% 0% 5% 1962 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 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 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 3. GLOBAL TRADE IMBALANCES AND THE CARRY TRADE Source: Federal Reserve 10 Year US Treasury Yield (1961 to Present) Rates have nowhere to go but up Interest rates in the developed world are at generational lows fueling leveraged carry trades and increasing public and private debt Effective Federal Funds Rate (1961 to Present) 12 .
GLOBAL TRADE IMBALANCES AND THE CARRY TRADE End result is “RISK-ON” /“RISK OFF” dynamic Developed World Borrow at historically low interest rates Risk Assets + Emerging Economies Reinvest in Risk Assets! RISK ON! ↑ global stock prices ↑ commodities ↓ “safe haven currencies” like the USD or Yen RISK OFF! ↓ global stock prices ↓ commodities ↑ “safe haven currencies” like the USD or Yen 13 .Global asset prices driven by the CARRY TRADE instead of economic fundamentals 3.
40% of positive carry Keys risk is depreciation of the AUD against the YEN (due to economic weakness) “Safety” or “Funding” Currencies Appreciate ↑ During Economic Weakness “Risk” Currencies Depreciate ↓ During Economic Weakness US Dollar Japanese Yen Swiss Franc (until recently) Australian Dollar New Zealand Kiwi Brazilian Real 14 .60% + 5.15Yen borrow 8.20% Convert to 100 AUD and reinvest @ 5. GLOBAL TRADE IMBALANCES AND THE CARRY TRADE 1 AUD = 81.Basics of the Carry Trade Japan Yen = Safety Currency Australia Aussie Dollar = Risk Currency 3.115 Yen @ 0.
21 day Rolling Correlation Index 65 55 45 35 25 15 5 S&P 500 Index Implied Correlation 75 Realized Correlation of 50 Largest Cap S&P 500 stocks (1 month rolling.75 0.2 Country ETF Correlation 21 day Realized Correlation 60 40 20 0 -20 -40 -60 -80 1 101 201 301 401 9/7/2011 (Highest Correlation at 0.Correlation at 0.4 0.2005 to Present) 78 73 68 63 58 53 48 43 38 33 Implied Correlation of S&P 500 Index (12 month constant adjustement) May-07 May-08 May-09 May-10 May-11 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Nov-07 Nov-08 Nov-09 Nov-10 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 120 100 80 Feb-05 Ranked 21 day Realized Correlations of 50 LargeCap Stocks in SPX (2005 to Present) Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 0.7 0.5 0.55 0.8 0.25 S&P 500 Sector Correlation 0.10) Ranking (Lowest to Highest) 501 601 701 801 901 1001 1101 1201 0.15 0.6 0.76) Bull Market Low (11/3/2006 .45 0.9 0.Excess global liquidity has arguably led to the most correlated period in the history of modern markets rendering diversification futile (correlation measures the propensity for assets to move in-tandem) 3.65 0. GLOBAL TRADE IMBALANCES AND THE CARRY TRADE ASSET PRICE RISK = CURRENCY RISK 85 S&P 500 .3 0.05 2001 2006 2011 2000 2002 2007 2001 2003 2004 2005 2006 2008 2009 2010 Source: Ivolatility & Artemis Capital Management LLC 2011 2000 2002 2003 2004 2005 2007 2008 2009 2010 15 .35 0.82) 2008 Crash High (11/13/2008 .Correlation at 0.
85 since September 2008 3. JPY/AUD. USD/AUD. GLOBAL TRADE IMBALANCES AND THE CARRY TRADE 90 80 70 60 0 Stock market volatility perfectly mimics the appreciation of “funding” to “risk” currency pairs 20 40 VIX index % 50 40 30 20 60 80 100 10 0 120 The marriage of volatility and currency is a worrisome development because it implies 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 JPY/AUD Jan-08 Jan-09 Jan-10 Jan-11 Oct-07 Oct-08 Oct-09 Oct-10 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 16 .g. USD/NZD) VIX (lhs) vs.Mirror reflection: Stock Market “Risk” and the Carry Trade are now one is the same!! ↑ Stock Market Volatility = ↑ “Safe” to “Risk” Currency Pairs (e. Japanese Yen/Aussie Dollar(rhs) Correlation = 0.
and unfavorable demographic trends the influence of the US dollar will likely face SIGNIFICANT challenges over the next 10 to 20 years 17 .Hegemony of the US Dollar 4. Chinese Yuan) Despite these facts due to trade imbalances. slow growth. HEGEMONY OF THE US DOLLAR 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. excessive government debt.
00% -31.34% -0.co.05% -26.35% -5.09% -12.94% -28.97% 60 50 40 2003 2004 2005 2006 2007 2008 2009 2010 Source: www.56% -18.15% -5.34% 8.59% -5.66% Composite -2.49% -8.96% -0.41% -12.40% -16.The dollar has lost approximately 30% of its value against a weighted basket of currencies since 2003 and over 50% since 1985 $100 USD translated into Foreign Currencies 2003 to Present 4. HEGEMONY OF THE US DOLLAR 110 100 $100 USD in Foreign Currency 90 80 70 Swiss Franc 1 year 2 years 3 years 5 years 8 years -8.65% -6.60% -17.42% US Dollar Currency Appeciation/Depreciation Australian Dollar Canadian Dollar Euro -2.22% 8.82% -14.forexrate.uk 18 .46% 0.20% -37.29% -27.45% -36.
000 65 6. HEGEMONY OF THE US DOLLAR Baltic Dry Index (lhs) vs.000 RELATIONSHIP between US Dollar and Worldwide Shipping Rates 4. FRB Trade Weighted Dollar Index (rhs) -0.000 80 10.US dollar typically strengthens when shipping rates fall consistent with safe haven status 14.000 50 0 45 Nov-00 Nov-05 May-03 May-08 Nov-10 Oct-03 Dec-02 Dec-07 Oct-08 Jan-00 Jan-05 Apr-01 Apr-06 Jan-10 Feb-02 Aug-04 Feb-07 Mar-04 Mar-09 Aug-09 Sep-01 Sep-06 Apr-11 Jun-00 Jun-05 Jun-10 Sep-11 Jul-02 Jul-07 FRB Trade Weighted Dollar Index (1985 = 100) Baltic Dry Index 19 .000 75 70 8.000 55 2.000 Baltic Dry Index FRB Trade Weighted Dollar Index 60 4.54 correlation since 2000 85 12.
the US dollar. HEGEMONY OF THE US DOLLAR 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 Special Drawing Rights (“SDRS”) – MOST VIABLE THREAT GOING FORWARD Weighted currency basket of four major currencies: the Euro. Euro.NO VIABLE ALTERNATIVES TO THE US DOLLAR 4. 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 20 . 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 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.
US debt to GDP continues to climb higher… …and these numbers do not even include the $7.whitehouse.gov/omb/budget/Historicals 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 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 Debt to GDP Ratio (%) 10 21 .9 trillion of unfunded Social Security and $22.9 trillion of unfunded Medicare obligations 16 4. HEGEMONY OF THE US DOLLAR US Government Gross Federal Debt and Debt to GDP (1970 to 2011) 120 14 100 12 Gross Federal Debt ($trillions) 80 8 60 6 40 4 Debt to GDP Ratio 2 Gross Federal Debt 0 20 0 Source: http://www.
0 -12.US continues to run large government deficits as a percentage of GDP… ….0 2.0 -8.gov/omb/budget/Historicals 2010 22 .whitehouse.0 -4.0 -6.0 4.0 4.0 0.0 -10.who is financing this? 6.0 -14. HEGEMONY OF THE US DOLLAR Total US Government Surplus or Deficit as % of GDP (1948 to 2010) Total Government Surplus / Deficit as % of GDP 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 Source: http://www.0 -2.
000 800 600 400 200 0 Federal Reserve / USA China Japan United Kingdom Oil Exporters Brazil Carribean Banking Source: Federal Reserve & US Treasury 23 .The largest holder of US treasury debt is the FEDERAL RESERVE (China is only #2) During QE2 the Federal Reserve was purchasing approximately 70% of the new issuance of US treasury bonds 1.400 4.800 1. HEGEMONY OF THE US DOLLAR Largest Holders of US Treasury Debt Holdings of IS Treasury Debt ($bn) 1.600 1.200 1.
HEGEMONY OF THE US DOLLAR Policy Makers (e. Fed) are likely to counter further slowdowns with monetary stimulus …but 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? 2.g.5 -5% 0 -10% Source: Shadow Government Statistics 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 M1 Growth % (YOY) 24 .5 10% 1 5% 0% 0.5 M1 Growth (YOY) 2 M1 15% US Money Supply (1970 to present) 25% Highest YOY M1 growth 20% M1 Money Supply (trillions) 1.Can you fight deflation with more debt? 4.
000. HEGEMONY OF THE US DOLLAR Performance of German Stock Market during Weimar Republic Hyperinflaton 100.000.000.000.000 100.000 10.000.000 Source: “Economics of inflation” by Constantino Bresciani-Turroni 25 .000.000 20 100 10 0 1 April-18 April-19 April-20 April-21 April-22 January-18 January-19 January-20 January-21 January-22 October-18 October-19 October-20 October-21 October-22 January-23 April-23 Adj.000 60 10.000 40 100.000.000. according to USD exchange rate Adj.000.000 1.000.000 1.000. according to wholesale index numbers In paper marks.000.000.000 Performance adjusted for fixed rate of exchange 100 80 1.000 1.000 100.000.000.000. Weimar October-23 July-18 July-19 July-20 July-21 July-22 July-23 Performance in paper marks 10.000.000 10.Currency devaluation can create the illusion of economic growth 120 4.000.
400 1.Currency devaluation can create the illusion of economic growth 4. -50% adjusted for dollar depreciation) 1.000 800 600 400 200 0 S&P 500 Index S&P 500 Index Adjusted by FRB Trade Weighted Dollar-Index S&P 500 index performance adjusted by Dollar-Index 1985 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2007 2008 2009 2010 2011 Source: Yahoo Finance & Shadow Government Statistics 26 .200 1. HEGEMONY OF THE US DOLLAR 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.600 1.800 1.
not ‘soft landings. HEGEMONY OF THE US DOLLAR ECRI Weekly Leading Index Growth & US Recessions -10% Growth usually means Recession in 6-12 months 30 ECRI US Weekly Leading Index Growth 9%) 20 10 0 -10 ? -20 -30 ECRI US Weekly Leading Index Growth Recession (Peak to Trough) TARP/QE1 QE2 by FED -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 Source: Economic Cycle Research Institute 2011 27 .’ “ (ECRI has a perfect recession prediction record with no false alarms) 40 4.Is monetary policy working? 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.
Oklahoma $USD Composite (CHF.g.EUR.Cushing.CAD) 4.95 Gold 1.45 Gold (GLD ETF) Crude Oil WTI .45 2006 2007 2008 2009 2010 2011 Source: Bloomberg 28 . HEGEMONY OF THE US DOLLAR 1. $USD Composite 2.45 0.95 0. Gold or Oil) typically climb when the dollar declines $1 of Gold & Crude Oil vs.Are commodities appreciating or is the dollar depreciating? Or both? Commodities (e.AUD.
Perhaps the best way to understand the true value of our currency is to melt down the coins and sell the raw metal 4. HEGEMONY OF THE US DOLLAR Description Denomination Metal Value Nickel 1982 to 2011 5 cents 5.502486 cents Source: www.40574 cents Penny 1909 to 1982 (95% copper) Penny 1982 to 2011 (97.37117 cents 1 cent 0.com / metals data as of October 31. 2011 29 .coinflation.5% zinc) 1 cent 2.
Diversify exposure during periods of dollar strength and deleveraging : Nations with healthy finances and commodity driven economies (e. Canadian Dollar.The Fall of the House of Money Global currency regime will face significant changes in the ensuing decade Self-reinforcing cycle between Debtor-Developed and Emerging-Creditor nations 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 5. Norwegian Krone.g. Prepare your business for the potential of a second global recession 2. volatility and managed futures) 30 . $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.g. CONCLUSIONS How to protect yourself and your business 1. Australian Dollar) Tangible assets like real estate and metals (but not on leverage) Alternative asset classes (e.
SOURCES AND ADDITIONAL READING .
Volatility.pdf “Is Volatility Broken: Normalcy Bias and Abnormal Volatility” Christopher Cole / April 2011 http://www. Princeton University Press 2011 “Dying of Money – Lessons of the Great German and American Inflation” Jens O Parsson.scribd. Wellspring press 1974 “The Ascent of Money: A Financial History of the World” Niall Ferguson.Sources and Reference Material: “This Time is Different: Eight Centuries of Financial Folly” Carmen Reinhart & Kenneth Rogoff.pdf 31 .com/doc/67897176/Artemis-Capital-Q3-2011-Fighting-Greek-Fire-With-Fire “The Great Vega Short” Christopher Cole / December 2010 http://economiemagazine. Penguin Press 2008 6.thetrader.fr/documents/ACM-The-Great-Vega-Short.se/wp-content/uploads/2011/04/artemis-volreport. SOURCES AND ADDITIONAL READING Materials by the Presenter: “Fighting Greek Fire with Fire: Correlation. and Truth” Christopher Cole / October 2011 http://www.
Christopher R. The Principal of the General Partner. and is a member of the National Futures Association ("NFA"). His research and volatility commentary has been quoted by publications such as the International Financing Review. Detailed information on the verified performance history of the incubator fund is available upon request. 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). Artemis will offer the Artemis Vega Fund LP for qualified investors beginning in January 2012. the net returns presented above reflect the deduction of (i) an investment management fee equal to 2% per annum of each investor’s capital account balance. BIOGRAPHY OF FUND MANAGER 32 . Cole. and serve as a vehicle for sophisticated investors to diversify their broader portfolio. charged quarterly in arrears. Accordingly. is an investment management firm that employs systematic trading models to generate alpha from the behavior of market volatility. LLC Artemis Capital Management LLC. remain uncorrelated to traditional assets classes. FT/Alphaville. Cole has since focused on systematic and quantitative trading of volatility. Proprietary account performance verified by Rothstein Kass according to AICPA attestation standards. During his career in investment banking while in both NYC and LA he structured over $6 billion in transactions for many high profile issuers. and (ii) an annual performance allocation equal to 20% of all net profits allocated to each investor. Artemis Capital Management.Christopher Cole. Past returns are not indicative of future performance. Cole holds the Chartered Financial Analyst designation. The Proprietary Account was not subject to a management fee or performance allocation such as those to which the Fund is subject. 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. CFA Managing Partner & Portfolio Manager Christopher R. and graduated Magna Cum Laude from the University of Southern California. The fund seeks to generate excess returns above the market from quantitative volatility trading. Mr. CFA founded Artemis Capital Management after working in capital markets and investment banking at Merrill Lynch. CFA Magazine. subject to a high water mark. is an associate member of the NFA. Cole. and Forbes. See accompanying notes in the disclosure section for important information. ACM’s quantitative algorithms are intended to produce returns in a range of market environments and protect against subjective or emotional bias. used the Proprietary Account as a vehicle to incubate the investment strategy of the Partnership with personal funds prior to the formation of ACI. Mr. 7. Note: Past returns are not indicative of future performance.
com 33 . Suite 350 Santa Monica. CONTACT INFORMATION Artemis Capital Management. 520 Broadway. CFA Managing Partner (310) 496-4526 phone (310) 496-4527 fax (917) 434-0106 mobile c.com Christopher Cole.Contact Information Christopher Cole.cole@artemiscm. CA 90401 (310) 496-4526 phone (310) 496-4527 fax info@artemiscm. CFA – General Partner and Founder Contact Information Contact Information 8.artemiscm.C.L. L.com www.
P. OPPORTUNITIES FOR WITHDRAWAL.P. SO INVESTORS MAY NOT HAVE ACCESS TO CAPITAL WHEN IT IS NEEDED. (THE “FUND”). AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. LEGAL DISCLAIMER 34 . CERTAIN DATA CONTAINED HEREIN IS BASED ON INFORMATION OBTAINED FROM SOURCES BELIEVED TO BE ACCURATE. 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. or ARTEMIS VEGA FUND L.Legal Disclaimer THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN ARTEMIS CAPITAL INVESTORS. BUT WE CANNOT GUARANTEE THE ACCURACY OF SUCH INFORMATION. L. AN INVESTMENT SHOULD ONLY BE MADE AFTER CAREFUL REVIEW OF THE FUND’S MEMORANDUM. THE INFORMATION HEREIN IS QUALIFIED IN ITS ENTIRETY BY THE INFORMATION IN THE MEMORANDUM. REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED. 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. THERE IS NO SECONDARY MARKET FOR THE INTERESTS AND NONE IS EXPECTED TO DEVELOP. INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN TIME PERIOD. 9.
Artemis Capital Management.General Disclosure Statement An investment in the Partnership and strategies discussed in this document involve a number of significant risks. BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL. INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET. L. MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTIONS TO THE POOL AND ITS PARTICIPANTS. TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT . The Principal of the General Partner. YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. 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 SO DOING. 35 . RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL. In addition. COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT. tax and legal advisors regarding the suitability of this investment. Christopher R. LLC (the “Proprietary Account”) are presented within this document that were verified by Rothstein Kass. FURTHER. INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT. All 2009 performance numbers quoted within this document are derived from financial statements that were audited by Rothstein Kass. 9. YOU SHOULD CAREFULLY STUDY THE OFFERINGMEMORANDUM.C. For a full list of potential risk factors please review the Offering Memorandum.L. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. an investment in the Partnership may be subject to additional and different risk factors. used the Proprietary Account as a vehicle to incubate the investment strategy of the Partnership with personal funds as well as those of close family members. Cole. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES. FURTHER.Past performance is not indicative of future returns. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETIONS OR EXHAUSTION OF THEIR ASSETS. 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). as the Partnership’s investment program develops and changes over time. 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. THE OFFERING MEMORANDUM CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN. YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. ADVISORY AND BROKERAGE FEES. Note that no management or performance fees were charged to the Proprietary Account profiled. THAT IS. THEREFORE. Prospective investors should also consult with their own financial. does not guarantee returns and investors bear the risk of losing a substantial portion of or potentially their entire investment. Proprietary trading results for White Fox. LEGAL DISCLAIMER Commodity Pool Operator Disclosure Statement YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN ADDITION.
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