ARTEMI S CAPI TAL MANAGEMENT

Fall of the House of Money: Changes in Global Trade and Currency Exchange
Council 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
info@artemiscm.com

For Investment Professional Use. Not for Distribution
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Source: istockphoto.com
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
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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
45
55
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105
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FRB Trade Weighted Dollar Index
(1985 to Present)
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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

Economic Data

Monetary Policy

Interest Rates

International Trade Flows


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The value of a currency (in relationship to another) is driven by a variety of fundamental and
speculative 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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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 4
th

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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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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Current Account Balance (exports minus imports of goods and services)








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Source: IMF World Economic Outlook Database, April 2009
Debtor-Developed nations are net importers and Emerging-Creditor Nations
are net exporters


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Debtor-Developed nations are massively OVERLEVERAGED








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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 Carmen
Reinhart & Kenneth Rogoff
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R
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%
Government Debt to GDP %
Developed Economies
United States
Japan
Greece
Germany
Euro area
OECD Countries
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Relationship between Developed-Debtor and Emerging-Creditor Nation
Mechanics 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 $USD
Reinvest $3.2 tn excess reserves in:
US consumer buys
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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









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0%
5%
10%
15%
20%
25%
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Y
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%
Effective Federal Funds Rate
(1961 to Present)
2%
4%
6%
8%
10%
12%
14%
16%
18%
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(
%
)
10 Year US Treasury Yield
(1961 to Present)
Source: Federal Reserve
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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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Basics of the Carry Trade








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Keys risk is depreciation of the AUD against the YEN (due to economic weakness)
Japan
Yen = Safety Currency


Australia
Aussie Dollar = Risk Currency

borrow 8,115 Yen @ 0.20%
Convert to 100 AUD and
reinvest @ 5.60%
+ 5.40% of positive carry


1 AUD =
81.15Yen


Safety or Funding Currencies
Appreciate u w

US Dollar
Japanese Yen
Swiss Franc (until recently)
Risk Currencies
Depreciate u w

Australian Dollar
New Zealand Kiwi
Brazilian Real

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15
ASSET PRICE RISK = CURRENCY RISK
5
15
25
35
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d
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I
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x
Realized Correlation of 50 Largest Cap S&P 500 stocks
(1 month rolling- 2005 to Present)
33
38
43
48
53
58
63
68
73
78
F
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M
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A
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N
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F
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M
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A
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5
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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
2
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R
e
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C
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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
2
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2
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2
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1
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1
1
S&P 500 Sector Correlation
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2
0
0
0
2
0
0
1
2
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0
2
2
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3
2
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2
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2
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2
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2
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2
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1
0
2
0
1
1
Country ETF Correlation
Source: Ivolatility & Artemis Capital Management LLC
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)







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16
Mirror reflection: Stock Market Risk and the Carry Trade are now one is the same!!
5 M v 5 k c P (e.g. JPY/AUD, USD/AUD, USD/NZD)
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
0
20
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120 0
10
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Y
/
A
U
D
V
I
X

i
n
d
e
x

%
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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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
40
50
60
70
80
90
100
110
2003 2004 2005 2006 2007 2008 2009 2010
$
1
0
0

U
S
D

i
n

F
o
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i
g
n

C
u
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r
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n
c
y
$100 USD translated into Foreign Currencies
2003 to Present
4
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O
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T
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U
S

D
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A
R









18
Source: www.forexrate.co.uk
The dollar has lost approximately 30% of its value against a weighted basket of currencies since
2003 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%
4
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R

RELATIONSHIP between US Dollar and Worldwide Shipping Rates
US dollar typically strengthens when shipping rates fall consistent with safe haven status








19
45
50
55
60
65
70
75
80
85
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
J
a
n
-
0
0
J
u
n
-
0
0
N
o
v
-
0
0
A
p
r
-
0
1
S
e
p
-
0
1
F
e
b
-
0
2
J
u
l
-
0
2
D
e
c
-
0
2
M
a
y
-
0
3
O
c
t
-
0
3
M
a
r
-
0
4
A
u
g
-
0
4
J
a
n
-
0
5
J
u
n
-
0
5
N
o
v
-
0
5
A
p
r
-
0
6
S
e
p
-
0
6
F
e
b
-
0
7
J
u
l
-
0
7
D
e
c
-
0
7
M
a
y
-
0
8
O
c
t
-
0
8
M
a
r
-
0
9
A
u
g
-
0
9
J
a
n
-
1
0
J
u
n
-
1
0
N
o
v
-
1
0
A
p
r
-
1
1
S
e
p
-
1
1
F
R
B

T
r
a
d
e

W
e
i
g
h
t
e
d

D
o
l
l
a
r

I
n
d
e
x

(
1
9
8
5

=

1
0
0
)
B
a
l
t
i
c

D
r
y

I
n
d
e
x
Baltic Dry Index (lhs) vs. FRB Trade Weighted Dollar Index (rhs)
-0.54 correlation since 2000
Baltic Dry Index
FRB Trade Weighted
Dollar Index
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R

NO VIABLE ALTERNATIVES TO THE US DOLLAR








20



Special Drawing Rights (SDRS) MO51 vl48L 1nk41 6OlN6 lOkw4ku
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
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









21
US debt to GDP continues to climb higher
and 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
1
9
7
0
1
9
7
1
1
9
7
2
1
9
7
3
1
9
7
4
1
9
7
5
1
9
7
6
1
9
7
7
1
9
7
8
1
9
7
9
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
D
e
b
t

t
o

G
D
P

R
a
t
i
o

(
%
)
G
r
o
s
s

F
e
d
e
r
a
l

D
e
b
t

(
$
t
r
i
l
l
i
o
n
s
)
US Government Gross Federal Debt and Debt to GDP
(1970 to 2011)
Debt to GDP Ratio
Gross Federal Debt
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









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
1
9
4
8
1
9
5
0
1
9
5
2
1
9
5
4
1
9
5
6
1
9
5
8
1
9
6
0
1
9
6
2
1
9
6
4
1
9
6
6
1
9
6
8
1
9
7
0
1
9
7
2
1
9
7
4
1
9
7
6
1
9
7
8
1
9
8
0
1
9
8
2
1
9
8
4
1
9
8
6
1
9
8
8
1
9
9
0
1
9
9
2
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
T
o
t
a
l

G
o
v
e
r
n
m
e
n
t

S
u
r
p
l
u
s

/

D
e
f
i
c
i
t

a
s

%

o
f

G
D
P
Total US Government Surplus or Deficit as % of GDP
(1948 to 2010)
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









23
1 u5 luk4L k5kv c

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
H
o
l
d
i
n
g
s

o
f

I
S

T
r
e
a
s
u
r
y

D
e
b
t

(
$
b
n
)
Largest Holders of US Treasury Debt
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









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 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?







-10%
-5%
0%
5%
10%
15%
20%
25%
0
0.5
1
1.5
2
2.5
1
9
7
0
1
9
7
1
1
9
7
2
1
9
7
4
1
9
7
5
1
9
7
7
1
9
7
8
1
9
7
9
1
9
8
1
1
9
8
2
1
9
8
4
1
9
8
5
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
1
1
9
9
2
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
8
1
9
9
9
2
0
0
1
2
0
0
2
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
8
2
0
0
9
2
0
1
1
M
1

G
r
o
w
t
h

%

(
Y
O
Y
)
M
1

M
o
n
e
y

S
u
p
p
l
y

(
t
r
i
l
l
i
o
n
s
)
US Money Supply
(1970 to present)
M1 Growth (YOY)
M1
Highest YOY M1 growth
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









25
Source: Economics of inflation by Constantino Bresciani-Turroni

Currency devaluation can create the illusion of economic 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
J
a
n
u
a
r
y
-
1
8
A
p
r
i
l
-
1
8
J
u
l
y
-
1
8
O
c
t
o
b
e
r
-
1
8
J
a
n
u
a
r
y
-
1
9
A
p
r
i
l
-
1
9
J
u
l
y
-
1
9
O
c
t
o
b
e
r
-
1
9
J
a
n
u
a
r
y
-
2
0
A
p
r
i
l
-
2
0
J
u
l
y
-
2
0
O
c
t
o
b
e
r
-
2
0
J
a
n
u
a
r
y
-
2
1
A
p
r
i
l
-
2
1
J
u
l
y
-
2
1
O
c
t
o
b
e
r
-
2
1
J
a
n
u
a
r
y
-
2
2
A
p
r
i
l
-
2
2
J
u
l
y
-
2
2
O
c
t
o
b
e
r
-
2
2
J
a
n
u
a
r
y
-
2
3
A
p
r
i
l
-
2
3
J
u
l
y
-
2
3
O
c
t
o
b
e
r
-
2
3
P
e
r
f
o
r
m
a
n
c
e

i
n

p
a
p
e
r

m
a
r
k
s
P
e
r
f
o
r
m
a
n
c
e

a
d
j
u
s
t
e
d

f
o
r

f
i
x
e
d

r
a
t
e

o
f

e
x
c
h
a
n
g
e
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
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









26
Currency devaluation can create the illusion of economic 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
1
9
8
5
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
S&P 500 index performance adjusted by Dollar-Index
S&P 500 Index
S&P 500 Index Adjusted by FRB Trade Weighted Dollar-Index
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









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
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
E
C
R
I

U
S

W
e
e
k
l
y

L
e
a
d
i
n
g

I
n
d
e
x

G
r
o
w
t
h

9
%
)
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
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









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
G
o
l
d
$1 of Gold & Crude Oil vs. $USD Composite
Gold (GLD ETF)
Crude Oil WTI - Cushing, Oklahoma
$USD Composite (CHF,AUD,EUR,CAD)
Description Denomination Metal Value
Nickel
1982 to 2011
5 cents 5.40574 cents
Penny
1909 to 1982
(95% copper)
1 cent 2.37117 cents
Penny
1982 to 2011
(97.5% zinc)
1 cent 0.502486 cents
4
.

H
E
G
E
M
O
N
Y

O
F

T
H
E

U
S

D
O
L
L
A
R









29
Perhaps the best way to understand the true value of our currency is to melt down the coins
and sell the raw metal







Source: www.coinflation.com / metals data as of October 31, 2011
5
.

C
O
N
C
L
U
S
I
O
N
S

30


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

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
SOURCES AND ADDI TI ONAL READI NG
6
.

S
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A
N
D

A
D
D
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I
O
N
A
L

R
E
A
D
I
N
G


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 2010
http://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


31
7
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B
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A
G
E
R

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 volatility
commentary 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 the Artemis v Fund LP for 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 of
future 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 a
management fee or performance allocation such as those to which the Fund is subject. Accordingly, the net returns presented above reflect the deduction of (i) an investment management fee equal to 2% per annum of each investors capital account balance, charged
quarterly in arrears, and (ii) an annual performance allocation equal to 20% of all net profits allocated to each investor, subject to a high water mark. Detailed information on the verified performance history of the incubator fund is available upon request.


32
8
.

C
O
N
T
A
C
T

I
N
F
O
R
M
A
T
I
O
N

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
info@artemiscm.com
www.artemiscm.com

Christopher Cole, CFA
Managing Partner
(310) 496-4526 phone
(310) 496-4527 fax
(917) 434-0106 mobile
c.cole@artemiscm.com



Contact Information
Contact Information
33
Contact Information
9
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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 QUALIFIED
IN 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 BE
ACCURATE, BUT WE CANNOT GUARANTEE THE ACCURACY OF SUCH INFORMATION.
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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 close 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
4551 v4Lu Ol 1n POOL 4Nu cON5uN1LY 1n v4Lu Ol YOuk lN1k51 lN 1n POOL lN 4uul1lON k51klc1lON5 ON kuMP1lON5 M4Y AFFECT YOUR
ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.

luk1nk cOMMOul1Y POOL5 M4Y 8 5u8lc1 1O 5u8514N1l4L cn4k65 lOk M4N46MN1 4uvl5OkY 4Nu 8kOkk46 l5 l1 M4Y 8 Nc55ARY FOR
1nO5 POOL5 1n41 4k 5u8lc1 1O 1n5 cn4k65 1O M4k 5u8514N1l4L 1k4ulN6 PkOll15 1O 4vOlu uPL1lON5 Ok xn4u51lON Ol 1nlk ASSETS. THE
OllklN6 MMOk4NuuM cON14lN5 4 cOMPL1 u5cklP1lON Ol 4cn xPN5 1O 8 cn4k6u 1nl5 POOL 4Nu 4 5141MN1 Ol 1n PkcN146 RETURN
Nc554kY 1O 8k4k vN 1n41 l5 1O kcOvk 1n 4MOuN1 Ol YOuk lNl1l4L lNv51MN1

1nl5 8kll 5141MN1 c4NNO1 ul5cLO5 4LL 1n kl5k5 4Nu O1nk l4c1Ok5 Nc554kY 1O v4Lu41 YOuk P4k1lclP41lON lN 1nl5 cOMMOulTY POOL.
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THE OFFERINGMEMORANDUM, INCLUDING A
u5cklP1lON Ol 1n PklNclP4L kl5k l4c1Ok5 Ol 1nl5 lNv51MN1

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.
35