Artemis Capital "Modern Financial Markets Are A Game Of Impossible Objects"

Tyler Durden's picture

A common theme among many of our insights is the reality that lurks behind the proposed perception of many of our economic, financial, and political leaders projections. From Spain not needing a bailout to Juncker's lies, from Bernanke's transitory inflation to Dimon's not needing TARP, the list is endless. Artemis Capital, whose insights we have discussed here and here, use the metaphor of the impossible object (e.g. Penrose Triangle or Necker's Cube) to explore the role of perception in modern markets, monetary policy, and risk while making note of the paradoxes in volatility and asset-pricing that should not exist.



Via Artemis Capital:


The paper uses the metaphor of the impossible object (Penrose Triangle, Necker’s Cube, and the art of MC Escher) to explore the role of perception in modern markets, monetary policy, and risk while making note of paradoxes in volatility and asset pricing that should not exist according to classic theory. Our cover illustration pays homage to M.C. Escher’s 1961 masterpiece Waterfall and is intended to be an artistic abstraction of the self-reflexive mechanics of modern monetary theory.


The fundamental characteristic of the impossible object is uncertainty of perception. Is it feasible for a real waterfall to flow into itself; or for a triangle to complete itself in both directions? The figures are subject to multiple forms of interpretation challenging whether our naïve perception is relevant to understanding the truth. The impossible object is of vast importance to mathematics, art, philosophy and as I will argue... modern pricing of risk.


Modern financial markets are a game of impossible objects. In a world where global central banks manipulate the cost of risk the mechanics of price discovery have disengaged from reality resulting in paradoxical expressions of value that should not exist according to efficient market theory. Fear and safety are now interchangeable in a speculative and high stakes game of perception. The efficient frontier is now contorted to such a degree that traditional empirical views are no longer relevant. The volatility of an impossible object is your own changing perception.


The modern investor must hold several contradictory ideas in his or her head at the same time and none of them really make any sense according to business school case studies.

Welcome to the impossible market.

Highlights Include:

  • The market is no longer an expression of the economy… it is the economy
  • Why volatility is cheap and expensive at the same time
  • Why fear is a better reason to buy than fundamentals
  • Risk-Free asset are Risky -----   how UST bonds have a risk-to-reward profile very similar to a collateralized OTM put option
  • Known Unknowns / Unknown Unknowns
  • Common sense says do not trust your common sense


Full paper below:

ArtemisVegaQ32012_Volatility of an Impossible Object

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Yen Cross's picture

Susposid, "mispel intended", [Energon cubes"]?

markmotive's picture

That won't stop the money changers. How many investment products out there exist to simply skim 2% fees off the top of someone's savings?

It's all just a paper-shuffle.

Documentary (The Money Masters):

LetThemEatRand's picture

If you replace the money feeding the waterwheel with human beings working, giving birth, and dying while their children climb the belt to be digested endlessly into the system of money creation for those who own the buildings all around it, it starts to make sense.  

AldousHuxley's picture

Greed to want something you don't have is what keeps the lemmings going.



old naughty's picture

You will be ass-imilated. Resistance is futile?

Yen Cross's picture

Markets are no longer a definition of exchange!  Anyone care to debate that statement with me?

Muppet of the Universe's picture

challenge accepted.  But first, Lets us take a look at artemis captial's fine mother fucking multidecade VIX IRT historical values <- doopedy fucking dope-dope

Now, onto wooping your ass.  On what grounds do you state the markets are no longer an exchange?

Are you declaring the methodology of contract and shares exchanging to be flawed?

Are you upset with the phenomenol amount of bank interventions?

Are you upset with the constant cycle of bubbles and busts?

Are you referring to the debt cycle?  Or strictly the equities, forex, futures etc?

Please explain in detail, so that I might be able to deliver a giant boot up yer ass.


However, if I think you are driving at the point, I think you are...:

The market utilizes historical price valuations, correlations, and fundamental analysis (in non-manipulated assets/derivatives).  In a market environment where these attributes exist, I cannot understand why you would declare the markets are no longer an exchange. These attributes are all that would be demanded when attempting to assess the correct valuation for any given asset.

DormRoom's picture

The Klein bottle [1] is a nice representation of the re-hypothecated mess modern finance has become.


[1] image of Klein bottle :

SheepleLOVEcheddarbaybiscuits's picture

this is good stuff....send it to bernanke

JuliaS's picture

Print it, bury under 6 feet of dirt and then let Bernanke read it on location.

chump666's picture

Chaos Theory

Something, as small as it is, is going to spread in this marker.  Maybe something we have never seen before.  Arrogance of humans, is always our undoing. 

The pain will be excruciating for the money printers as they descend further into madness.

I look forward to that.

ATG's picture

0 told the world last night at the debate brawl he solved the energy problem and LA premium gasoline prices hit $5.999 overnight.

Reflexivity suggests Presidential propaganda is not reality and markets may have a meaningful move sooner rather than later:

fonzannoon's picture

OT but anyone see this? Apparently it is way to expensive to ever be done. I don't know if it is bs or not.

billsykes's picture

gotta read the article, it said by adding gold chloride the microbes make gold- and they have to add too much gold cloride to convert into gold. the story is total bullshit. 

Big fucking deal.  When I add eggs to a frying pan the microbes in the pan on my stove turn my raw eggs into an omelet. Rev-a-fucking-lutionary.



fourchan's picture

ebay often has free shipping.

RockyRacoon's picture

Kinda like instant water, isn't it?

Acet's picture

As somebody else pointed out, you're adding gold in the form of gold chloride so there is no win there (it's a bit like getting salt out of salted water, though in this case there is an actual chemical process that reduced the gold chloride back to gold and some other byproduct).

As I pointed out previously when commenting in a similar post, this might be intended to extract gold from sea-water. The problem is, they haven't proved that the bacteria work at the concentration levels that gold chloride would have in sea-water and that is the hard bit, not the extraction at high concentrations.


ThisIsBob's picture

Tell it to price.

bad craziness's picture

For the love of god please provide a link to PDF as this wretched Scribd piece of shit locks my whole system up.

Artemis has a woopsy loop at their end too.

StandardDeviant's picture

Thanks for the link.  Scribd is an abomination.  Why does it exist?

Atomizer's picture



Taking a quote from Rumsfeld and plugging it into the Global Central Banker theory model.  

There are known knowns; there are things we know that we know.

There are known unknowns; that is to say there are things that, we now know we don't know.

But there are also unknown unknowns – there are things we do not know we don't know.

-United States Secretary of Defense, Donald Rumsfeld

The unknown factor, global bank account withdrawals happen on an international community level. Derivatives contracts would collapse within the hour. The question, does central planning continue to push policy or does the existence of Central Banking disintegrate under its own powers to mandate unlawful policy? 

Time always reveals. Stay tuned. 

disabledvet's picture

But we are working on the last one. I think due to Facebook, Twitter and the I phone the concept of an unknown unknown is simply over. Given the ability to process, store and distribute data (Total Information Awareness) will become so complete there will be nothing more to "know" actually. doesn't solve the problem of how to grow the economy of course. Still...

Atomizer's picture

Terms and Conditions equate, giving up your rights to use a government subsidized service. Collecting information and reselling your personal data is how they keep their company doors open.

MisterMousePotato's picture

"But there are also unknown unknowns – there are things we do not know we don't know."

Are there really?

Sounds to me more like more justification for uttering the words "completed unexpected," and/or "no one could have foreseen this," and/or, well, more bullshit.

When the planes hit the World Trade Center, there was an interview of an Air Force Colonel(?) General(?) (I really don't recall) who was nominally or absolutely in charge of security for the East Coast, and he said something to the effect of, "Who could have imagined that someone would use planes as weapons?" (True. Look it up.)

Well ... uh ... duh. How 'bout Tom Clancy about ten(?) or 15(?) years earlier? I can't recall the title of the book, but Jack Ryan became president fortuitously on account of a Japanese pilot's pique over [the death of his son(?)] and steered his 747 into the U.S. capitol?

Yeah. Right. WHO coulda foreseen that?!? Bullshit.

Acet's picture

Unknow unknowns exists because one doesn't even know the right questions to ask. It doesn't matter how much data you have, if you don't know that you should search it for something you won't find that something out until it's too late.

Also "Total Information Awareness" is about gathering data. Data is the lowest level on the information tower (it's Data < Information < Knowledge < Wisdom) - the hard bit is to get information out of data, and knowledge out of information (and the hardest of all is to get wisdom out of information, which is why there are so few wise people around). There is a huge different between knowing that person X was at place A on date N (data), that person X went to the baker (information), that person X goes to that baker because he likes the style of bread sold there ever since he spent one year in France as a student (knowledge), that there is a way to do bread which is very appealing for people with a specific combination of genes and which have a specific sensitivity to certain chemical substances (wisdom, if it was true, I just made it up).

Do not confuse data with knowledge.

grid-b-gone's picture

Modern financial markets have changed price discovery from a process to a revelation.

What used to be a drive on a winding road, seeing the curve ahead and adjusting the wheel accordingly, is now a drive on a foggy, winding road with somebody else's foot on the accelerator.

At some point, there will be a break in the fog. We will swerve and brake once our true situation is revealed. Maybe we will stay in contact with pavement, maybe not.

Most of us are saying, "Let's pull over."

The guy with his foot on the gas responds, "We're making good time."

disabledvet's picture

This is really good. I used to draw these types of figures when I was a kid...especially the over lapping square that simply couldn't overlap. I also loved to create mazes for some reason. There was always a solution of course...I hesitate to agree with anything I totally agree with...but I totally agree with this. Markets to me are NOT made to be figured out at all. I don't want to say the dumber you are with them the better...but the dumber you are the better you are with them. Know your risk always of course...but what is logical about choosing one beer over another? Nothing of course. And yet it is what we humans do everyday...CONSTANTLY. Humans JUDGE obviously to ignore perception is to disavow judgement...which is EXCLUSIVELY perception based...and thus to deny reality itself.

RockyRacoon's picture

I just feel sorry for the poor (rich) bastards that have no other way to make a living than to fiddle with these "markets".  That must be scary as hell.  When your livelihood can disappear like fog into a sunny morning...

Ibird's picture

Absolute power corrupts absolutely. The lunatics have taken full control of global financial markets. "Common sense say not to follow common sense?" I say no! Push back on the machine.

adr's picture

The market is a MC Escher drawing. It can go up and down at the same time. In fact nobody can actually tell where it is going at any time. You are just along for the ride.

Westcoastliberal's picture

Knocked that one out of the park, didn't 'cha?

buzzsaw99's picture

Everything the bernank tells you is a lie, remember that.

the bernank: I am lying.


Yen Cross's picture

buzz, the Bernak is in "self preservation"mode right now. He is oblivious to anyone or thing.

lasvegaspersona's picture

We view the world and say 'that just cannot be: then when it fails we say, 'how did we ever think that could last?'. When the housing bubble burst I read many 'of course it had to fail, incomes never supported values near those levels'. But while it was happening we all just stared in amazement...those of us who were not benefiting and thus cheerleading.

When the dollar pops we will all wonder how it lasted all those years and we will be amused that we ourselves wondered if it would actually fail. Time will pass and a newer resilient system will grow, perhaps one that will endure. If it does it will be one that services the needs of men in their need for commerce and in the need for real fairness and liberty. Eventually we will get it right. We have just about found all the wrong ways of doing things. A reliable store of value not related to the medium of exchange is the key.

RockyRacoon's picture

All too few are prepared.  They'll just wander the streets in a haze looking for someone to blame for the mess.  That's when things get ugly.

Poor Grogman's picture

The fed should be preserved as a museum like the tower of London.
So tourists can marvel at the hubris of a bygone era...

Notarocketscientist's picture

Agree. The same fools who were incredulous when I was buying gold in 2007.

The same ones who will be biting and clawing to get that piece of rotting burger out of the dumpster when this thing implodes.

recidivist's picture

We have built a house of cards, based on fresh infusions of capital from retirement savers, payers of interest, penalties, fees, service charges, taxes, and fiat synthesis.  Woe be unto the savers, for their dollars are debauched.

Dingusdongus's picture

'Brown admits that the process is too expensive to replicate on a large scale so don’t expect to purchase bacteria gold anytime soon'

Transfer production to China. Chinese bacteria work harder for less pay.

Radical Marijuana's picture

... hold several contradictory ideas ...
at the same time, and none of them
make any sense according to

business school case studies.


self-reflexive mechanics of the impossible object

of vast importance to mathematics &  philosophy

An impossible object is an illusion. However, the monetary impossible objects are the result of the triumph of frauds, backed by force. That was always true, but not so plainly and painfully obvious as it was before! Imagine building a brick wall, which leans, and with each new brick it leans over more. Then imagine that the bricklayers speed up their work, so that what took centuries before then took decades, then takes years, etc.! So the bricks in that leaning wall keep on being added faster and faster, so that the wall gets higher and higher, quicker, and therefore, the manifest way that it was always leaning suddenly becomes too apparent! Behold the Fraud Kings of privatized fiat money central banking, building impossible objects before our very eyes, at a faster and faster pace, making their manifest absurdities become more animated! OF COURSE, business school case studies were covertly bullshit, politically correct presentations, through massive lying by omission. The schools deliberately do not teach that the fundamentals of the real system were privatized frauds, enforced by governments. There was no future in calling out the biggest bullies for being the best bullshitters!  After all, business school was about preparing to get a job working FOR them, helping them build their impossible objects, while NOT understanding that! ... However, at some point, more and more people start to notice and ask themselves, how much longer can that apparently impossible object of such a leaning wall keep on standing???