First Impressions

Phupinder Gill, CME Group – A Look Into Your Future Employment
MarketsWikiEducation.com

“As an employer, we need to understand you in a way that makes sense to us and a way that makes sense to the businesses not just as we currently run, but the businesses we want to continue to run as the world evolves.”

It’s not easy to predict much about the future. But Phupinder Gill, CEO of CME Group, is looking forward to see just where the next generation, the so-called Generation Y group, fits into his business.
Watch the video»

Quote of the Day

“Some people have a hard time imagining that the current state of affairs will change — ever. And they have an impossible time imagining that it can change rapidly. But history shows that it can on occasion. What a hero you would have to be to believe that inflation will never go back to 4 per cent.”

GMO’s Jeremy Grantham in the story, “Inflation risk neglected by smug markets”

Lead Stories

Inflation risk neglected by smug markets
Robin Wigglesworth – Financial Times
Students of economic history often marvel at some of the phenomena and oddities of past eras such as feudalism, giant stone currency, tulip bubbles and the gold standard. Perhaps in the future inflation will be added to the list of quaint, incomprehensible quirks banished to the history books.
That, at least, seems to be the conclusion of many investors and economists. Aside from a motley group of stubborn doomsayers — who have loudly and wrongly predicted the outbreak of hyperinflation since the financial crisis — the feeling in markets is that inflation is not just an inconsequential danger today, but in the future too.
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U.K.’s Financial Conduct Authority Warns Commodity Firms Over Market Abuse
Alistair MacDonald – WSJ
The U.K.’s financial regulator said that the firms that trade commodities, from oil to gold, have learned little from recent high profile cases of market abuse and are failing to adequately monitor the risks of such abuse.
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China’s transition is complicated – but the dragon has not lost its fire
Vivek Tulpule – The Telegraph
China has been the engine room of global economic growth over the past decade. So it is right to ask what the Dragon economy’s adjustment to a “new normal” means for the rest of the world.
First we need to assess what the new normal looks like. It does not mean that current economic conditions in China will prevail forever or that there is some future mythical stable state. It means that there will be a process of significant adjustment involving difficult structural reforms, a reallocation of resources, changes to public sector incentives and, inevitably, macroeconomic volatility.
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As China Sells Bonds, Others Step In to Buy
Min Zeng – WSJ
When China reduced U.S. government bond holdings, U.S. bond funds have stepped up to the plate.
The buying, revealed in the latest fund-flow data this week, partly explains why U.S. bond yields have not climbed in the face of China’s selling. The yield on the 10-year Treasury note was recently at 2.137%, compared with 2.188% at the end of last week. Yields fall as prices rise. The yield, a bedrock of global finance, has fallen from this year’s peak of 2.5% set in June.
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Massachusetts regulator investigates BNY Mellon fund pricing snafu
Ross Kerber and Tim McLaughlin – Reuters
The top securities regulator of Massachusetts said on Friday he is investigating the computer glitch at BNY Mellon Corp that last month disrupted pricing on more than $400 billion worth of mutual fund and exchange-traded fund assets.
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G-20 Increasingly Concerned About Slowing Chinese Economy
Ian Talley and Emre Peker – WSJ
China’s market routs and a string of weak data are fueling concern among Group of 20 officials that a slowing Chinese economy could fuel further market instability and push global growth deeper into a long-term rut.
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JPMorgan Analyst Is Latest to Choose Bliss Over Less-Fun Finance
Jody Shenn – Washington Post
Abhishek Mistry went out on top.
He and his colleagues were recognized for the third year in a row by an Institutional Investor survey as one of Wall Street’s premier teams of mortgage-bond analysts. About the same time, he quit his job at JPMorgan Chase & Co. to focus on his startup, Mixcity Inc., which creates software for DJs.
“A lot of people were surprised,” he said.
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The Jobs Report and Stocks: What’s Not to Hate?
Spencer Jakab – WSJ
There are tens of thousands of people working in finance who have never experienced a Federal Reserve rate increase. Friday’s jobs report did nothing to convince them or their older colleagues whether that 9½-year wait will end this month.
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Did a Black Swan Fund really just “make a billion dollars”?
Joshua M. Brown – The Reformed Broker
The Wall Street Journal ran a story sourced by “a person familiar with the matter” wherein a Black Swan fund – which seeks to profit from extreme outlier negative events – has earned a billion dollars for the year, with most of the gain happening during the volatility of last week’s market correction.
This is the kind of story that captures the imagination of investors, who are always looking for scenarios where they can have their cake and eat it too. Being invested for the ups of the stock market while simultaneously being positioned to make a killing from the next crash is a Holy Grail of sorts. If the Wall Street Journal’s account is true, then perhaps the grail quest is at an end.
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Nouriel Roubini dismisses China scare as false alarm, stuns with optimism
Ambrose Evans-Pritchard – The Telegraph
Nouriel Roubini has cast aside his mantle as the lugubrious “Dr Doom” of the global economy, scathingly dismissing market panic over China as “manic depressive” behaviour by ill-informed investors.
“China is not in free-fall,” he told the Ambrosetti forum of world leaders on Lake Como.
Mr Roubini, a professor at New York University, described the alarmist reaction to the Shanghai stock market rout as “excessive, unreasonable and irrational”.
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Paul Krugman: Australia can weather a Chinese economic downturn
Greg Jericho – The Guardian
Australia is resilient enough to weather the weakening of the Chinese economy, the Nobel prize-winning economist Paul Krugman has said, but he poured cold water on the benefits of the free trade agreement between the two countries.
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Russia courts Asian resource investors
Kathrin Hille and Jack Farchy – Financial Times
Russia has started giving Asian companies access to some of its most prized oil and gas resources in exchange for money badly needed to develop them.
State oil company Rosneft agreed on Friday to sell a 15 per cent stake in Vankor, its largest oil and gas field discovered and developed in the last 25 years, to ONGC Videsh, an affiliate of India’s national oil company.
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Fixed Mortgage Rates Tick Higher Amid Continued Volatility
FINCHANNEL
Freddie Mac on September 3 released the results of its Primary Mortgage Market Survey (PMMS), showing average fixed mortgage rates ticking higher amid another week of volatile market activity on essentially no new information.
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Jeremy Corbyn’s economics make no sense at all
Allister Heath – The Telegraph
There are two kinds of bad economic ideas: on the one hand, the well-intentioned but naive; on the other, the self-evidently destructive. There is a blurry line between the two, but it certainly exists.
To those unschooled in basic economics, the idea of price controls can be appealing, though one would hope that anybody running for high office would take the trouble to read about the catastrophic consequences of trying to buck markets.
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Central Banks

Bank of England’s QE through the looking glass
Neil Collins – Financial Times
Next Monday the Bank of England will dish out £38bn to the holders of 4.75 per cent UK Treasury 2015 stock as it matures. It will pay almost half of that to itself, before plunging into the market to buy more government debt with the cash. Welcome to the Alice through the looking glass world of quantitative easing.
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If we don’t deal with fiscal policy, monetary policy will become irrelevant: Greenspan
Matthew J. Belvedere – CNBC
If countries don’t tackle fiscal problems, monetary policy will be “become utterly irrelevant,” former Federal Reserve Chairman Alan Greenspan said Friday, as investors try to figure out whether the central bank will increase interest rates for the first time in nine years at its meeting later this month.
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IMF: Fed can hold off on rate rise
AFP – The Telegraph
The International Monetary Fund has said the Federal Reserve has the room to hold off from raising interest rates for the moment amid a “pretty bumpy” global economic situation.
“Our general view is that they have flexibility to hold off,” said IMF spokesman William Murray, adding that the Fed “should proceed gradually” with its planned series of rate hikes.
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Stanley Fischer expects US inflation to head higher
Sam Fleming – Financial Times
Inflation in the US should head higher as temporary factors such as the impact of the dollar surge dissipate, a key Federal Reserve policymaker said, while emphasising that the central bank will move “cautiously” in lifting interest rates.
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Economists agree: The Fed will move in September
Myles Udland – Business Insider
It’s time for the Federal Reserve to raise interest rates.
On Friday, the August jobs report showed that nonfarm payrolls grew by 173,000 while the unemployment rate fell to 5.1%.
The headline job gains were less than expected, but the unemployment rate drop was larger than had been forecast and put this measure right in the middle of the range — 5.2%-5.0% — where the Fed considers the economy to be at “full employment.”
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Fed’s Lacker says will go into September policy meeting ‘with an open mind’
Jason Lange – Reuters
The head of the Richmond Federal Reserve said on Friday he would go into the Sept. 16-17 Fed policy meeting with an open mind over whether to raise interest rates this month.
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Currencies

Euro Bears See Redemption as Draghi Squashes Inconvenient Rally
Eshe Nelson – Bloomberg
Mario Draghi has finally bought Europe some relief in foreign-exchange markets.
The European Central Bank president sent the euro tumbling to a two-week low Thursday after he revamped his quantitative-easing plan and signaled officials might expand stimulus if the global market rout continues to weigh on growth and inflation. An analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. reiterated his projection for the 19-nation currency to fall to parity versus the dollar.
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China’s ‘Engineered’ Yuan Devaluation Not Signalling Currency War Just Yet
Roger Aitken – Forbes
Talks about a currency war, doubts about Chinese policymakers’ credibility and worries over the Chinese economic slowdown and its ripple effects have certainly ignited risk aversion among investors. Yet to call the recently engineered devaluation by the People’s Bank of China (PBoC) dramatic might seem harsh, as the yuan (CNY) has since depreciated by only around 4%. Well that’s one view.
Contrast the yuan’s fortunes with Switzerland’s decision to end the Swiss Franc’s cap with the Euro in 2015, for example, which caused its currency to rise by more than 19% with markets reacting in dramatic fashion. Over the past year the Euro has declined by around 15% against the greenback.
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Chinese currency war averted or market forces at work again?
Avi Gilburt – MarketWatch
Last week we wrote a column discussing the devaluation in the Chinese yuan and the “reasons” behind the People’s Bank of China (PBOC) allowing the yuan to devalue. What we learned from this column was that, try as they might, the PBOC cannot control the value of the yuan, and ultimately the driving force behind the value of the yuan is the will of the market.
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UBS Building Virtual Coin For Mainstream Banking
Anna Irrera – WSJ
Swiss bank UBS is working on a prototype virtual currency that it hopes will be used by banks and financial institutions as a basis to settle mainstream financial markets transactions.
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Speculators cut US dollar longs to smallest in more than a year -CFTC, Reuters
Gertrude Chavez-Dreyfuss – Reuters
Speculators further cut back bullish bets on the U.S. dollar in the latest week to their smallest in more than a year, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.
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Swiss RMB hub dream unfazed by currency scare
Matthew Allen – SWI
Swiss analysts are taking a positive view of the recent renminbi devaluation. The recent fluctuations of the Chinese currency and stock market volatility have not dampened Switzerland’s dream of becoming a renminbi trading hub.
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Weidmann open to talks on including China in IMF currency basket
Reuters
Bundesbank chief Jens Weidmann said he is open to discussion on including the Chinese yuan in the International Monetary Fund’s benchmark currency basket, adding that recent financial turmoil in China should not pose a lasting danger to the global economy.
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Ruble Swinging Most in Four Months Triggers Putin Budget Switch
Vladimir Kuznetsov – Bloomberg
The ruble fell with oil prices, retreating for a fourth day as market turmoil that’s driven the strongest swings in the Russian currency since May forced Vladimir Putin’s government to cut its budget planning horizon from three years to one.
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Pound’s Longest Drop in 3 Years Defies Signs That Foretold Gains
Lukanyo Mnyanda – Bloomberg
The pound completed a fifth weekly decline against the euro, its longest stretch of losses since September 2012 — and a slide that most strategists didn’t see coming.
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New Speed Limits on EBS BrokerTec Not There to Deter HFT
Profit & Loss
As EBS BrokerTec prepares to implement further changes to its EBS Market platform that will limit the speed of trading on its infrastructure, this shouldn’t be viewed as a move to deter firms using HFT strategies from trading there.This September, EBS Market is planning to roll-out its new Distributed Quote Interrupt (DQI) system, which is designed to prevent high-speed traders from gaming its platforms.
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Bitcoin Trades Undergo Surging Volumes in Brazil
Sarah Jenn – NEWSBTC
While most of the financial headlines in the past few months have focused on the Greek debt crisis, another type of cash crunch has been going on in Latin America as well. Apart from Argentina, Brazil has also suffered a huge blow to its currency and capital flows, rendering bitcoin trades as an alternative form of investment.
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Indexes & Index Products

The Best VIX ETFs Are Also the Most Dangerous
Eric Balchunas – Bloomberg
You know exchange-traded funds have arrived when USA Today starts covering leveraged VIX ETPs.
With the recent wild market swings, it is not surprising people are talking about VIX exchange-traded products, which track derivatives on an index that goes up when there is fear in the market.
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Traders Ride the ETF Roller Coaster; Commodity-linked funds have experienced some of the roughest volatility over the past several weeks
Dan Strumpf – WSJ
Some of the roughest volatility over the past several weeks has been reserved for individual investors who piled into risky bets on commodities prices.
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“Interval Alts” Combine Benefits Of Alternative Mutual Funds And Traditional Hedge Funds
George M. Silfen and Ronald M. Feiman – Mondaq
Interval Alts strike a useful balance, successfully marrying the interests of managers, clients and brokers. We thus expect the current filing wave to continue.
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The Straits Times Index is Changing: What Investors Should Know
Hui Leong Chin – The Motley Fool Singapore
As Foolish investors may know, the Straits Times Index, the most prominent market benchmark in Singapore, is made up of 30 different stocks. What may not be that well-known is that the list of 30 is reviewed on a quarterly basis to determine whether any changes should be made.
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SIX Financial Information now providing index-linked products data to S&P Dow Jones Indices
Mike Fox – LeapRate
SIX Financial Information’s Valordata Feed announced this week that S&P DJI, one of the world’s leading index providers has decided to rely on the Zurich based multinational financial data vendor for index usage data to support its index sales and licensing operations. The Valordata Feed captures a broad range of reference data and valuation prices including current ownership hierarchies, funds composition information and corporate actions. Its data is structured so clients can achieve high levels of automation.
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Gold

The Economist explains: Why Islamic State’s gold coins won’t replace the global banking system
The Economist
Advocates of the gold standard have long been dismissed by mainstream economists as a club of bow-tie-wearing crackpots. That is no longer quite fair. Joining the gold bugs’ ranks is a group of individuals who almost certainly never wear dickie bows: so-called Islamic State. On August 29th, al-Hayat, the organisation’s foreign-media arm, published a 55-minute video denouncing the fractional reserve banking system, and advocating “the return of the ultimate measure of wealth for the world”: gold.
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Gold And Bitcoin Could be the Beneficiaries of China’s Woes
Martin Tillier – Nasdaq
I don’t know about you, but I am getting sick of hearing about China. It seems that every time any market moves, stocks, bonds, oil – anything – China is given as the reason. It’s beginning to sound more like an excuse than a reason. I mean, does slower than expected Chinese growth justify oil below levels from the depths of the recession? How does lower manufacturing output in China justify a big drop in Lowes Home Improvement stock, or U.S. utilities?
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South Africa Gold Strike Still More Likely Than Not After Pact
Paul Burkhardt – Bloomberg
A labor strike at one of South Africa’s top gold producers is still more likely than not even after companies, unions and the government signed a pact this week to address job losses, according to consultant Eurasia Group.
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Reddit gold revenues: $750k in 2014
Rob Price – Business Insider
Reddit made around three-quarters of a million dollars from the sale of “gold” in 2014, one software developer has calculated.
The social news and community site has an unconventional fundraising method: Letting users buy “Reddit gold,” a kind of subscription that gives them additional features — and also allows them to publicly gift gold to other users in return for a good post.
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Miscellaneous

The Good, the bad, and the ugly: The 10 most important economic charts of the week
Melvin Backman – Quartz
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Syria’s President Assad Accepts Early Parliamentary Elections, Putin Says
Henry Meyer and Ilya Arkhipov – Bloomberg
Syrian President Bashar al-Assad has agreed to early parliamentary elections and to share some power with his opponents, a concession that may facilitate a broader international coalition against Islamic State, Russian President Vladimir Putin said.
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Data-shamed, economists are turning an influential email into an experiment about bias
Max Nisen – Quartz
The weekly email that I and more than 20,000 others get from the National Bureau of Economics each Monday at 4:15am ET is something that I genuinely look forward to.
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