DROPS MORE THAN 3%.

THE QUESTION IS, "WHAT'D YOU

MISS?"

SCARLET: A CLOSELY WATCHED

SPEECH THIS WEEK BY JANET

YELLEN.

JOE: JAPAN'S PRIME MINISTER

MAKES AN EPIC OLYMPIC APPEARANCE

AS SUPER MARIO.

MATT: AND WE DISCUSS WHAT YOU

MISSED IN TODAY'S $14 BILLION

DEAL MADE BY PFIZER.

SCARLET: WE BEGIN WITH OUR

MARKET MINUTE.

A MODEST MOVE IN THE MAJOR

INDEXES WHEN ALL IS SAID AND

DONE.

THE BIG STORY HAS TO BE OIL

PRICES.

OIL DECLINING FOR THE FIRST TIME

IN EIGHT DAYS, THE LONGEST

WINNING STREAK IN MONTHS, IF NOT

YEARS.

ENTERING A BULL MARKET BEFORE

GAVE WAY TO SOME PROFIT MAKING

TODAY.

SOME MODEST MOVES.

MODEST IS THE WORD OF THE

DAY AND PROBABLY THE WORD OF THE

MONTH.

MATT: I LOOKED TO MEASURE ON

STOCKS AND I SAW THAT HALF A

,ERCENT WAS THE WIDEST RANGE

THE NASDAQ AND THE DOW'S 1.5%.

TAKE A LOOK AT MY IMAP, THE MOST

BASIC FUNCTION TO USE TO SEE HOW

THE INDUSTRY MOVES ARE GOING

THROUGHOUT THE DAY.

YOU CAN SEE A TOTALLY DEFENSIVE

INVESTOR.

UTILITY THE BIGGEST GAINER, THEN

HEALTH CARE, THEN CONSUMER

STAPLES.

DOWN ANDS WERE

CONSUMER DISCRETIONARY STOCKS

WERE DOWN AGAIN AS WELL.

SO PEOPLE WERE GETTING DEFENSIVE

IN TODAY'S MARKET.

JOE: ON THE GOVERNMENT BOND

DEALT, THE INDIAN TENURE

JUMPING, SOME NERVOUSNESS IN

INDIAN MARKETS.

ANY TRANSITION OF POWER IS GOING

TO CAUSE A LITTLE AGITATION.

THAT STICK WITH

EMERGING MARKETS HERE.

SEEING THE BIGGEST DROP IN ABOUT

A MONTH.

THE RUSSIAN RUBLE LEADING THE

SLIDE.

THE UP ARROW IS THE DOLLAR

VERSUS THE RUBLE AS THE OIL

PRICES DROP FOR THE FIRST TIME

IN EIGHT DAYS.

FITCH CUT ITS OUTLOOK ON

TURKEY'S CREDIT RATING SAYING IT

INCREASES THE LEGAL RISK OF

INVESTING IN TURKEY.

JOE: GOLD AND SILVER GETTING HIT

SILVER REALLY GETTING

SLAMMED.

PERHAPS SOME OF THAT WAS THE

SELLOFF THAT WAS PERCEIVED TO BE

THE HAWKISHNESS OF THOSE

COMMENTS FROM STANLEY FISCHER.

ONE COMMODITY GETTING A BOUNCE

TODAY WAS NATURAL GAS.

ONE LAST HEATWAVE, YOU CAN SEE

RIGHT THERE A BIT OF A RALLY

TODAY.

DIVEET: LET'S TAKE A DEEP

INTO THE BLOOMBERG AND YOU CAN

FIND ALL THE CHARTS USING THE

FUNCTION AT THE BOTTOM OF YOUR

SCREEN.

WE WILL STICK WITH THE IDEA THAT

OIL PRICES HAVE GIVEN BACK FROM

THEIR RECENT GAINS.

YOU NOTICE THIS COLUMN, THIS IS

SEPTEMBER.

OIL TENDS TO DROP IN THE MONTH

OF SEPTEMBER.

FOR THE LAST FIVE YEARS THAT'S

BEEN THE CONSISTENT PATTERN.

IN 2015 CRUDE OIL DROP MORE THAN

8%.

2013, ABOUT 5%.

THESE ARE PRETTY SIZABLE LOSSES.

SO AN OMINOUS WARNING AFTER

THIS EXTRAORDINARY ABOUT.

I WANT TO TALK ABOUT THE STOCK

MARKET TODAY BECAUSE IT'S KIND

OF AN INTERESTING DAY.

IT'S REALLY JERKY.

MATT: HOW DID YOU DO THIS?

YOU SEE THESE REALLY SHARP

UPS AND DOWNS.

ON THE LEFT SIDE YOU SEE THIS IS

VOLUME DISTRIBUTION, THIS IS THE

VOLUME ANALYSIS FUNCTION.

YOU CAN SEE IT'S CONCENTRATED AT

BASICALLY HERE,

HERE, AND A LITTLE BIT HERE.

YOU GET THE POINT THERE WERE

JUST A FEW PRICES AND THEN YOU

HAVE THESE BIG GAPS WHERE THERE

IS ALMOST NO VOLUME IT ALL.

OF A JERKY, SLOW,

SUMMER DAY.

ULTIMATELY NOT MUCH CHANGE BUT

THE CHANGES THAT DID HAPPEN

HAPPENED THAT NO VOLUME AND VERY

FAST.

I HAVE A GREAT CHART THAT

I STOLE FROM SOMEONE ELSE.

WHAT IT SHOWS YOU IS COMPANY

R&D, CAPITAL

EXPENDITURES AND PROFIT MARGINS.

R&D IS THE RED COLUMN AND YOU

CAN SEE IT HAS GOTTEN BIGGER

EACH QUARTER GOING BACK TO THE

BEGINNING OF 2014.

AT THAT CAPITAL EXPENDITURES

HAVE DROPPED TO ALMOST NIL.

WE KNOW THAT CAPITAL

EXPENDITURES ARE PROBABLY

BECAUSE COMPANIES HAVE LITTLE

CONFIDENCE IN THE ECONOMIC

FUTURE, BUT THE R&D EXPENDITURE

IS GROWING.

I THOUGHT THAT WAS INTERESTING.

IT MAY HAVE SOMETHING TO DO WITH

THE TAX TREATMENT ON R&D.

IT LOOKS LIKE THEY WOULD BE

PUTTING MORE INTO THAT.

PROFIT MARGINS GOT BIGGER OVER

THE FIRST COUPLE OF YEARS IN

THIS CHART.

THEY ARE STARTING TO SHRINK A

LITTLE BIT.

A LOT OF PRESSURE ON PROFIT

STILLS, BUT THEY'RE

GROWING R&D, WHICH IS

INTERESTING.

YOU CAN MAKE YOUR OWN CHART

THAT IS THAT.

THERE HAS BEEN SOME

CONCERN OR AT LEAST PEOPLE

NOTICING THE RECENT SURGE IN THE

WITH USETWEEN LIBOR --

IS BOB FINCH.

WHEN SOMEONE TALKS ABOUT LIBOR,

WHAT COMES UP IS THAT THIS IS

ANTICIPATION BEFORE THE MONEY

MARKET REFORM KICKS IN.

BUT WHEN YOU LOOK AT THE SPREAD,

WHY ARE PEOPLE TAKING A SECOND

LOOK AT IT AND WONDERING IF THIS

COULD BE CONCERNING?

>> WHEN YOU SEE SPREADS BETWEEN

BANK ORIENTED PAPER AND TREASURY

BILLS, YOU HEARKEN BACK TO THE

2007 FINANCIAL CRISIS.

IS THERE SOME SORT OF RISK

BREWING UP THAT WE ARE NOT AWARE

OF?

AND CONCERNS THAT THAT IS WHAT

THE MARKET IS BEGINNING TO TELL

US.

IN THIS CASE IS MORE INNOCUOUS.

OCTOBER 14 THERE IS A MAJOR

REFORM GOING ON FOR MONEY MARKET

LINES.

THE INDUSTRY IS CREATING MORE

VOLATILITY IN THE NET ASSET

GAINS THATLSO SOME

SLOWDOWN REDEMPTIONS IN CHARGE

REDEMPTION FEES IN CASE THERE'S

A RUN ON THE MONEY MARKET FUNDS.

THIS IS DESIGNED TO IMPROVE

LIQUIDITY.

WHAT HAS LED TO IS A LOT OF

COMPANIES, MAJOR BROKERAGE

FIRMS, RETAIL ORIENTED, RICK

WEARING THEIR CUSTOMERS TO SHIFT

OUT OF WHAT WOULD BE CALLED A

PRIME MONEY MARKET FUND THAT

WOULD INCLUDE CDS, COMMERCIAL

PAPER, AND MOVE INSTEAD INTO

GOVERNMENT ONLY FUNDS.

THERE MAY BE A BENIGN EXPIRATION

FOR THE SHIFT, BUT WILL IT HAVE

ECONOMIC RAMIFICATIONS FOR LOANS

AND OTHER THINGS TIED TO LIBOR?

EVEN IF THERE'S A BENIGN

EXPLANATION, WILL IT FILTER

THROUGH TO THE ECONOMY IN A

NEGATIVE WAY?

>> YOU HAVE A $400 BILLION

SHIPPED FROM PRIME MONEY MARKET

FUNDS TO GOVERNMENT FUNDS.

AS A RESULT THE DEMAND FOR

T-BILLS HAS GONE UP IN THE

DEMAND FOR LIBOR-BASED PRODUCTS

HAS GONE DOWN AND THE SPREAD HAS

WIDENED ABOUT 30 BASIS POINTS.

IS THAT BECAUSE LIBOR WENT UP 30

BASIS POINTS OR T-BILLS WENT

DOWN 30 BASIS POINTS, OR IS IT

SOME COMBINATION OF THE TWO?

MY GUESS IT IS A COMMENDATION OF

THE TWO.

.AYBE LIBOR IS OVERSTATED

I CANNOT BELIEVE 10-15 BASIS

POINTS IS GOING TO HAVE A MACRO

EFFECT ANYWHERE IN THE ECONOMY.

I THINK IT IS SMALL, BUT

SOMETIMES YOU JUST READ

SIMPLISTIC MEASURES LIKE THE

WIDENING SPREAD AND SAY THERE'S

SOMETHING BAD HAPPENING OUT

THERE, THERE ARE LIQUIDITY

STRAINS ON THE ECONOMY.

I THINK THIS IS EASILY EXPLAINED

BY REFORM PROCESS.

JOE: I FIND THAT SHIP THE MOST

INTERESTING.

IS THAT BECAUSE THEY'RE GETTING

INTO GOVERNMENT FUNDS, OR IS IT

BECAUSE THEY'RE GETTING OUT OF

PRIME MONEY MARKET LINES?

THE LATTER COULD BE BECAUSE OF

CHANGES IN THE WAY THEY ARE

REGULATED, MAYBE INVESTORS HAVE

LESS TRUST IN RUN MONEY MARKET

FUNDS IN THE HAVE IN THE PAST.

>> I THINK IT IS BOTH, AND I

THINK IT'S REALLY NOT A CHOICE

BACK HER.

I BROKERAGE ACCOUNT AT A MAJOR

DISCOUNT FIRM REQUIRED ME TO

TAKE MY SWEEP ACCOUNT FOR MY

BROKERAGE ACCOUNT FROM PRIME

FUND TO A GOVERNMENT FUND.

ALL THE BIG RETAIL BROKERAGE

FUNDS ARE THE CHRIST TO DO THAT.

,HIS IS NOT A CHOICE VARIABLE

IT'S BEEN HAPPENING OVER THE

LAST COUPLE OF MONTHS.

IT'S A LOT OF MONEY TO SHIFT

FROM PRIME FUNDS TO GOVERNMENT

ONCE.

LUCKILY T-BILL ISSUANCES

CREEPING HIGHER.

I DO THINK THIS IS A REGULATORY

ISSUE, AND AGAIN IT'S NOT THAT

INDIVIDUALS ARE MAKING A

CONSCIOUS DECISION.

I RECEIVED A NOTICE SAYING YOU

HAVE NO CHOICE.

MATT: YOU CAN SEE THAT THE

INULATION WENT INTO EFFECT

DECEMBER 2015.

THERE IS A DROP IN PRIME MONEY

MARKET FUNDS THERE AND A

COINCIDING JOB IN GOVERNMENT

FUNDS.

IT'S NOT REALLY A GOOD

METRIC OR INDICATOR OF

LIQUIDITY.

WHAT WOULD YOU LOOK AT TO GET A

SENSE OF THE LIQUIDITY CRUNCH IF

YOU CANNOT USE THIS METRIC?

MARKETS OTHERTHER

THAN TREASURY BILLS TO YOU CAN

LOOK AT COMMERCIAL PAPER,

INTERNATIONAL DOLLAR MARKETS.

THE SPREAD BETWEEN LIBOR AND

COMMERCIAL PAPER RATES IS

UNCHANGED THIS YEAR.

IT'S THREE BASIS POINTS THROUGH

COMMERCIAL PAPER.

BASICALLY THE OTHER MARKETS IT

MIGHT SHOW SOME CHANGE

RELATIONSHIP TO LIBOR IN FACT

HAVE NOT DONE THAT AT ALL.

IN THAT CONTEXT, IT TELLS ME

THAT THIS IS MORE THAN ANYTHING

ELSE A BIG DEMAND FOR T-BILLS,

WHICH IS ARTIFICIALLY DEPRESSED

T-BILL RATE AND MAY PUSH UP THE

OTHER GREAT IS ALL THE PRIMARY