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Numbers Don't Lie; Don't Fear The VIX; Cable Consolidation

Doug Cubberley, Special to CNBC.com
Friday, 14 Jun 2013 | 4:42 PM ET
Federal Reserve Board Chairman Ben Bernanke
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Federal Reserve Board Chairman Ben Bernanke

Recapping the day's news and newsmakers through the lens of CNBC.

Ending on a High Note?

Notes:

Following a big Thursday gain, positive closes in Asia and Europe, and better-than-expected Producer Price Index numbers, you'd think the markets would have some momentum moving into the weekend. You'd be wrong.

Consumer sentiment sagged in June after reaching its highest level in almost six years in May. Economists expected a gain. U.S. factory output was flat as well. Financials and energy lagged. The economy is being held back by slower government spending and higher taxes, economists say.

There is greater optimism that the economy can handle a tapering off of the Federal Reserve's bond buying program, but not enough to prevent jitters about next week's Fed policy meeting to keep stocks in positive territory.

Quotes:

"I think the Fed's message is confused on QE and I think the Fed is sending a confused message, and I think the chairman did that as well during his testimony. I don't think they've made clear 'substantial' compared to what and 'improvement' compared to when. I think he needs to do that. And I think that's why you have had a lot of the volatility in the market. I think the market is confused here. I think they're less confused about the interest rate issue."—CNBC's Steve Liesman

"Bernanke has been saying for some time at his March press conference, at his Joint Economic Committee testimony a few weeks ago, that these are two separate instruments. When they taper, that doesn't mean they're any closer to raising interest rates. One thing has changed and that is that the market is behaving in a way that the Fed wouldn't want it to see react. We're seeing futures markets acting as if rate hikes are coming sooner than the fed had been saying before. What's changed is that the market has moved."—Jon Hilsenrath, Wall Street Journal chief economics correspondent

Staying the Course on Stocks

Notes:

You've probably heard a dozen predictions about how to expect choppy markets this summer. The volatility numbers support those predictions. But more than one investor is advising to stay the course and stay long U.S. equities, despite the VIX. Cyclical, rather than defensive stocks, could be the best bet. And if Fed Chairman Ben Bernanke eases off taper talk next week, equities could be off to the races.

Of course, the skeptics won't be silenced.

Quotes:

"Everyone wants to hear what the Fed thinks. Everyone trots out every current, voting, nonvoting Fed member and the market is reacting to everything. Volatility is not going to go away this summer but the Fed is not going to tighten. They might accelerate the balance sheet more slowly but the balance sheet is still growing. The economy isn't doing great but it's not doing horribly. I think stocks can still go up. It will just be a choppier summer."—Rebecca Patterson, CIO of Bessemer Trust

"I think the market has kind of gotten to an equilibrium point. They are coming in from a taper panic and they're not yet at the point where they think anything is really at stake at the June meeting as far as policy change."—Mike Santoli of Yahoo Finance

Consolidation Stations?

Notes:

Charter Communications is reviewing possible acquisition targets, as it and its 27-percent owner, Liberty Media, seek to use the company as a vehicle for cable industry consolidation. Charter had made an overture to Time Warner Cable about a merger of equals, but that was rebuffed, though TWC was concerned enough to secure Morgan Stanley and a public relations firm if a public fight ensued. That's unlikely, though; the deal would require $15 billion in new debt and new Charter equity.

Quote:

"Sources close to Time Warner Cable tell me the company indicated it had no interest in any sort of a link up with Charter, believing that it was simply an attempt by Charter or Liberty in this case to use Time Warner's balance sheet along with its own high-multiple stock to pursue a deal that would not end up making financial sense."—CNBC's David Faber

Big Trouble for Big Banks?

Notes:

Financials have done well during the current rally, surpassing the S&P 500's 15 percent year-to-date gain, but will that change as mortgage rates rise? Probably not. The biggest lenders, such as Wells Fargo and Bank of America, are diversified enough to make up for slowing REFIs. Besides, there's still room on the REFI gravy train even with rates rising slightly.

Quote:

"I think that they vulnerable in the ramp up in interest rates because of their securities portfolios. A lot of these banks are trying to protect the balance sheet, and they have added onto their securities portfolios at very low rates. With rates going up you could see book value hits in that process. But in general, most of the CEOs want to see the rates up and not down. I know you have seen the downgrades and a spike of average rates, but the coupon rates are at 4.5 percent, and 4.75 percent, which leaves a lot of room for the REFIs. For the last three years, everybody has been trying to call the end of the REFI boom, and it has plowed through all of the predictions."— Paul Miller of FBR Capital Markets

Moment of Truth

Notes:

Syrian rebels are demanding heavy weapons from the U.S. government for their fight against the regime of Bashar al-Assad. The news comes just a day after President Barack Obama authorized sending unspecified weapons to the rebels after it acknowledged that chemical weapons were being used against them. There is some speculation that the measures could be too little, too late.

Oil hit its highest price in nine months on the developing story.

Quotes:

"It's unclear whether this is going to be too little, too late. Clearly the rebels are on the defensive. The introduction of large numbers of fighters from Hezbollah has made a significant difference for the Syrian forces. Anti-tank weapons will certainly help them. But they've lost al-Qusayr. And the Syrian Army is approaching Aleppo and Homs. This is a dire situation. We've all known the Syrian regime has used chemical weapons for quite some time."—Steven Cook, Council on Foreign Relations

"They need weapons, big weapons, heavy weapons, they need anti-tank, anti-aircraft. If they don't get them, they will lose this fight."—Richard Engel of NBC News

—By Doug Cubberley, Special to CNBC.com.

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