In Yellen, Obama delivers Wall Street's Fed wish
Recapping the day's news and newsmakers through the lens of CNBC.
President Obama's choice of Janet Yellen for Federal Reserve chairman didn't exactly buoy the markets—investors just have too much on their minds. But Wall Street was happy with the choice, and political experts said Yellen should be confirmed easily, despite objections from a few Republicans who don't like her support of quantitative easing.
"She's got her own opinion, especially if you look at the [FOMC] minutes. She's in there pushing her point of view. She's a feisty lady. ... I think her one weak point ... quantitative easing, is pretty unpopular in some circles."—Former Fed economist Kevin Hassett, director of economic policy studies at the American Enterprise Institute
"Okay, hit me for liking Yellen. Attack me. All she has done is everything you want your kid to be. Anyone have any kids? U know what I mean."—Tweet from CNBC's Jim Cramer
This issue just won't go away, at least not as long as the government debt showdown lingers: yield on the one-month Treasury bill has jumped to the highest level in five years. Five years! Of course, Tuesday's peak of 0.322 percent, up from 0.083 percent a week earlier, is not going to make anyone rich. But it is a clear sign of investors' growing concern about the risk of a government default if the debt ceiling is not raised before Oct. 17.
The bright side? Maybe you'll make a little more in your money-market fund—if that money market fund is still operating, that is, as some fear a debt default will wreak havoc on money fund operations. In fact, the nation's largest manager of money market mutual funds, Fidelity Investments, disclosed Wednesday that it no longer holds any U.S. government debt that comes due around the time the nation could hit its borrowing limit, but the surprise announcement from Fidelity Investments failed to deter Pimco founder Bill Gross, who said his firm continues to buy debt.
"If the U.S. was to default, T-bills are under real threat of not being paid ... and the risk premium in the bond yields is reflective of that fear."—Evan Lucas, market strategist at IG
"We're doing exactly the opposite actually."—Bill Gross, Pimco Founder, on Fidelity's decision to sell out of short-term U.S. government bonds
Quick, Find an Irish firm to merge with
What's the hottest dance move among corporations? The "inversion." Ultimately, it's a way of incorporating in an overseas tax haven. But since regulations have made it tougher for U.S. corporations to do this by simply reincorporating offshore, tax experts have devised a twist: merge with a firm that's already a non-U.S. entity. The move has grown in popularity over the past 18 months. Recently, California chip maker Applied Materials cut its effective tax rate to 17 percent from 22 percent by merging with rival Tokyo Electron, cutting the annual tax bill by $100 million. The tactic was also reportedly part of the rationale for the ad world's big deal between Publicis and Omnicom. Be warned, though: the IRS may look askance at a merger done strictly for tax-avoidance, so it's prudent to have a strategic rationale as well.
"You don't want anybody to think you're doing these deals for tax reasons. They don't want a spotlight on it. That's like the kiss of death."—Martin A. Sullivan, chief economist at Tax Analysts
Connecting flight, via a Porsche
You know those glorified golf carts that beep annoyingly as they zip from gate to gate at the airport? Riding one has never made anyone look cool. Well, now there's a better way to get around, if you're enough of a hotshot—a Porsche Cayenne. Delta Air Lines provides the Porche service at the mammoth Atlanta Hartsfield Airport for highly valued passengers in danger of missing their connecting flight. So check your frequent flyer points—you need 125,000 to qualify. Delta plans to expand to other airports, and other airlines like United are following suit, proof positive it's better to be a have than a have-not.
—By Jeff Brown, Special to CNBC.com