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Portrait of economy, as painted by Fed, is distorted

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

Notes:

It hasn't yet earned a place in economics texts, but "Francis Bacon inflation" could offer another window into the economy's inner workings. On Tuesday night the artist's work "Three Studies of Lucian Freud" sold for an astounding $142.4 million at Christie's. It was the most ever paid for an auctioned work. Since the previous high for a Bacon piece was $86 million, paid in 2008, his work hints at an art inflation rate that far surpasses gains in the CPI or price of gold.

Some experts say Bacon inflation is just one of many examples of soaring asset prices, including things like stocks and New York City apartments, due to Fed's easy-money policies. The question: Is the focus on standard gauges like the CPI missing a growing inflationary pressure evident in assets that those traditional indexes don't include? Further, is Fed policy just promoting asset inflation without fixing the economy's most important problems, like unemployment?

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"Those that are paying $142 million for a painting are not going to be able to sell it for that price when the Fed is out of the game. ... And selling a painting for $142 million doesn't give the person looking for a job a job."—Peter Boockvar, chief market analyst at Lindsey Group

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Macy's: A pleasant surprise, promising outlook

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Macy's shares got a nice bump today—closing up 9 percent—after the retailer handily beat expectations for third-quarter profit and revenue, earning 47 cents a share versus 36 cents a year ago. As the first of the major retailers to report, Macy's could be a harbinger of better-than-expected results. After a summer slowdown that hit much of the sector, Macy's said it enters the holiday period "with confidence." Analysts were impressed by the chain's strength in beauty, home retail and jewelry.

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"There's no question there's optimism in this report. Some of the components heading into the holiday season would be the drivers; they looked to be accelerating as the quarter progressed."—Matt Boss, senior retail analyst at JPMorgan Chase

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Tax cheats beware: The Feds are on your trail

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The dicey business of hiding money offshore to dodge taxes is getting trickier as federal prosecutors pry deeper into foreign bank accounts. Federal judges have approved summonses for data on identities of Americans who may be secreting money at Switzerland's Zurcher Kantonalbank and Bermuda-based N.T. Butterfield & Son. Those banks have no U.S. operations, so investigators served summonses on other institutions that hold correspondent accounts for the two that were targeted, including Bank of New York Mellon, Citibank, JPMorgan Chase Bank, HSBC Bank and Bank of America. The tactic, known as a "John Doe summons" because the account holders are unknown, has been used successfully in a number of previous cases.

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Gee, why didn't I think of that!

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How do you invest like a billionaire? Simple: Buy the stocks they do. That's not as difficult is it may seem, because some billionaires are investment managers who must file quarterly 13F disclosures of holdings. Now some clever folks have come up with a product that, once you hear about it, seems obvious—an index listing the 30 S&P 500 stocks most widely held by billionaires like Warren Buffett, Dan Loeb, David Tepper, John Paulson, Carl Icahn and David Einhorn. The NYSE launched the iBillionaire Index today, and you can easily track it with the 99-cent iBillionaire app. Promoters say the index would have returned 12.6 percent a year over the past eight years, compared to 7.06 percent for the S&P. An ETF tracking the index may come soon. Fair warning, though: 13F disclosures are often out of date, and billionaire investors may not share your time horizons, goals and tolerance for risk.

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"In essence, the index works as though one gathered a group of billionaires and asked them to come to a consensus as to which S&P 500 stocks are the best bets."—Statement from iBillionaire backers

By Jeff Brown, Special to CNBC.com

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