Dog days’ distraction: Who’s next at the Fed?

Getty Images

Janet Yellen and Larry Summers

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

Notes:

It's Summers! No, it's Yellen! Then again, maybe it's someone else!

Speculation about President Obama's pick to replace Fed Chairman Ben Bernanke kept churning today, with analysts debating how the financial markets might respond.

In the wake of a CNBC survey saying Wall Street prefers Fed Vice Chairman Janet Yellen to former Treasury Secretary Larry Summers, some warned that a nod to Summers could be tough for the markets to swallow, at least in the short term. They say Summers would push for a quicker end to the Fed's low-interest policies, which many credit for a big role in the stock gains of recent years. Many think Yellen, because of her stronger emphasis on unemployment, would take a slower approach to tapering, allowing the Fed's bond buying program to prop the markets up longer.

Some analysts think Yellen's Fed experience and gender will weigh in her favor, but others note that Summers and Obama have a history, too, as Summers has taken part in many presidential briefings on the economy.

And some, inclined the Machiavellian, think Summers is an administration stalking horse, a name floated to help test the market's view of Yellen.

How will it all unfold? It's a mystery for now—happily, something to keep us entertained during the August doldrums.

Quotes:

"If Summers is appointed, then we many see markets correct as tapering will be expected to happen more quickly. ... Yellen is a Fed insider and was part of the Federal Open Market Committee (FOMC) when QE [quantitative easing] was being implemented, while Summers questions the efficacy of QE."—Macquarie Bank strategist David Forrester

"So all of a sudden if Larry Summers pops up against the logical favorite, which is Janet Yellen, it gives you a chance to vet Yellen, to look at how the markets do—when which horse is ahead, how is that going?"—CNBC's Art Cashin

The tapering turnaround

Notes:

All this taper talk has its upside:It's stimulating mergers and acquisitions.

M&A activity was slow at the start of the year, then got a dramatic boost in May after Bernanke said the central bank would begin cutting back its asset purchases.

The idea is that tapering will lead to higher interest rates, resulting in lower prices in M&A deals. Any company that's thinking of selling itself thus has reason to do it sooner rather than later. At the same time, potential acquirers are sitting on lots of cash and are getting more confident about spending it.

Through the first half of the year, global deals totaled $1.25 trillion, on par with 2012's pace. But in the two months after Bernanke's May 22 comments, $164 billion in deals were announced, a 59 percent increase from the previous two-month period.

Three new deals were announced today: Hudson Bay and Saks for $2.4 billion; Essilor International and Transitions Optical for $1.73 billion; and Perrigo and Elan for $8.6 billion. Those follow Sunday's announcement of a $35.1 billion deal between Publicis and Omnicom.

Quotes:

"Higher interest rates will result in lower pricing in general, but it comes down to buyers and sellers just agreeing where it's going to go. It's a good time to own something for sale."—Tim Hartnett, global and U.S. private equity leader at PricewaterhouseCoopers

"Greater competition is driving valuations and deal timelines, leaving some would-be acquirers to reflect on missed opportunities, and others with buyers' remorse for failure to capture deal value."—Martyn Curragh, PWC's U.S. deals leader

Big prospects for having little

Notes:

Where will tomorrow's customers come from?

Any executive with a long-term perspective has to ponder that from time to time. In a perfect world, the future will offer more customers with more to spend.

If that's your hope, swallow hard and read a sobering new study that says four out of five adults in the U.S. struggle with joblessness, near-poverty or a reliance on welfare at some point in their lives. The study cites a widening gap between rich and poor and the loss of good-paying manufacturing jobs.

The survey found, for instance, that among whites pessimism about the financial future is at its highest level since at least 1987. Currently, a record 46.2 million people are counted as living in poverty, about 15 percent of the population.

Quote:

"Poverty is no longer an issue of 'them,' it's an issue of 'us.' Only when poverty is thought of as a mainstream event, rather than a fringe experience that just affects blacks and Hispanics, can we really begin to build broader support for programs that lift people in need."—Mark Rank, a professor at Washington University in St. Louis

Another 30 percenter?

Notes:

Remember how Facebook dazzled investors last week, jumping 30 percent in a day? Well, some think Ford could do the same. Not overnight, perhaps, but in short order.

In fact, some experts think Ford could become the most popular vehicle brand in the world. The reason: enviable results not just here and there, but all over the world.

Last week Ford reported a 15 percent jump in sales, three times the global average for the car industry. After chewing over the report, analysts cite the company's "One Ford" strategy, which emphasizes similar vehicles everywhere, streamlining manufacturing.

Ford shares tend to move in lockstep with those of General Motors, but some analysts think Ford can break away.

Quotes:

"Ford has been a better-managed company than GM and deserves a premium valuation. While the stock is arguably fairly valued versus prior cycles, downside is limited and upside could be significant if European economic growth returns."—Short Hills Capital Partners' Managing Partner Stephen Weiss

"Asia could add a new leg to Ford story. The result finally shows the benefit from years of investment in the region and lends confidence to Ford's goal of Asia being a material profit contributor by mid-decade."—Colin Langan of UBS

—By Jeff Brown, Special to CNBC.com