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tv   Power Lunch  CNBC  September 10, 2013 1:00pm-2:01pm EDT

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i like oil service name cameron international cam, buying a lot of upside call. >> that does it for us. don't forget more "fast" at 5:00 and coming up in a matter of moments apple's big unveil. we're all over that live. for the moment "power lunch" begins right now. >> scott, thank you very much. this is an hour of power filled with breaking news start to finish. the big story, of course, as scott mentioned, the apple announcement, widely reported, sue, that the company will unveil two new iphones. >> and the stock in particular needs something to juice it. it's down 25% in a year. it's down 5% year to date and it's down in today's trading session. right now it is down better than $4 on the trading day to 501, but above the 500 mark. cnbc's research team has found on most major apple product announcement days the stock falls, but the shares go positive both one week and one month later.
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brian sullivan is live at the big event out in cupertino, california. hi, brian. >> hey, sue, thanks very much. listen through the magic of jet travel i was there yesterday and i'm here in silicon valley today. right behind us is where the action is supposed to take off any minute now. we're going to be bringing you live updates all day as the headlines roll out. here's what the market is expecting, right. somewhat well telegraphed by apple this time. a new apple iphone 5s, an advance on what you got, may have color, fingerprint sensor. also a so-called iphone 5c, we don't know if that would be the name, but a lower priced iphone, less components, made for emerging markets and a lower price point. the pry point is the thing. the event has begun, we're hearing that. also look for a china mobile launch. china mobile 740 million subscribers more than at&t and verizon combined double in the united states. that could be a big one
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potentially in japan. maybe an update on the ios 7 as well. steve jobs made the one more thing famous, the surprise at the end that would move the stock, right? what could we get today? we don't know but here are ideas. perhaps an update or even a full launch of a tv product or enhancement to the current apple tv product. everybody looking for the so-called iwatch. the smart watch, samsung rolled theirs out. could we get one from apple today? so that could be the one more thing. maybe a mac book pro refresh. that wouldn't be much of a big deal. the analyst notes i read and the people we talked to, if we get it it's nice. tv and watch could be the big one more thing. guys, couple maybe new iphone 5s, big push into emerging markets, lower price points and the price point will be the key. the analysts note i read suggested if it's too low, it could kill apple's gross margins, but if it's not low enough, who wants to buy it? the idea is a lower priced phone for folks in countries that don't have the disposable income
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of a tyler mathisen or sue herera or john fortt who is inside that building behind me, team coverage coming up, it's going to be awesome. >> i know it is because you're out there. thanks, brian. shahheed kahn joins me, chair founder and co-founder of media morph. both will be with us throughout the hour on apple. shahheed, start with you, i think brian set it up perfectly for us and touched on two points that are important to you. you said there are two places that apple is behind emerging markets and living room. >> especially china take that, for example, apple is -- iphone is ranked number 7, way behind samsung, at&t, all of the local brands as well. the lower priced iphone combined with the china mobile launch. >> tell me where we're going. rick santelli for the bond market results.
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>> 31 billion three-year notes, 1 billion smaller than normal package. the yield.913. the 92 trading that was trading, and the one issued market. we look at the bid to cover, $3.29 chasing every dollar's worth of securities. that's close to the 3.36. we give it an aminus, a nice first leg to the three-year all the metrics were solid. tomorrow, of course, we move towards the long end in the form of the ten-year. sue, back to you. >> so rick, this is the first time in a long time we've seen a three-year get an a-mu min nous minus from you. why do you think this came in so strong. >> maybe more so just that rates have moved up. it's a short maturity, pretty safe and i think at these levels it i peels to some -- appeals to some investors. >> thank you very much. appreciate it. let's go back to our discussion and it's a little loud down here this afternoon at some of the
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posts, so i beg your parden if i have to ask questions of the producer. shahid you mentioned the living room is where apple is behind. >> look what the competitors have done, consoles like xbox, playstation, sony, they've done a lot more than apple. all apple does today is allows you to download stuff from itunes and stream stuff on television. we know that they've been in discussions with many of the content companies to get their own deals done. and they might already be in plans to actually put together some kind of an offering, something like a net flix or a combination of a bunch of different -- >> spencer, do you want to weigh? do you agree apple is behind in those two places and what are you anticipating for today's announcement? >> i absolutely agree with your guest that apple is certainly playing catch-up in emerging markets and playing catch-up in the living room to a certain extent. the bigger picture for apple, this is a company that pioneered the smartphone market six years ago. came out with this amazing
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device, all these apps, wowed the world and now at a crossroads. its has lost its market share leadership to samsung in the last year or two, it is not actually growing its revenues right now, and its profits are declining and on top of that, people think that apple is not as innovative as it used to be. today they need to answer the growth question, with the emerging markets play, and hopefully they can answer the innovation question, with some wow factor. >> do you think they can, though, spencer? there are those, larry ellison is one of them, that feels that now that steve jobs is no longer with us, that apple has peaked basically, that the innovation is not there, that the bench is not there? >> yeah. no, i think it's really an open question. it's hard to answer that, but i would say the odds are that it will be difficult for them to answer that in the near term. i don't think a new iphone is going to be the answer. the it has to be a completely new product and category like a tv product or some kind of
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wearable device or something we can't even imagine which steve jobs was great at imagining things that people didn't even though they wanted. >> what do you think about that, shahhid. >> i beg to differ. i think the cheaper phone is a strategic launch, it opens them in an emerging market where they're competing with phones 150 to $200. you said earlier that china mobile relationship puts them in front of 740 million subscribers. so if even they sell 50 million devices in the next 12 months at $300, that's a 10% incremental profit for the company. that's not tactical. that's strategic. >> that's very interesting too. >> mature product line such as telephone, growth is very important. they need to innovate on the television and home side but in the telephone market it's going to be all about competitive share they have to take in from all of the other players. if you look at china and india,
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they're the largest secondary market of used iphones that sell. people love the brand. offer them a $300 phone they'll go for it. >> hold that thought, gentlemen. we will have you back throughout the hour so you're going to stick around for more breaking news from apple. ty, up to you. >> thank you very much. tim cook on stage out there. we're going to bring you all of the flashes from that apple event as they happen. sheila has a market flash for us right now. >> hey there. keep an eyes on forest laboratories. the company announced the former head of boush and lamm will be taking on the ceo role of the company replacing solomon. he's been a director there since august 2011. the move, of course, comes after billionaire investor carl icahn has been pushing for change at the company for some time. icahn tweeted about the anoimts saying we have great exexpect tases for forest laboratories. he is the second largest shareholder in the company. back to you. >> stocks moving higher once
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again following further upbeat economic data from china and a possible way out on this military strike against syria. more on that in a few moments as the diplomacy moves fast and furious. mean time, the three major indexes are gaining ground. the dow industrials up 97 points at 15160. the s&p up a half a percent, 1681, 9.5 point gain there. the nasdaq at a nearly 13-year high, 3722 up 16 points right now. oil prices falling after they have, of course, been rising on those middle east tensions with west texas crude down 2.52 at 107 on the button. brent is at 111.12, down 2.60, gold taking a hit as well today. comex down 23 dollars an ounce, down 21% over the past one year. now the other big story we've been following all morning the
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big changes that are coming to the dow jones industrial average. biggest changes really in nearly a decade's time. the index going through its first major shakeup in really nine years plus. three companies coming in, three going out. as of the close of trading september 20th. they'll really take effect september 23rd. in, goldman sachs, visa and nike. out, alcoa, bank of america and hewlett-packard. dom min nick chew breaks down the numbers on all six companies what it means to their stock prices and people that own the shares. >> look at what's happening intraday day so far. yes, the market is up overall but check out today's trade it's an up trade but the newest members of the dow are getting a pop ahead of their index inclusion september 23rd. goldman sachs up nearly 3.5% to 165 bucks a share. visa up about 3% we'll call it to 184 dollars and then nike up about a 1.5% to 66.48 a share.
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nike shares did hit a record high on the heels of this news. as for the names being dropped in the dow, kind of a mixed bag of sorts. hewlett-packard, alcoa are down, but bank of america is joining all the other financials moving to the upside despite being unfriended by the dow. for the momentum these guys have going into this inclusion, visa up about 15% this year. goldman 21% to the upside. and nike is up get this 26%. some serious momentum there. as for the dropped stocks, hewlett-packard has been one of the best performers in the dow this year, it was up 49%, too bad it's getting dropped. bank of america up 20%. alcoa is actually down around 10% so far this year so that real materials commodities still play. >> i saw in one of our graphics in place of bank of america we had boeing being booted. >> oh, no. boeing is not being kicked out of the dow. >> it's bank of america. >> this index is a price
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weighted index and what they chose to get rid of were three of if not the three lowest priced stocks. >> they were. between those three stocks, bank of america, alcoa and hewlett-packard, together they represented less than 2.5% of the overall waiting in the dow. they can disappear and drop off the face of the earth the dow wouldn't be hurt that much. here's what's at risk, other names like intel, ge and cisco are here the bottom of the dow's waiting list, those are stocks to keep an eye on as well. >> we corrected it there. bank of america is the lone gainer here among those that have been bootsds out today, up 17 cents. >> thank you very much. sue, down. >> bob pisani is here with me and why these moves matter and happening now. they don't make these moves very often. >> no. >> however, they're supposed to reflect the ever-changing aspect of the u.s. economy. >> that's right. the dow jones industrial average is not an industrial average, it hasn't been for decades and the point is, it's about big cap
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indices, the big cap market sector. what they want to do is keep up with the times and change as the society changes. here's what's really going on. the important thing is overall here, this is about index construction. as dominic said, low price stocks have little impact when a price weighted index. the three lowest price stocks don't move the index at all. move those out of there and get other stocks that have impact in the index. second diversification. they have to keep up with the times and they think nike with the expanding consumer section -- sector is more important than having alcoa in it. visa, which is a broader technology stock than hewlett-packard is more important having in there. they're trying to keep up with the times overall. >> interesting, though, that bank of america flipped with goldman sachs being added. >> that is purely a price thing. you can argue that goldman sachs provides similar services to bank of america. not completely overlapping but similar. you have a $14 stock in bank of america and $168 in goldman sachs. that's a price switch for equal
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company. one thing that's important people ask me about this all the time when it happens is this a statement about the companies an it's not. dow jones is not saying that goldman is a better company than bank of america. they don't make recommendations. not buy or sell recommendations. >> it's more reflective. >> out to brian in cupertino, the latest news on apple. brian? >> yeah, thanks very much, sue and bob. here's how we've started so far. basically talking about ios 7 the next generation of the apple operating system getting set to launch. frustrated by siri, the voice command, a lot said google's android is better, apple announcing they have made improve mnss to the siri where you can search tweets and wikipedia, search for cnbc, talk into siri, not only bring up the web results but also bring up tweet results, wikipedia. enhanced search with the siri operating system. they're showing off ios 7. a different look, a flat screen type look. we learned that at the developer's conference but they're hammering that point
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right now, guys. if you're looking for numbers, because we like numbers, right? apple saying it is ready to ship its 700 millionth ios apple mobile operating system device. not too bad as the headlines keep crossing we're going to keep bringing them to you first on cnbc. >> that's a big number. that certainly is a big number, brian. thank you very much. apple still down on the trading session right now, folks. last trade was down about 4 bucks. up next, syria, hours before the president speaks a look at which direction this speech will take the country. can syria's chemical weapons ever really be contained? is that really a viable option? michele caruso cabrera is on that part of the case for us. michele? >> [ inaudible ] made the original proposal. is it possible to box up syria's chemical and biological weapons? see what experts say next. [ male announcer] surprise -- you're having triplets.
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>> if you are wondering when the new ios 7 will be available for download, it is september 18th. we have a date. we knew when they announced it back in june, it would be coming out in september, but september 18th is going to be the date. i want to show you video we are bringing you from inside really
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moments ago, looks at the new ios 7, a totally different look for apple. if you have an iphone and know how the apps look and how it is a very flat look meant to be more efficient and that is a screen being basically preptsds by tim fed roggy the head of the ios system at apple. that is a look at the ios 7 available september 18th. itunes radio, guys, if you're buying pandora, pay attention to that. itunes radio going to be integrated into ios 7. keep your eyes on shares of pandora and anything to do with on-line music as well. we are feeding stuff from inside to you. i think the kid calls it drops, but released. trying to be young. back to you. >> you are hip. thanks very much, brian, from apple and siri to syria, president obama addressing the nation tonight, 9:00 on syria.
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at 4:00 this afternoon, the united nations security council will hold a meeting on syria. more on that in just a moment. michele carew sa cabrera is looking into the possibility of collecting syria's chemical weapons. to our chief washington correspondent john harwood. what is the president going to say tonight? >> well, first of all he's rehearsing it right now, tyler, because he's meeting with democratic senators, then with republican senators, to talk about the situation, including that u.n. security council action. everybody's cheered on the diplomatic front because proponents and allies of the administration didn't want to vote for force in syria given public attitudes and harry reid announced they're not going to have to for a couple days at least. >> the senate should give these international discussions time to play out, but not unlimited time. that's why although there's support to move forward, i didn't rush a motion to proceed to this.
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we don't need to prove how quickly we can do this but how well, we can do this. >> why is everybody so relieved not to have to vote on it. look at the numbers in the "wall street journal"/nbc news poll. six out of ten americans say they don't want the united states to strike syria. only a third say they do. one of those who is opposed to it which illustrates the difficulty of getting this through the congress is the senate republican leader mitch mcconnell. >> so i'll be voting against this resolution, a vital national security risk is clearly not at play. there are too many unanswered questions about our long-term strategy in syria including the fact that this proposal is utterly detached from a wider strategy to end the civil war there. >> senator mcconnell has a difficult primary campaign coming up. he's getting attacked from the right, influenced certainly his decision on syria. you've got the senate -- the house republican leader eric cantor and the speaker john boehner siding with the president but nobody is going to have to vote soon because of this diplomatic initiative,
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probably for at least a week or two, tyler. >> john harwood on the north lawn of the white house. how viable is this russian idea floated yesterday to collect the chemical weapons? can they be collected? can they be inventoried and then effectively destroyed? michele caruso cabrera has been asking around as to whether this whole idea is practical at all? >> it's a lovely idea, it's going to be extremely difficult to execute. the idea is for syria to crede control of its chemical weapons, inspectors to catalog and inventory and troops on the ground to control them. whose troops? russia's? ours? the u.n.? nato. there's an ongoing civil war at this time. stop that for weapons inspectors in the middle of this all? this assumes syria would tell the truth. there are grave concerns that they will lie about what they have, where it is, use it as a delay tactic, with the help of russia. now, assume syria does cede control. what do you do with them?
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you can't just blow them up. that could lead to the release of gases. you cannot transport them out of the country due to fears they will contaminate people on route. we have nine destructive facilities from our old chemical weapons because we don't move them state to state never mind putting them on a plane. syria's chemical weapons would have to be destroyed on-site. that is extremely difficult to do. >> a chemical like sarin and nerve agent like that, is not easy to destroy and is not going to be simply burned until you get a temperature of 2500 degrees or something in that range. which is pretty hard with most chemical or most explosive systems. >> all of that being said, tyler, that doesn't mean anything i've just said doesn't mean that this can't be used a as a safe -- face saving way for the president to get out of this. >> gives him an out that certainly he and many of his party and not just in his party would prefer to see.
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michele, thanks. all right. you can watch president obama's speech to the nation tonight at 9:00 p.m. eastern right here on cnbc. meanwhile let's go back to brian sullivan at the apple event in cupertino. >> and tyler, what has been rumored is now true. right now, phil schiller head of the iphone business coming out and saying, they are going to replace the iphone 5 with two new mod the. the only details we have right now and folks, this is happening seconds ago, the iphone 5c not sure what -- cheaper phone, whatever it is, will, indeed, become a reality. the speculation has been a apple will unveil a lower price, less technically savvy, slower components to make the price point come down phone for emerges markets. we do not have a price point on the iphone 5c but this was one of the big expectations out of this meeting, guys, is that apple will make a big push into emerging markets where android because of certain designs, plastic case can offer a lowered
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priced phone. apple is saying google and android we're coming after you in emerging markets. again, apple going to replace the iphone 5 which it calls the most successful first year of any iphone 5 yet with two new devices one will be the 5c for emerging markets. more details as i get them. back to you. >> when you were giving us that news the stock ticked into positive territory. didn't hold on to it long. that's an indication apple is giving traders some of what they want to see. the stock is now down better than -- about two-tenths of a percent but we move into the green and watching apple as that key conference is under way in cupertino. brian is handicapping it all for us and we'll keep watching the stock for you. more "power lunch" in two minute's time.
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. okay. . a triple digit advance in the dow jones industrial average, bob with me here on the floor of the nys, kenny is with me as well. i'm still a mill surprised given the headline risk we have a 103-point advance. >> look what happened this morning. a repeat of yesterday, china, better economic news, industrial production, retail sales were terrific overall, that helped and then we had less syria tensions really matter. it's not surprising here, interest -- excuse mi me cyclical like industrials, financial, technologies on are
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the market leaders and watching what's going on in the emerging markets. people were panicked a month ago asking me about the eem that dropped 25, 30% a month and a half ago and now look it's been up 8, 9 straight sessions. >> kenny, you said something interesting -- okay. hold that thought. brian sullivan back out to you. >> sorry to barge in again, but we're getting the pricing details on that new iphone 5c. the 16 gig model 99 bucks, the 32 gig model is 199 bucks. again those are the subsidized prices. that is not what you're going to pay for the phone by itself. 99 bucks for 16. john fortt tweeting saying this is not a low-end phone. it is made of a poly carbonate material. the phone is a steel basically a metal so this looks like it's going to be pulled back a little bit to compete, perhaps, more on the price points with the android phones which people have criticized for being made of plastic. apple now obviously has to reduce the price of the components otherwise it can't
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reduce the price of the phone and keep its famously solid gross margins. apple shares as you just saw, went into positive territory. 99 for the 16, 199 for the 32. waiting on more details about the other new iphone 5, back to you. >> better margins. >> thank you so much. as brian mentioned we turned positive on apple when the pricing came out on that because the emerging market is where the growth is and apple has been a laggard in that particular area. the street is obviously hoping that perhaps they will be able to participate more fully in that. kenny, before we went out to cupertino you were saying some of the big money is not in this market yet. >> well, they're very patient as you can see, not a whole lot of explosive volume. maybe after the news of terrific the headline risk of syria off the table, things in asia getting better there might have been a little bit more volume and the fact that there isn't the market is moving up. large asset managers are participating because they are investing but yet doesn't feel like they're fully committing
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yet and they're waiting for almost another shoe to drop to see whether or not, what the president says tonight, what this is going to lay out to, the syrian conflict, because this morning you could feel the pressure being lifted off the market. when that news came out this morning, the market took off. >> that turn up in apple want to note a little surprise not doing that plastic model, that higher priced metal model better margins on that too and that's another factor. >> interesting point. okay. back out to brian i believe. and he's got some video i think. >> yes. video a positive thing in the world of television so we will bring you video of the new iphone 5c. here's the important point, the iphone has been famously held up as a more solid device. we are getting confirmation, available in a rainbow of flavors, green, blue, red, yellow and apple's famous white and black. jonathan, head of design, saying this is, quote, unapologetically
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plastic. so apple is, indeed, changing out for that lower priced iphone the metal it was famous for, to plastic will help them compete on costs, $99 for the 16 gig, 199 for the 32 subsidized. the key is what their production costs are, because the analysts and investors you've talked to, we have talked to, want apple -- want a lower priced phone for the eemerging markets but want apple's gross margins to remain steady, lower priced phones with higher priced components will compress that margin. analysts say that's not what they want. apple going the plastic route. here's to you, mrs. robinson, it's about plastics and the iphone 5c, back to you. >> apple says it is beautifully and unapologetically plastic end quote. >> like my hair. >> stop. we'll be back with you in just a second. got to get to the gold market because it was a rough day in gold and prices are closing
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right now and sharon epperson is tracking the action which has been decidedly negative at the nymex for us. >> hi, sue. gold prices down $20, more than that actually at the close here right around 1364 an ounce. we have seen gold prices tumbling ever since we got word that syria had accepted russia's proposal for its chemical weapons and as we await what president obama has to say tonight, gold traders say that this is really an unwinding of the safe haven trade of that risk premium that had been in gold prices. it was significant not only for gold but silver as well and silver is unwinding. those long positions also. we're looking at silver down as much as 3% and at a three-week low nearly for both gold and silver on this session. meanwhile the only positive light here we're seeing in the metals complex is in palladium. it is up on the day. we did get the positive production data out of china and the car exhausts are made out of palladium, something helping
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platinum prices at this hour. >> thank you very much. up town to the nasdaq where see ma has been following the move in apple and other big movers today. >> that's right. we're not only keeping an eye out on apple but its suppliers as well which tend to move when we get a product announcement from apple. qualcom which powers the iphone 5 with its mobile chip, serious logic and avago. other companies that are said to do business with apple, triquant, nuance, sandisk and last but not least sandisk a flash memory maker for the most part trading higher in today's trade. elsewhere, netflix hitting an all-time high, virgin media striking a deal with the company. my con tech hitting a 52-week high. these moves are fueling the nasdaq composite which hit another record high. sue? >> all right. thanks very much, seema. to the interest rate front an
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a-minus on the auction. see what rick santelli sees right now. >> the postmortem you can see we drifted southward on interest rates before that auction. still elevated for the day. afterward the ten-year may say it best, yields popped up a bit hovering at the second highest yield you can see on a close going back to august. the most popular currency trade today dollar yen. look at the chart going back to july 1st because the dollar is now at seven-week highs against the yen. tyler, it's all yours. >> thank you very much, rick. we keep hearing about the comeback in housing and now has a big story about a bubble. yes a bubble in housing. that is just ahead. plus, the apple product event in full swing out in cupertino, california. shares right now down, down, $3.76 at 502 and change. who else stands to gain from
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and welcome back, everybody. i'm brian sullivan at the apple launch in cupertino, california. 30 minutes now into the big presentation and here are the three headlines you need to know so far. we have the iphone 5c, a lower priced phone, 99 and 199 bucks depending on the size subsidized for the lower cost emerging markets. the new iphone 5s. that is the refreshed iphone 5 we know and guess what? not just white and black anymore. they're going the burrell ives route, silver and gold, few more color options. wondering when the new operating system, totally different look will launch, we have date, september 18th. those are the three big things. the big announcements may still be to come and, of course, the apple famous one more thing. will we get that? if you know, let me know i'm here for you guys. >> you're doing a fantastic job,
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brian. the street is not impressed with the latest results because we've dropped now. we're down about 3 bucks on apple's stock. we continue to follow that. that's two-thirds of a percentage point to the downside at 502.83. recap some of the other big headlines. the fda reviewers say trial data on roche's breast cancer treatment supports a faster approval of that drug for use in early stages of the disease. conagra warning first-quarter profits will come in below street forecast due to weak sales at its consumer business, chef boyardee and hunt slauss and slim jim beef jerky. kisco systems paying $450 million to acquire whiptail. ty, up to you. >> everyone loves a list, maybe they love a list more than slim jim beef jerky. a new one on the top ten places to retire. plus, dozen today's apple announcement get you excited about buying the stock? go to and
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how lincoln financial can help you take charge of your future. ♪ well, apple hoping some of these announcements will change the 59% of the people in the poll that said they're staying away from apple stock. here is a look folks at the new apple iphone 5s, previously just white or black, maybe going the henry ford route. now silver and gold. so there is a look at the iphone 5s. looks similar to what we have now. this one is a metal finish. you've got granite, you've got gold and black. there are your new options.
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if you're interested in the guts i think of the a 7 as a nice looking audi, the a7 will be the new looking chip into the iphone s. phil schiller calling it incredibly fast. they were demonstrating games inside. if you're a mobile gamer, if you're interested in mobile video and that's been a huge move right now, apple going after those markets. they want those graphics and those videos to be smooth. this is going to be a very fast chip and some new colors as well. there's your look. the iphone 5s not heard about a price point yet. we did get one for the 5c. a lot of breaking news continues to roll out here on a beautiful day in silicon valley. back to you. >> thank you very much. let's see what's coming up from your friend mandy on "street signs." >> hey there, obviously it's going to be a really big show. we have a big show for you. of course brian, you can see he's on the ground in cupertino going to bring us every apple headline you could possibly want and maybe some you don't want. loads of apple stuff coming up. we've got a big interview with morgan stanley's james gorman,
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he's, of course, a fellow australian and it is going to be an exclusive interview. lots of reasons to tune in. from 2:00 to 3:00 p.m. eastern time on "street signs." back to you on "power lunch." >> we'll see you at 2:00. well it's the list you wait all year for. where to retire. it's the fifth edition of america's best places to retire. it's out. number 10, colorado springs. that's a beautiful part of the world. 9, coachella valley, california. number 8, maryland's eastern shore. number 7, lancaster county, pennsylvania. 6, albuquerque, new mexico. number 5, ocean county, new jersey. number 4, portland, oregon. number 3, nashville. number 2, austin, texas. and drum roll, please. we'll just tell you. phoenix, arizona. the number one spot. the housing market hot once again as you know, but it may not be such a good thing for the average homeowner. is it possible that we're in
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another bubble? on the flip side, the wealthy have money to spend and cashing in on low mortgage rates. robert frank has that part of the story. hi, robert. >> hey. as interest rates rise the rest of the country, the wealthy are actually borrowing more and more. we'll have that coming up after the break. apparently we are coming back this quickly. as interest rates rise the rich are cashing in on mortgages. cnbc's wealth editor who describes himself like an
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iphone, unapologetically plastic, beautifully plastic, is here with the details. robert? >> thanks. more gauge applications are falling for most of america but the wealthy are borrowing big time. new data from realty trac shows 63% of people buying homes in the $1 million to $2 million range actually used a mortgage in july, that's up from 49% a year ago. homes priced $2 million to $5 million saw a bigger jump to 46% from 27% of all people using mortgages. now in the rest of america, different story. mortgage use is falling as rates, of course, are rising and homes become less affordable. why are the wealthy piling into mortgages? well the wealthy want cheap money while it's still cheap. loans are more discretionary financial tool for the wealthy and those that have been sitting on the fence about buying or borrowing are jumping in. jumbo loans are cheaper than many conforming loans. that's usual and it's boosting the high-end housing market. sales in the hamptons, palm beach, aspen, other posh locales
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have seen a huge surge driven by this mortgage boom. tyler, we have to see whether the borrowing and the buying continues the rest of this year. >> very interesting phenomenon. stay with us as we turn now to john careny. you have reported what you think you see as a bubble in the housing market. >> absolutely. what we've seen since january is the national association of realtors measure of affordability has been plummeting. this is a notoriously bad index, because even during the entire housing bubble, it never showed that houses were becoming unaffordable. it said they were less affordable but never breached what the nar says is the affordability level. what it did do and what it's done again, during the last housing bubble, it breached the long-term 20-year trade line. what you see on this chart right here is that we once again have fallen below for three or four months now, the long-term trend line. that's a sign that we may be in
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a housing bubble. home prices are becoming less affordable because interest rates are going up and home prices are going up. and people's incomes are not rising at that kind of level. so that makes homes less affordable. when you get a lot of months of below trend affordability that's a danger. >> does the crossing of that trend line and the fact that the affordability number is coming down, does that tell you that prices must come down or that prices will stop going up? >> what i would say is actually tells us that we could be several years more. remember, we've reached that line, the first time in 2004, p we didn't hit peak prices until 2006. we could be at the very beginning of a bubble. it doesn't mean that prices are going to come down right away, but it could mean that the fed will -- >> the bubble could still inflate. >> the bubble may have a long time to inflate. the fed, they just went through this crisis. this could put pressure on them to say, whoa, maybe we need to raise rates faster than we expected because of what's going
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on in the housing market. >> and rates are going up as you point out. i mean they're going up and that's why the rich are coming in and many other people are coming in to take advantage of relatively lower prices on money while they're still low. >> it's interesting because it's been a damper on the rest of the market. for the wealthy it's actually been an incentive, get now while the getting is good. it's going up. the question is whether you're going to see any of that pent up demand that we're now seeing in the second quarter and rest of the year, a lot of that may be spent and it could be a tough second half for the high end of the market. >> john, so i understand, the affordability index takes into account the level of prices and price of money? >> what the affordability index really does -- >> and incomes. >> what it's measuring can you afford a mortgage on the median sized house. a family of average income that gets an average priced house could they afford the mortgage on that? we're still well above what the nar says is affordable. but again, you have to take that with a little grain of salt. in the height of the housing bubble last time they never said
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that houses were unaffordable but we did breach that long term trend. >> thank you very much. robert, john. sue? >> gentlemen, the latest from apple's big event when we return and is the tech giant making the right move with iradio? cnbc's julia boarston is following that part. >> see apple's itunes radio, first major ad supported service is entering a competitive space but there could be major upside. what it means for apple's and its biggest rifle after the break. .
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welcome back. i'm julia boorstin in los angeles. at apple's big event we're hearing more about ios 7 which
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launches on september 18th and its itunes radio, its first ad supported business. today apple calling itunes radio, quote, the best way to experience new music featuring in its presentation the ability to create stations and search by genre. both of which are very similar to pandora's internet radio service. now apple has the advantage of a built-in audience for its free ad supported radio service. the company announcing today that it's nearing its 700 millionth ios device and there are more than 575 million itunes accounts in use. now apple has already signed big name advertisers including procter & gamble, pepsi and mcdonald's as it goes after a piece of the $15 billion radio ad market but even more important it's looking to grow loyalty to apple devices and also sell music downloads. pandora shares reversed their morning gains, up 3% earlier today and pandora dipped into
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the red as apple discussed itunes radio during its presentation. pandora is the internet radio leader with 72 million users and one of the most downloaded free apps on the iphone and ipad the first real indication we'll see of apple itunes' radio impact on pandora will come when we get pandora's september and october audience metrics. sue? >> thank you very much. more from shahid khan, chairman and co-founder of media and spencer is deputy editor of the "wall street journal." of what you've heard what is the most significant development and are you pleased with what you heard? >> yeah. so according to what i heard the most significant thing is they did confirm they are distributing and marketing the cheaper iphone for emerging markets and come back to something your previous guest said. i do believe the emerging market device is strategic for apple and it could lead to some meaningful earnings growth and revenue growth of sanford berstein estimates $30 billion
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of few revenue could come from this product because the emerging markets are seen in 50% growth of smartphones where developed markets are 15% growth. it doesn't seem like this is wowing people which gets back to what i said before, fewer people are upgrading their smartphones in developed markets because there's almost everyone has a smartphone and don't think there's really a good enough reason to buy a new one. >> absolutely. i have 45 seconds, shahid. the operating system. >> yes. going forward i believe that the battle on the mobile front will not just be a hardware battle. software will be important as well. microsoft acquiring nokia, with google merger, having the deep integration of operating systems and hardware is going to be important. i think ios is very, very significant. that's the new platform on which they will go out and compete with the new emerging platforms that microsoft develops and all the enhancements that google does.
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"power lunch" is back in two. [ tires screech ] ♪ [ male announcer ] 1.21 gigawatts. today, that's easy. ge is revolutionizing power. supercharging turbines with advanced hardware and innovative software. using data predictively to help power entire cities. so the turbines of today... will power us all... into the future.
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♪ a body at rest tends to stay at rest... while a body in motion tends to stay in motion. staying active can actually ease arthritis symptoms. but if you have arthritis, staying active can be difficult. prescription celebrex can help relieve arthritis pain so your body can stay in motion. because just one 200mg celebrex a day can provide 24 hour relief for many with arthritis pain and inflammation. plus, in clinical studies, celebrex is proven to improve daily physical function so moving is easier. celebrex can be taken with or without food. and it's not a narcotic. you and your doctor should balance the benefits with the risks. all prescription nsaids, like celebrex, ibuprofen, naproxen and meloxicam have the same cardiovascular warning. they all may increase the chance of heart attack or stroke, which can lead to death. this chance increases if you have heart disease or risk factors such as high blood pressure or when nsaids are taken for long periods.
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nsaids, like celebrex, increase the chance of serious skin or allergic reactions, or stomach and intestine problems, such as bleeding and ulcers, which can occur without warning and may cause death. patients also taking aspirin and the elderly are at increased risk for stomach bleeding and ulcers. don't take celebrex if you have bleeding in the stomach or intestine, or had an asthma attack, hives, other allergies to aspirin, nsaids or sulfonamides. get help right away if you have swelling of the face or throat, or trouble breathing. tell your doctor your medical history. and find an arthritis treatment for you. visit and ask your doctor about celebrex. for a body in motion. we have a strong market, ty, up 104 points on the dow jones
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industrial average. right now they're buying this market. >> and a changing dow jones industrial average as we've been reporting all day. let's take a look at oil which has been selling off after, of course, several weeks of rises in price. probably the syria premium coming out of oil and gold as well. >> that's right. >> that will do it for this edition of "power lunch." >> "street signs" begins now. >> welcome, everybody, to a special bicostal edition of "street signs." i'm brian sullivan in cupertino, california. outside of apple headquarters. mandy, apple rolling out a bevy of new phones, features, itunes radio, we're getting dates, prices and these are expected to continue all throughout this hour. we might get the next one more thing, who knows, i know it's also a big day tore you in the stock market. >> it absolutely is. in fact we've got triple digit gains for the dow. in fact, also later on in the show we'll have an exclusive interview wi


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