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tv   Street Signs  CNBC  September 10, 2013 2:00pm-3:01pm EDT

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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 with morgan stanley's
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ceo james gorman. we're looking forward to that as well. in the meantime why don't you bring us up to date on what we know so far out of the apple event. >> okay. something that just came out moments ago and again we're getting live feeds from john fortt and bringing it to you on tv and radio and this doesn't look like a big headline folks but it might be. it is called the touch id. moments ago, apple unveiling essentially a touch sensor for your phone. right now you've got a pass code you put in. they're unveiling a touch sensor. biometric fingerprint type scanner for mobile security. you may say who cares about that, just another way to protect your phone. the analyst notes that i read all the way out here and folks i've talked to about it say forget about protecting your photographs and whatever. this could be the start of a mobile payment revolution. because right now there are ways to pay for things on your phone, but people are afraid if their phone is lost, picked up by somebody else they won't have the security to pay so they
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don't engage it. if it is biometric, your fingerprint sensitive analysts say this could be the start of something big or a new mobile payment revolution. keep your eye on apple stock with that news. what else have we heard in the last say 40 minutes or so? we've got the new iphone 5c which is a plastic, not metal case, lower priced phone. really meant to take a shot at android, not just here but in the emerging markets. we have the iphone 5s the new version of the higher end phone, faster processor and available if gold or silver your thing. it's going to have new colors. the iphone 5c will be in red, yellow, green, a bunch of other colors. other stuff we heard so far, improved siri search, right. and, of course, we've got it grated itunes radio. julia talked about pandora. your first look, folks, at this new touch id system. that is a giant finger. i mean when i say a giant fipger that's a finger. whose fingerprint is that? we don't know. the point is this. you put that on your phone and
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that is the new unlock feature if you want it. forget about security. i can't reiterate this enough, mandy. almost every analyst note that i read on the flight out here last night, highlighted this as a potentially big new thing from mobile payments. the credit card industry, maybe doesn't have to be nervous, right, because they might team up with mastercard, visa, discover, somebody else, but if you feel comfortable that your phone, if you lose it, can't be used by somebody else because it's your fingerprint, the odds of you using that phone to pay for goods and services, goes up dramatically. watch this thing, folks. i think to me, this is the biggest thing yet i have heard from apple, my own opinion on that, but there you go. >> so touch id is something that could potentially move the needle. take a quick look at what the stock of apple is up to because exactly one hour ago, when they started this big event over there in cupertino, we saw apple stock was $502 a share.
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now it's down to -- sorry, it's up marginally to $505 a share, but sitting slightly lower beneath the line. let's bring in michael, senior electronic editor at "consumer report." good to have you on the show. the stock hasn't moved that much, just a few bucks here. do you think that with what we've heard so far, the touch id including, is bringing us the wow factor that everybody was clamoring for from this event? >> well, we have to see what it's used in conjunction with. the other piece is if there's support from nearfield communication, the wireless technology that will allow you at the point of sale to bump the phone up against the terminal and complete the sale. the fingerprint reader, the touch id, is the -- probably a very simple way to validate the purchase but you need the connection to complete it. there are other problems with payment. i've been at a lot of meetings with mastercard and other people in the industry and one of the
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challenges is there's so many players that want to get involved in that purchase. do you really want to pay $10 for that $5 latte if everybody gets a little piece of the action. that has to be worked out too. one of the important things, though, that this addresses, is security. iphones are highly coveted. they're stolen regularly. and thieves know how to defeat a lot of the security features. the -- and the phones aren't being stolen -- some of them are being stolen for local use but a lot of them that are, you know, stolen, knocked out of your hands in new york, are on their way to an emerging market that night. so, if anything they can do to take a poison pill approach to make that phone less attractive, you know, in the illegal markets, is a good step. >> mike, hey, mike, it's mike, it's brian sullivan in cupertino at apple headquarters. so much of what i read the new
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phones are nice and going after emerging markets is great but if apple can revolutionize a multihundred billion dollar industry because that's what credit card payments are, if they can revolutionize that and truly create a secure way to make mobile payments so yourself, me, mandy, whoever doesn't have to worry about losing their phone and thus losing their money, right, that some thief can use that to buy something for themselves, this could be a game changer. agree or disagree? >> no. that is important. but one thing to remember, the big obstacle was at the point of sale. mobile payments are growing on phones now anyway. more people are buying things on on their mobile app than they are going to their desk top. that kind of mobile exchange is going on. what's not happening is what was long billed for phones as the mobile app at the store. when you're there and you want to get the coupon discount and pay with your phone. because the main obstacle was, that it was more of a hassle to
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use the phone, all the various systems they've introduced is more complicated than just taking out your credit card and swiping it in the counter. this could change that. i agree with you. this could make that simply better. also, you're right, i think more people will trust having accounts on their phone now that there's a biometric feature. we have to see how well, it works. this isn't the first time we've seen a fingerprint reader on a phone. two years ago android tried it on the motorola. it didn't work very well. you had to swipe your thumb a certain way. i suspect because apple's doing it they've worked out most of the kinks. but this is a very exciting development in mobile technology. >> mike, i want to ask you, because when you were putting out your wish list of all the things you wanted from today' event you did calling on -- polling on your facebook page and one of the things everybody wanted was an immortal battery. >> yes. >> we are getting improvements here. my question is, with this new
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iphone 5s it's going to be super fast, right? >> right. >> won't that drain your battery even faster? >> on the surface, yes, but i've noticed they have support for bluetooth 4.0. a wireless connection that's very efficient. it's on all the new phones. this newer processor which is many times faster also has built within it technologies that allow the phone to be more efficient with its power usage. so that's one of the benefits of the newest processor is not just on the iphone, this is the first 64 bit processor we've seen on a phone. one of the main benefits is not only faster, but they're smarter about using the energy. they don't use everything even for small tasks. so this -- we could see in our tests again, the iphone had only a good battery life. other phones like from samsung and lg had excellent battery life. this could be a big change in that area. >> okay.
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mike, thank you very much. we appreciate your time and insight into the breaking news here and guys, just to recap so far what we've heard, what are we about an hour into this apple event, we've got the iphone 5c, going to be 99 and $199 it depending on the size meant to go after the lower priced market, a shot across google and andro android's bow. it's going to launch september 13th or 20th. the iphone 5s, new colors there. better camera. faster sensors. couple smaller things. siri search. it will search tweets. search for whatever it might be. yell into siri it's going to be a little more clear. some people have been frustrated with siri saying that android's operation is a lot better with the voice search recognition. plus itypunes radio. watch pandora. i can't reiterate mobile payments watch ma, master card, watch visa and discover financial. this could be a new thing for apple. a lot more coming from right behind us here in california.
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>> could be a game changer. the stock over the course of that hour and ten minutes has gained about 2 bucks. still in the red but is gaining as we speak. still ahead, a big shakeup for the dow. alcoa, bank of america and hp out. nike, goldman sachs and visa in. what the changes mean for the market and we ask whether the index is going to be to get an artificial bump. our interview with morgan stanley's james gorman, a lot to talk about including five years after the financial crisis. are we any safer? we will bring you that. do not miss it. [ male announcer ] ah... retirement. sit back, relax, pull out the paper and what? another article that says investors could lose tens of thousands of dollars in hidden fees on their 401(k)s?! seriously? seriously. you don't believe it? search it. "401(k) hidden fees."
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okay. let's take a look at what the markets are up to. globally they are cheering a second day of strong chinese data and the possibility of syria giving up its chemical weapons under a russian proposal. more on that in a seconds. we're seeing money leaving gold and crude as a result. and we also want to see how the dow will look like come september 23rd, right. as we mentioned nike is replacing alcoa, goldman sachs replacing bank of america and visa replacing hewlett-packard. see the wonderful graphics behind me. this is the biggest shakeup of the index that we have seen in a decade. let's get straight down to the trading floors. bob pisani at the nyc and rick santelli in chicago. when you see what they have in common, they're the three cheapest stocks in the dow even with hp's comeback this year. when you have a price weighted index like the dow they didn't cut it anymore. what are the broader
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implications for the market here? because it seems like it's a bit of an artificial bunlp. >> it is. look this is good news for dow jones and the dow jones industrial average. they need to keep freshening the index. they can't have the low priced stocks. they need to change with the times. nike, big consumer name, economy moving more towards consumer, make those kinds of changes. in terms of how it's going to affect the market the answer is not that much. let me show you where the money is, is at the s&p 500. there's not a lot of money indexed to the dow jones industrial average. about $30 billion is indexed to the dow. right now, $1.6 trillion is indexed to the s&p 500. we're talking about orders of magnitudes more in the s&p. so the dow not that important overall for the money but in important of terms of what they need to do to keep the index updated. the rally we've had in september because more important is what's going on. the two factors that have been pushing the s&p and dow up so far, in september, is number one, china data better than
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expected and, of course, syria and the prospects for conflict there moving to the downside. in the last six days we're up. the s&p 500 is up every single day in september. we're up about 3% for the month. the volume has been on the moderate side. i don't want to say it's too light or heavy but a great move up in cyclical names, material stocks, industrial stocks and technology stocks. weak has been energy stocks, not surprising since we've seen oil move to the downside in the last few days and some interest rate sensitive stocks like utilities. i'll take a rally in cyclicals any day because that helps indicate the global economy is getting a little better. >> we are flying in the face of history here and seasonality as well, bob, right. so much for september being a bad month for stocks. rick santelli, we have yields moving up and feels like they're moving higher on optimism, ie, for the right reasons? >> well, i would think that, you know, putting aside accuracy of
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things like chinese numbers the answer would be yes, yields are moving up. the only thing optimism best fits what's going on in syria and any of you history bufs out there, i just hope when you deal with a des pit like assad we're not looking at a nerval chamber lin movement when he gets off the airplane. will he keep his word is a big deal but the markets are being optimistic about that today. >> rick santelli, thank you very much, sir, as always. for more on the new face of the dow bring in matt mccormick, vice president of portfolio manager. great to see you here today. the index committee at the dow said that they wanted to diversify the sector representation. do you feel that the dow come september 23rd is better now? >> i -- i question their logic, mandy. if you look at specifically within the financials there will be five names and i would argue that visa is a quasi financial. it's technically an information technology sector within the s&p
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500 but many people view it as a financial and i think when you look at it as an equal weighted index with the dow that's almost 20%. so i get the idea of switching goldman sacks for bac. i kind of understand nike for alcoa to try to make it more consumer versus industrial but i would question the logic of hewlett-packard and maybe not put something like apple. i thought apple would be a fair representation as a one to one switch as opposed to visa. >> rather have added apple instead. i would like to know if index reshor reshuffling is a reason to buy the stock. they're putting visa in. maybe i should buy it. is that a bad argument. >> for short term traders, they'll use any opportunity to trade, mandy, and this would be one of them. long term, they're going to change into visors so even though the committee changed the quality higher, made the prices higher, and made it less industrial, the devicer change
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will be kind of smoothed out. there's not going to be a material impact on the average as a whole. it's a short-term trade if at best. >> do we pay any attention to the curse of the dow? >> i think it's something that's relevant when you look at some of these companies when you see people moving in and out of them, the fundamentals of these companies have not changed from yesterday. all you're seeing is they're included in a different index and something when you look at the reshuffling of the will shire or russell or any other indices it happens with these companies, operate on day to day and something short term you can see pain in some of the names but long term there's still some opportunities with them that i think people should take a look at. >> okay. matt mccormick, thank you for joining us today. brian, back over to you, sir. >> yeah. i want to give an update here. we've been quiet a few minutes which for me is highly unusual but the word is elvis costello, the singer, is on stage playing a song. we don't know if it's the end of the event or do something after elvis costello gets off the stage. but guess what? here's what we know so far.
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iphone 5c, the new lower placed plastic rim version for emerging markets and for here as well. iphone 5s that's going to be highlighted with new speed, camera capabilities, improved siri, ios 7 will launch september 18th. the new operating system. itunes radio, here's the one thing we have not heard which every single analyst say is important is china mobile. china mobile not only the biggest mobile company in china, the biggest in the world by far. they have 740 million subscribers, more than double the entire population of the united states. right now apple has deals with china unicom and telecom which are big players. some people expected a big china mobile announcement. we have not heard that. but before you go away all disappointed, two things. a, we could still get it or something else, watch, tv, spaceship, who knows. but apple is doing something, mandy, it has never done before.
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later tonight our time, really tomorrow in china, it has a huge event in beijing. they've got back-to-back events. one here, one in beijing. if we don't get china mobile today, it doesn't mean it's not coming. it could happen at the china' vent in a few hours time in china tomorrow. >> absolutely. i think that's a really important point to make and it could be huge news they don't really want to steal the thunder from by announcing it today in the united states. by the way, very quickly, why don't we take a look at apple's stock. it was 502 at 1:00 when the event started. it is now down to 498. we've lost steam and moved further into the red. potential progress in averting a strike in syria is important. later on our exclusive interview with morgan stanley's ceo james gorman. do stay with us. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪
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welcome back. i'm seema mody. wall street keeping an eye out on apple suppliers which tend to move when we get an announcement from apple. new products could mean more business for these players. qualcomm which specializes in mobile chips, cirrus logic, avaggo and lago are said to have
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their chips in older versions of the i fon and triquant, nuanced communications known for its voice technology siri, sandisk, flash memory maker boosted its guidance on the move, and my con tech closed its ac questiontition of al pe da, a company set to deal with apple. back to you. >> okay. seema mody, thank you very much for that. part of the reason why stocks are rallying today, were that president obama has okayed a russian proposal to secure syria's chemical weapons. the u.n. will meet in just a couple of hours, but the president still plans on speaking to the nation tonight. john harwood is monitoring the fast-moving situation closely. it looks like key senators are working on a resolution. are we going to get there? >> well, we're not going to get there immediately because they're not going to vote. the president is meeting with republican senators. earlier he met with democrats and it's a pretty good bet what
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he's doing is previewing the message he's going to give the nation tonight in the wake of the turn away from the immediate possibility of military force toward the possibility not a reality yet, of a diplomatic solution. here's harry reid after that meeting with democratic senators. >> the president's credible threat of military action has opened up the possibility that this goal can be achieved through diplomatic means. instead of military means. but overlying all of this, if we're going to have any success diplomatically in the future, on this issue, we have to make sure that the credible threat of military action remains. >> so i think the bottom line, mandy, is that the president is going to be asking the congress or the american people to stand with him if not in votes with the idea of military force, to at least keep their minds open to it, and i think the right way to think of how the administration's reacting to the
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syria/russia proposal is not that they've accepted it per se, they're willing to test it and explore it and that's probably going to take a kwup couple weeks. >> thanks for the update. our viewers can watch it all tonight cnbc will be carrying the president's address to the nation at 9:00 p.m. with a special report hosted by our own carl quintanilla. still ahead, a fast food fight, which restaurant stock is worth digging into and much, much more from the apple event. of course brian sullivan, my other half is out there, he's in cupertino, we'll debrief john fortt and stan monster on deck. do stick around for all the apple news.
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welcome back, everybody. brian sullivan at apple headquarters where the apple event has wrapped up.
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elvis costello playing a couple songs. our man inside hopefully you've been following his tweets, john fortt you ran out here, very impressive by the way, great job inside. couple things before we get into your impressions about what you heard and think i want to ask you something we learned, $549 for the unlock, no subsidized contract iphone 5c most of the notes i read they wanted something more in the 350, $400 range to compete. 549, is that too expensive to make a dent as a quote/unquote cheaper phone? >> it's not cheaper. so i think that's the big headline. >> and look at the stock, by the way. sorry to interrupt. once we started to get details on the 549 price point f you're thinking i don't want a contract phone, that's not going to be viable for you if you're 18, 19 years old. >> what apple has done is taken the two phones that are most expensive and instead of giving you a year old phone at 99
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bucks, subsidized they're giving you a newer phone in a plastic case with some more features. it's different from what a number of people were hoping they would do as far as attacking emerging markets with a cheaper phone. the 4s is still in there, keeping that around. that is the emerging markets play. it's not just the 4, but this is a disappointment for people hoping for expanded emerging markets. >> couple things here. right now the takeaway that i'm going to gain from what we've heard has been apple maybe screws up on price? >> it depends. if you like margins the margins on the 5c will be nice. >> but to get a big margin you have to sell the phone. not going to gain any gross margin if nobody buys it. the 5c. that is supposed to be the cheaper version. here's the caveat as we hey lighted when inside. tonight, our time, tomorrow in china, we're going to get a huge rollout in beijing from apple. it is expected they will launch
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a deal with kind na mobile. is it possible we could get a different pricing strategy in the emerging markets that you referred to which are hugely important, right, versus what we charge here, or do you think they necessarily have to be in equivalent currency converted price? >> it's going to be closely watched presentation now, brian, for exactly that reason. because apple announced docomo in japan. which is a big deal. it's a highly penetrated market for them. it's an important carrier there. they didn't announce china mobile is that because they want to give china mobile the pop in china unlike nttdocomo or not have the phone to attack that market. the 5c is an lte phone. china mobile would probably want something more 3g. anticipate not sure they have the phone. a different phone to attack that market unless they make a different product announcement and that would be very strange for apple. >> and the market is gigantic. you don't realize that china
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mobile's 740 million subscribers of which about 180 million use a 3g network. they are advanced networks. they don't need the 2 g super low end emerging phone. apple according to most of what i read has about a 7% to 8% market phone in china. it's tiny. we have to see if they come out with a lower priced phone in china. look at that stock price reaction, 549 you heard john fortt say it and seeing it on twitter and stock, a lot of people disappointed that, quote, lower priced phone is not lower priced. >> absolutely. sitting there at 491 as you say. remember back in september of last year when it hit the record high at about $705. we've come down quite a lot. by the way, just quickly, brian, when you say that china mobile has 745 million subscribers do you know what that is in terms of the world? that is 11% of the world's wireless subscribers. if apple could get that, that is huge. anyway, we'll get back to apple in just a second. we have breaking news now on the
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crisis in syria. let's get to john harwood out at the white house. >> we've gotten word that syrian foreign minister has said two things that are significant or potentially significant. one, is that syria is prepared to acknowledge the existence of its chemical weapons arsenal which is known by everyone but never officially acknowledge by the government. it's the first step toward some of the diplomatic moves we've been talking about. second, they're willing to sign the chemical weapons convention. syria one of the few countries around the world that did not sign that convention which was part of what the president said was the international red line ta was drawn against the use of chemical weapons. this is an attempt by the syrian government to get ahead of the president's speech to the country. it's possible what they're trying to do is make these as gestures of good faith that would obscure some of the other more difficult steps about transferring control of their chemical weapons. everybody will have to watch again. there's skepticism on all sides,
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democrats, republicans, the hill and white house about the sincerity of the syrias/russian proposal but this is their attempt to make the beginning of a half step toward saying yes, we're going to participate with this proposal that secretary kerry and the russians talked about. >> hopefully a positive development. john harwood, thank you very much for the latest on that. also coming up next, our exclusive interview with morgan stanley ceo james gorman. do not change the channel. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
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all right. welcome back. i'm brian sullivan outside of apple hq. forget journalists like myself, bring in gene monster coming out of the meeting as well. your analyst take, your reaction to what you heard inside? >> well, it was a lot of the expected, the 5s and 5c. i think the big question was how they're going to really address the emerging markets here. and they keeping the 4s around, a little bit of a surprise for us. i wouldn't be surprised if they actually keep the 4 around. they didn't even talk about that. i think they'll keep the 4 around for the true emerging markets and separately as china mobile will be coming tomorrow i would say there's a -- >> you believe china mobile will
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come at the beijing event. >> i would say 99% chance of that happening. >> we saw -- guys, bring up an interday chart of apple. i want to highlight a point here. if you're listening on the radio the stock tanked as they announced the pricing for the unlock, which was theoretically designed to go after the lower priced market because it's made of plastic. look at what the stock has done, down 2.5%. the market is disappointed with that pricing. are you? >> it's disappointing in terms of total units in terms of what that opportunity is. the positive side here is that it's going to be better for margins because they're not doing the pricing pressure they had talked about. i wouldn't be surprised if apple goes after really branding themselves in some of these emerging markets being aggressive in terms of marketing it. china mobile is a huge opportunity and that's going to be a positive. >> gene, i want your take, it strikes me as a gutsy move, everybody was expecting them to do demand expansion, addressable market expansion by going lower priced. but they seemed to have said,
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we're going to do colors, we think the product, the colors, at 99 bucks are going to get more of the people who are going to other platforms to come to apple. >> it's a bold move. they're basically saying they don't need price at this point to really drive demand and obviously getting a big carry like china mobile will be a huge factor in that. >> but hasn't google and android completely disavowed that theory? that the average price for a samsung smartphone as i read it is $269 and we've seen what they've done in market share. does apple care about that? maybe they don't care. >> they do care but keep in mind if you look at dolkomo and china mobile, that's 800 million, there's some really big markets, opportunities that apple wasn't playing in and them be tomorrow. >> i wonder what you think about the impact of having a $99 phone on contract that's not a year old, that's new, and that has these colors? how much should we expect that to play into the buyer's mind as far as that being something they want to have, something they can
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show off and be excited about versus i have last year's phone? >> i think it's going to be a driver and ultimately i think this phone will do exceptionally well. >> send it back to mandy. do you change your rating or price point on what you heard today? >> no. we're still at a 630 price target still on board. >> bullish but no change up in the target on what you heard. >> thank you. >> great job as always. mandy, back to you. >> thank very much. coming up next, our exclusive interview with morgan stanley ceo james gorman. (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine.
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all eyes have been on apple shares of morgan stanley have been hitting a 2.5 year high today. let's get to mary thompson for her interview with the firm's ceo james gorman. mary, over to you. >> thank you so much, mandy. as you mentioned we're speaking with morgan stanley ceo james gorman. thanks for joining us. as mandy was saying the stock at a two and a half year high, middle of the third quarter, a little weak on the trading side probably but you have been part and parcel or your firm of the verizon vodafone deal, did a deal? japan, is the quarter we see an investment out a breakout in investment breaking?
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>> i don't know about a breakout. thank you for commenting on the stock. great to have you here. listen, the tone, the sentiment is changing. when you see the verizon deal, you see the financing that's supporting that, you look at where rates are at the moment, it's not surprising. corporate ceos are getting ready for action. >> what are they telling you? >> i think those who have a strategic plan and have been waiting for enough uncertainty to leave the marketplace to act on that are getting ready to act. when you can finance to support that strategic plan my advice is go for it. let's not wait for the plus or minus 15%. >> "the wall street journal" did a front page article on the transformation of morgan stanley since the financial crisis today and ended with what some might consider a cutting remark about the former white shoe investment bank now another retail brokerage. what did you feel when you read that? >> i didn't get to the end of the article.
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it's a wonderful thing with no disrespect to the media when you can take one person's point of view and hold it out as reflecting whatever. i remember when one of our competitors had an employee write an op-ed piece being very critically of them. i said publicly i thought it was ridiculous. one person's opinion is just one person's opinion. at morgan stanley we have transformed the institution but the basis of that transformation is not just the wealth management build out by the resurgence of our securities business and you look at where we are with our equities business, number 102 in the world, investment banking in the world, 102, equity capital markets, 102 in the world, tremendous strength across the franchise. >> you would bet basically i think to a good part your own legacy i guess too early to call it that, but the brokerage business is obviously an important part of that. one of the areas where you have to basically improve is the lending to your clients because you're now one of the basically the tenth largest bank with the
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deposits now that jv has completed from citi. how do you plan on increasing that? >> first, we have made a huge bet on the brokerage business and the ashes of the crisis we went to citigroup to enter into a deal over a period of time to buy the basis of smith barney, the balance of it, and we were fortunate to complete that a couple months ago. that gives us enormous balllast, stability, resilience of earnings and supports our institutional side. as you said it also comes with $130 billion of deposits which makes us the tenth largest bank in the country. we'll be building both the consumer lending pieces which are tied to our clients' accounts, where we have very good exposure to the credit position, as well as the corporate lending to support our institutional clients. >> 13% of your clients right now actually lend or borrow from you. where's the goal let's say in the next year. >>? >> how high to you want that
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percentage? >> not so much focused on the percentage. more focused on the quality of the loans. you look at our housing residential mortgage business, our average fico score is over 750, this is very high-quality premium lending. that's the business we should be in. >> i want to go back to the financial crisis. >> don't. >> it's the water cooler topic since we're at the five-year anniversary. former citi ceo was on our air today saying that financial regulation risks making the u.s. financial system ineffective. how has it hurt your competitiveness? >> i think you to put it in the context of the financial crisis. it didn't just come out of the blue. it came as a response to the most significant shock to our financial system since the great depression. the fact that we've had a host of regulations, some of which i think have been very powerful and some of which have not been, and, you know, can go into the details of those, but the fact that we've had that kind of response is not surprising. it was necessary.
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the banks didn't have enough liquidity, they didn't have enough capital and their leverage was too high. that's been changed an and for the better. the banking system in this country is much healthier than it might otherwise have been? >> i want to follow up on that in a moment. do you think morgan stanley would be better off if glass steagall hadn't been repealed? >> i don't think it would make a lot of difference. we were never a merge commercial and investment banking entity unlike the other institutions and even if we were better off i'm not a fan of repealing glass steagall. if you look at the institutions that got into trouble in the financial crisis almost to an institution they were single business model institutions whether it's countrywide, or whether it was lehman brothers or bear stearns, it was not the congom rate commercial blanking. the argument that glass steagall causes i have no dog in that fight but it doesn't hold up.
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>> you said in a recent interview, that there is a very small chance we could see another financial crisis in our lifetime. that's a pretty bold statement. but what about the risks that might be being offset into the shadow banking system right now and how do you manage your company company to avoid being impacted by any risks that exist there? >> happily what i said was, there is nearly zero chance of seeing a financial crisis like the one we just had. i truly believe that. if you look again at the amount of capital that is in the banking sector, the change in liquidity on their balance sheet and leverage of these institutions, take morgan stanley. taken our liquidity from $80 billion to $200 billion. and we've taken our leverage from 35 times to 12. these are a once in a lifetime set of changes. there will be other shocks in the financial system, including in the shadow financial sector, i guess we call it, which can't be predicted at this point.
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there will clearly be shocks, but of the kind of nature we saw, i truly believe the u.s. financial system is in dramatically better shape than it's been in a long time. >> one impact that people see is the affect of the emerging markets. how are you positioning your bank toen had this will? you have exposure there. >> you stay within your limits and manage your exposures and hedge them. i'm not particularly concerned about any emerging market exposure we have anywhere in the world. we had a risk committee meeting this morning and we reviewed it and we're comfortable with it. you have to look at the emerging markets. it's not just monetary policy. brazil is very different from china. very different from russia. very different from india and so on down to the smaller emerging mark pets. >> i have to ask you one question. last month we saw the freeze flash at the nasdaq. no firm other than facebook was as impacted by the tech problems at the nasdaq during the facebook ipo than morgan stanley, what was your reaction
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when you heard about the freeze flash and do you have confidence in the management of the change. >> i had no reaction to the freeze flash. what i reacted to was the performance of facebook. and i have to say this. i said on cnbc a little over a year ago that we should all be a little patient and let's see how this plays out after the mess at the opening. 12 months later i thought we'd see the true story. it's 15 months, facebook is up 15% since the offering and i think all credit to their management, to the great company that it is. it deserved that credit and it's getting it. >> one more question. i have to ask you, what are your thoughts about a federal reserve led by larry summers? >> i don't comment on individuals on the federal reserve or any other institution. i care about morgan stanley. we work with the regulators and we'll continue to do so. >> james gorman, thank you as always for joining us. let's go to breaking news on the verizon bond deal. >> the order book for the verizon bond deal which is set to be the biggest deal in the
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u.s. corporate bond market is set to close in just about ten minutes, i'm told the orders are approaching $100 billion. and that verizon is expected to upsize the bond deal to roughly 30 billion today's $40 billion, though management has yet to make a decision on that front. market sources have been told the deal will be upsized meaning it is not only the biggest bond deal but it could be a multiple of what apple did in april at $17 billion. i'm told there's the most demand for the ten-year and 30-year tranches of these bonds. that order book, mandy, closes at 3:00 p.m. and it's approaching $100 billion. back to you. >> okay. thanks very much for that. still ahead, we'll be heading out to apple hq to wrap up the day's big event. don't go away.
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welcome back, everybody. i want to bring up this tweet that was apparently sent out by nokia. imitation is the best form of flattery. it has an array of its own beautiful phones shining in the sunshine with none other than colored casing on the back. which i guess is what the imitation is referring to. because there you go. we can show you some pictures there of what apple is bringing out. which color would you choose out of new colors that have come out from apple? >> you know, they weren't the only one, mandy. i also noted on the twitterverse that motorola mobility was
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promoting tweets and the iphone stream. this is how we fight now. used to be cage matches, swords, axes, game of thrones type stuff. that's where it really mattered. we're sort of offending each other on twitter. that's the new world we live in, still is kind of funny, john, to see these guys going after each other. stealing thunder. >> keeping it real. is nokia trying to say they invented multicolor electronics? come on. right? imac, ipods. yes, i mean, multiple colors. that's sort of something, the swirling around imacs, ipod, something we saw apple do before nokia was really thinking about that. i think apple and their legion of fans on twitter have some ammo to come back at them if they want to. it will be a twitter war. >> absolutely. twitter war instead of media war. >> mandy, i know we have a delay here. just yell at each other remotely. >> just like at home. >> just like at home. that's fine. mandy, what's your take on -- on what you heard today by the way?
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>> you know, we've heard a lot of things today. i know everyone of course was expecting a wow factor to be able to bring the stock back up. the stock has been recovering somewhat from its june low. i think it was 30% from the june low. i don't have the exact figures in front of me. what's interesting, brian, we're sitting at 495. what were we sitting at when we started the big event at 1:00 p.m., $502. it feels like there's quite a bit of disappointment. i know you have your theories, whether it's the price or something else. i'm sure you've been talking to some people coming out of the event. what's the general feeling on what we saw and whether or not the innovation is there to be able to propel the stock forward? >> well, also, mandy, to top that, we're a long way from 705.07 which is the all-time high for apple shares. we're 200 bucks off that. price point is an issue here. we didn't get the wow factor. you and i spoke before the show. a couple things to remember. number one, you have the china
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event tonight, tomorrow in beijing, something wow could come out of that. maybe they're playing to the china market. you should we should expect another apple event maybe mid-october, early november? >> mid-october they'll have an event about ipad, maybe some other things as well. i would note the m7 chip, the motion detecting chip that they mentioned for the iphone 5s would be perfect in a watch. you have to wait to see when these things go on sale. >> i'm surprised we're not getting more mobile payment type reaction there. >> guys. >> yes. i love coming out west. it's hot. my fair irish skin is burning for me. that's all they got for me. >> that's all they got? apparently there was a tweet the "c" stands for cheap and the "s"
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stands for same. ouch. that's one person's eactireacti. >> that's bad. >> fantastic out there. great job, guys. thanks for watching "street signs," everybody. 114 points to the upside is what we're seeing on the dow. "closing bell" is next. hi, everybody, we enter the final stretch. welcome to the "closing bell," i'm maria bartiromo with the new york stock exchange. make peace not war is the clear message. >> certainly ahead of the president's speech tonight, possibly the russian's suggestion getting more traction. yesterday was 140 to the plus side, today we're up triple digits one again. >> we approach the final hour, plus, big interviews coming up, rudy giuliani is with us. henry mcveigh, legendary


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