Good friday morning. Welcome to squawk alley. Carl quintanilla with jon fortt at post nine of the New York Stock Exchange morgan has the morning off were going to start this morning with apple, with the companys latest slate of iphones hitting shelves this morning. Josh lipton is at the apple store in San Francisco where i think theyre just opening, right, josh . Reporter thats correct, carl were here at one of Apples Stores in San Francisco. Doors are just opening i will step out of the way so you can check it out three new iphones officially hitting shelves today, carl. Faster processor, longer lasting battery, better camera, the toughest glass in a smart phone, not just an iphone, but smart phone, period, according to the company. The big question for our audience, traders, investors, business people, did apple do enough to keep the iphone franchise stable over the next few quarters i checked in with mike olson he bets apple has done just that he is looking for iphone revenue to be basically flat to slightly down over the next fiscal year as we wait for the expected 5g iphone in 2020 of course, it is not just the new iphone, the new watch hits shelves too, starting at 399. The big feature everybody is talking about, always on display. You can check the time always without having to tilt the wrist. They took the series 3 down to 199 jim cramer thinks thats going to explode the watch in his words, meaning attract more fans we wearables are a bright spot to date they sold an estimated 80 million watches. Guys, back to you. Josh, thanks. Meantime, apple ceo tim cook is out in california made an appearance at the fifth avenue store in new york city. Ra hell solomon is there reporter normally we would see tim cook on the west coast for the first day of sales this morning we saw him here, arrived at 7 30, the fifth avenue store, major location for the company. Arrived at 7 30 to about 300 customers, adoring fans, applauding, cheering, giving him high fives, taking selfies with him. Once the doors open at 8 00, high fives continued, cheers continued, a big celebration here the first person that got here in line, 1 00 yesterday afternoon. He tells me that he wanted to get the 11 promax. Some tell me they slept here, others stayed awake all night. A lot of tired folks this morning. Gone perhaps are days when people waited for days to get their hands on the first iphones. We know now iphone, apple has streamlined this process you can preorder the phone, have it shipped, arrive same day it is available in stores, preorder and physically pick it up from a store. Apple says the lines and crowds out here should not be indicative of demand for new merchandise. That said, speaking of time slots, guys, this is the only 24 hour apple location. It is open 365 days a year but it has been closed since january, 2017 for major renovations, not quite three years. They have since doubled the size of the sales floor you can now go to the genius bar at any hour of the day, buy new merchandise any hour of the day. This is an important location for them when the store opened in 2006, steve jobs opened the door, celebrated, welcomed the first folks inside the store now since then, since that opening in 2006 that same pr rep tells me theyve seen 57 million visitors in the store. More annually than the statue of liberty, than the empire state building, and Madison Square garden tim cook here again on the east coast, celebrating, welcoming the first customers in the store. Usually we see him on the west coast. A big day for the company. Back to you. Ill take it. Apples iphone franchise has been under pressure in recent quarters, posting slowing sales. Bring in Wolf Research managing director steve mal on vich happy friday good to see you. Good to see you we can watch the lines we want, but we need to know about preorder trends in general some colleagues argue this one is good at least on the 11 what do you think . I think it is a good iteration. Youre not going to see a huge amount of innovation, the camera is important particularly to millennials. Were looking for a slight decline in apple iphone revenue the next 12 months that means growth comes from services and wearables i think theyve done a nice job. Dont hear too much bickering about the product this year, the pricing, they were more aggressive on pricing, starting to regain share in china again i think theyre in relatively good shape, set up for a stronger cycle with 5g a year from now a bit of a circus in midtown as pictures show reuters has images from beijing, shanghai locations where they argue we havent seen people cue up like prior cycles how much does that matter . I am not sure how much not lining up matters, it may indicate that some ultra die hard fans, but there are other ways to buy it im not sure china is a big question for apple, for this model. There have been not only trade pressures but the iphone may be less attractive over time in the Chinese Market thats otherwise based on android that does well there. And a lot of cheaper android phones, huawei and samsung do well there it is a question to me personally, i like the new models i think it was very smart to go with focusing mostly in the improvements of the camera, and theyre really good improvements, it is an amazing camera i bought every iphone comfortable the last several years, i think maybe all of them, and i will get this one too, i need that better camera steve, you have a 220 price target, your friend does on apple. Apple trading above that today i might argue this cycle china is the only market that really matters because theyre rolling out 5g pretty early. A lot of chinese manufacturers have 5g phones apple does not have a 5g iphone. How much do you think that matters . Well, first of all, carl, the valuation, the stocks now at market multiple which is fair. Theyve shown they can continue services, growth, maybe that will improve, it is near fair value. Regarding china and 5g, i think it is overplayed at this point 5g even next year wont give that much incremental capability in the phone networks are faster. The real benefit is beyond phones, internet and things. Nevertheless, it is a big deal next year from a marketing standpoint carriers will push it in a big way. In china, maybe apple is behind relative to huawei earlier in the year, apple is losing share in china, reduced prices, have new phones out. They have been regaining share in china huawei has problems generally speaking outside china at this point. I feel like apples market share around the world and perhaps in china as well is in fairly good shape. Were used to dissecting phone cycles bit by bit, but increasingly were having conversations about howary going to act as a programmer of content and as a purchaser of content. You must have some hot takes on whether or not theyre truly ready to surpass hollywood i mean, we will see the quality of the shows on this i thought it was smart to have the lower price intro for the services for the Video Service the videogame service looks interesting. Theyre on a good plan with services i dont think it is a great measure of innovation of the company to spend money on tv shows when everyone else is doing that maybe theres not a lot of appley stuff to do. I think it is a little sad to me theyre not working on some great new hardware, but it has been awhile since we have seen it instead we get these shows but everyone loves watching tv so it is fine. Steve, im a little worried about ios 13, reported by many reviewers to be a bit buggy. I would argue apple needs a strong year for ios 13, more than it needs a strong year for the iphone because they need people to stay loyal and stay up to date to make all the accessories and features and Services Work the way theyre supposed to. How closely are you watching the uptake on that this week and next week as the update to 13 is supposed to be coming out. It is important that ios 13 not be buggy or be fixed quickly. I am confident theyll be able to do that theyve talked about the percentage of the base that moved up to the new operating system and contrasted that with android which has been forked over years, people are all over the place on android if they have a major faux pas, that could be a problem. Two problems are growth of the installed base and retention rates, it is still 85, 90 for retention. I dont think that changes as long as that doesnt change, gives them opportunity to monetize otherwise such as streaming video that you just referred to. Finally, we raised this point before in the old days, selling prices were higher, bulls argued thats great per share. Now as average prices top off, thats great for unit volume do you feel strongly either way . I mean, i think that the volume is kind of set now. People decide whether to get these phones not based on new features, it is based on install base and when youre ready features will always be incremental, and prices, theyre changing the prices slightly from year to year, but theyve settled on this new cadence, two more expensive ones and cheaper one. It is a good mix cheaper one is cheaper this year there were years of adjustment and theyre hitting a right strategy on that well see how orders come in, how reception is over the weekend. Steve, good to see you farhad who writes about the world, but like to think of him as a tech columnist from new york times. Coming up, grub hub, uber, and other big take big take aways from delivering alpha. Top opportunities in tech next. And first, shares of roku, some investors turning it off on the back of a downgrade at pivotal. On pace for the worst week and ckn montceerdemb ba ia me at fidelity, we believe your money should always be working harder. Thats why your cash automatically goes into a Money Market Fund when you open a new account. Just another reminder of the value youll find at fidelity. Open an account today. Of the value youll find at fidelity. The amount of Student Loan Debt i have im embarrassed to even say i felt like i was going to spend my whole adult life paying this off thanks to sofi, i can see the light at the end of the tunnel as of 12pm today, i am debt free not owing anyone anything is the best feeling in the world, i cannot stop smiling about it from recession fears to yes, i am ipos, leslie picker joins us. Throughout delivering alpha, a big theme was whether the Public Markets and ipo process specifically is working the way it should. If a direct listing is providing the same kind of fair information, fair access to the market as your more traditional, underwritten ipo, who are we to judge whether one is better than the other, as long as the investors have fair access to information. We think that the ipo happens in the private market now, and the public ipo is really just a second bite of the apple a little later youve got this new liquidity there, and they are filling the coffers with capital, they dont need capital in the public ipo. The exception of the ipo market, theres a quasi bubble, i think the equity market is okay cooperman said other than the ipo market, doesnt see much euphoria out there apollo cofounder had similar comments, saying aside from faang, five of the top tech stocks, the market he believes is fairly valued, said there are ample opportunities for buyouts. They addressed the same idea, scott cooper, whether temperatures are waiting too long to go public. Cooper said companies are now used to going public a decade after they were founded. He believes that trend will continue also making tech headlines yesterday, jim chanos revealing a change in grub hub seems like softbank took this stay private longer trend to a different level. I wonder if that changes if softbank narrative changes, what were seeing with wework and uber, et cetera. Will companies have to go public sooner again you bring up a good point were starting to see the beginning of having conversations about silicon valley, exsoftbank. This is a trend exsoftbank. I wonder if this is a similar trend, Companies Staying Private for longer, including softbank or exsoftbank is an important question to be asking, and whether or not that changes. Theyre currently raising a Second Vision Fund perhaps we will see that trend continue over time, despite what we might see with wework and the likes. And coopermanmade a splash with threats from warren and the stock market did that supersede Capital Markets or was politics first . Politics was more front and center than recent years only because you have so many candidates that have come out with policies or plans that are relevant to the Financial Markets and relevant to these heavy hitters on stage as you mentioned, cooperman talked about Elizabeth Warren and the potential her election could send the stock market lower. I spoke with josh harris what it means for the private equity business warren has come out with a plan, stop wall street looting act, which essentially means private equity firms and companies they acquire have to usurp liabilities for debt and pension obligations of those companies i said what would this mean for your business. He essentially said his Business Needs to do a better job of communicating their value to washington so Something Like that doesnt take place. We heard from cooperman was there diversity of opinions about impact of big tech on investing ecosystem . Some feel like theres an allagopoly some feel theyre competing with each other, let them go. There certainly was i was surprised to hear, although he is a big tech investigator, glen said he doesnt believe the crime meets the punishment discussed in terms of regulation now in the industry, and he thinks that they need to take a step back, make sure theyre not overregulating and punishing these companies for doing things that may not have really fit the crime as he called it. Finally, things that maybe didnt get discussed this year as years past. Good question. Little discussion of cyber risk, security, things like that and crypto. Heard a lot about crypto the last couple years. I think andrew asked jay clayton one question on crypto, other than that, didnt hear about bitcoin, crypto. People seem measured talking about big mac row things trade war was a big theme through the day yesterday. Leslie, were getting breaking news from the fed were going to Steve Liesman thanks very much. Two stories breaking first of all, new york fed announcing it will hold daily 75 billion repo operations through at least october 10th as a result of whats been happening in the overnight lending market, some disruption there. The fed moving in, going to regulate through october 10th. It will also offer at least three next week, 14 day repos, instead of supplying money overnight, it will extend out the term effort by the Federal Reserve to get ahead of this by new york fed and get on top of those, 30 billion operation. One of the dissenters, coming out with additional comments about dissent. He says first of all it is unusual for the fed to be so easy with the economy quite so robust looking for 2 growth, getting it says the expansion will continue so far trade is a risk, but impact has been limited. Lower inflation appears to be temporary, it has been up the past several months he points out. This is the concern, that low rates encourage excessive risk taking, too much easing causes risk of financial stability. High leverage can make recession more severe. He is concerned about the commercial real estate market. It has always been a concern he says commercial real estate losses may be larger in the next downturn he details one area called coworking space models. Says it creates potential financial risk coworking space models. He doesnt name it, wework is the coworking model space, doesnt name wework. Says short term leases to small unless mature firms that go out of business quickly, landlords, banks potentially at risk from coworking model in downturn banks that own loans, landlords hit with empty space cities, he doesnt name them, boston is a big one, new york another. Coworking firms may face greater defaults to be clear, doesnt see the current level causing a downturn, is worried about leverage in the system here, specifically from coworking arrangements that could make a downturn if it happens more severe and create Systemic Risk on the back end. Jon . Thank you for that. Leslie, it is like one of the feds risk factors is wework i wonder how this impacts that companys desire to have an ipo and get that done before the end of the year. This is really significant. This is the first time that i can recall that we have seen someone of rosengrens stature that said we believe wework is a risk to the economy if theres a downturn so far it focused on what does it mean for wework in the prospectus, they say both yes, we would be impacted in recession, never experienced a recession with this Business Model before on the flip side, we cater to Companies Looking to lower their own expenses and they turn to wework to do that. We can benefit from more Companies Using the service. I think it is significant. Steve, do you think he is over his case . The fed has a spotty record identifying bubbles while they happen, before they happen it is now a bigger part of central banking in the wake of the financial crisis to use what they call macro tools, leaning on the Banking System, spotting, identifying, trying to deflate bubbles while they happen so the fed can be freer, independent to use its Monetary Policy for the broader economy. So this is now a new thing the fed has to be doing. I think the concern, two specific ones here first of all, that wework concentration or cowork model are big chunks of the real estate in boston and new york. I dont know if leslie has the percentages, but i think theyre big chunks the other thing is use of spes special purpose entities one of the specific concerns in the speech is that the spe doesnt allow the landlords recourse to losses because losses are contained theres no recourse back to the parent i do not know wework uses that specific model, but theres implication coworking spaces do not allow recourse it is the feds responsibility to be worried about the Banking System whether or not rosengren is right about this, thats part of his responsibility just to clarify, steve,