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Kelly Evans: Look At Morgan Stanley Go!

CNBC's Kelly Evans
CNBC

I've got to hand it to Morgan Stanley. They've been incredibly clairvoyant since the financial crisis. And today, they're making a splash by buying up E*Trade.

James Gorman, who has been CEO since 2010, was on CNBC this morning with Wilfred Frost. The motivation for this deal is pretty simple, Gorman said: to reinforce their lead in wealth management and generate more leads for their team of financial advisors. Morgan wound up with a big lead in wealth management thanks to Gorman's post-crisis moves, including buying Smith Barney. Just look at the outperformance of Morgan shares relative to longtime rival Goldman Sachs (below) in recent years.

But critics have been growing restless, saying Morgan's clients are aging and growth is slowing. Buying E*Trade is meant to help address that. Mike Mayo isn't loving it; the longtime bank analyst downgraded the stock to equal weight, citing "strategic, financial, and execution risks." Mayo prefers Goldman's "invest to build" strategy versus Morgan "spending $13 billion for such an uncertain transaction."

And Morgan shares are down about 4% this morning. But Gorman wasn't fazed by that. Nor was Roger Altman on CNBC earlier, who said "Morgan Stanley has been leading the transformation from wholesale banking to the retail side, and this pushes even them further in that regard."

As Altman noted, more than half of the company's profits now come from wealth management and Morgan trades at a higher multiple to book value than Goldman does. "I take my hat off to James," Roger said. "I think this is a smart move and entirely consistent with his vision."

My question today is pretty simple: what does Goldman do now? Buy up one of the other online brokers? They're all trading at vastly lower prices now in the wake of Charles Schwab's bold move last autumn to cut trading commissions to zero. Buy Robinhood? Do nothing? We'll be speaking to Rich Repetto at the top of the show today about this.

Could there be antitrust issues? Possibly, now that Schwab and TD Ameritrade are also combining. More important will be the Federal Reserve's response, since Morgan Stanley is a global systemically important financial institution subject to extra scrutiny on anything that might increase systemic risk.

It's a very different era these days on Wall Street. Or do we call it "Main Street" now?

See you at 1 p.m.!

Kelly

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Twitter: @KellyCNBC

Instagram: @realkellyevans