Best of the Week
Most Popular
1.SNP Offers Labour Deadly Death Embrace Alliance, Holding England to Ransom, Destroy UK From Within - Nadeem_Walayat
2.Gold And Silver – Most Widely Used Currency In Western World? Stupidity - Michael_Noonan
3.Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - Nadeem_Walayat
4.Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - Nadeem_Walayat
5.Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - Mike_Shedlock
6.Leaders Debate Election 2015 - Natalie Bennett Green Party Convincing Anti-Austerity More Debt Argument - Nadeem_Walayat
7.Labour Economic Collapse vs Coalition Recovery - UK Election Forecast 2015 - Video - Nadeem_Walayat
8.China’s Stock Market Mania; How High can Red-chips Fly? - Gary_Dorsch
9.Gold and Misery, Strange Bedfellows - 31st Mar 15 - Dan_Norcini
10.Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - Nadeem_Walayat
Last 5 days
Unsound Banking: Why Most of the World's Banks Are Headed for Collapse - 21st Apr 15
Bitcoin Recent Low Price Volatility Might Be Deceptive - 21st Apr 15
Currency Wars Back As Russia Buys Gold - One Million Ounces in March Alone - 21st Apr 15
The Greece 'Grexit' Issue and the Problem of Free Trade - 21st Apr 15
Why Europe Lets People Drown - 21st Apr 15
Wealth Destruction for the 99.9 Percent - 21st Apr 15
SNP Publish England's Suicide Note as Pollsters Still Forecast Labour-SNP Election Disaster - 21st Apr 15
Characteristics of Extremely Over-Indebted Economies - 21st Apr 15
Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 21st Apr 15
Gold & Silver Alert: Silver Stocks’ Signal - 20th Apr 15
Now is the Time to Buy Resource Stocks, Especially Gold Equities - 20th Apr 15
DJ Transportation & Utility Averages Suggest Stocks Bull Market Is Over - 20th Apr 15
Crude Oil Price Bull Market Hope - 20th Apr 15
Stock Market Bears Get Slaughtered Despite Greece Counting Down to Grexit Financial Armageddon - 20th Apr 15
The Rise of the Paper Machines - 20th Apr 15
Gold and Silver Inflection Point - 20th Apr 15
SP500: A Butcher's Stock Market (Chop Chop Chop) - 20th Apr 15
Are Stock Market Bears Slowly Gaining Control? - 20th Apr 15
Sugar Commodity Price Bear Rally - 19th Apr 15
Avoid the Spread of the Stock Market "China Syndrome" - 19th Apr 15
Stock Market Going Nowhere Fast - 19th Apr 15
An Easy Way to Profit From the Two Biggest Trends in the Stock Market - 19th Apr 15
No Scripture Is Divine, Authentic and Beyond the Creation of the Human Brain - 19th Apr 15
Inflation, Central Banks, and Business Cycles - 18th Apr 15
Stock Market Correction May be Nearing End - 18th Apr 15
UK Housing Crisis, Immigration, Population Growth, Election Forecast 2015 - Video - 18th Apr 15
Q1 Corporate Earnings Risky for Stocks - 17th Apr 15
US Stock Market Getting Scarier by the Day - 17th Apr 15
Stock Market Watershed Day - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
King Dollar Hurting Stock Market Corporate Earnings! - 17th Apr 15
Production Declines Hide Bigger Crude Oil Storage Issues - 17th Apr 15
Top Three Takeaways From Today’s OPEC Crude Oil Report… and How You Can Profit - 17th Apr 15
How to Profit from Australia's Healthiest Biotech Stocks - 17th Apr 15
What Is Really Driving Gold Price? - 17th Apr 15
Will Ever More Boomers Selling Retirement Assets Change Investment Prices For Decades? - 16th Apr 15
Won't Be Contagion with 'Grexit' Greece Euro-zone Exit - 16th Apr 15
Sharp Decline in USD/CAD and Its Consequences - 16th Apr 15
Blackstone is like Apple, Google, Hermes, Boeing - 16th Apr 15
The Most Dangerous Financial Headline I've Seen Since the 2008 Crisis - 16th Apr 15
Is Legal Tax Avoidance Extinct in the UK? - 16th Apr 15
Why Russia Will Send More Troops to Central Asia - 16th Apr 15
More Thoughts on the Current Crude Oil Market - 16th Apr 15
U.S. Treasury Secretary Warns Greek Exit Will Cause Enormous Disruption and Hardship - 16th Apr 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Historic Bubble

BlackRock's Fink: Very Bullish on US Economy 2013

Economics / US Economy Dec 12, 2012 - 03:24 AM GMT

By: Bloomberg

Economics

Larry Fink, CEO of BlackRock, guest hosted Bloomberg TV's "Market Makers" with Erik Schatzker and Stephanie Ruhle today. Fink said that he's "very bullish" on the United States and "our corporations are in fabulous shape with $1.7 trillion in cash...I don't believe you're going to see that much default risk in the next few years."

Fink also said that "95% of the people that are talking about [the fiscal cliff] have no clue" and "I think we will find a solution."


Fink on the fiscal cliff:

"I would say that 95% of the people that are talking about it have no clue...I was in Washington for a couple of days last week. I am on the phone a lot. I think we will find a solution. Republicans and Democrats understand the enormity of the issue. I actually believe that the Republicans understand--I would say that the nation's consensus that we have to raise the upper income taxes and I think that what they are trying to do is work on a great bargain, working with the Democrats, and making sure that there is a 3 to 1, 2.5 to 1 in terms of expense savings for revenues. I actually think that the threshold of the Republican side has been determined subject to working out on the Democratic side the expense savings. I do believe that the Republicans will threaten if they can't find those expense savings...There is still posturing going on."

On whether there's a buying opportunity between now and the end of the year:

"I told all my investors that any time the market had a down shaft, go buy. The market is almost creeping back up to a month high. I think that the market is saying that there will be a solution and those who were able to buy on those downdrafts, those momentary fears, did well. Once again, we spend too much time focusing on those day traders and you have to look for your point in time to be an investor and you like a stock at a certain level, you should stick with those strategies."

On how banks can make big money going forward:

"I am quite bullish on the banking system going forward. I think banks in the United States have done a very good job of retooling its businesses. They have much more to do but their balance sheets are very strong. Much of the problems in U.S. banks are behind them."

On how he feels about BlackRock being bigger than the Street:

"I don't compare us and we are not the Street. This is our clients' money. I believe the thinning of the balance sheets is what regulators wanted. Regulators basically said you will have higher capital charges and we want you to have lower balance sheets so you are not too big to fail. We want you to get into more flow business. I think at this period of time, we as investors are struggling with a lack of liquidity so I am not suggesting these are not difficult times for all investors in the market trading of bonds, specifically, but over time, I think you'll see more products moving to exchanges. The Wall Street firms will do more flow business. This will be evolutionary and unfortunately we are now at this period of time of a real big sea change. We are historically dependent on the balance sheets as a mechanism for inventory and now we will be more dependent on flow business. That will force more business onto exchanges. I actually think this is what regulators want."

On saying in February that investing 100% in stocks is the way to go and whether this holds true today:

"I would speak more cautionary until we see what happens in Washington. If you are a long-term investor and thinking about retirement or your pension plan, you have no other choice but to be in equities. If you are not in equities now, you need to start layering in and starting to buy but I would not do it all at once."

On whether he's surprised that mortgages have had such a great run this year:

"No, when the Federal Reserve buys as much as they do, you are certainly not surprised at the performance of certain items. Operation Twist and QE3 buying all the mortgages really didn't help the mortgage market. At the same time we also started to see stability in housing markets and rising housing prices for the first time and when you put that together, you had a good year. But where is S&P up? 13% this year. Some of the European stocks dropped over 20% so I am happy with my prognostication and I would live by it going forward."

"I am very bullish on the United States over a cyclical period of time. With that in mind, it is hard for me to see how bonds will continue--at this rate--continue to have that kind of performance. Way too many people are investing in bonds with all the volatility that is embedded in bonds now with their duration...a 30-year treasury today is at a record low, around 3.5%. Excuse me, 2.5%. If you look at the CBO estimates over a 10-year cycle, the U.S. government says 10-year Treasuries in a number of years will be at 5%. Let's assume the spread between 10 and 30 years is another 100 basis points so they are suggesting that 30 year will be at 6%. With a duration of 16, that means that if the CBO, our government's accounting, is correct, you will lose 45% of your principal in bonds...I think this is the big mistake that people don't understand now. Bonds don't possess that risk-free return in this low rate environment. I am using what our government is projecting out for interest rates. When we talk about budgets, it is the U.S. government's belief that 10-year treasuries will be of 5% out in another five years."

On whether searching for yields and going for corporates is a mistake:

"As I said, I am bullish on the United States. If you're going to take a risk in bonds, I believe you will have a higher return in corporate bonds. I don't believe you'll see that much default risk in the next few years. Our corporations are in fabulous shape with $1.7 trillion in cash. They are using some of that cash at the moment for special dividends and stock repurchases, so they are not using it in the one best way for bondholders, but if you're going to invest in fixed income you will need higher return assets and that will be in corporates."

On what happens to pension funds that are investing in corporations and high yield:

"The pension issue is bigger than just bonds. In fact, bonds are only a component of all the risks they are sitting with. I visited a couple of large pension plans in the United States last week and they are assuming they will earn 7.5% return."

"If you believe that the world can grow 3% per year--that is lower than we have seen in the last 10 years--if you assume we can grow by 3% per year in world growth and assume you can buy stocks that have a dividend of 3.5%, if there is an improvement in margins, you will see you can make a 7-7.5% return over 10 years in equities. You will have to be a patient investor and not worry about the intraday volatility. This is the reason why I like equities even though everybody is running away."

On whether BlackRock investors have been harmed by LIBOR:

It's too early for me to tell. We are doing a full review of all of the trading activities. We don't know yet. In most cases, we are learning that they artificially lowered the LIBOR rates. That is very harmful for the investors because we had an artificially low rate. I think we are discovering also that there are moments in time--and I think this is where the investigators are really looking into it--where there was some form of malfeasance at a specific day because they had many clients money that was going to be reset and they raised the price. Until you understand how their behavior was or if there was a series of money for the artificially lowered the rates, we as an investor have been harmed. There are other cases where we saw evidence that they possibly raised the rate and those issuers were then harmed. This is not an easy thing to determine. We are doing a full and exhaustive review and many of our clients have asked what we are doing on behalf of them.

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014