Black­rock CEO up­beat on how the world is go­ing

The Pak Banker - - 6BUSINESS -

Larry Fink, the Chair­man and CEO of Black­Rock, the world’s largest in­vest­ment man­ager with $3.79 tril­lion (Dh13.93 tril­lion) as­sets un­der man­age­ment and around $9.9 tril­lion ad­di­tion­ally in as­sets on its in­vest­ment man­age­ment plat­form, is sur­pris­ingly up­beat about how the world is mov­ing, com­pared with 10 months ago when he last spoke to me­dia per­sons.

“The world is a pretty good place when you think about what is go­ing on in China, and in Ja­pan. The sta­bil­i­sa­tion of Europe is far bet­ter than a year ago. The di­rec­tion of the US econ­omy is more un­der­stood to­day and Mex­ico is grow­ing from strength to strength. There is still un­cer­tainty around the Mid­dle East and Gulf re­gion but all in all you can sum­marise the world to­day ver­sus a year ago as feel­ing a lot bet­ter.”

The US mar­kets are a lot more con­fi­dent than they were a year ago, in the view of Fink, and even with the cur­rent un­cer­tainty around the po­lit­i­cal process, there is an as­sump­tion that the econ­omy will be put right in the long term. That said, Fink sees con­tin­ued con­cern over how the Obama ad­min­is­tra­tion will move on from its short­term fix of the fis­cal cliff, and un­cer­tainty about how the ad­min­is­tra­tion will de­velop a long term eco­nomic pol­icy.

“The so­lu­tion that was de­signed in Washington [for the fis­cal cliff] was a short term fix. Now we have the whole is­sue of the se­quester, and the ad­di­tional cuts in the deficit that must be ad­dressed. Once that is done, we can have a sen­si­ble long term process in which we bring down our deficits. At the moment we are about a third of the way there.

“But the mar­ket place is tak­ing that all in its stride, and ac­cepts the no­tion that pol­i­tics are messy. De­spite all this un­cer­tainty mar­kets have ex­panded nicely in the last five months and that trend looks to con­tinue un­less the po­lit­i­cal process turns into sheer dis­ap­point­ment. But I spend a great deal of time in Washington talk­ing with men and women who are gov­ern­ing our coun­try, and I do not think we are go­ing to see dis­ap­point­ment.

“Peo­ple un­der­es­ti­mate the pos­i­tive macro eco­nomic trends. When I last spoke to Gulf News, we were very bullish in eq­ui­ties, and since then eq­ui­ties have ral­lied a lot. I think they will con­tinue to rally be­cause so many peo­ple are un­der-in­vested in eq­ui­ties. “Peo­ple are over-in­vested in long du­ra­tion bonds and they are not risk­free. Bonds used to be seen as a sta­ble place to keep your money, but with such low yields on ten year trea­suries to­day, you could lose your whole year’s coupon if in­ter­est rates rise only 17 ba­sis points.”

“There­fore we are see­ing peo­ple mov­ing from cash into eq­ui­ties and higher yield­ing fixed in­come, and we are see­ing greater op­por­tu­ni­ties for in­vest­ment in div­i­dend stocks that can give you three, four or five per­cent div­i­dends higher in­ter­est rates plus some type of in­fla­tion pro­tec­tion if you are afraid of in­fla­tion.

Fink wel­comes the global trend for gov­ern­ments to in­ject more money into their economies, in or­der to kick start growth and avoid re­ces­sion.

“Ev­ery­body around the world is find­ing that they must jump­start their economies to cre­ate jobs. In the past eight months, the Fed­eral Re­serve has done more quan­ti­ta­tive eas­ing. The new government in Ja­pan is do­ing its own form of quan­ti­ta­tive eas­ing and the UK might start the same type of process. “There is more prob­a­bil­ity that the end­ing to this eas­ing does not have to be messy. Of course, there is a pos­si­bil­ity that our cen­tral bankers might mis­cal­cu­late how fast in­fla­tion picks up and they will not be able to stop it, which would be a very bad out­come.

“But if we are able to jump­start th­ese economies, stim­u­lat­ing some in­fla­tion, and man­ag­ing it, then you can’t say that it’s go­ing to be a bad out­come. In the United States.

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