Friday, October 4, 2024

WATCH:: BlackRock CEO Larry Fink on US Economy, Trump Vs. Harris, Geopolitical R...

Bloggers note: Sorry its taking me a little longer before I can share my observation on the so called Strong Resilient but vulnerable Banking system.....We will start with the Big Six in Canada.

 With Transcript below..

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  Oct 1, 2024 BlackRock CEO Larry Fink discusses the US economy, his views on the presidential election, and why he sees a "dawning of infrastructure" fueling growth. In a conversation with Bloomberg's Francine Lacqua on the sidelines of the Berlin Global Dialogue 2024 conference, he also comments on the wars in the Middle East and Ukraine, and why he favors a stronger banking union in Europe. 

 https://bloom.bg/3X2O2d8 00:00:00 Global Infrastructure Partners; strength of capital markets 00:02:06 Sees "dawning of infrastructure" as major way to stimulate economy 00:04:55 Less systemic risk despite geopolitical risks and demographic shifts 00:07:46 US election: says Trump, Harris have "similar views" on economy 00:09:21 Favors Europe banking union; Mario Draghi report on future of EU 00:10:36 China fiscal and monetary policy stimulus; resilient supply chains 00:12:31 Wars in Ukraine and Middle East are "very unsettling" 00:13:45 US economy will continue to grow at 2% to 3% - no "soft landing" 00:15:00 Market is wrong to bet on so many Federal Reserve rate cuts 

 

TRANSCRIPT 

 

Happy anniversary. There was that prospectus the 1st of
October 1999 where BlackRock went public.
So you're 25 years young. That's great reading, wasn't it?
Yeah, it's a really good day for us. It's our 25th anniversary.
It's our day that we are closing the gap.
And right around this time we're going to have our 30th anniversary here in
Germany. So it's it's a good day.
I'm very pleased that our stock performance is up, you know, close to
11,000% over over that time, actually 20 times greater than the S&P.
So the market has changed so much in that time.
And it's amazing, 25 years, you know, there's a lot more private there's a lot
more credits. You're gone into infrastructure.
I'm not going to ask you 25 years to come will bring.
But what are you most optimistic about in the next three years?
Well, I think one of the reasons why our stock has done so well is I think we we
understood that more and more of the global economy would be moving to the
capital markets. And I think all the things you suggested
is just an indication of all the movements towards the capital markets.
And I think this is going to be broadly a world event.
We're seeing more and more countries focusing on their capital markets.
A great economy is a economy that has a strong capital markets and a strong
banking system. We've seen here in Europe historically a
strong banking system and a weak capital markets.
That's changing right now here in Europe.
But in other countries like Japan, you had the conservative government doubling
down their retirement up tax deductibility for for our product, that
they have a desire to building out their capital markets.
In India, Prime Minister Modi is focusing on retirement to build out
their capital markets, to broaden their entire economy.
And I think that's that's the movement for the next 25 years in front of us, a
further broadening of the global capital markets, whether that is private debt,
infrastructure debt, private equity, venture capital.
And I think this is important. And if I look back over the 25 years,
one of the strengths that I see is because of the strength of the US
capital markets, the US influence in the world has become broader and greater
than it was 25 years ago. And that is because of the depth of the
capital markets in all of this. Larry, where where do you find the best
deal? So, for example, in infrastructure, if
you look at the closure of JP, it's today, this massive play.
What does it mean for integration? What does it mean for actually
fundraising for infrastructure? Well, JP is in the midst of closing a
$25 billion infrastructure product the old BlackRock are in for a team is going
to be raising another 0 billion. And then we announce a partnership with
Microsoft, NVIDIA and MGM. We have aspirations of raising $30
billion of equity and then beyond that, more debt associated when we built out
these air data centers. So so to me, this is the dawning of
infrastructure. When I look around the world today, I
see the inadequacies of infrastructure in almost every country.
So we need to be decarbonized and we need to be digitizing, We need to be
moving forward. We need to be building out more and
more. And I think this is one of the big
issues. As I wrote in an editorial a few months
back in the FTA and I spoke with the G7, I spoke about every economy needs to
focus on growth. There's too much focus on should we
lower taxes, should we raise taxes, not enough?
How do we stimulate growth? And I think infrastructure is a major
component of how we stimulate growth. And we don't because of the breadth of
the capital market, we don't have to rely on federal spending or state
spending. There is enough capital in the private
sector that will be able to fund these new projects.
And so to me, this is the dawning of the new reality that we're going to see
broader broadening of public and private investing for infrastructure.
Is there a worry that it becomes quite political?
So there are a couple of projects, Malaysia and Minnesota, that have been
politicized. Is there a danger that infrastructure
becomes a new ESG? I see a very different outcome.
This is helping government build out their infrastructure.
There is no question there may be one project or another project that may be
politicized for one reason or another. But overall, in my conversations with
politicians worldwide, they know they're in need of more private capital.
So I dearly hope it's not politicized. If it's politicized in one location, it
means money going to seek another safer spot.
And so you always have those type of risk.
But capital is free moving and capital is going to be seeking a safe, sound
investment. You know, we are the largest retirement
manager in the world. Our job is of try to be finding
investments on behalf of our retirees to find safe outcomes over a long period of
time. So if there is a an event that
politicized, that money will leave and many will seek another destination.
Where does the smart money stay away from?
Is there anywhere in the markets where either price to perfection or it's too
risky? I know we talk about commercial real
estate markets move up and down. You always see you mentioned like
commercial real estate. You see too much money moving in 1 to 1
area. Then it then it runs away from it.
I think that's that's what markets do. They we test the outer boundaries of
pricing and it becomes maybe a level in which that we don't find it's a great
outcome for a long term investing. And then money moves to another another
destination. I think that's a natural movement.
So I'm not worried about one area versus another.
The one other thing that I think everybody asks me is, you know, is a
market so pricey and yet all this geopolitical issues,
I would argue today because of the the expansion of the global capital markets,
we're diffusing more risk than ever. There is actually less systemic risk
today than ever before. You mentioned private credit.
Private credit is chiefly matching a liability and an asset together.
It's not leveraging 8 to 1 like in a banking system.
That's a good example of diffusing some systemic risk.
But as more and more capitals broadening out how they invest, where they invest,
that actually reduces less concentration in one area.
Of course, we've seen in especially in cities, a decline in commercial real
estate. But that's a natural process.
And and but there's nothing systemic about it.
You may lose money on one building, but you're moving into other destinations
like data centers. You're moving into different cities that
may have rising population growth, but, you know, you can't fight demographics.
So there are some cities that are shrinking.
Obviously, commercial real estate in those cities are going to be declining
with a declining population. All right.
What's your your your play in private credit?
How much bigger do you want to. How much do you want in the space?
We have large aspirations as we wrote about it last year, and we continue to
be building out our private credit area. And there's more to come.
We're very excited about our position. If you just think about the role of
infrastructure and debt. If you think about what we announced
with MGM and Microsoft raising $30 billion of equity, but we're going to
have to we're going to raise 100 to 20 billion of debt associated with those
datacenters. So I actually believe as we move out and
building out more and more infrastructure investing, you're going
to see more infrastructure or private credit associated with that.
And so that will also represent a great, great opportunity.
You know, you have a hyperscale or like a metro, like a microsoft, like Amazon,
that you have their credit that you're going to be able to leverage it up and
provide returns, stable returns over 15, 20 years, because that's what those
leases will be, these data centers. And so you have a great opportunity for
long term investing. Larry, on the U.S.
economy and we talked about U.S. exceptionalism.
Do you worry that actually there are two very different outcomes with the US
election that could bring the economy in different ways?
Both candidates have in many cases very similar views on making the U.S.
even stronger. Both candidates, in their interpretation
of how that may happen, may differ. Our job is to work with any political
position. Our job is to be working with the U.S.
government like we're here in Germany, we're working with the German
government. There's going to be election here next
year, too. Our job is to be working with societies
and building a platform together. And so we're not trying to make any
judgments. But but you deploy capital differently.
Under President Trump and under President Harris, A, the margin not that
much. I think we over conflate what it means.
I mean, I don't think the U.S. is going to be pivoting that much
depending on what outcome. You know, we're not focusing on the day
to day movements of markets for folks who are is the U.S.
an exceptional place to invest for five years, ten years, 20 years?
That's what we're focusing on. Yes.
There may be moments where you can have a 10% or even 15 or 20% downdraft.
Does that represent a major shift or does it represent an opportunity?
And so you have to look at it that way. In most cases over the last 30 years,
any time you had a ten or 20% downdraft, you wanted to be there standing by and
buying. And those who ran away over a 20 year
horizon who have lost a lot of possible return.
Are you optimistic about Europe? So you're one of the biggest
shareholders in UniCredit. You're one of the biggest shareholder in
Commerzbank. Yes.
Does a combination needs you know, does it make a bit of impetus for Europe?
Does it make sense? I am a very large believer.
On a banking and a capital markets union.
I think that's the strength of the United States.
Europe needs to do that. I've read the Draghi report because we
are large shareholders and both I don't talk about any any any activity about
one organization versus another. But tactically, I look at the strength
of the United States, and much of the strength is because of the strength of
our capital markets and our banking system.
Europe needs a stronger capital market system and it needs a more unified
banking system. And I think that's going to be urgently
necessary for Europe to go to the next step.
So as a shareholder, you don't get involved.
Have you spoken to the chief executives? I, I don't talk about it.
And too I don't do any of the voting at BlackRock, but myself.
That's not my responsibility. Let me just say, I speak to a lot of
executives on this. I speak to a lot of politicians on these
matters, and that's between me and the politicians.
What's your take on China right now? I would've said before these Chinese
actions of last week in terms of the massive fiscal and monetary policy
shifts in China was going from bad to worse.
I think they recognize now that their economy was, you know, descending quite
rapidly. There was a lack of confidence.
And I think we're going to have to wait and see.
Is this enough to stabilize the I would say, the failings of of confidence.
And as I spoke to more and more executives in China, there was a fear
that, you know, we haven't found a bottom yet.
Could this be the bottom for China? You know, I think systematically you're
going to see more and more companies diversifying their supply chains.
And you're seeing that you're seeing India as a great destination.
You're seeing Philippines and Vietnam as great destinations closer to the United
States. Mexico has been an incredible
destination for more and more manufacturing.
And so that's not going to change. We are going to see a systematic change
in how we manage supply chains. I think it taught us a lot of lessons on
too large a dependencies. And with all the disruption in the
supply chains that everybody's waking up to, we need to have a more resilient
supply chain. Just before COVID, we talked about we
need we need to, you know, the most efficient supply chain when you have
those issues. Efficiencies didn't work and we had real
big disruptions. And every company is focusing on a more
a broadening, a more diversified supply chain so you don't have these type of
disruption. And that's a fit that's going to be a
downdraft for China. So that's not that will be continuing.
You seem very bullish about, I guess, the next 2 to 3 years.
But there's a lot of you know, there's China, there's a lot of unsettled
politics. There's a I, which I know you're playing
through Microsoft and data centers. Is there anything that unsettles you
that the world is living through? Look, I think every moment it's
unsettling. The war in Ukraine, which we haven't
talked about, is incredibly unsettling and very destabilizing for Europe.
The war in the Middle East right now with Lebanon and Gaza is very
unsettling. At the same time, as I said, we are
broadening the capital markets. And even with these type of disruptions,
we're not seeing disruption in the energy market
and we're not we're seeing more diversification.
And so the markets are able to overcome some of these.
Now, if they create more supply chain disruptions, they create supply chain
disruptions for energy. That changes a whole ecosystem.
But right now, I don't see anything that really, to me is going to be disrupting
this tremendous momentum. The amount of trillions of dollars that
are going to be necessary for infrastructure investing is going to be
vital to uplift the economies worldwide. And this is why I'm still, you know,
urging more and more economy to focus on growth, focus on how to build out their
infrastructure that will lift up the economy and create great jobs.
When you look at the US economy, you're not you're expecting a soft landing.
Or is there a danger actually that that we get?
I don't see any landing. The economy is going to continue to grow
two plus 3%. I don't even know why we use a landing.
Landing last time means it goes to zero. It goes.
You know, I don't I know we use those words.
It's really fun to talk about going to crash.
I have. I've been very consistent.
We are not we're not going to have a hard landing.
But I don't see a soft landing. We're going to continue we're continuing
to move and navigate it, that is. But despite all that, there are segments
of the economy that are struggling. There are segments of the economy that
are doing really well. We are you know, we spend so much time
focusing on the segments that are doing poorly.
And I'm not trying to suggest that's not the right thing to do, but we're not
looking at in the holistic way that other parts of the economy are doing
really, really well. Look at corporate earnings overall.
They've been very strong and I think they're going to continue to be very
strong. We have you know, we do have segments of
the economy that are very strong. And I think that's why I don't know why
we talk about a hard or soft landing. We're continuing.
We're going to grow at 2 to 3%. It's the Fed watchers blame the Fed
watchers because they're all who are they?
I don't follow them, by the way I look, let me just tell you
one thing. Right.
Let me just tell you, I think the forward curve is wrong.
We're not going to see and I think Chairman Powell said that yesterday.
You know, we're going to be patient as we I think the amount of easing that's
in the forward curve is crazy. I mean, I do believe there's there's
there's room for easing more, but not as much as a forward curve would indicate.
And this is what a flaw in the markets. It's the markets.
Markets move. They have to readjust.
And I think yesterday was a small readjustment.
I mean, I don't look at this as a problem.
You're talking about the tick tock on the market.
I don't spend any time on the tick tock of the market.
I'm aware of it, but I'm not you know, whether it's you know, the Federal
Reserve tightened I mean, eases another 150.
We'll see. We'll see.
I mean, you know, I think we're I see more policies by more government that
tend to be more inflationary than deflationary.
And so with that in mind, it's hard for me to see another 200 basis points of

 

 

 

 

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