Larry Fink, CEO of BlackRock, appeared on Bloomberg Television this morning and said he is a very big' buyer of the U.S. dollar, that BlackRock will not get into consumer lending and that he sees no large deals ahead for BlackRock at this time.
Fink also said he's 'more worried' about stocks amid worldwide unrest.
On the markets today
'I believe the market has shifted from euphoria, from August through late January and now we are at a moment of reflection. I think this period of reflection will be sustained for some time'.
On whether he is a buyer or seller
'If you believe that markets are efficient, some of that uncertainty has been priced in already. We've had an increase in oil; there has been no increase in demand in oil. It is that risk premium that has been priced into the marketplace. We've had a reduction in equity prices worldwide, especially in the emerging world, where everyone was so bullish one year ago and now money is being poured out of it'.
'If you believe that all this noise, uncertainty will produce a better outcome, it is probably a buying opportunity. If you think the noise will create a more troublesome world, it may cause some developed economies to revert back into a recession, then we will have rough going for the next year'.
'I am more in the camp that this uncertainty will create a great amount of volatility, the marketplace is pricing this in, and if the market has a setback in terms of prices, I would be a long-term buyer'.
'I don't think an 80 basis point increase in interest rates is a bear market. We have a possibility of rising rates. The outer limits could be 4.40%, on the ten-year. The market knows that the Federal Reserve will be completing its QE2 program by June. The markets are efficient. A lot of this is priced in'.
'We believe rates will creep up. We're not calling that a bear market. The other issue we need to focus on...We all spend time focusing on the Treasury market but in the United States, we've had a collapse in the outstanding of debt. Corporations, individuals have really pared down their debt. The amount of outstanding debt in America has shrunk...You cannot look at just the Treasury market alone.
'If you encompass all the cash sitting on the side and you look at how much debt reduction we have seen in the credit markets, I believe there will be a ceiling of how high rates can go. What can throw that out is if we start experiencing a persistence in inflation...If you believe we will have creeping, rising inflation over the next two years, of course interest rates will have to go higher'.
'Inflation will be more moderate. Until I see a labor market that is more robust and until I see factory utilization to be larger, I think inflation in this country will be more muted than what we see other countries'.
On whether he is a buyer of Treasuries
'If rates creep up over 4%, I would be incrementally buying interest rates'.
'I would definitely be lengthening . I believe inflation may be a problem in the short run but in the long run, not. You would want to buy if the yield curve shifts upward on the longer end and take advantage of that. If your views of inflation is short, the long end will do the best'.
On the European sovereign debt crisis:
'I don't think [the European debt crisis is over]. I think we will have more volatility there. We still have not addressed the Greek problem. We are in the midst of reviewing what is happening in Ireland. We still have the banking system in Europe which is undercapitalized. You had the governor in Italy saying his banks need more capital. Spain and other countries are saying their banks may need more capital. You put this idea in, the need for more capital to the financial system plus the sovereign credit difficulties, which would probably cause a reduction in capital. We will still have more volatility out of Europe. It will probably be a negative trend'.
'I'm a big buyer of the U.S. dollar here'.
On reports that BlackRock is teaming up with KKR, Warburg Pincus, and others to buy Citi Financial from Citigroup
'I don't comment about market rumors...I will say, we do a lot of things for clients....Yes, we are not getting into the consumer-lending business. One should assume that if we are involved in this, it would be on behalf of clients, not for our balance sheet'.
On BlackRock making deals:
'It is not our intention to do another large deal. I don't see a need for it. Whether regulators are inhibiting us or not, we have said publicly we are happy with our business model as it is today. We made to fill-in acquisitions in different countries or may do an acquisition for the BlackRock technology business, BlackRock Solutions. But it is not my intention to be doing anything large-scale'.
'I remind people and regulators that 100% of our business is a client-serviing business. We are in agent in all our businesses. This is not our capital. This is not our balance sheet. We don't have leverage. What caused the credit crisis was leverage. We are a different animal. We are only an agent'.
On the Middle East
'Saudi Arabia is probably the most troublesome country to answer. I think the government will manage the situation properly. They have offered a big infusion into the economy. It is a very wealthy economy with huge oil reserves and huge reserves. It is a very large population in the Gulf region. It is the largest population in the entire Gulf region. That is what produces the uncertainty. The world is dependent on their 8-9 billion barrels per day'.
'That is an uncertainty we have to factor in. If there is uncertainty around Saudi Arabia that produces a slowdown of oil production, then we will have severe issues in this world. That is probably one of the most difficult issues that we are facing today.
'In the short run, you could see oil prices going north of $150 if you had that type of oil shock. It could be $200 at any one moment. My view would be that this would be managed over a course of a period of time'.
'They are more uncertain. They are the biggest producer of products in the world today. We're very much dependent on China. It is a similar way we are dependent on Saudi Arabia for oil'.
'I am very concerned about China. China has done a magnificent job about engineering its economy...They have 300-400 million people living at substandard levels. They are in the outer regions outside the river delta valley. They are in many ways minorities and Muslims. They want change...China, because of the size of its population and because the imbalances of standard of living in the country, is an issue. They have done a good job of navigating this but we should put that in as a factor of risk going forward.
'I am more worried about equities today because of this uncertainty. Five-six months ago, I said our economy is better than we thought it would be. I would argue today that we think the economy is better today than it actually is. The enthusiasm has increased dramatically. I think the market is pausing. We need to see how this all plays out. I am quite constructive on Northern Africa, that this will be played out in a positive way. In the short run, democracies are dirty and messy and we could see moments of time in which that uncertainty is a negative uncertainty'.
Source - Bloomberg TV