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Larry thank you so much for joining well it’s great to be here in Berlin and Danny thank you so I see many of my friends here so it’s great to be here lots of friends in the crowd so no no pressure Larry look let’s let’s start
With the here and now though I mean it’s it’s been this time of of a reappraisal of risk in these markets higher for longer yields are at cycle highs tech stocks are in a correction worst month for stocks this year have markets adjusted enough have they adjusted
Enough to this new normal we’re in well I don’t I don’t know what is a new normal I I actually think every day is normal um I you know the markets go up and down markets move markets respond markets respond to political issues political uncertainties uh but I would Clearly say
We are in a period of time in in with these Mega Cycles we’re in a period of time with so many transitions whether it’s a transition from deflation to inflation a GE geopolitical transition and how does that where does that go the fragmentation of Supply chains is just
Beginning we have policies and so many democracies that have moved from policies that I would say were embedded for more deflation and now policies are more embedded in inflation well as we adjust to that you have Jamie Diamond for example saying rates in the US to
Could go to 7% and we’re not ready for it is he right I look we all have opinions I mean I’ve been saying for over a year we’re I want to know your opinion my opinion is we’re going to have 10year rates at least at 5% or higher um because of this embedded
Inflation this structural inflation is unlike anything and and I think Business Leaders and politicians are not providing uh the foundation to help explain this we have not seen inflation like this in over 30 years actually I was a young B Bond Trader uh during the late 70s and and where we had
Hyperinflation I don’t I don’t think we’re going to have anything close to this inflation of the 70s but we have so much deeper structural inflation and and we are under estimating what what this the change in geopolitics is so structurally inflationary when when when I was in Davos earlier this
Year I heard the phrase National Security uttered everywhere and quite frankly I never heard those phrases uttered that often before that in all my so National Security for chips or food or energy obviously energy and all these issues and the question is at what cost and nobody answers that question at what
Cost well you said politicians governments they need to do better job of of of explaining this of talking what would that actually look like well I mean they have to recognize if we are going to uh focus on um if the whole uh uh the whole idea about restricting
Immigration big topic here in Germany big Topic in the United States um we are down in the United States o close to 3 million legal immigrants we’ve changed the immigration policy at the same time there’s so many job needs and in the United States we’ve had close to a trillion dollars of
Fiscal stimulus just beginning its jcurve and these are huge job creators and at the same time we have restricted uh immigration and as a result of it you know we see more wage pressure so at what cost we have in the United States a very protracted uh strike between the Auto
Workers and the auto companies it has been reported that the the union is asking for a 40% increase so at what cost what you know in the long R what does that mean for jobs do more more jobs move this is the conversation we’re having now um we are you know because of
The invasion of Ukraine and the realization in Europe especially here in Germany of the dependency in Russian gas every boardroom is asking themselves where are are other dependencies yes but and the dependency in China in in in terms of manufacturing assembly is something that many companies have said we cannot does
There need to be leadership though to reinvigorate multilateralism or is that concept because in this era of friend Shoring reshoring is that over do we need to rethink that well globalization is still intact it’s just being reimagined um so whether we have our supply chains out of China now we’re
Moving them to Vietnam Philippines Eastern Europe turkey uh India Mexico is is one of the real destinations for North American demand and so this is not Global by no means globalization is over but as we reimagine these Supply chains there’s a reason why so many Supply chains were so embedded in China because
That for years and years and year was the cheapest easiest place to do it and so in many cases we’re moving Supply chains at higher costs yes especially if you’re on showing on onshoring to either Europe or the US where you’re having these labor conversations as saying but
You may have all of this means is we’re going to be more aggressively moving towards technology to add more productivity whether it is pro using more robotics AI all of this is going to in the long run that’s what I’m saying markets go up and down we have big
Changes we have big changes in in Labor uh we have higher wages in the long run companies adapt businesses adapt but the biggest issue for me and I say this to every governmental leader I see worldwide what what the world is missing today is hope I see more
Fear than any time in my business career what are you hopeful about Larry what is that hope look I’m a long-term Optimist um and and and we build Black Rock on optimism we are the largest retirement manager in the world okay why on Earth anybody would ever put a put their savings
Into something that may have a 30-year outcome my gosh that is optimism okay if you if you’re not if you’re not optimistic that 30 years hence is a better outcome you’re you’re going to keep all your money in a bank and and and but
Danny what’s going on in China is a is a great example of fear before Co the Chinese who are unbelievable Savers they save 35% of disposable income 35% % think about about that now they did it because there’s no safety nets of healthc care like we have here
In Germany No safety nets of retirement one child family all these you know dynamic issues during Co and the fear and the lockdowns and the changes of policies savings rates in China right now are 50% and and that’s fear and and they’re struggling to reinvigorate the economy at this point because they’re F
Frightened but but what what is that look like on the ground for the investors in the crown you at Black Rock how do you look at this is there a way to capitalize on it do you pull back what what do you do with a problem like
This right now I think in our Mega Trend said right now we are we are underinvested in China We Believe structurally until we see savings rates which is a in my mind when we see savings rates Decline and they’re consuming more that’s an indication of more hope that that that they don’t need
To save as much that they could consume they could do other things to me these are very big macro Trends and but I just want to say the biggest issue is we as Business Leaders we as political leaders if we don’t provide more certainty and more hope this is what causes recessions this
Is what causes pullbacks that we so to be clear because there are a lot of calls of a recession hard Landing soft Landing no Landing they’ve they’ve all lost their meaning at this point let’s let’s be honest so in this era of fear of no hope are we headed for no hope
It’s all I you know I’m hopeful let’s hope Larry’s hopeful we’re happy about that but does that mean we are headed for recession right now so I think we have to analyze that by each region because the United States um our home mortgage Market is based on a 30-year
Mortgage so anybody who has a home mortgage higher interest rates does not impact them and so the transmission of high elevated interest rates in the US takes much longer to impact the economy whereas in other places where you have more floating rate or like in the United Kingdom where you have generally a
Five-year fixed and then it resets and so let’s assume 20% of the mortgages have to be uh uh you know uh re-evaluated at a higher level that creates more immediacy that higher ratees so I think we’re going to see some economies enter recessions early which ones without
Well I think Europe any more sensitive to the ones that are more sensitive to this elevated interest rates and you’re and you’re starting to see a real decline u in GDP and other you know they’re they’re basically flat now but can they go into a a more protracted recession whatever the recessions we’re
Going to have they’re going to be quite modest so I’m not even that fearful but the other issue let me just say one thing then I’ll inject but I but I believe if we have Labor short shortages if we’re getting back to this whole social issue of how are we going to be
Doing this in many areas you may need a recession to bring down labor demand and so and I think this is one of the things that’s going to impact in the United States you still have a very vibrant economy the United States and the and
The as I said the J curve of the infrastructure act the chips act the IRA which is huge implications um that’s going to be creating jobs and so it may require a more protracted Federal reserve and it may mean by 2025 the the United States economy may be entering a
Recession but I don’t see it any time in the near term so throughout history of US growth slowdowns we have underestimated every single one of them are you confident we’re not making that same mistake again look at central banks can overshoot if fear becomes worse then consumers pull back and the
Recessions are going to become more protracted we have elections in so many places of the world we have an election in the United States we have all that stuff you know we are going to have many uh political candidates who are going to provide a lot of fear yes unfortunately
And I think the winner I think the political winner is the one who provides the most hope for the future or what people believe with the Hope in the future see that though do you see anyone projecting hope I I dearly hope so I’m projecting hope
Larry for president I don’t know no I’m too young that is that is very true um look you make an excellent point I think half half of the population is going to be in an election next year yeah could we then have a recession based on what you’re saying
Not by a monetary accident but by a fiscal accident I I so in my travel seeing um governmental leaders I talk about the need for more public private investing whether it is in infrastructure sustainability whatever you want to say power grids what I see is most democracies are having elevated fiscal
Deficits I worry about it I think it’s going to be a crisis in the future I believe we are hitting thresholds of just too much debt the only solution we have now is reoriented reimagining how we Finance growth and I think the way we’re going to be able to
Finance growth is public private there’s so much private money that is looking for great long-term Investments to work whether that in power grids or infrastructure uh and sustainability charging stations you name it um you know and and and and so in all our conversations is how can we reimagine
Finance how can we find a better structure and how can we then leverage Public Finance with private Capital to augment growth right and this is going to me the big key for the next 10 years can I ask about how you’re thinking about that at Black Rock because you’re already you’re
Already the world’s largest asset manager so so what is your goal now look at I had my our goal is to provide a better better financial future for more human beings um all our money is not not a not a single euro dollar is our money 100% of our money is our
Clients money we have to do what our clients are looking to do and I think we are a really good fiduciary that we work really well with our Cent clients we give them long-term views I really when they ask me what’s going on in the market I really don’t have a good answer
Because I don’t really care about the day-to-day your business you care about the day-to-day business I mean our job is to Pro is to give opportunities for long-term investors that they could earn a return and that they could have a healthy life in the future with dignity
Right and that’s our job and and so if we can provide that advice to give more people hope with dignity in retirement then I think we’re going to earn more share a wallet I do care about the day-to-day Larry but I also I know I know that I know the history and one
That stands out is is 2009 you buy bgi you buy ey shares 6.6 billion it was the Louisiana Purchase of asset management and in apologies for all the non-f Frenchies and Americans in the audience you might have to explain to them what the Louisiana Purchase is but in other
Words it was big it was transformative will you ever do a deal like that again you think something so transformative for Black Rock well I mean when we did that deal uh many uh reporters and the commentary said we’re already too big and we were 2.9 trillion then and now we’re 95 trillion
Um and and so the answer is yes we are we believe we have great opportunities to transform our company again I am very excited about change um let me be clear we are as neurotic today as we were when we started the company 35 years ago we’re
Having a great time working with our clients and we have I do see some very large opportunities for inorganic growth yeah because what what would be today’s equivalent of ETFs in 2009 that are on the verge of this explosive growth oh my gosh I mean I getting back
To this whole idea of working with governments public private it may not have that type of trillion dollars of explosive growth but I do believe we can help make a difference in building better societies we can prepare societies better working with governments in terms of preparedness for elevated temperatures in the
World um you know we believe we are going to have to move more rapidly towards decarbonization we believe that hydrocarbons by the way are going to be with for a long long time and that’s why we’re working with energy companies not against energy companies that is why we
Said do not ever divest of hydrocarbons which the far left doesn’t agree with me but in many cases the far right disagrees with me and so I guess we’re doing something right when I’m getting attacked from both sides but yes that is the measure I think attacks everywhere
Well look I mean these These are massive Global threats right and and they do require a level of trust so how do you gain trust from the Skeptics especially with some of the political dialogue happening in America by doing the right thing every day by making sure that we
That the skeptic truly understand what we’re doing in many cases they don’t many people don’t care what we’re doing they just are using us as a vehicle but the most important thing we provide choice for every client we work with every client it is not our money and we
Work with them to try to have each and every client have a you know have options and choice and it is their money and they have to direct the money how it goes uh but we just did a survey that was part of that uh article that 57% of our Global
Investors are going to put more money into decarbonization technology and let let’s be clear we are not going to have a transition unless we can find Technologies to bring down the competitive cost of Renewables we cannot do that we saw what happens with elevated Energy prices just
Two years in Germany and in Europe you can’t have a transition and more importantly if we don’t reorient and reimagine finance we will never decarbonize the emerging World they we see when Energy prices go up the emerging World uses more coal because livelihood and life is more important than the
Future and so we need to reimagine finance we need to and finance is going to have to find ways of bringing you know billions and billions and trillions to help them decarbonize we don’t have the structure in the world today we have a world bank and IMF that was created
After post World War II they’re organized that when banking was a prominent lender and they can’t because of the bosel capital standards uh because of DOD Frank in the United States Banks can’t lend and and and more of that you know the world has a Wasing to to developing countries they lend
Well but well I mean the the world’s debt is moving more into private hands $300 trillion do worth of debt but when it moves into private Capital into an asset management are there risks in that well my gosh I mean when I’m asked that question by many Central bankers
And when you raise Capital standards for the banking system and and the banking system is very important because that they’re the only organizations that can provide leveraged Capital but because of leveraged Capital there are risks when an asset manager provides a loan we have one liability we don’t leverage and so the
Transmission is far safer but could there be risk I’m not trying to suggest or not risk one of the foundations of Black Rock when we began the the organization we had a strong belief that the capital markets were going to be become the engine to finance the world
And if you look at the charts the role of Banking balance sheets which is what Society wanted has been reduced and the role of the capital markets have grown that’s a good outcome because as Society wanted to reduce social’s risk in a in in a banking system we needed another
Source of raising Capital right and this is a blessing now is there a new risk when you have these big pools of money in capital markets unquestionably should there be what are they though what are the risk I mean right now uh in in the world we’re moving more and more private
Credit from the banking system to the capital markets the one beauty of banking when they provided a loan to a medium and small business they generally have a banking relationship they generally have deposits they’re generally more patient the question will be be when you’re when when you’re in you know an investment
Firm are you going to provide that patience to that small and medium company that may be struggling and there lies attention they’re not going to be as patient and that could create a real structural issue and if there was a deep recession where many small and medium businesses are being threatened we are
Going to see then a more immediate reaction the transmission is going to be very very quick quicker than the banking system because the banks have other businesses and if somebody in the private Market is just providing a loan and there’s no other interconnection then they’re going to
Have to do the right thing on behalf of their owners of capital as a fiduciary they’re going to have to call a loan they’re going to have to repossess property or whatever that may be and and so I just I’m not saying that’s a risk
At all what I’m trying to say we need to talk about what what are the Dynamics what are the changes are when there is a real ecosystem change and so right now I don’t see any risk in fact I think the Federal Reserve came out with a position
Paper saying there’s actually less risk because there’s less leverage in the system by doing that but let’s be clear when we’re in a recession we need more leveraged capital from the banking system and so what Society needs is a very strong banking system alongside a very strong Capital Market right I mean
A lot of these things are new but I think we can also learn a lot from the past I mean we’re we’re an audience with with a lot of young business school students who and a lot of young investors who haven’t seen 5 a half% rates before you’ve seen it you’ve lived
Through it you’ve traded through higher 1986 a quite Infamous story of yours of making a wrong way B on on interest rates that lost first boss in a100 million with that experience in hand what is your advice to someone managing risk right now to avoid the mistakes of
The past well the probably that that was probably my biggest learning experience in my life so so let’s start there and I and and I promised myself when we lost money and we did not understand the risk we were taking and that was a foundation of Aladdin which is the largest risk
System in the world and so my you know you you you can’t avoid risk in fact those who avoid risk make no returns okay that’s but you have to be aware of the risk you have to study risk you have to be self-aware of the risk you’re taking
So I would just say it’s just as bad and actually the year before we lost that money we were the number one profit Center for a couple years before we might should have and we might have been foolish but everybody loved it when you made a lot of money because we did not
Understand it why we were making so much money okay everybody understand when you lost money so the biggest lesson I ever had in my life was I want to know every moment every day as much as possible that tended risks were taken and so the foundation when we started Black Rock 35
Years and 25% of our people were technology people which was kind of unheard of in the financial services area and now we have built the largest um most comprehensive risk system that is utilized by governments by central banks by insurance companies by wealth managers uh and by Pension funds around
The world when you look at the landscape now of global Wall Street and I know you have an excellent view of that do you see people taking undue risk not applying that lens that you’re talking about that concerns you every moment there’s some people taking undue risks some of them are
Wildly successful okay you know there’s asymmetric risk everywhere and and the people who were wildly successful let’s be clear it was probably an asymmetric bet and they won the problem is would you take an asymmetric bet a lot of people are going to lose and so let’s be clear um the beauty
Of markets there are going to be winners and losers unless you’re in index funds and you’re doing a long thing and you’re keeping it for the long term that is not a bad thing the question is is a risk Attis occurring within markets within any individual does that create a
Systemic risk it’s not about risk it’s about does it impinge on the economy does it impinge on society but we should not be running away from risk we if we ran away from RI you know you I when I’m here in Berlin I see cranes okay that developer making a
You know whatever it’s a fiveyear risk of of planning maybe it’s a seven-year risk of planning building is there going to be tenants in that building that’s a risk yeah um today unfortunately because permitting I mean when when you want to build a power grid when you want to
Build a a pipeline as we if as you P for prepare for hydrogen or whatever the use may be in a pipeline what is that a 15-year plan because of Permitting and getting this done what I mean that’s the problem why we’re not moving fast enough
If we could shorten is that is that just a regulation issue there’s too much regulation in general is that what you’re saying regul if we have regulation is fine if it’s can it be more immediate no one is questioning the review process but why can’t we with new technology
With AI why can’t we get the review process in weeks instead of seven years why can’t we move the you know Society forward okay that’s what we need and by the way if we could review if we could move the review process down from years to weeks I promise you hope will be
Flourishing because we’re going to be able to do things faster to move Society forward great that sounds great but but we’re 44 hours away right now from a US Government shutdown they’ve been unable to come together on that I mean the they’re yes what do you want me to say
I’m I’m not in favor of a shutdown okay they’re not they’re not listening to me no that you know I think that is um I think a shutdown uh for a country that is that has $33 trillion dollar of debt that is not a good outcome when you have that type of debt
What are we telling the lenders 40% of the US Treasury Market are owned by non us entities whether it’s individuals in a bond fund corporations Pension funds Sovereign wealth funds central banks that is not I mean can you imagine you go to your bank and say I’m not paying my
Mortgage I mean that’s what we are doing and it’s not about create it’s not about the new debt it’s about what we already what Congress has already approved I mean it’s it’s irrational from my vantage point it’s wrong from my vantage point at the same time it’s political
And as we know in politics today it’s it that creates the fear and and and it’s scary I we’ve seen rating agencies react Moody’s put out a note basically saying a US Government shutdown would be bad for American can credit are are we are we still in a place where a default is
Likely I know the shutdown is separate from that but if that’s the track we’re headed on is a default still possible for the American economy let’s hope not that is an excellent answer that’s an excellent answer um you know at the same time going back to this idea of of
Decarbonization in the world we have had many funds have to pull back from ESG funds I know you felt under pressure as well and we talked about this but in an election cycle do you fear those attacks those very specific attacks get worse as I said we’re hearing from more
Investors that are looking to put more money in in decarbonization we believe that we have to we as a world have to rapidly find the new technologies to bring down the competitive right premium so yes we are going to have you know and I said I’m not using the term
ESG anymore and the main reason why you may have a different opinion what ESG does everybody has a different opinion it is it is but we want to talk about you know sustainability and decarbonization um I I don’t believe okay and here’s here’s an amazing thing already and so much of the attack
On sustainability and decarbonization comes from what we call our red States if you look at the most recent data where all the IRA money is going I think it’s like 60% of the money is are going to the red States and so if you think about Texas
Right now and Texas is an amazing state it is the number one state in hydrocarbons everybody knows that but it is a number one state in America for wind and solar right it had 50 days of temperature around 40 degrees in a row this summer yeah 50 straight days in
Austin Texas and for the first time they had no blackouts because of wind and solar this year so the other angle to this also in the middle of an election year is this is kind of the first AI election when we have mass use of of artificial intelligence the potential for
Misinformation to increase yes does that concern you I think AI has tremendous uh potential it’s going to change how we work how we live it also has a potential of creating uh real fears and problems and so you know as as we have heard from the the
Men and women who are deeply involved in it there needs to be structure governments worldwide need to get in front of this this is moving so rapidly but let’s be clear every company every board we talk to is aggressively focusing on how can we navigate if you over overlay Ai and
Robotics this is what is going to transform societies very rapidly and I think Europe because of the demographics of Europe we could use Ai and Robotics as a means to create much more productiv ity um I’m worried about let me just say one one thing I’m really worried about Ai and
Robotics his you know historically over the last 30 40 years the countries that had great masses of people that were educated that were aggressive who are willing to work hard the Chinese is a great example they were able to re you know build their economy if Ai and Robotics changes how
We work and how we uh build um the countries that have huge populations growing populations could be the most suffering Nations because we are not going to have to build so many things offshore interesting and the countries actually that have declining demographics and are worried about it
And the narrative what do that mean for growth it actually might be the true blessing it may be those countries that will have less social pressure and the bad the great thing that I that I wanted to say and the be best test Tu and it’ll be very clear for here in
Europe in the world each year there’s 1.2 million human beings die from Automobiles and every one of us we’re pretty immune to it unless we have somebody we know or a family member we know who have been harmed or died from automobile accident we’re just around the corner to
Have um a a driverless cars yeah yeah we’re close but driverless cars will have less than a 5,000 U 5,000 deaths a year and it’s going to save so much fuel people be using this so on sustainability issues but we have millions of jobs that will be lost yeah
And how do we navigate that yes okay that’s exactly where I wanted to go I’m glad you went there we’re we’re I think we’re running up a against a little bit of time so we have to be quick here I’ve already accepted my jobs going to the AI
Overlords layer I don’t think I I don’t even think there going to be a need for CEOs anymore but maybe that means uh you know we can all be on a beach somewhere um but how do you think about that at Black Rock you obviously have you know a
A robust AI research Department too do you foresee a lot of Black Rock jobs going the way of AI I I think we have jobs that are going to be evolving and changing and we’re going to have even more Dynamic jobs from that I mean every time you see I
Mean the naysay is about technology job loss job loss job loss we have not seen that we’ve seen actually job creation but there’s a transition from the time when there may be immediate job loss to a transition to a different type of job all I could say is you know this past
Year we added over a th000 employees on a base of 20,000 we are we see more opportunity we are aggressive using AI we have our AI Labs with different universities we’re deploying big data to get better insights in how we invest and how we think we’re studying more and
More things we’re using AI to understand physical climate risk we have really Advance what we believe is models that show where physical climate risk can have a real impact and how and should how should we invest in that how do we think about that so we are spending most
Of our time I’m focusing on how we can use this to improve Society how we can improve Black Rock and how can we improve our relationships with our clients and in all the societies we work well you know we have to leave it there because it’s a message of hope hope lar
Thanks everyone thank you so much thank you [Applause] everyone