OT- I was talking about changes to the financial system.
The article below is kind of what I am talking about. "Take 2 aspirins and...". I know Mr. Fink. If I were someone really stupid I might say he is talking out of some other end. But I am not that stupid and I would never never say anything bad about him. Never.
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NOVEMBER 11, 2009
BlackRock's Fink: Forget 'Bubble'
System Needs Some Change, He Says, but 'Things Are Playing Out as They Should'
By DAISY MAXEY, WSJ
NEW YORK -- Laurence Fink, chairman and chief executive of money manager BlackRock Inc., said there is all too much talk of a bubble being created in the stock market, and that the economy is now in a period of stability.
In the latest Viewpoints Breakfast series, Laurence Fink, Chairman and CEO of BlackRock Inc. comments on a question from the audience on the dollar policy in Washington and what he thinks will happen when the government stops providing the capital it has been providing during the Stimulus Plan.
"I think things are playing out as they should," Mr. Fink said in The Wall Street Journal's latest Viewpoints executive-breakfast session, speaking to editor Alan Murray. "We are now seeing record amounts of cash being put to work," with huge flows even going into hedge funds recently, said Mr. Fink, who dismissed talk of a bubble.
There are too many articles in today's newspapers about bubbles, he said, adding that crises occur when they aren't in the rearview mirror.
The financial system needs change, including increased disclosure, more derivatives trading on exchanges and regulatory change, Mr. Fink said. He also said that although BlackRock misjudged the commercial real-estate sector, it is an area on which it will be refocusing and that the asset-management business is changing drastically.
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Mr. Fink also said he didn't think the U.S. dollar would fall that far, though it will slip lower versus the Chinese yuan, the Brazilian real and other countries' currencies. "I don't know if this is a bad thing," he said. "Hopefully, a weakening dollar will produce more companies willing to manufacture here."
As for the crisis, the financial system needs to be a lot more responsive to society and make sure this doesn't happen again, Mr. Fink said. "Risk has to be a lot more transparent to investors. I think that is happening."
The system is dialing back risk substantially, bringing down leverage, Mr. Fink said. It also needs more derivative products trading on exchanges and to make sure everything is done on balance sheet, he said. But regulatory change also is in order, Mr. Fink said, calling for global consistency in regulation and risk management.
One question that needs to be answered is, "Where will capital come from to finance America next year?" Mr. Fink said. The Obama administration's theory is that if interest rates are kept low, banks may start lending in the mortgage area, he said.
"I hope the private sector will come in," he said, but noted that there is currently a reluctance to buy mortgage securities because of the uncertainty around rights as a first-lien holder.
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Laurence Fink of BlackRock at Tuesday's session: 'Where will capital come from to finance America next year?'
Gabe Palacio for The Wall Street Journal
Laurence Fink of BlackRock at Tuesday's session: 'Where will capital come from to finance America next year?'
Laurence Fink of BlackRock at Tuesday's session: 'Where will capital come from to finance America next year?'
Laurence Fink of BlackRock at Tuesday's session: 'Where will capital come from to finance America next year?'
In addition, a new ratings system is needed if there is going to be more private-sector involvement in the mortgage market, he said.
Mr. Fink also launched into a defense of mortgage securitization, calling it "a good thing" that went bad in this decade. "For 30 years, mortgage securitization saved American homeowners 250 basis points" on their mortgages, he said. It wasn't the structure, but the underwriting and the acceptance of risk that became a problem, he said.
As for commercial real estate, BlackRock "probably had an overzealous view of where real estate was going to go," Mr. Fink said, noting that before 2006, it has been a sector where there had been "tens of years of success."
Commercial real estate hasn't rallied much, and if you believe that tight spreads and high yields will continue and that the U.S. can expand only about 2% a year, "we are going to have slow healing," he said.
Nevertheless, it is an area on which BlackRock will be revisiting, he said, noting that for the first time in a year, an investor has given the asset manager money to be put into the sector "because they think values are now appealing."
As for the asset-management business, it is being redefined, with more clients seeking holistic advice and increased use of traditional index-tracking products, Mr. Fink said.
BlackRock is helping clients manage large chunks of their portfolios "almost like a fiduciary outsourcing," he said. |
