WEBVTT - Larry Fink Talks Rate Cuts, Fed Policy and China

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>I'm delighted to be joined by the one and only

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<v Speaker 2>Larry Fink of Blackrock. Larry, thank you so much for

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<v Speaker 2>joining us. First of all, happy anniversary. There was that prospective.

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<v Speaker 2>So first of October nineteen ninety nine, we're Blackrock Republic.

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<v Speaker 1>So you're twenty five years young.

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<v Speaker 3>That's great reading, wasn't it. Yeah, it's a really good

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<v Speaker 3>day for us. It's our twenty fifth anniversary. It's our

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<v Speaker 3>day that we are closing GIP and right around this

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<v Speaker 3>time we're going to have our thirtieth anniversary here in Germany,

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<v Speaker 3>so it's a good day. I'm very pleased that our

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<v Speaker 3>stock performance is up close to eleven of thousand percent

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<v Speaker 3>over over that time, actually twenty times greater than the

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<v Speaker 3>S and P.

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<v Speaker 1>So the market has changed so much in that time,

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<v Speaker 1>and it's amazing.

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<v Speaker 2>In twenty five years, you know, there's a lot more

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<v Speaker 2>private there's a lot more credits, you're gone into infrastructure.

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<v Speaker 2>I'm not going to ask you twenty five years to come,

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<v Speaker 2>we'll bring But what are you most optimistic about in

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<v Speaker 2>the next three years.

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<v Speaker 3>Well, I think one of the reasons why our stock

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<v Speaker 3>has done so well is I think we understood that

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<v Speaker 3>more and more of the global economy will be moving

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<v Speaker 3>to the capital markets. And I think all those things

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<v Speaker 3>you suggested is just an indication of all the movements

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<v Speaker 3>towards the capital markets. And I think this is going

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<v Speaker 3>to be broadly a world event. We're seeing more and

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<v Speaker 3>more countries focusing on their capital markets. A great economy

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<v Speaker 3>is an economy that has a strong capital markets and

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<v Speaker 3>a strong banking system. We've seen here in Europe historically

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<v Speaker 3>a strong banking system and a weak capital markets. That's

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<v Speaker 3>changing right now here in Europe, but in other countries

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<v Speaker 3>like Japan, you had the Kashia government doubling down their

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<v Speaker 3>retirement tax deductibility for a product that they have a

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<v Speaker 3>desire to building out their capital markets. In India, Prime

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<v Speaker 3>Minister Modi is focusing on retirement to building out their

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<v Speaker 3>capital markets to broaden their entire economy. And I think

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<v Speaker 3>that's the movement for the next twenty five years in

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<v Speaker 3>front of us, a further broadening of the global capital markets,

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<v Speaker 3>whether that is private debt, infrastructure debt, private equity, venture capital.

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<v Speaker 4>And I think this is important.

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<v Speaker 3>And if I look back over the twenty five years,

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<v Speaker 3>one of the strengths that I see is because of

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<v Speaker 3>the strengths of the US capital markets. The US influence

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<v Speaker 3>in the world has become broader and greater than it

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<v Speaker 3>was twenty five years ago. And that is because of

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<v Speaker 3>the depth of the capital markets.

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<v Speaker 2>In all of this, there where do you find the

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<v Speaker 2>best deal? So, for example, infrastructure, if you look at

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<v Speaker 2>the closure of GIP It's today.

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<v Speaker 1>This is a massive play. What does it mean for integration?

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<v Speaker 2>What does it mean for actually have fundraising for infrastructure?

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<v Speaker 3>Well, GIPS in the midst of closing a twenty five

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<v Speaker 3>billion dollar infrastructure product, the old Blackrock, our infra team

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<v Speaker 3>is going to be raising another ten billion dollars, and

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<v Speaker 3>then we announce a partnership with Microsoft, Navidia and MGX.

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<v Speaker 3>We have aspirations of raising thirty billion dollars of equity

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<v Speaker 3>and then beyond that more debt associated when we build

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<v Speaker 3>out these AI data. So to me, this is the

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<v Speaker 3>dawning of infrastructure. When I look around the world today,

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<v Speaker 3>I see the inadequacies of infrastructure in almost every country.

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<v Speaker 3>So we need to be decarbonizing, we need to be digitizing,

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<v Speaker 3>we need to be moving forward. We need to be

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<v Speaker 3>building out more and more. And I think this is

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<v Speaker 3>one of the big issues. As I wrote in an

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<v Speaker 3>editorial a few months back, to the FT and I

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<v Speaker 3>spoke of the G seven. I spoke about every economy

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<v Speaker 3>needs to focus on growth. There's too much focus on

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<v Speaker 3>should we lower taxes, should we raise taxes?

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<v Speaker 4>Not enough how do we stimulate growth?

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<v Speaker 3>And I think infrastructure is a major component of how

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<v Speaker 3>we stimulate growth, and we don't because of the breath

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<v Speaker 3>of the capital market. We don't have to rely on

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<v Speaker 3>federal spending or state spending. There is enough capital in

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<v Speaker 3>the private sector that we'll be able to fund these

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<v Speaker 3>new projects. And so to me, this is the dawning

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<v Speaker 3>of the new reality that we're going to see broadening

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<v Speaker 3>of public and private investing for infrastructure.

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<v Speaker 2>Is there a worry that it becomes quite political? So

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<v Speaker 2>there are a couple of projects Malaysia and Minnesota that

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<v Speaker 2>have been politicized.

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<v Speaker 1>Is there a danger that infrastructure becomes a new ESG.

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<v Speaker 3>I see a very different outcome of that. This is

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<v Speaker 3>helping government build out their infrastructure. There is no question

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<v Speaker 3>there may be one project or another project that may

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<v Speaker 3>be politicized for one reason or another, but overall, in

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<v Speaker 3>my conversations with politicians worldwide. They know they're in need

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<v Speaker 3>of more private capital. So I dearly hope it's not politicized.

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<v Speaker 3>If it's politicized in one location, it means money's going

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<v Speaker 3>to seek another safer spot, and so you always have

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<v Speaker 3>those type of risks. But capital is free moving and

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<v Speaker 3>capital is going to be seeking a safe, sound investment.

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<v Speaker 3>We are the largest retirement manager in the world. Our

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<v Speaker 3>job is to try to be finding investments on behalf

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<v Speaker 3>of our retirees, to find safe outcomes over a long

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<v Speaker 3>period of time.

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<v Speaker 4>So if there is an event that.

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<v Speaker 3>Politicizes that money will leave and money will seek another destination.

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<v Speaker 2>Where does the smart money stay away from? Is writ

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<v Speaker 2>anywhere in the markets where either something price perfection or

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<v Speaker 2>it's too risky.

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<v Speaker 1>I know we talk about commercial real estate.

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<v Speaker 4>Markets move up and down. You always see you mentioned

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<v Speaker 4>like commercial real estate.

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<v Speaker 3>You see too much money moving in one to one area,

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<v Speaker 3>then then it runs away from it.

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<v Speaker 4>I think that's that's what markets do.

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<v Speaker 3>We test the outer boundaries of pricing and it becomes

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<v Speaker 3>maybe a level in which that we don't find it's

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<v Speaker 3>a great outcome for a long term investing it, and

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<v Speaker 3>then money moves to another destination. I think that's a

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<v Speaker 3>natural movement, so I'm not worried about one area versus

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<v Speaker 3>another area. Then one other thing that I think everybody

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<v Speaker 3>asked me, is you know, is a market so pricey

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<v Speaker 3>and yet all this geopolitical issues. I would argue today,

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<v Speaker 3>because of the expansion of the global capital markets, we're

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<v Speaker 3>diffusing more risk than everything. There is actually less systemic

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<v Speaker 3>risks today than ever before.

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<v Speaker 4>You mentioned private credit.

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<v Speaker 3>Private credit is chiefly matching a liability and an ass together.

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<v Speaker 3>It's not leveraging eight to one like in a banking system.

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<v Speaker 3>That's a good example of diffusing some systemic risk. But

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<v Speaker 3>as more and more capitals broadening out how they invest

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<v Speaker 3>where they invest, that actually reduces less concentration in one area.

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<v Speaker 3>Of course, we've seen, especially in cities, a decline in

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<v Speaker 3>commercial real estate, but that's a natural process, but there's

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<v Speaker 3>nothing systemic about it. You may lose money on one building,

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<v Speaker 3>but you're moving into other destinations like data centers. You're

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<v Speaker 3>moving into different cities that may have rising population growth.

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<v Speaker 3>But you know, you can't fight demographics. So there's some

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<v Speaker 3>cities that are shrinking. Obviously, commercial real estate in those

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<v Speaker 3>cities are going to be declining with that declining population, lar.

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<v Speaker 2>What's your play in private credit? How much bigger do

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<v Speaker 2>you want to? How much do you want to?

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<v Speaker 3>We have large aspirations, as we wrote about it last year,

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<v Speaker 3>and we continue to be building out a private credit

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<v Speaker 3>area and there's more to come. We're very excited about

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<v Speaker 3>our position. If you just think about the role of

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<v Speaker 3>infrastructure debt. If you think about what we announced with

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<v Speaker 3>MGX and Microsoft raising thirty billion dollars equity, but we're

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<v Speaker 3>going to have to We're going to raise one hundred

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<v Speaker 3>to one hundred and twenty billion dollars of debt associated

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<v Speaker 3>with those data centers. So I actually believe as we

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<v Speaker 3>move out in building out more and more infrastructure investing,

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<v Speaker 3>you're going to see more infrastructure or private credit associated

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<v Speaker 3>with that. And so that will also represent a great,

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<v Speaker 3>great opportunity that you have a hyperscaler like a Meta,

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<v Speaker 3>like a Microsoft, like an Amazon, that you have their

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<v Speaker 3>credit that you're going to be able to leverage it

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<v Speaker 3>up and provide returns, stable returns over fifteen twenty years,

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<v Speaker 3>because that's what those leases will be these data centers,

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<v Speaker 3>and so you have a great opportunity for long term.

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<v Speaker 2>Investing US economy, and we talked about US exceptionalism. Do

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<v Speaker 2>you worry that Actually there are two very different outcomes

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<v Speaker 2>with the US election that could bring the economy in

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<v Speaker 2>different ways.

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<v Speaker 3>Both candidates have in many cases very similar views on

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<v Speaker 3>making the US even stronger. Both candidates and their interpretation

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<v Speaker 3>how that they happen, it may differ. Our job is

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<v Speaker 3>to work with any political position. Our job is to

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<v Speaker 3>be working with the US government, like we're here in Germany.

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<v Speaker 3>We're working with the German government. There's going to be

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<v Speaker 3>election here next year too. Our job is to be

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<v Speaker 3>working with societies and building a platform together. And so

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<v Speaker 3>we're not trying to make any judgments.

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<v Speaker 2>But you deploy capital differently under President Trumps and under

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<v Speaker 2>President Harris.

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<v Speaker 3>On a margin that much, No, I think we over

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<v Speaker 3>conflate what it means. I mean, I don't think the

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<v Speaker 3>US is going to be pivoting that much depending on

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<v Speaker 3>one outcome. You know, we're not focusing on the day

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<v Speaker 3>to day movements of markets from focus on is a

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<v Speaker 3>US and exceptional place to invest for five years, ten years,

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<v Speaker 3>twenty years.

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<v Speaker 4>That's what we're focusing on.

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<v Speaker 3>Yes, there may be moments where you could have a

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<v Speaker 3>ten percent or even a fifteen or twenty percent downdraft,

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<v Speaker 3>Does that represent a major shift or does that represent

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<v Speaker 3>an opportunity?

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<v Speaker 4>And so you have to look at it that way.

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<v Speaker 3>In most cases, over the last thirty years, anytime you

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<v Speaker 3>had a ten or twenty percent downdraft, you wanted to

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<v Speaker 3>be there standing by and buying, and those who ran

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<v Speaker 3>away over a twenty year horizon have lost a lot

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<v Speaker 3>of possible return.

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<v Speaker 1>Are you optimistic about Europe?

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<v Speaker 2>So you're one of the biggest shareholders and unit credit,

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<v Speaker 2>you're one of the biggest shareholders in the commerce bank. Yes,

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<v Speaker 2>does a combination needs you know? Does it make a

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<v Speaker 2>bit of impetus for Europe? Does it make sense?

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<v Speaker 3>I am a very large believer on a banking and

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<v Speaker 3>a capital markets union. I think that's the strength of

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<v Speaker 3>the United States. Europe needs to do that. I've read

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<v Speaker 3>a Droggy report because we are large sareholders and both.

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<v Speaker 3>I don't talk about any any activity about one organization

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<v Speaker 3>versus another, but technically I look at the strength of

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<v Speaker 3>the United States and much of the strength is because

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<v Speaker 3>of the strength of our capital markets and our banking system.

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<v Speaker 3>Europe needs a stronger capital market system, and it needs

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<v Speaker 3>a more unified banking system, and I think that's going

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<v Speaker 3>to be urgently necessary for Europe to go to the

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<v Speaker 3>next step.

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<v Speaker 1>So as a shareholder, you don't get involved. Have you

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<v Speaker 1>spoken to the chief executives?

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<v Speaker 3>I talk about it. And two, I don't do any

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<v Speaker 3>of the voting at Blackrock myself. That's not my responsibility.

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<v Speaker 3>Let me just say I speak to a lot of

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<v Speaker 3>executives on this. I speaks a lot of politicians on

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<v Speaker 3>these matters, and that's between me and the politicians.

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<v Speaker 1>What's your take on China right now?

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<v Speaker 3>I would have said before these Chinese actions of last week,

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<v Speaker 3>in terms of the massive fiscal and monetary policy shifts,

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<v Speaker 3>China was going from bad to worse. I think they

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<v Speaker 3>recognize now that their economy was, you know, descending quite rapidly.

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<v Speaker 3>There was a lack of confidence and I think we're

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<v Speaker 3>gonna have to wait and see is this enough to

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<v Speaker 3>stabilize the I would say the failings of confidence. And

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<v Speaker 3>as I spoke to more and more executives in China,

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<v Speaker 3>there was a fear that, you know, we haven't found

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<v Speaker 3>the bottom yet.

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<v Speaker 4>Could this be the bottom for China?

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<v Speaker 3>You know, I think systematically, you're going to see more

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<v Speaker 3>and more companies diversifying their supply chains, and you're seeing that.

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<v Speaker 3>You're seeing India is a great destination. You're seeing Philippines

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<v Speaker 3>and Vietnam as great destinations. Closer to the United States,

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<v Speaker 3>Mexico has been an incredible destination for more and more.

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<v Speaker 4>Manufacturing, and so that's not going to change.

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<v Speaker 3>We are going to see a systematic change in how

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<v Speaker 3>we manage supply chains. I think COVID taught us a

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<v Speaker 3>lot of lessons on two larger dependencies. With all the

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<v Speaker 3>disruptions and supply chains that everybody's waking up to, we

0:12:03.840 --> 0:12:04.199
<v Speaker 3>need to.

0:12:04.120 --> 0:12:05.920
<v Speaker 4>Have more resilient supply chain.

0:12:06.440 --> 0:12:09.439
<v Speaker 3>Just before COVID, we talked about we need we need,

0:12:09.720 --> 0:12:12.360
<v Speaker 3>you know, the most efficient supply chain. When you have

0:12:12.480 --> 0:12:17.160
<v Speaker 3>those issues, efficiencies didn't work and we had real big disruptions.

0:12:17.559 --> 0:12:20.600
<v Speaker 3>And every company's focusing on a more a broadening, a

0:12:20.679 --> 0:12:24.000
<v Speaker 3>more diversified supply chain so you don't have these tuff

0:12:24.000 --> 0:12:26.360
<v Speaker 3>of disruption and that's the fit that's going to.

0:12:26.280 --> 0:12:31.640
<v Speaker 4>Be a down draft for China. So that's not that

0:12:31.679 --> 0:12:32.840
<v Speaker 4>will be continuing.

0:12:33.800 --> 0:12:36.760
<v Speaker 2>You seem very bullish about I guess the next two

0:12:36.840 --> 0:12:37.440
<v Speaker 2>to three years.

0:12:37.440 --> 0:12:38.360
<v Speaker 1>But there's a lot of.

0:12:38.280 --> 0:12:41.440
<v Speaker 2>You know, there's China, there's a lot of unsettled politics.

0:12:41.440 --> 0:12:43.480
<v Speaker 2>There's AI, which I know you're playing through Microsoft and

0:12:43.559 --> 0:12:46.400
<v Speaker 2>data centers. Is there anything that unsettles you that the

0:12:46.440 --> 0:12:47.320
<v Speaker 2>world is moving through.

0:12:47.840 --> 0:12:50.760
<v Speaker 4>Look, I think every moment it's unsettling.

0:12:51.440 --> 0:12:53.960
<v Speaker 3>The war in Ukraine, which we haven't talked about, is

0:12:54.000 --> 0:13:00.840
<v Speaker 3>incredibly unsettling and very destabilizing for Europe. The war in

0:13:00.880 --> 0:13:04.480
<v Speaker 3>the Middle East right now with Lebanon and Gaza is

0:13:04.600 --> 0:13:08.880
<v Speaker 3>very unsettling. At the same time, as I said, we

0:13:08.960 --> 0:13:13.000
<v Speaker 3>are broadening the capital markets. Even with these type of disruptions.

0:13:13.000 --> 0:13:18.200
<v Speaker 3>We're not seeing disruption in the energy market, and we're

0:13:17.800 --> 0:13:21.800
<v Speaker 3>not We're seeing more diversification, and so the markets are

0:13:21.840 --> 0:13:25.160
<v Speaker 3>able to overcome some of these. Now, if they create

0:13:25.200 --> 0:13:28.640
<v Speaker 3>more supply chain disruptions, they create supply chain disruptions for

0:13:28.840 --> 0:13:31.239
<v Speaker 3>energy that changes the whole ecosystem.

0:13:31.559 --> 0:13:33.760
<v Speaker 4>But right now, I don't see.

0:13:33.520 --> 0:13:36.880
<v Speaker 3>Anything that really, to me, is going to be disrupting

0:13:37.280 --> 0:13:40.640
<v Speaker 3>this tremendous momentum. The amount of trillions of dollars that

0:13:40.679 --> 0:13:43.800
<v Speaker 3>are going to be necessary for infrastructure investing is going

0:13:43.840 --> 0:13:48.040
<v Speaker 3>to be vital to uplift the economies worldwide. And this

0:13:48.200 --> 0:13:51.240
<v Speaker 3>is why I'm still urging more and more economies to

0:13:51.280 --> 0:13:54.480
<v Speaker 3>focus on growth, focus on how to build out their

0:13:54.520 --> 0:13:58.199
<v Speaker 3>infrastructure that will lift up the economy and create great jobs.

0:13:58.559 --> 0:14:00.000
<v Speaker 2>When you look at the US E commy, you're not

0:14:00.040 --> 0:14:03.079
<v Speaker 2>you're expecting a soft landing or is there danger actually

0:14:03.160 --> 0:14:04.080
<v Speaker 2>that we get?

0:14:05.200 --> 0:14:06.280
<v Speaker 4>I don't see any landing.

0:14:06.320 --> 0:14:08.120
<v Speaker 3>The economy is going to continue to grow at two

0:14:08.160 --> 0:14:09.320
<v Speaker 3>plus three percent.

0:14:09.600 --> 0:14:11.280
<v Speaker 4>I don't even know why we use a landing.

0:14:11.360 --> 0:14:14.280
<v Speaker 3>Landing last time means it goes to zero, it goes

0:14:14.440 --> 0:14:17.280
<v Speaker 3>you know, I don't, I know we use those words.

0:14:17.320 --> 0:14:21.920
<v Speaker 3>It's really fun to talk about. I've been very consistent.

0:14:21.960 --> 0:14:23.880
<v Speaker 3>We are not We're not going to have a hard landing.

0:14:23.920 --> 0:14:25.200
<v Speaker 3>But I don't want to see a soft land We're

0:14:25.200 --> 0:14:27.880
<v Speaker 3>going to continue we continuing to move and navigate it.

0:14:28.200 --> 0:14:28.520
<v Speaker 4>That is.

0:14:29.000 --> 0:14:31.680
<v Speaker 3>But despite all that, there are segments of the economy

0:14:31.720 --> 0:14:34.000
<v Speaker 3>that are struggling. There are segments of the economy that

0:14:34.040 --> 0:14:36.880
<v Speaker 3>are doing really well. We are you know, we spend

0:14:36.960 --> 0:14:39.360
<v Speaker 3>so much time focusing on the segments that are doing poorly.

0:14:39.400 --> 0:14:41.960
<v Speaker 3>And I'm not trying to suggest that's not the right

0:14:42.000 --> 0:14:44.080
<v Speaker 3>thing to do, but we're not looking at in the

0:14:44.120 --> 0:14:46.880
<v Speaker 3>holistic way that other parts of the economy are doing

0:14:46.960 --> 0:14:49.920
<v Speaker 3>really really well. Look at corporate earnings overall, they've been

0:14:50.080 --> 0:14:52.800
<v Speaker 3>very strong, and I think they're going to continue to

0:14:52.800 --> 0:14:55.400
<v Speaker 3>be very strong. We have, you know, we we do

0:14:55.520 --> 0:14:58.840
<v Speaker 3>have segments of the economy that are very strong. And

0:14:58.880 --> 0:15:00.640
<v Speaker 3>I think that's why. I don't know why we talk

0:15:00.680 --> 0:15:03.000
<v Speaker 3>about a harder soft line and we're continuing. We're going

0:15:03.080 --> 0:15:04.320
<v Speaker 3>to grow it two to three percent.

0:15:04.560 --> 0:15:05.520
<v Speaker 1>It's the FED watchers.

0:15:05.520 --> 0:15:08.600
<v Speaker 2>Blame the FED watchers because they're all who are they?

0:15:08.720 --> 0:15:12.200
<v Speaker 3>I don't follow them, By the way, let me just

0:15:12.200 --> 0:15:13.040
<v Speaker 3>tell you why to the right.

0:15:13.240 --> 0:15:15.000
<v Speaker 4>Let me just tell you. I think the forward curve

0:15:15.480 --> 0:15:15.920
<v Speaker 4>is wrong.

0:15:16.400 --> 0:15:18.400
<v Speaker 3>We're not going to see and I think the Chairman

0:15:18.480 --> 0:15:20.600
<v Speaker 3>Palace said that yesterday. You know, we're going to be

0:15:20.600 --> 0:15:24.200
<v Speaker 3>patient as we I think the amount of easing that's

0:15:24.240 --> 0:15:26.560
<v Speaker 3>in the forward curve is crazy. I mean, I do

0:15:26.600 --> 0:15:29.960
<v Speaker 3>believe there's there's there's room for easing more, but not

0:15:30.000 --> 0:15:31.800
<v Speaker 3>as much as a forward curve would indicate.

0:15:32.120 --> 0:15:33.720
<v Speaker 1>And this is what a flaw in the markets. A

0:15:33.800 --> 0:15:36.680
<v Speaker 1>flawns markets.

0:15:36.680 --> 0:15:39.960
<v Speaker 3>Markets move, they have to readjust and I think yesterday

0:15:40.040 --> 0:15:43.720
<v Speaker 3>was a small readjustment. I mean, I don't look at

0:15:43.720 --> 0:15:45.520
<v Speaker 3>this as a problem. You're talking about the TikTok on

0:15:45.560 --> 0:15:47.920
<v Speaker 3>the market. I don't spend any time on the TikTok

0:15:47.960 --> 0:15:49.840
<v Speaker 3>on the market. I'm aware of it, but I'm not

0:15:50.360 --> 0:15:53.040
<v Speaker 3>you know, whether it's you know, the consideras are tightened,

0:15:53.120 --> 0:15:55.200
<v Speaker 3>I mean, ease is another one hundred, one hundred and fifty.

0:15:55.760 --> 0:15:58.400
<v Speaker 4>We'll see, we'll see. I mean, you know, I think

0:15:58.440 --> 0:15:58.960
<v Speaker 4>we are.

0:15:59.360 --> 0:16:02.160
<v Speaker 3>I see more policies by more government that tend to

0:16:02.160 --> 0:16:05.680
<v Speaker 3>be more inflation ay than deflationary. And so with that

0:16:05.840 --> 0:16:08.960
<v Speaker 3>in mind, it's hard for me to see another two

0:16:09.080 --> 0:16:11.000
<v Speaker 3>hundred base of points of decline insure rates.

0:16:11.040 --> 0:16:12.160
<v Speaker 1>I'm gonna use that.

0:16:12.200 --> 0:16:14.160
<v Speaker 2>You know, the TikTok of the market is fine, but

0:16:14.240 --> 0:16:16.480
<v Speaker 2>secondary Larry, as always, thank you so much for joining us.

0:16:16.560 --> 0:16:18.240
<v Speaker 1>Larry Fink, Black Rock Chairman,