Hilarious comment from BlackRock CEO Larry Fink on the company’s conference call today about what’s REALLY causing the economy to be so bad.Thanks to John McDermott at Alphaville for the catch on this one
Transcript from Seeking Alpha:
So as we reflect on the third quarter, as we help our clients digest all this, the third quarter was obviously very challenging. It’s exasperated by governmental policies worldwide, not just here in the United States. Politics and government are playing a major role in market performance and market volatility. Long-term investing have become more difficult as a result of this.
When government focus on short-termism, when government focuses on blogs, when government is not focusing on how to best prepare an economy over a long cycle, it becomes really difficult for investors to focus on long-term investing, too. And this is one of the greatest issues that we are trying to confront with our clients. How do you manage these short-term issues, the extreme volatility, this enormous uncertainty but focus on long-term investing? This is not an easy answer because some clients, who may have 10-, 15-, 20-year liabilities, they may be judged by their shareholders or by their Board or by their pension fund committee by quarterly results. They may be judged by annual VAR if you are an insurance company, and that’s how your regulators look at you.
Meanwhile, this actually seems pretty spot on:
A good example of what I would call government’s failure is the European stress test, where just 10 weeks ago, the governments indicated in their stress test results that a bank like Dexia, a client of BlackRock’s, has capital of 10%. They’re on capital at 10%, only to have that bank nationalized a few weeks ago. And it’s that sort of information and problems is really unsettling to the marketplace. I don’t need to tell you that, but to me, this is just a glaring example of how government has really unsettled the marketplace. We just can’t understand how they could have an institution that’s cited in the top 10 most capitalised banks in Europe, then weeks later, nationalize it. It just doesn’t feel right, and as a result, people are de-risking. And if you look at our flows, the most amount of de-risking and flows that we’ve seen in our high-fee business has been in our European mutual funds, which I’ll talk about, where we saw the greatest amount of outflows because of fear in Europe, because of things like that have been the most severe.
Overall, he says, this is not 2008 again, since the fundamentals aren’t as bad as the crisis of confidence would imply.