BlackRock's Fink Joining Buffett Sees U.S. Stocks Ready to `Rock and Roll'

Date: Thursday, June 3, 2010
Author: Bloomberg

BlackRock Inc.’s Laurence D. Fink, who leads the world’s biggest asset-management firm, said the U.S. stock market is poised to rally, joining Warren Buffett and Barton Biggs in calling equities a good buy.

“We’re ready to really rock and roll as a country,” Fink said yesterday in a meeting at the Oregon Investment Council, which manages retirement accounts for public employees and has money in BlackRock’s funds. “I think we’re just too pessimistic about our country,” Fink said at the meeting in Tigard, Oregon.

Fink, who co-founded BlackRock in 1988, follows Berkshire Hathaway Inc.’s Buffett and Biggs, who runs New York-based hedge-fund firm Traxis Partners LP, in endorsing U.S. stocks over the past month. The debt crisis in Europe has sent the Standard & Poor’s 500 Index down 10 percent from its 19-month high in April amid speculation that global growth may slow.

Fink said he was more bullish on the U.S. a few weeks ago, before the sovereign-debt crisis in Greece and other European nations dominated headlines.

“We’re very bearish on Europe,” said Fink, 57, chief executive officer of New York-based BlackRock, which manages $3.36 trillion in investments. “We worry that it will bleed into other areas,” he told the group of two dozen employees and board members at the council.

Investors fled U.S. equities for the fourth straight week in the period ended May 26, pulling $13.4 billion from domestic stock funds and bringing withdrawals in the trailing month to about $24 billion, according to data compiled by the Investment Company Institute, a trade group in Washington.

Buffett’s Stance

Buffett, 79, chairman and CEO of Omaha, Nebraska-based Berkshire, said on May 1 that over the next decade or two he would “rather own U.S. equities than cash or 10- and 20-year bonds.” Berkshire Vice Chairman Charles Munger said at the time that Buffett’s views should be taken as a preference for stocks over other asset classes rather than a prediction of historically superior gains.

Biggs, 77, whose flagship fund returned three times the industry average last year, said in a Bloomberg Television interview on May 26 that the U.S. stock market was “oversold,” and he predicted it would rally in the coming days.

The bullish views are at odds with Eric Sprott, manager of the top-ranked Canadian mutual fund in the past 10 years with at least $1 billion in assets. Sprott said last week that the S&P 500’s May slump was the start of a collapse that will drive the measure below its weakest level of 2009 in the next year.

Much of Fink’s optimism about the U.S. and pessimism about Europe is based on demographics, he said yesterday. Asked what Europe could do to solve its problems, Fink said: “Breed.”

Profit Growth

Second-quarter profits at U.S. companies will be stronger than analysts expect, Fink said. Excluding some items, companies in the S&P 500 earned a combined $19.87 a share in the first quarter, up 53 percent from the year-earlier period, according to data compiled by Bloomberg. Analysts estimate S&P 500 profits will be $81.31 a share this year and climb to $95.59 in 2011, topping the record $87.72 in 2006.

Fink said he talked to Ford Motor Co. CEO Alan Mulally last week about how the automaker’s unions had agreed in 2007 to cut wages for new hires. Such cuts, combined with cheaper housing after the real estate market’s decline, make the U.S. attractive to manufacturers again, he said.

Fink, who started BlackRock as a fixed-income firm in a one-room office in Manhattan, has built it into the largest asset manager through a series of acquisitions, including the Dec. 1 purchase of Barclays Global Investors. The firm has about $1.1 trillion in bond assets and $1.6 trillion in equities.