BlackRock’s Fink Says Be 100% in Equities

[Roland99]

http://www.bloomberg.com/news/2012-02-08/blackrock-s-fink-says-investors-should-be-100-in-equities-take-more-risk.html

Investors should have 100 percent of investments in equities because of valuations and higher returns than bonds, said Laurence D. Fink, chief executive officer of BlackRock Inc. (BLK), the world’s largest money manager.

Investors who seek the safety of treasury bonds will have minimal returns and will not be able to meet their needs with the U.S. Federal Reserve expected to keep interest rates low, said Fink, who in 1988 co-founded the New York-based manager with $3.5 trillion of assets. By contrast, equities are trading at the lowest valuations in 20 or 30 years.

“I don’t have a view that the world is going to fall apart, so you need to take on more risk,” he said in an interview with Bloomberg Television in Hong Kong today. “You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.”

...

“I’m very bullish on the market,” he said, citing the increased liquidity from the U.S. and European central banks. “I think the market is focusing too much on noise like Greece. And yet we’re going to have a lot of volatility and we’re going to have to live with it.”

wow. just....wow.

[unblock]

1. i ALMOST agree.

the rationale for actually hitting 100% is rarely met. even a tiny bit of diversification gets you a LOT of risk reduction for a VERY small price in expected returns.

that said, i think heavy into equities is right. fixed income products are terrible in these days of negligible interest, and commodities are just too much risk for too little reward, for the most part.

i also think the worst of the shrub economic hangover is behind us. i'm not saying smooth sailing, but it finally feels like we're actually having an economic recovery (as opposed to a technical recover in economic statistics).

i think there's good upside for stocks and not nearly as much risk as people think.

[denverbill]

2. Personally, I think the bigger risk is being in fixed income securities.

Eventually, someday, interest rates will go up, and, IMO, inflation will as well. Bonds/CDs are about the worst place to be during inflation. Corporations can and do raise their prices to cope with inflation, and dividends increase accordingly..

[unblock]

3. right -- limited upside and huge downside, with negligible interest to compensate. ugh.

[eridani]

5. IOW, you think that the "new normal" is acceptable.

48% of the population with little or no discretionary income, record low labor force participation rates, record longterm unemployment. IMO, an economic recovery leading to this situation is totally unacceptable.

Stocks will probably do fine--where else can the affluent minority park its money?

[unblock]

6. i said nothing of the sort. i never said anything about "acceptable" or "unacceptable"

nor did i say anything about the current situation being the "new normal".

in fact, i think that things will get better from here on out. i think unemployment will continue to come down (and not just through lower participation rates) and households' discretionary income will slowly improve. i.e., the recovery that has previously been limited to statistics will start feeling like a recovery that actually benefits real people.

as for "acceptable" or not, i previously said nothing, but i've long been on record that it's scandalous that washington didn't pass a gargantuan stimulus/hiring/spending program. we should have had an fdr-like keynesian response, and we were only able to get a woefully tepid gesture in that direction before the austerity mentality set in across the globe.

[eridani]

7. We still need the kind of stimulus you've advocated in the past

Naturally the Republicans will prevent that, but Obama and other Dems should be taking this right to the voters.

Things are getting better, but waiting until 2019 to get to where we were before the crash is UNACCEPTABLE!

[unblock]

8. for many, it will never be as good as it was before the crash

overall, the economy is finally really moving in the right direction, albeit slowly, in terms of growth and jobs, and more predictably and reliably so.

but the distribution of the growth is still on a long-term trend toward ever more wealth and power in the hands of fewer and fewer families. every year more and more families are left behind, and those the number of the suffering grows, they voice is heard less and less in washington.

at this point we could get there without stimulus, again, though slower. what we really need is more structural reform, starting with the notion that "union" and "socialism" are not toxins that must be eradicated at all costs. growth does't benefit all unless it is reasonably shared.

[banned from Kos]

4. Fink is also an Obama supporter.

And he manages more money than anyone in the world.