BlackRock CEO Explains Road To Recession
Larry Fink’s company has risen to become the world’s largest asset manager.
BlackRock (BLK) has grown to more than $10 trillion in assets
As its size has grown, so has its influence.
Reuters has aptly described BlackRock:
It’s a force in myriad global markets.
It’s the default source for governments needing advice on the biggest financial questions.
Its sprawl means that sometimes it seems to be on both sides of certain dealings.
It’s tough to find any part of the global financial system that BlackRock doesn’t have a tentacle in.
This reach gives it direct access to information and trends long before anyone else.
That’s why when Larry Fink, BlackRock’s CEO, issues a warning, we pay attention.
Here’s the good, bad, and the possible ugly of his latest warning.
How Pullbacks Become Recessionary Spiral
Larry Fink appeared on FoxBusiness and reported the major trends he’s seeing about the economy (click here to view full video segment).
Here’s the major takeaways we spotted.
First things first, Fink is blunt about the coming recession.
He said, “There’s a high probability we’re going into [a recession]."
His reasoning should be more than familiar to Shareholder Intel readers.
Fink cited three main factors leading to inevitable recession:
Slipping Housing - “We’re seeing the housing market really, you know, collapse from the peak levels that we saw last year…"
Declining Auto Sales - "We’re seeing auto sales starting to fall quite considerably…”
Consumer Borrowing Surge - “We’re starting to see actually more and more consumers borrowing against their retirement…"
These are three pillars of the U.S. economy.
Weakness in one is a hit.
Weakness in all three is a clear and obvious recession.
These are three pillars of the U.S. economy.
Weakness in one is a hit.
Weakness in all three is a clear and obvious recession.
But he also sees another major risk.
That is the debt ceiling debate currently underway in the U.S. Congress.
Fink focused on the risks to the currency and economy if the limit is not raised.
Fink stated without the normal hysteria that comes along with the issue, "Well, if we saw the lack of function within Congress, if we don’t have Congress trying to find a way to move forward, of course we have that risk. I would just urge every lawmaker to be focused on the responsibility. We owe our creditors money."
We don’t see it being an issue by the end of the year.
But it could be a big, albeit brief issue.
The only real risk is the political calculus that all the current problems worsening could be blamed on this event rather than the years of policy leading up to it.
If it looks like they’re going to take that approach, watch out. An epic dip in every sector could follow quickly.
