Emerging Market Equities Outlook

A number of factors should be considered when evaluating the wisdom of equity investing in the emerging markets today.Andrew Swan,head of Asian Equities and portfolio manager with BlackRock,the world's largest money manager,lists the following:
1.Valuations are very,very defensive;
2.Most investors are out of the asset now;
3.The Fed is changing directions,getting more dovish.*
Improving momentum in the EM has just been for the past two months,said Mr.Swan.What you've seen is currencies appreciate and capital starting to come back to these markets.I do see growth weakening for the moment outside of Asia.*
Exports have been a very big headwind.If we do get a weaker dollar and higher materials pricing,global trade could start to pick up later this year,and that would benefit the EM,Mr.Swan pointed out.*
iShares Emerging Markets ETF (EEM),iShares Asia/Pacific Dividend ETF (DVYA)

Taking Advantage of Market Volatility

This volatility is a real problem,said Rob Kapito,President of BlackRock,the world's largest money manager.People are back in cash,but my message is to get invested in the marketplace and try to put all this noise away.There's always noise in the marketplace.Most companies have been buying back stock and paying dividends.I'd like people to think about who benefits from lower oil prices.Discretionary goods are going to see a pop in this.Tech advances are changing the business models of many companies.Think through what's going to change.Look at companies that are innovative and changing their models,and those that are just lagging behind.
You're going to live longer,and you're not going to have saved enough for retirement.You can't invest for the future in the future.The millennials are saving,but we need to get others thinking about it.You can benefit from being a long-term investor in those sectors.*
I think you've put in a low on oil prices,adds Jeff Saut of Raymond James Financial.The oil stocks have been absolutely crushed.If crude oil has bottomed,you're going to see some pretty good action on the way back up.If we've seen a low,you're going to do very well in an energy etf or an energy-centric mutual fund.*
I'm just a little bit concerned about the near-term volatility,said Brian Jacobsen of Wells Fargo Advantage Funds.However,I would view that as a buying opportunity.Any weakness,I'd be buying into the equity front.*
Coach(COH),Macys(M),Energy Select Sector SPDR Fund(XLE),iShares Select Dividend ETF(ETY)

Asset Management:Inflows and Strategy

We had 8 billion of equity inflows in Q2,said Larry Fink,CEO of BlackRock,the world's largest asset manager.I do think for those investors overweight in bonds,I recommend moving some of it into equities,looking at your bond portfolio and moving it from your core strategy into unconstrained strategies.Expect to see tens of billions move to unconstrained bond funds. As more and more moves into etfs,we are gonna be lowering our fees.As of yesterday,we saw 6 billion of inflows into etfs this month.The market has come a long ways.We've seen some very good earnings,but I would never be surprised to see a 5% correction.I look at it as a buying opportunity. We own 5% of PepsiCo.We think Indra Nooyi is doing a very good job.We are very happy with her imaginative team and strategy. I think the Fed will move to a change of policy in the next six months.We should all be prepared.For investors focused on the long term,whether it's in September or December isn't important.We're gonna see a shrinkage of Treasury borrowing for the next five years,with as high as a 5% ten year by 2015,Larry Fink projected. PepsiCo(PEP),BlackRock(BLK)

Issues in Money Management

BlackRock is the world's largest money manager,owning the iShares exchange traded funds.Consumer confidence is up,but manufacturing is down,BlackRock CEO Larry Fink noted.Private sector deleveraging is still going on.
I actually believe we can't find enough good investments.Bonds are no longer providing sufficient return.
Emerging markets are probably today relatively cheap compared to where they were a few years ago.
We need a mandatory savings policy in the US.Retirement is an even bigger issue than tax policy.We need to educate Americans about the longevity of life.
I'm not worried about retirees.I'm worried about the young people who are not putting money away for retirement.We have men and women who should have more choice-maybe with the mandatory savings plan as a backup.
Everything that we face today is more short-termism.Most market partcipants make money on the velocity of money,on quick trades.It's the 24/7 news cycle,the annual election of board members.Some form of elongation is needed.
One of the big issues is confidence.We're sitting with a trillion dollars in money market funds by corporations.
Five years is the average term of CEOs.You see more short term changes in their behaviour.
BlackRock is the largest shareholder of JP Morgan Chase,and is among the top three shareholders of many other firms.Less pressure on board members means better outcomes,Mr.Fink suggested.
BlackRock(BLK)

Asia's Investment Surge;Goldman Sells China Stake

The mood is very upbeat,said Nick Good,Head of Strategy and Business Development Asia Pacific for BlackRock,attending the CFA Institute Annual Conference in Singapore.Asians believe in Asia.Seventy percent or more of any given portfolio is invested in Asia,and 50% of capital markets growth will take place in Asia.
We're seeing the rise of the Asian investor.Wealth in China has increased tenfold.Asians need to invest for the long term,and that dynamic will inform the growth of the region.They are looking for bond and income funds that meet their needs.
We are developing funds that cater to that market and educating about long term investing.We try and take a broad view of the markets,providing both active and index funds.You're seeing an emphasis on income funds.
Goldman Sachs says it is committed to China,despite its recent sale of a minority stake in the Industrial and Commercial Bank of China.Goldman unloaded its seven year investment in ICBC for 1.1 billion dollars.Macquarie Capital Securities Ltd estimates Goldman made about 12 billion dollars in dividends and sale proceeds on its 2.58 billion investment in ICBC.Many banks are selling such holdings to cover the new,more stringent Basel III capital requirements.
The world just went through a big trauma,a credit crisis,said CEO Lloyd Blankfein.Not all the fixes work.Sometimes the fixes need fixes.
BlackRock(BLK),Goldman Sachs(GS)

Global Money Manager:What You Have To Do

There is considerable concern about the fate of the European banking system in these troubled times.It's about deposits,and you're worried about deposit flight,according to Peter Fisher,Global Head of Fixed Income at BlackRock.It's a bigger issue than whether Greece leaves the euro currency.You want a banking system that's stable for Europe.You don't have to have a fiscal union;but not having a banking union,that's a problem. In a high volume,low liquidity environment,you have to bring your risk level down.You've got to be much more judicious.In the U.S.,I think Congress will not want a recession this year,and will pass a marginal measure;but will have a rude awakening in October,when the market reacts to the fiscal cliff.As a return play,you look at high quality corporates and fixed income,Mr.Fisher advised. BlackRock has offices in 27 countries worldwide.From governments to pension plans,insurance companies and individuals,the money management firm serves its diverse clientele with risk management,strategic advisory and investment system services,building portfolios totaling approximately 10 trillion dollars. BlackRock Inc.(BLK)

BlackRock's Downgrade Reaction

The timing of the downgrade of U.S. credit did take us by surprise,said Peter Fisher,head of fixed income trading at BlackRock,but we did a great deal of planning to protect our clients.It's a wake-up call about the level of risk in the world.A number of investors will take it as one more risk.They're selling risk assets,not Treasuries.
We're not mechanistic sellers or buyers.We are managing risk and looking for opportunities that this downgrade may create.The risk that the U.S. will not pay is pretty marginally increased.Clearly,coming in the fragile markets,it's one more straw breaking the camel's back of investors.
U.S. Treasuries were 60% of all AAA assets.It's a liquidity pool with great transparency.There's a little too much overreaction.Do not change behaviour abruptly.We've been up in quality and liquidity to try and brace ourselves,Mr.Fisher indicated.
BlackRock is the largest money manager in the world,with 3.66 trillion dollars of assets under management.It provides investment,advisory and risk management solutions from offices in 26 countries.
BlackRock(BLK)

From Downturn to Downgrade

Concerning the Euro-zone plan for debtor aid,it's surprising in terms of the scope and the coordination,in the view of Rick Reider,Chief Investment Officer of Fundamental Fixed Income at BlackRock,who helps manage more than 600 billion dollars in assets.I think it's a pretty significant move.A series of parliamentary approvals have to take place,and we're still in a slow growth European economy,so we're not out of the woods yet.
The one point with the plan is,you're dealing with liquidity,but not solvency.That's the big risk.Also,how do you recapitalise the banks?
The U.S. still has the best refuge for investors.Even if it lost one AAA rating,there's nowhere else for investors to go.If losing the rating is a warning sign,it's ultimately terrific.
The markets are anticipating a 50/50 chance of a downgrade.Companies are in great shape relative to the governments around the world.Ratings agencies need to see real reform or they will downgrade.If the deal is late or weak,downgrade can still occur,Mr.Reider explained.
Although the global markets have transitioned from the collapse of equities engendered by bad loans and obscure instruments,they now must surmount a new challenge in the form of the sovereign debt issue.This aftermath of governmental largess is a follow-on dilemma for the wealth creators and managers.

Asking Much of China

Pete Fisher,a Vice-President at BlackRock,the world's largest money manager,thinks we're getting to the point where China has to tighten their policy.He fears we'll have more friction,but he's hoping we won't.He's worried about too much hype.We can over-hype how much we can get out of Chinese exchange rate hikes when they do occur.It would cool down their economy.We don't want China to have inflation or a bubble.
What a revaluation of the yuan may not do is affect our trade relations,Mr.Fisher points out.It's terrific for the world economy for China to have cerated all this wealth over the past 20 years.We've got to be careful not to expect too much from what they've accomplished.
BlackRock isn't afraid of the long end in bonds.Mr.Fisher believes the economy is gonna do O.K.,but not brilliantly.BlackRock thinks if the economy is gonna do O.K.,that's gonna mean a sideways movement in interest rates,attractive to investors at the long end.Some analysts have been warning investors that the long bond will collapse under inflationary pressure.