Larry, where should we begin? There is as we were just discussing a lot of history in this club, there's a lot of history in this building.
So where are you going with this?
How would you characterize?
How would you characterize this moment in American history?
It's no different than anything else. We're fine. I mean, you know, look at in our thirty seven years of running Black Rock were not focused on the day to day. We try to consistently talk with a narrative about long termsm working with clients in the long run. I mean, obviously things when you see a twenty percent market decline in three days, obviously it has significant impacts. And the ripple effects of of the potential of teriffs is going to be longstanding. And so our job right now is
to just be We're having more conversation with clients. Probably the last time we had this many client conversations that Blackrocks was right when we closed our economy in March of twenty twenty. And this is a type of time where we really try to connect. We manage money for people in one hundred and six different countries. We have
offices in thirty six countries. So what we need to be doing every moment is bringing all this global information that we gather with eleven plus trillion dollars of money and hearing and paying attention to the flows and where the money is going. But the magic sauce of Blackrock is the last twenty percent of being local and being really connected to each and every client worldwide and try to really add to them. So we're bringing all this global information, but we really try to be local in
every community where we operate and work. And as a fiduciary, our job is to be helping Canadians right now. Our jobs are helping Europeans now. Our job is to be helping Americans now. And so you know, obviously markets are down twenty percent, some stocks are down over thirty forty percent from their high water marks of just from January. But in the long run, I would say, in the long run, this is more of a buying opportunity than
a selling opportunity. That doesn't mean we can't follow another twenty percent from here too, But I do believe over the long run the vitality of the United States will persist, and I do and I'm still proud in terms of working with every investor worldwide.
When you just said.
It doesn't mean that the market can't drop another twenty percent.
Yeah, bit of a gas go through the audience.
I won't like it, but it's not gonna you know, and and and but but unlike most like let's say eight to o nine, I don't you don't see the leverage in the system. You see, you don't see systemic risk. You see. This is more geopolitical issues. Look, the fundamental issue that that we're all trying to recognize. Post World
War Two, the United States was a global stabilizer. And I've been now you know, in July will be my forty ninth year in finance here in New York City, and that's been one of the foundational tenets of of I would say the financial community that you know, we we we live and work and grow with our economy. And one of the main foundations in the US that
we are a global stabilizer. Obviously, in the last week we have not been a global stabilizer, and I think that is something that we Is this going to persist? Are they going to be new global stabilizers in the world. Well, if there are new global stabilizers in the world, and I'm not suggesting there will be. These are questions that that must be asked. You know, what is the role of the dollar in that in that ecosystem. So there's a lot of questions that we need to be asking yourselves.
But you know, eighty days ago in Davos, the phrase was American exceptionalism. You heard everywhere. I would say, probably every meeting I went to everyone who's focusing on how to do more in the United States. And obviously that's been thrown out right now. Obviously you could look back and say that was, you know, just irrational exuberance of too much related to the US. And so that we
are seeing a recalibrations. You know, seventy five percent of the market value, this would before the last few days, seventy five percent of the market value of the global capital market was here in the United States. Can there be a re ordering of that in the short run, maybe in the middle, medium term? Sure, And so all of this this is the type of questions. Clients have historically underweighted Europe. Okay, so far this year that's been
a bad trade. Should clients be reorienting themselves back into Europe? Should to be reoriented into more of a a more broadening of a portfolio. So all these questions are being asked, and I don't have a good answer yet. But I am troubled by that we are not the stabilizer as a country. We are destabilizing. And I think this is what the financial markets are trying to grapple with.
There are, let's say, at least a couple of competing narratives. One of those narratives is from President Trump himself. He says that the tariffs he rolled at last Wednesday in the Rose Garden will create an economic renaissance and make America wealthy like never before. And then the other narrative
is the public market narrative. That's the one that's telling us something altogether different, that the tariffs are an economic train wreck in the making, and if anything, they'll make not only the US but perhaps other countries a lot poorer.
Which of those narratives is right?
There's probably something in between. But you know, as a market partsis what I'm more in the market narrative. So let's be clear. In the United States right now, eight percent of workers who are in manufacturing eight percent, eight eight So how much more should it be sixteen percent? I don't know. But it's not I don't think you know. I looked up what they are. The new entry level of an automotive worker is today. It's about twenty five
dollars an hour. Twenty five to twenty eight dollars an hour. That's not that's not a great job versus today. And and Brad Smith, the president of Microsoft, talked about this last Monday, stating that we have we're going to have a shortage as large as five hundred thousand electricians in this country. Electricians today are paid over one hundred and fifty thousand dollars a year, especially to the advanced electricians
are doing AI and all that. So there are you know, there are many ways where we could create great jobs instead of this whole reordering. And so I'm I'm I believe the markets. I've always believed in the markets, and I believe the markets are telling you the real story. And the markets are telling it that story right now. Could the story be a little too negative? Now? Maybe? Could it be not negative? Not? Maybe too I'm not here to suggest we're over this pathway. We'll have to
see how this plays out, you know. And so we're going to have to see how this plays out. But let me step back and respond to another statement you said. Let me just reiterate, seventy five percent of the global capital markets rested here in the United States. I would say that means the United States is fabulously successful when
you have that. That being said, and I wrote this with my CEO letter that came out a week ago today, the biggest issue we have in capitalism, the biggest difference that we have today is we have not seen a broadening of the economy as much as we need to. And I think this is what President Trump is trying
to do. How can we brought in the economy that we can have more opportunity for more I mean, like I said, I think we need more more you know, more schools that helped men and women in the trades like electricians and other where we know we have a severe shortage right now. And the other thing I would say, if you look across the different manufacturer expectum, there's a lot of job openings. My biggest issue is all of this, and this is where the market is not focusing on enough.
All of this, in my mind, is much more inflationary than the market is expecting right now. How much more inflationty Well, the market is talking about all the recessionary pressures, which obviously will mute down prices. But if all the terrats, and I'm not saying they're going to be put into place, if all the terrafts would be it would be put in place. Almost so many items are going to be much more elevated, two more expensive, much, yes, more expensive.
We have we have so many needs for jobs already and we only have we're you know, we're at four percent of employment. When I started in walterd in nineteen seventy six, full employment was considered six percent, and you know, we evaluate it and now we say, maybe what is full employment three or four? I don't know if they even to use that term anymore. But you know, you know, we have shortages of workers, and we're going to have
even more shortage of workers. And if you overlay a part of the reason why we had American exceptionalism eighty days ago and AI, the need to build out infrastructures just as great today. And my biggest fear as we roll out AI in the United States, building these data centers, building our electricity grids, building out America, building out our infrastructure,
we don't have enough workers already. All of this is going to lead to higher elevated wages, which is in some respect a good thing, but a lot of it is going to be elevated inflation. So this notion that the federal Reserve is going to tighten, I mean, see the ease four times this year. I see zero chance of that. I mean, I'm much more worried that, you know, we could have a we could have an you know, elevated inflation that's going to bring rates up much higher than they are today.
Zero chance of four or five FED cuts, depending on what what what moment we're looking at futures prices, or zero chance of any cuts whatsoever.
That's not an unrealistic idea because and I think the Chairman Paul said that last week, but he said we need to have more information, right you know, I don't see any reason to cut right now. And that's how I interpret his comments last week.
So you're concerned about inflation, you briefly, but.
Can I interruptxcuse me? Sure, I'm concerned about inflation if all the proposed terrorists truly go into place at the same time, at the same time, you have you know, the you know, as if the president is successful and changing the behaviors of other countries by bringing down the terrafs, you know, we could actually the end result could be lower terraffs across the board. And I think that's what
they're when he talks about reciprocal terrafts. He's talking about I'm going to match your terraces and if we both you bring him down, I'm going to bring him back down. And so there is some value to that to read. Our terrace system was founded post World War two, post Korean War, where we believe that if we could lift these other countries posts, these crisises American business, that would
be the biggest beneficiary. And we have not changed how these asymmetric tariffs that we've created over the last eighty years. And you know, is it is it is there a value today to relook at how we have terrafts today and how to try to make it more symmetrical. Sure, and so see how this all plays out the But the uh, my former partner rough lost time.
So you've touched on this idea, Larry, that perhaps there's some justification for a change in.
Yeah, I mean, look at I was with a senator today and he talked about we import twenty nine million tons, which seems like a lot of beef from Australia. Yeah, and yet our beef cannot go to Australia. Okay, there's something that sounds like a legitimacy.
So that's that's one of the justifications that President's sites, right fairness, yeah, right, other countries are, in his words, ripping us off.
The second, I'm not going to go talk about that, Okay.
The second is revenue taxing imports will raise trillions of dollars to pay down the federal debt.
At who's costs, So no, that's never the same.
Then there's a third, right, rein industrialization that companies will bring jobs and factories back to America. Which of those is that a package of arguments that makes sense?
I believe there are in some areas where we need to bring back manufacturing for national security areas. I don't think Barbie dolls is something that we're gonna or Swiss watches or anything like that that we have to have or or or shrimp from this from Vietnam. I mean all these different things there are. I'm you know, there are some industries where having a more control of your supply chains is probably very.
You're making the case from much more calibrated, But that's why I am.
I'm always a little more balanced in the center.
Yes, what about the the theory that these retaliatory tariffs are part of a Nixonian grand strategy like dropping the gold standard was to solve America's debt problem by four seeing down treasury yields and weakening the dollar.
That's a theory that has some purchase right now.
Well, I do believe the dollar will be weakened. I mean, most political theory is, or economic theory is tear us raise the value of the currency. I think it's going to weaken the dollar. And look, one thing I would say with certain you know, the economy is weakening as we speak, and so the need for the administration to focus on these pro growth agendas, which was much of what the President campaigned on. We have to get that going,
whatever it's the tax cut. We need to be deregulating, we need to be streamlining, permitting exactly all the things I've been writing about where we need to get the private capital, private markets to start investing in the United States. We need to you know, and I think right now the market is not focusing on all these We forgot about the power of AI, the power of all these
different changes. We're focusing on the market, But the macro trends of AI, the macro trends of rebuilding our infrastructure, these macro and if the President is successful in deregulating, if he's successful in streamlining permitting, then you know, we could go back to this view that we have a major growth agenda in front of us. The President has been focusing on right now areas that in my mind, in the short run, are very inflationary and destabilizing the economy.
And that's what we've been talking about. But if we can find ways of rebuilding, rebuilding growth through these agendas, and then you know, as I said at the beginning, these the market declines, we're going to look back and say, this might be a good entry level. Did we get back into the market. Are we.
Headed for recession? Are we inter recession?
You know, most CEOs I talked to I would say we are probably in a recession right now, right now, right now. A couple of airline CEOs told me. One COO specifically said, you know, the airline industry is like a proverbial bird in a coal mine, canary in the coal mine, and I was told that the canary is
sick already. If you look at what's going on in air traffic, and how people are changing, and how so many people who like Canadians, who are not coming to the United States, we're seeing in very different sectors are real downturn.
I have no doubt that people in this room and elsewhere are encouraged by this idea of yours, that there are opportunities to seize. And it doesn't surprise me to hear you say that, because in the sixteen years that we've known one another, you've always found a way to think constructively about the future, to make a case for taking risk, to make a case for staying invested.
So explain that case right now.
If, as you say, there's the possibility that at the very least, equity prices continue to go down, what should people do?
Where are these opportunities?
I can see why there might be opportunities for a firm like black Rock, but what does everybody else do? Do you stay invested, do you take risk, do you take money off the table?
What do you do well? I would not be taking money off the table right here. I think that we've had enough, you know, from the high water point of January, which may have been excessive. You know, I think rolling one year average S and P is down about seven percent. Now, yeah, could it be down, as I said, could it be down seventeen percent from rolling one year average? Sure, that's that would be. That would be about forty percent from the high water mark.
That's a lot.
That's a lot, and it's a great entry level of getting because I think the macro trends are not are not going to change the need for the United States to rapidly build out AI as imperative today as it was three months ago. Our need to invest in our infrastructures as great as today as ever before. And so some of the big macro trendsors have not changed. The
narrative that has changed. We're not talking about it. But I think if you spent time right now with the CEOs of the Hyperscalers and this, the Navidia and other players, they would say the need is just as great today as there was three months ago. And I think some of the big macword trends are just are still in place.
Do you believe in in a Trump put who Trump put? What is that if the market's weakened too much that he'll reverse course, oh on policy tariffs for example, or somehow engineer a combination of stimulative measures to bail them out.
That's what I said, if you know, I do believe the president is going to be focusing on these pro growth agendas, and so we'll see how that offsets on.
Front though, that's something that he's been promising the whole way along, correct, and so Trump put would be effectively about the president getting scared.
I don't know how to value that.
Tariffs, Larry, are just one piece of a much more comprehensive policy agenda. Since the inauguration, we've seen major initiatives on everything from immigration and the border to rolling back DEI.
I could go on.
There's a lot, most of it by executive order. Again, trying to take a step back from the burning question of tariffs, which are occupying the markets of the moment. How would you evaluate these first eleven weeks of Trump two point zero.
A lot of volatility, a lot of change, and I think even before the tariffs there is so much change, so much volatility. I think this is one of the reasons why even four or five weeks ago, most CEOs were telling me businesses incrementally getting worse. I think, whether it was a threat of terrorists, whether it's just all these changes. I think more and more people were pausing and slowing down consumption as we speak, and I think all of this is just going to slow down consumption.
One interesting fact that I wrote about this in my CEO letter this here. You know, there was always this notion that Main Street was different than Wall Street, and we always, you know that you had it was it was good political statements about you know, Wall Street is here and Main streets here. Well, the reality is sixty two percent of Americans now invest in equities. So the
market impact is impacting Main Street. And so even before this market setback you had, you were starting to see more and more I would say trepidation by consumers more and more slowing down on their purchases, slowing down theirifacation plans, and all of this. I would imagine now where the market setback is going to freeze more and more consumption, and I think we're going to start seeing that really quickly.
So there's you know, and so I do believe that in the coming months, we're going to we're going to see more evidence of a slowdown in this economy, and.
Investors are going to have to continue pricing that in, whether that's question on economic growth, whether it's whether less consumption leads to.
But we're going to also see how companies navigate these these tariffs. Are they going to navigate the terrafs by trying to jam it down the manufacturers and lowering prices. We've already heard a couple of US retailers going back to their place and manufacturing and telling you got to lower your prices. So that's one point. One point is are they going to absorb the terraffs in their in their margins that's not good for the equity mark mar or are they going to just pass it all the
way on to the consumer and elevate prices. It's probably going to be a combination of all three. But so until we see how this all plays out, and then two how much of these tariffs are going to be actually implemented, we'll see. But I think most of America does not understand the extent of these TIFFs. What is it eighty six percent of toys are manufactured in China.
So there's what a sixty seven percent cumulative tariffs Now in China, those are going to be expensive barbie dolls, they are and mean, But across the board, you know, the terraffs across the board, everything we're talking about is just going to be you know, I'm not saying one hundred percent is going to be passed on in terms of the final purchase price, but a lot of it can be passed in and then the cumulative effect of that.
So just think about there are more American jobs in the fabrication of steel and aluminum there than there is an in making steel in aluminum. So we now have these aluminum and steal terrorists in place. What does that impact in the demand of the fabricated products? So all these things have major ripple effects that we have. Nope, and this is why the market's down because it just creates this vast amount of uncertainty how this will all play.
Out, and uncertainty means paralysis right in the boardroom in the c suite for how long?
How long?
This is the question that management teams are asking themselves right now. You know, how do we move forward? Well, is there a way to move forward? Yet or do you as you said, do you have to wait and see.
I think in most cases you're going to have to wait and see. But look at it. If you're if you're in a boardroom looking at acquiring a company, well it's cheaper now, a lot cheaper.
Now, but you also may have less currency.
Okay, fine, But if you're doing one hundred percent, equity doesn't really matter. So I you know, I don't it's not a binary decision. I don't think it's going to defer all these decisions. I mean, obviously, already we saw a number of IPOs pausing, and probably for a good reason. But it's not like it's over. We're going to reassess itself. Maybe some of the evaluations of these companies that we're going to go public are going to be down twenty percent.
In the long run, if they have a vital, strong business proposition, their stock will be fine. Yes, so sell a little less secondary shares, sell all primary and it really doesn't matter. Larry, what are.
Foreign leaders telling you about these big shifts in US posture and policies.
I saw a couple of foreign leaders last week in Europe. You're asking my opinion, So I am too. They're pretty shocked. They're questioning, they're not. They're also also willing to think about, Okay, where is there asymmetry in the trading agreements with the US, and is there means in ways that we could be, you know, managing this more successfully that we can move forward. Uh, someone are going to be adapting. Someone are going to be retaliatory like what China did.
What do you think is the right approach to stand up to President Trump like Mark Karney is doing in Canada and the Europeans might get around to doing, or be more non confrontational like the UK or Mexico.
I don't think Mark has been one hundred percent confrontational. I mean, I think it's talking a good game. Look, all right, everybody's job is to try to solve problems and try to move forward. If you truly believe in your country situation that you've got to be confronational, see how that works. I don't. I don't think there's one shoe that fits all, and so I think we're all
going to have to play this out right. Look, I do believe the issues that we had with Mexico were more with less related in most trade it had much more to how to do with immigrants and fentanyl, and I think the government of Mexico has mitigated much of that in the short run. So we'll see how that all plays out. So that came to a better outcome, better outcome for America too.
Will it be harder to operate as an American company outside the US.
I'm hearing worries and concerns, But if you know, whether the US is put in a put on a pedestal, or knocked off a pedestal, each in every country, each and every company has a responsibility to prove every day
that your fiduciary in each every country. So if you if you were a company that was not proving each day that you're trying to be working on behalf of your clients in Italy or your on behalf of your clients in Korea or Australia or Canada or Mexico, You're not going to be serving your clients in the long run. And so you know to me, this is why I started off this conversation. Today, we're in one hundred and six different countries. We have offices in thirty six countries.
Our job is to prove every day that we are working on behalf of each and every client, and so of eleven plus trillion dollars that we manage is zero, is our money zero. So we don't prove every day that we are working on behalf of each and every client and helping them, then we're going to fail anyway. Will there'd be some negative overhang maybe, but I don't believe that's going to be translating into into I would say, a direct impact on the future of our business.
There is obviously no small, small I should say, no small amount of risk in running a foul of the president. He has shown himself to be willing to inflict a lot of economic pain on his critics and his opponents. Do corporate leaders have to choose their words carefully?
I think corporate leaders have to choose their words carefully with every government, it doesn't matter who's in who's in office. I think our job is to as a leader, you know, as a leader of Blackrock, my job is to be working on behalf of each in every country as best as we can. Our job is to provide the best advice that you can. And when you can can give advice that it's held in private, you can do it one on one or in a small group of people. You know, your job is to be earnest and forthright
and not to bs anybody. And so I have made my career around not telling political leaders what they want to hear. But I've led my professional career in telling political leaders what I think they should hear.
When I used the term economic pain, I had one thing in mind. A lot of people, including many people here in this room, have been following the president's attacks on law firms affiliated with attorneys who prosecuted him, and some including Paul Weiss and Scatten and Wilkie Farr, have cut deals to save their businesses.
Others are fighting the president in court. What do you make of that? That use of presidential power.
I let's move on. I mean, honestly, you.
Know, I could rephrase.
I could rephrase if the president threatened to bar Blackrock from federal business like managing money for civil servents, what you do and warned your clients they might.
Lose federal contracts? How would you handle that?
I would look at what the issues are at large, and what what the the administration is asking, and I would make a judgment on what is the value of that? And am I standing up to the principles that I tell every employee at the firm that we're Are we living those principles every day? Are we doing what we need to be doing, or or you know, is there you know, is there something that in my past that we needed to mitigate. So I don't know the circumstances a bout any of the law law firms, you know
Blackrock has has. You know, our job is to be working on behalf of everybody. Last year, clients were rewarded US six hundred and thirty one billion dollars of new money on Friday. Well, that was our first quarter. You know. Our job is to prove every day that we're doing we're working for our acid owners. And so I could answer that question how we I would play it.
You were at the White House last month to see the President after Blackrock clinched a multi billion dollar deal to buy the port operations from a Hong Kong company, C J.
Hutchison.
I'm glad you said Hong Kong. It's important right.
That deal was important because it included two ports in Panama that the President had accused of being controlled by China. Gd Evans was at this meeting Mark Waltz was at this meeting. Elon Musk was at this meeting. What did you learn from them?
I'm not going to talk about the meeting. Let me just go back on the TikTok of the deal. Hutchison has been talking about for two three years on the idea possibly entertaining an idea of selling their ports. If you look at their stock price, their stock from our our evaluation was trading at thirty percent of book. It was trading around a twenty six billion market cap at that time, and they saw the valuation of the ports to be worth at least twenty two billion of it.
And they have many more enterprises within the whole complex. So they went out and spoke to dozens of different potential investors. Because of our acquisition at GIP, we already had a large position in ports, having over fifty ports alongside our partners MSc and their port business till and we coveted the opportunity of adding on the Hutchinson's ports to the port business that we have on it already, and all the who's who of New York private equity
was bidding on it. Every major shipping company was put a bit in it. And so this is a pretty sought after asset, and I believe our consortium with MSc until just gave us an overwhelming position. And the one thing I would tell this audience of the investment was done as a profit opportunity on behalf of our investors. There was not a kernel of decision making related to
any geopolitical considerations at that time. That being said, once we started into an exclusive conversation in locking down the deal with the seller, I did reach out to members of both parties, not just one part PARTI. I did have conversations with the administration and I and we had conversations with some of the countries where the ports were located. So so we we you know, I don't think I would have done anything differently. We were trying to be
a fiduciary in everything we were doing. Now, obviously it became much larger because if you read ninety percent, maybe one hundred percent of all the papers, it said Blackrock bought Panama. I mean, and.
It's not a done deal yet. Chinese raised some concerns. What happens now.
I think this is going to be a very interesting thing to watch for geopolitical purposes and China is just you know, China is going to be reviewing this just like every other MSAction. We would have to go to fifty different jurisdictions for anti competitive reasons. In China because one of the big users of all the ports, none of the ports, we're inch on it, that'll be one of the jurisdictions that will will review the transaction. And so that's the only way actually China can stop it.
Well, is there a greater risk now because of last week's tariff announcement that it does actually move to.
Block it from taking place?
Of course it can, but it's going to be nine months of regulatory review. So we'll see how this all plays out. I'm actually pretty optimistic that we will find a solution because if you look at it, everything was done in the right order. It was not done politically despite all the narrative. It was done.
A solution with or without the Panamanian ports.
I'm pretty confident would be the Panamic ports. Will he represent four or five percent of the total valuation of the whole enterprise. You know there are six there's six port concessions at the Suez Canal that no one has ever talked about. So I just give you, you know, some of the color. I mean, the port of Rotterdam, the biggest port in Europe, is one of the concessions there. It's going to be reviewed as one transaction.
You're confident.
Yeah, well, yea as of the moment.
Yeah, is this kind of thing going to become a trend, big ticket m and a especially if critical infrastructure driven by geopolitical risks.
Well, let's be clear, two years ago, no one would you even care about a port. It would have been on page forty of financial press. I mean, there was a lot of poor transactions in the last two years that no one cared about. Yeah. I think, I think this is a new reality today that countries are going to be looking at all these different geopolitical issues. That being said, you know, Blackrock last year announced three mergers.
There were three acquisitions, two of them are closed. In the first two we were hung up by one jurisdiction for crazy reasons. The g IP deal was closed because one of the assets, one of the infrastructures they had, and our prequent technology transaction was held up by for five months by one jurisdiction. But they both closed and so it just requires conversation, and we're mostly through the regulatory review of HPS and we have already said it
should close early second quarter. Excuse me, this is early third quarter or no, late the second quarter. I got to get my quarters right. And we're on track. But yeah, I do believe there's going to be a little more review, but we saw that already a year in the last year.
And the more review, yes, for sure, more activity, more M and A activity because of geopolitical risks.
Oh no, if the geopolitical risk creates economic opportunities, yes, but M and A is not going to because of geopolitical issues, because you know, if geopolitical issues creates opportunities, good, you know, I think there's gonna be more M and A opportunities as we deregulate