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In its 2024 annual letter, BlackRock (New York Stock Exchange: BLACK) President Larry Fink stressed that well-functioning capital markets will play a central role in overcoming the main challenges of the 21st century, which he sees as the retirement of older workers, infrastructure (including the exercise of what he called “energy pragmatism”) and debt. See selected quotes below.
On the problems facing the world in the 21st century
- “I believe the growth and prosperity-generating power of capital markets will continue to be a dominant economic trend for the rest of the 21st century.”
- “Why did the United States recover from 2008 faster than almost any other developed nation? A large part of the answer is the country's capital markets… Countries that aspire to prosperity not only need strong banking systems : They also need strong capital markets.”
- Two key challenges of the current century that can be solved through capital markets: 1. Providing a “secure and well-deserved retirement”; 2. Provide a financing mechanism for infrastructure development, including to help achieve “energy goals, including decarbonization, in an affordable way.”
About social security and retirement
- After noting that the Netherlands changed its retirement policy 10 years ago to gradually increase the retirement age: “Obviously, implementing this policy elsewhere would be a huge political task. But what I mean is that we should start having the conversation. When people regularly live past age 90, what should be the average retirement age?”
- “How do we encourage more people who want to work longer with carrots instead of sticks? What if the government and private sector treated people over 60 as late-career workers with a lot to offer, instead of people who should retire?”
- “I don't claim to have the answers (related to Social Security and retirement). Despite BlackRock's success in helping millions of people retire, these questions will have to be asked of a broader range of investors, retirees, policymakers and others. In the coming months, BlackRock will announce a series of partnerships and initiatives to do just that, and I invite you to join us.”
On Encouraging Retirement Investing and Sound Retirement Spending Habits
- “The first barrier to retirement investing is affordability.”
- “No one is born a natural investor. It's important to say this because sometimes in the financial services industry we imply otherwise. We make it seem like saving for retirement can be a simple task, something anyone can do with a little bit of effort. practical. It's like driving your car to work. Just grab your keys and get in the driver's seat. But financing retirement isn't that intuitive. The best analogy is if someone dropped a bunch of engines and auto parts in your driveway and said, 'Find out.'”
- “It's good that lawmakers are proposing different bills and that states are becoming 'retirement laboratories.' More should consider it. The benefits could be huge for individual retirees. These new programs could also help America guarantee the long-term solvency of Social Security”.
- “As a nation, we must do everything we can to make investing in retirement more automatic for workers.”
- “This retirement paradox has a simple explanation: Even people who know how to save for retirement don't know how to spend it.”
- “Simply put, the move from defined benefit to defined contribution has been, for most people, a move from financial certainty to financial uncertainty.”
- “We're talking about a revolution in retirement. And while it may happen first in the US, eventually other countries will also benefit from the innovation. At least, that's my hope. Because while retirement is primarily a challenge of savings, the The data are clear: it is also an expense.
- “Arguably the biggest barrier to investing for retirement, or anything else, is fear.”
- “Compared to 20 years ago, today's group of young Americans is 50% more likely to question whether life has a purpose. Four in 10 say it is “hard to have hope for the world.” I have been working on finances for almost 50 years. I've seen a lot of numbers. But no data has worried me more than this one.”
- “Any response has to start by incorporating young people. The same surveys that show their lack of hope also show their lack of trust – much less than any previous generation – in every pillar of society: in politics, government, media. “And in corporations. The leaders of these institutions (I am one of them) must be empathetic to their concerns.”
On infrastructure, 'energy pragmatism' and a potential debt crisis
- “The future of infrastructure is public-private partnership.”
- “How are we going to pay for all of this infrastructure? The reason I think it's going to have to be some combination of public and private dollars is that the funding probably can't come from the government alone. The debt is simply too high.”
- “But is a debt crisis inevitable? No. While fiscal discipline can help control debt at the margins, it will be very difficult (both politically and mathematically) to raise taxes or cut spending to the level the United States would need to dramatically reduce the debt. But there is another way out beyond taxes or cuts, and that is growth. If the US GDP grows at an average of 3% (in real terms, not nominal) over the next five years, that “It would keep the country's debt-to-GDP ratio at 120%: high, but reasonable.”
- “This is part of the reason I'm hearing more leaders talking together about decarbonization and energy security under the joint banner of what might be called 'energy pragmatism.'”
- “This is where the power of capital markets can be unleashed to great effect. Private investment can help energy companies reduce the cost of their innovations and scale them up around the world.”
- “In this letter, I have shared my view that capital markets are going to play an even greater role in the global economy. They will have to if the world is to address the challenges around infrastructure, debt and retirement. These “These are the main economic problems of the mid-21st century. We are going to need the power of capitalism to solve them.”
About BlackRock's strategy for 2024
- “The combination of technology and advisory, along with ETF and active and private markets capabilities, allows us to offer a better client experience, leading clients to consolidate more portfolios with BlackRock or engage us for outsourcing solutions. We believe this in turn will drive We will continue with differentiated organic growth in the future.”
- “We have strong conviction in our strategy and our ability to execute with scale and expense discipline. Our strategy remains focused on growing Aladdin, ETFs and private markets, maintaining alpha at the heart of BlackRock, leading sustainable investing and advising clients on their entire portfolio.”
- “In private markets, we are prepared to capitalize on structural growth trends. Whether responding to demand for much-needed infrastructure or the growing role of private credit as public banks and lenders move away from the middle market, private equity will be essential.”
- “At ETFs, we will continue to lead the expansion of investment access globally and through innovation. The ETF is an adaptable piece of financial technology and, over time, we have been able to do more with it than simply make investing be more affordable.
