Larry Fink of BlackRock and Bill Gross of PIMCO sat down on Thursday with Bloomberg Television‘s Erik Schatzker for a conversation at an alumni event hosted by UCLA Anderson School of Management. Both men are alums of the school, having graduated five years apart.
Fink and Gross discussed the U.S. economy, Washington politics, Europe’s crisis and Occupy Wall Street.
Fink on the slowdown in the U.S.:
“I think this is a continuation of 2008 and 2009. So I don’t think this is a new crisis. I think it’s just a continuation of what we experienced… And I think the fears of 2008 are so very much a part of our psyche that we just are continuing to run any time there is any fear. And I think the marketplace is in a very difficult position. But on the other hand, there are trillions of dollars of money sitting in cash, sitting in bonds. Owning a bond today is slowly eating away in your returns because if you have any projections in terms of what you need to live on when you retire or retirement plans, you’re just not going to earn enough return. So I look at what’s going on in the world right now. It is a problem. It may get worse. But I also see all the seeds for a real revival.”
“These are really big structural issues and our governments are not addressing them as fast as they should but I still come to the conclusion that much of this is already priced in the stock markets and I’m not suggesting we can’t fall briefly another 20 percent. If we don’t fix Europe, we will.”
Gross (below) on the slowdown in the U.S.:
“These are structural problems that can’t really be addressed by Washington or policymakers in terms of cheaper money or in terms of fiscal spending.”
Gross on Europe’s crisis:
“The outcome will be decided in terms of this tussle between the private market, insurance companies, banks, private investment management companies attempting to sell all that was the ECB being a reluctant buyer. So it’s not a determinable outcome at the moment but it’s certainly in flux and very dangerous.”
Gross on how the instability and uncertainty in Europe ranks among the risks to the American economy:
“Right at the top.”
Fink on Europe’s crisis:
“It is a very dangerous stake Germany’s playing. And many people would not play these stakes because the outcomes can be black or white. So I believe ultimately Germany does not want to see the abandonment of the Euro. In fact, I don’t even know how that can be done, because when you talk about the abandonment of the Euro and these countries moving back to their original currency, it would probably mean bankruptcy for every financial institution and maybe every large multinational company within those nations because their liabilities were still in Euros.”
Gross on the Obama administration: