That now. He wasnt famous. No one knew him. But this is a great song. I hear it once and i like it already. Ive heard this a thousand times. Where . I dont listen to that. I like it. Anyway well hear more about larrys call on ceos to focus on longterm value in a moment. Also its a moment of news makers on the set. Well be joined by Steve Schwarzman and jack and suzy welch will be stopping by. Lets get you up to speed on the markets. Yesterday the markets did end higher. Dow up by 75 points. Things are mixed at this point but the to you pu tours are down by 26 points. Economic data at 8 30 eastern time. Weekly jobless claims plus housing tarts and then at 10 00 we have the fed survey. Its early in earnings season but only three dozen S P Companies reported but of those 80 have topped profit forecasts. Among the names posting results before the bell today we got black rock black stone. Well see steve in a little bit. Citigroup, Goldman Sachs, mattel and health united. United health just crossing the tape. That company earning 1. 46 a share. Revenue there 35. 76 billion. The street looking for 348 billion. That company, thats a big number. In a quarter. 35. 7 billion in a quarter. Anyway, they did raise guidance also to 615 to 6 30 and it had been 6 to 6. 25. But they beat by 11 cents or so. So raising the year by 10 cents, actually, yeah raising the year by 15 cents on the low end, 5 cents on the high end. So he they already sort of beat. So i dont know whether i didnt look. I didnt know where the street was for the year. The stock is called up sharply though. Its up 272. Bidding 120 after that close. Theoretically trade an all time high today. 123. 76 is the all time high for that. Its 621. So they go to 615 or 630. Other stocks to watch, we told you about netflix. Company subscriber additions rising 22 year over year and that was better than people thought. Netflix also asking its board to approve a stock split. And sand disk shares trading lower. The data storage product maker warning of a steeper than expected drop in revenue. Also plans to cuts jobs to reduce costs and panera getting a boost. They plan to share and refranchise 73 Company Owned caves and increase its stock buy back program. Why these Companies Continue to do these buy backs for shortterm gains is beyond me. Well talk about that with our guest host for the hour. What theyre doing is selling some of these franchisees to do it. Selling them out . No refranchising them. So they wont be the Company Owned stores anymore. If you lose control over that were in the mix of this turnaround. You have more control if you own more on the stores rather than franchise them. Larry. You know about mortgages and shoes. And music. We want to get to larry on all of these things. Real quick the other buzz story of the morning, ben bernanke has a new job. A advisor to citadel fed group. Hell advise the firms investment committees on Global Economic and financial committees. Hell also meet with the funds investors and i talked to him last night about this. He says that he was pretty sensitive about the concerns over the revolving door between wall street and washington. A lot of banks approached him. Other investment firms that had dealings with actually we should talk to you about this. Had dealings with the fed. He declined their offers and chose them because it wasnt regulated by the fed. He wont be doing any lobbying in this role. He will continue blogging and being a fellow full time at the institution. So its just going to be one piece of his pie. Did you try to hire mr. Bernanke by any chance. We did not. You were not on the list . It was foolish i didnt try. As i saw that. But no we did not have any conversations. See i would have hired him like five years ago. Hes not doing anything now and what does he know anymore than anyone else. He can give you texture. He designed he designed the program. Would have been much better to hire him as he was fed chairman. We can find out what hes thinking about that moment. That was your deal. He saw a problem with that. I asked him last night, its not an exclusive deal. I said is it even exclusive in Financial Services. He said he can still do work for you. Tell me if this is surprising hes getting paid a flat annual fee. He wouldnt disclose what the fee was. Of course you know i asked but the but its not he doesnt get a stake or carry in the funds. Nor should he. He then loses independence. I think he was paid differently. Im not sure if he when he went back to govern lt and then he left and i dont think he has any of that stuff now. Still talking to goldman or black rock. He is going to still do speaking enfwajgagementsengagements. Im long bernanke. Bb, is that the symbol. I would be very long bernanke at this point. Lets talk about our other big story of the morning. Blackrock oversees more than 4 trillion. Numbers came in at an adjusted rate of 4. 89 a share. That was much better than expected. 4. 52 a share. Larry fink says performance is strong across all categories and hes here with us on the set for the hour. Great to have you here. Great to be here. Especially here in new york. The numbers came in quite a bit better than the street was expecting. What happened . What did they not anticipate . Probably the number one story is the breath of the flows. We had 70 billion of net longterm flows. For the quarter. For the year is 252 billion. For rolling year 250 odd billion of longterm flows. Across our retail platform and our mutual funds 35 million and our shares and most importantly where we were weak we had 21 million and that closed institutionally and it was spread across asset categories from some of our alternative products. Heavily fixed income and modest even in parts of our equity franchise. Why . Whats happening . Well i think the low rate environment and the fragmented markets that were seeing more and more clients are looking for theyre having more problems than they had in years. In europe negative rates is truly harming Pension Funds and Insurance Companies. Especially Insurance Companies. European Insurance Companies are going to have a real difficult time to even offer insurance. Negative rates. Solvency too. So theyre having obviously we had negative rates for ten years. Many Insurance Companies would be insolvent. This is one of the come poenlts where i dont believe Central Banks appreciate what negative Interest Rates do to the longterm interest of Insurance Companies. We cannot reinvest in europe or switzerland now. Were seeing broad based interest. Its a statement of black rocks position with being in 34 countries worldwide. So its a global phenomenon that lower Interest Rates is creating huge pain and this is something that is misunderstood and not talked about enough. Everyone appreciates he Interest Rates, how it really accelerates the equity markets which it is certainly doing but its creating quite a bit of havoc with a lot of our clients. Warren buffet called in a couple of weeks ago and we talked with him about this. He pointed out they would be better off if the people werent paying their premiums. If they were good for them and just held on to that money. But his Insurance Company is on a global basis. Probably one of the net winners to this because yes warren does have a german Insurance Company but the Global Presence of the Insurance Company is less dependent on germany and switzerland when you talk about some of the large european Insurance Companies that are heavily european focused. Theyre much more harm. So it actually plays quite well and i dont think people appreciate how powerful the low and negative rates in europe are for warrens company. Meaning what . Theyre struggling in making any return and even as low as our Interest Rates are hes making a return. They have more flexibility right now. Whats amazing to watch, yields here. Ten year in the u. S. Below 2 again at 1. 9 is what we have been tracking. Its surprising until you realize that germanys ten year rate went negative. Japan is low was announced yesterday that japanese are the largest owners of treasuries. 180, 190 u. S. Ten year treasury. Its very low. Its actually quite attractive compared to the global market. Why would anybody buy a german bund when they can buy a u. S. Treasury. I agree with that. Thats one of the reasons the equity markets will continue to do fine. Because if you believe and the chair of the ecb said yesterday hes going to carry on his program, that program has another year plus going. Year and a half going. That tells me were going to have low or negative rates in europe for sometime and if you have if you think rates are going to stay that low longer youre going to see more and more people moving into equities and more alternatives and getting back to black rock, were seeing that conversation now. We have one of the top ranked European Equity funds in the world and were seeing huge in flows in our european equities and were seeing more and more people looking at asian he equities because Lower Oil Prices has a huge impact in asia because they are net importer of almost all Energy Sources so this is very powerful for india and china and japan. I want to follow up on several things you said. Yesterday we saw a rally of oil prices up almost 6 . Do you think Oil Prices Remain lower or oil is headed back to 78 . I think long run stability of oil will be between 60 and 80. I believe well see greater production. The one thing that people misunderstood when we had when we see the count collapse in the United States 30 of the wells produced 70 of the oil. So much of the inefficient wells have been taken off line. Secondarily, you can have a well sitting there and turn it off and turn it on so these, through this Technology Transformation of the oil market you can use your wells as the reserve. Depending on the break even from any specific area, whether its the balkin or eagleford. Lets say the break even is 50 theyre going to turn on that well. So my view is were going to have far greater supply issues in front of us and im not trying to navigate 5 or 6 move but i think theres going to be more supply pressure for the oil market. Putting a lid on prices. Than demand. Now we wake up one day and see Global Demand and global gdp rising back to 5 then youll have the demand curve picking up quite considerably but until we see global gdp pick up the story is going to be excess supply. Not an assumption or resumption of more demand. Lets go back to what you said about equities. You like stocks at these prices because sounds like youre t in the camp of there is no alternative. Well theres a Cash Alternative but earning 0 or negative. If you worry about it and theres a lot of worries. Im very constructive on europe. Europe is going to have higher gdp in the First Quarter than the u. S. Thats a huge change from what i said and everyone else said four months ago. This is why i think the dollar is too expensive now. Well see a very weak First Quarter. You can say its weather or Capital Expenditures but probably the Biggest Surprise of the u. S. Is the consumer savings. The oil savings, the gasoline savings. Theyre not consuming it and then in europe the lowering has created huge advantages for the companies. Not unlike what we had when our dollar was so weak. Europe is benefitting by weak oil and benefitting by a weak euro and its finally stable and secure with the october stress test. I like european equities more today than i like u. S. Equities. I like asian equities more today than u. S. Equities. U. S. Equities out perform for three straight years. Its catch up time. Its not like i dont like u. S. Equities but i see more demand elsewhere than the u. S. Can i ask a question when we get to the buy back issue to some degree how much do you think the u. S. Market is artificially inflated by corporate buy backs right now . Well the question if buy backs are permanent its not artificial. Thats a question thats how much has been retired and is why are you laughing he says theres a supply and demand. Were reducing supply and theres more demand. You have the same demand for lesser supply of stock but i dont even know what that question means. Other than ask whether that is actually weve had that for years. We have seen fewer ipos and weve seen more stock buy back for a number of years now so the if he phenomenon is accelerating. Its weird. If a corporation is deciding thats the best use for Corporate Cash thats part of running the business and i would agree with that. I dont understand that question. I think youre imlying that stock prices are being artificially held by the companies that hope their stock prices are held artificially high. To some extent if the companies decided for example to listen to larry and stop buying back their stock. I didnt say stop buying back stock. If they were to be more balanced in their approach. Thats what i said yes. Its not clear to me that the eps and stock prices themselves would hold the way they are. Because theres an anticipation in part on Many Companies today that these companies are going to continue these stock buy back programs. But andrew my letter spoke that it was some companies that may be more productive use of the money. Instead of buying back stock, if you can, reinvest it back into the company and earn a better return than the stock buy back or giving me a dividend because i have to reinvest it at zero, thats better than the stock market. Theres the whole issue of who wants to expand when for six years we had 1. 5 growth too then the idea that maybe an activist government made it more difficult to plan for longterm capital investment. I think society made it much more difficult. You think its because theres pressure for immediate returns. Pressure immediate returns. I think government is just totally focused on the shortterm. Dont you think if we had 4 growth people would be expanding plants and equipment and employees and Everything Else. The issue, joe, you cant wait until 4 growth because some of these factories or hiring a team of people may take two or three years. The good leadership of companies have to anticipate that. You can get burned. Approximate copper producers, do you see how they cut back so quickly . They already know where the copper is. Thats an easier thing to do but to build a factory like dow chemical is doing in houston, thats a ten year commitment. Right. But it also takes government tax you have to be able to see where the government is headed with some of that stuff too. As i said we have a persuasive society of shorttermism right now. You wouldnt be expanding your operations right now would you . Coal operations . The terms of regulations and epa. I wouldnt build another coal plant. But yoir picking an industry just an example theres a lot of industries that you dont know what regulations, health care i dont know pharmaceuticals im not sure where i im just making the example that regulations and government all of that stuff have an impact on what you decide to do. If its not clear then its going to be easier to buy back stock. Let me tell you black rocks story. We reinvested 550 million back into the company. Ive had 7 headcount growth annually. Here we are reinvesting back into the company. Its one of the reasons we had such Phenomenal Growth in the country but at the same time we have a dividend pay out ratio of 40 . We have a Stock Repurchase Program that brings it up to 60 and at two times i had an opportunity to buy back shares from our two large shareholders. And i was able to buy back 2. 5 billion of stock at an average price of 170. The stock at whatever 370. So what we are calling for is a balanced approach and just to raise a consciousness. Theres too much debate about rising dividends and not enough talking about if youre going to invest for the future you cant wait for a 4 gdp. You have to anticipate it and if you see the and if you believe were going to have a Lower Oil Price for a longer period of time which i believe this is going to create much more demand out of asia because they have been a net importer. It will ultimately create more demand in the United States. A consumer is benefitting from it so you can anticipate higher global gdp and for those companies reinvesting in their companies, whether in china or the United States or mexico or where ever those are the companies that will be the winners. If i were you i would have been more focused on individuals where they obviously are not grow growing revenue. So their compensation and the share price is important that it rises so they decrease the float with their excess cash and the multiple becomes cheaper and theyre able to throw in earnings by essentially moving the stock higher not based on investing for the future. In the long run you lose. How . In the long run Financial Engineering works for tell ibm that as revenue continues to go down. I think ibm today is focussing on building out their systems. Reinvesting to. So i dont think its all a stock repurchase plan. Theres companies that have done that to admit they have no revenue growth. And those are the companies we are attacking. Then you are talking about it. But were al