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BlackRock Responds To Zero Hedge Query On Its Italian Debt Exposure
Earlier we asked some simple questions regarding BlackRock's sovereign debt exposure. Multi-trillion asset manager BlackRock responds:
- BLACKROCK RESPONDS TO QUESTIONS ON ITALIAN DEBT HOLDINGS
- BLACKROCK COMFORTABLE WITH INTERMEDIATE ITALIAN BONDS
- BLACKROCK ENCOURAGED POLICY MAKERS ADDRESSING CHALLENGES
- BLACKROCK CHIEF INVESTMENT OFFICER RIEDER COMMENTS IN A NOTE
Hopefully this response will satisfy the market and make it comfortable with BlackRock as an intermediate-term going concern. Then again clarifications such as this one by other Blackrock professionals, namely that the market is wrong, probably will not help:
- BLACKROCK'S ROVELLI: ITALY SPREADS DON'T REFLECT FUNDAMENTALS
So, what happens if the spreads do reflect fundamentals? Will Blackrock apply Mark to Market to its Italian holdings? And perhaps BLK can follow in Jefferies' footsteps and be so kind to break down it gross and net exposure for all to see? After all, there is nothing to hide among its "nominal exposures."
More from Bloomberg:
BlackRock Inc., the world’s biggest money manager, said it’s “comfortable” holding intermediate Italian bonds as a surge in yields triggers concern the collapse of the government will force the nation to seek a bailout.
“Our view has been that a solution to stabilize European sovereign and financial markets is very far from conclusion, and thus, maintaining very nominal exposures to some of the countries with substantial refinancing needs was the right portfolio posture,” BlackRock Chief Investment Officer Rick Rieder said in an e-mailed statement to Bloomberg News.
On Oct. 13, Rieder said on Bloomberg Television’s “Inside Track” with Erik Schatzker that BlackRock was buying Italian debt given improved prospects for a resolution to the euro zone sovereign debt crisis. Italian 10-year notes, which finished today at 7.25 percent, traded at 5.82 percent on Oct. 13.
"The ultimate outcome we think is going to be constructive,” as far as European policy makers’ efforts to contain the crisis, Rieder in the Oct. 13 interview.
“We have become more comfortable with the levels of some of the debt, like some intermediate Italian bonds,” Rieder said in the statement today. “These levels will foster a greater sense of urgency towards an ultimate European solution. However, we still maintain a very conservative posture here and see a number of hurdles which still have to be cleared before growing positions.”
In a separate Bloomberg television interview on Oct. 21, Rieder said BlackRock remained a buyer of Italian government debt as European policy makers were set to gather to address the region’s sovereign debt crisis. “Italy is attractive,” Rieder said during an interview on “InBusiness With Margaret Brennan” on Bloomberg Television that day. Euro finance ministers meet on Oct. 21, followed by ministers from all 27 European Union countries the following day.
“We are encouraged that policy makers appear to be meeting and addressing the challenges implicit in some of the recent proposals, and think these debt levels require policy movement and decision-making,” Rieder said in the statement today. “We are optimistic that this will happen over time, but still think that markets will be stressed until that time comes, and thus are maintaining a very conservative posture.”
In other words, BlackRock is betting, hopefully not the house, that Italy is Too Big To Fail and someone else will not make a case study that could cost the company billions. Surely to former Lehmanite (and former vice chairman of the all important TBAC) Rick Rieder, this is prudent risk management. Unfortunately, it did not quite work out for the Norwegian sovereign wealth fund's foray into Greek "hold to infinity" investing.
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Remember in 2008 where everyone was releasing their exposure to Subprime.....history doesn't repeat itself, but is sure as hell rhymes.
This little fundamental? Oh I wouldnt worry about that little guy.
BLACKROCK SAYS: WE BUY SHIT BONDS FROM ALL OVER THE FREAKING WORLD SO THAT WE ARE GUARANTEED TO GET HOSED SOMEWHERE. iT'S CALLED DIVERSIFICATION BITCHEZ!
They wish.
BLK will likely make a mint on fees passing those hot potatoes around among their clients.
meh. They bought the good stuff. With the extended warranty.
It's just paper, what the hell, relax.
As is my interest, now, in owning BLK.
I guess Rick Rieder isn't familiar with the Corzine manual.
Post assolutamente excellente, tyler
Really Mr. Durden!
It's as if you are asking for transparency, truth, and an absence of tragic hubris from Blackrock in a culture of milky malfeasance and felonius fish tales!
(keep up the good work)
Can I ask a dumb question? These bonds are in client investment portfolios, right, and not on the balance sheet of Blackrock itself. If so, it means client asset outflows (not fun, but not an abyss) and not not some kind of insolvent deleveraging a la Lehman.
If Blackrock is using 30 to 1 leverage and Italian bond holders have to take a 50% haircut Blackrock could become insolvent, meaning they can't cover the balance owed in portfolios for all investment clients.
MF Global was using something like 44 to 1.
The Emperors outfit is the most smashing in a century, as long as no one realizes, or tells him, he is naked.
Hit that nail on the head.
What happens if Black Rock goes down?
Ugly shit.
some bloggers want to know...
Reider is a bull market trader who has always depended on govt intervention to bail him out. He lucked out post Lehman and is not very different than most HF guys. They just dont get that their livlihood and much of their success was totally dependent on the seat and govt puts. The really great traders/hf guys get it - Reider is not one of em.
- Its very easy to trade with somebody else's money and lose a fortune. Then you pack up and find another stupid company, and start the same old sh*=t again.
and what, if the fundamentals don't count. If current spreads and margin reqs kill and even mroe important, if the EUR splits up, holding ITA bonds until maturity will be fun for an asset manager. Ask Falcone's clients what they think of those long-term fundamentally strong investments.
THE PRICE OF [WHATEVER] DOES NOT REFLECT FUNDAMENTALS
The rallying cry of losing traders everywhere. Yeah, double down, clown.
ZH, you just display your stupidity with these kind of posts. Blackrock is an asset manager that manges assets on behalf of others. It does not finance itself in the repo or cp market and it does not use 30:1 leverage to make money. If it made a dumb bet in one of its funds, it will lose assets. It's fee income is secure.
So you are saying an asset manager can never blow up, because it will just "lose assets" if one of its key assets is found to be massively deficient?
Stupidity....get on the floor and rehydrate my dried ejeculate with your blood. Keep bleeding until I say so. Now, listen you know that fee income in some way must reflect the perfomance of their managed accounts/asset classes whatever the fuck you want to call it. IT TAKES MONEY TO MAKE MONEY YOU TWIT. If the AUM goes to ZERO how "secure" is the fee income then? Stop smoking that SHERM(an). You imply "losing" assets" isn't bad? Is it then good? WHY DON"T THEY JUST LOSE ALL THEIR MOTHERFUCKING ASSETS AND SEE WHAT HAPPENS? Where is my "fee income" and well-educated polyamourous size 0 bisexual girlfriend? I know with the seemingly omnipresent derivatives insanity you might think being unlevered means you simply can't lose, but you can still LOSE all your FUCKING money unleveraged. I don't lose money (ever-I'm just that guy) but alot of people do. Took Miami +9 last weekend. Assholes like you lose the assets of the proletariat only to take "fee income" and make snarky remarks. Your cubicle must be a hotbed of investment sagacity.
Sherman McCoy:
Repo and derivative clearing houses concentrate the risk | RepoWatchAnd here's a hint for you before you think about responding: Read the linked article VERY carefully, because Blackrock indeed has risk, because although it states in the most generic of terms that it is "reluctant to to post collateral with certain central counterparties that do not have central bank backstopping," no where does it claim that it hasn't or doesn't, and God only knows how much derivative exposure they have, whether such private contracts (not traded on public, regulated exchanges, thus being very opaque) it has, whether pre or post 2007, for that matter.
Finally, how sound do you think Blackrock's assets are? Do you know?
Are Blackrock's assets marked-to-market in manner remotely approaching FMV levels? Or is Blackrock, like so many other financial players, marking to fantasy?
Do you want to wager that Blackrock won't be declaring itself the next AIG when the next and soon to arrive crisis reveals the value of its assets held on its balance sheet are a fraction of what it claimed, and that if it's allowed to fail, it will bring systemic risk to the entire financial system?
And if Blackrock is a mere manager of assets, how do you explain this fact set, as just one example, based on a snapshot in time a month ago?:
BlackRock CEO says investors confused, fearful | Reuterswww.reuters.com/article/.../us-blackrock-idUSTRE79I2EH20111019
Why have Blackrock's shares been subject to such volatility, and why has it seen the types and sizes of redemptions it has, if it is merely a custodian of funds, implying little to no risk of loss (assuming there's an explicit or implicit government backstop - hell, the same could be said of Bank of American, which holds 40% of all U.S. retail bank deposits, no?)?
DOW/SP500/NASDAQ charts reveals very overextended price action and another Wile E Coyote scenario...
http://stockmarket618.wordpress.com
FDIC loan loss sharing details are a total taxpayer ripoff to big money types and billionaires like Soros, Dell, GS execs. Look up OneWest Bank started by those guys. FDIC sold them a portfolio at up to 50% discount and the FDIC backs up to 90% of losses, not based on what OneWest paid, but the ORIGINAL amount of loans. OneWest makes more money not working out any loans and letting them foreclose and cashing in from the FDIC.
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