Larry Fink is the CEO of BlackRock (BLK) which in 2018 managed nearly $6 trillion in assets. That is 'trillion' with a 'T' which makes it one of the most powerful financial institutions in the world.
This morning Mr. Fink comment on CNBC: "We have a risk of a melt-up, not a meltdown here. Despite where the markets are in equities, we have not seen money being put to work... We have record amounts of money in cash. We still see outflows in retail in equities and in institutions."
Mr. Fink goes on to say: "Many people thought we were going to be in a period of rising rates. We were not and we saw huge under investment and people had to rush into fixed income...We have not seen that in equities yet."
Unsurprisingly, these bullish comments have produced quite a bit of scoffing and amusement among the bears, who have been predicting disaster for months now. It is easy to understand the response given the size of the move off the December 24 low. This market is almost back to all time highs, and someone is predicting that it is going to 'melt up'? The bearish argument for why this is absurd is not hard to appreciate and sounds logical and compelling.
How could this billionaire money manager not appreciate the warnings of all these profound and erudite bears? Is he just 'talking his book'? Is this just another case of institutional Wall Street saying what its clients want to hear?
There have been many times when well-respected Wall Street figures have made predictions of this sort at the exact market turning point. On October 31, 2007 Barton Biggs called for a "market melt-up." The market reversed sharply the next day, and we did not see those levels again until seven years later. The timing of the call was absolutely stunning and is a good lesson for those that are inclined to make such grandiose predictions.
Those of us that recall Mr. Biggs prediction cringe when we hear something similar from Mr. Fink, but what is interesting is how much disdain there is out there for a positive call at this point. I don't recall the sort of bearishness that we have now back in 2007, but the fact that it wasn't such an outrageous view probably contributed to the poor timing.
The important issue is that Mr. Fink's argument is not some outrageous prediction by a Pollyanna. The conditions for it to happen do exist. One of the most important conditions in place is the number of people that think it is totally and completely ridiculous.
I'm not going to load up and go on margin in hopes that Mr. Fink is correct, but I'm certainly going to keep an open mind about the possibility that it could occur.