Thursday, May 8, 2008

NYTimes: BlackRock is Fix it Firm to Manage Risky Assets of Others in Distress

Blackrock (BLK) has been one of 2 financials I've held through thick and thin, even in the worst of it for the sector - Mastercard (MA) being the other. You can see from the chart, you would not even realize it's a financial based on it's stock behavior - many of its peers are down in the 40-60% range over similar period.

(I'll post the chart later, it's not loading right now) :)

This is a nice overview story on the NYTimes, led by one of my favorite managers Larry Fink [Mar 18: Larry Fink from Blackrock Getting more Bullish]. It has been interesting to see when other companies, or even states get into trouble [Dec 7: Blackrock Swoops in to Help Florida] that Blackrock is on the other side of the Bat Phone. In fact, when the Federal Reserve needed some help - they turned to JPMorgan (JPM) (who got all the press) AND Blackrock [Mar 24: Blackrock Continues to be Interesting]

This company is now the biggest asset manager in America, has a burgeoning international business, and is led by one of the best in the business - I consider it a core holding for a very long time - and hope their CEO is not whisked away to run some trouble child [Nov 5: Merrill Offers Job to Blackrock CEO Fink] Most CEOs do not carry their weight, but this is one of the few that deserves every penny.
  • One Saturday morning in March, Laurence D. Fink got some urgent news: Wall Street needed his help. Mr. Fink runs BlackRock, a money management company whose name probably rings few bells outside financial circles. But on that March weekend the Federal Reserve, moving to defuse a crisis threatening the American financial system, began turning to BlackRock to play a critical role in the government-brokered rescue of Bear Stearns, the faltering investment bank.
  • Now, under the aegis of the Fed, BlackRock is managing $30 billion of hard-to-sell assets from Bear Stearns, part of the central bank’s unprecedented deal with JPMorgan Chase under which JPMorgan took control of the investment bank.
  • In Washington, some question the arrangement, saying it puts taxpayers’ money at too much risk. But on Wall Street, Mr. Fink’s job for the Fed, along with other high-profile work, is quickly earning him a reputation as the Mr. Fix-It in the troubled credit markets. And for BlackRock, that means business — lots of it.
  • There is no shortage of drama these days in the credit markets, which happen to be Mr. Fink’s specialty. Back in the 1980s, at First Boston, he helped pioneer mortgage securities, the kind of investments that are causing so much of the trouble now.
  • Just this week, BlackRock agreed to manage risky subprime assets with a face value of $22 billion from UBS, the ailing Swiss bank.
  • During the last year, as the shares of many larger, wealthier financial companies have plummeted, BlackRock’s share price has soared 43 percent, closing at $212.15 on Wednesday.
  • Mr. Fink has transformed his firm from a small bond shop into the largest publicly traded asset management company in the country. Along the way, the firm has focused ruthlessly on managing the risks it takes in the markets, BlackRock executives said. That conservative approach appears to have paid off.
I do believe that this displays a very important fact that can apply to individual investors as well - the first rule of making money is not losing it. Cut losses quick, avoid rampant speculation, and try to push the odds in your favor as often as possible. This is why I always cut back ahead of earnings even when it costs potential upside - the risks are too great in most cases as we have a binary outcome (could be up 25% in minutes or down 25% in minutes) in which we have no control over. I guess when you first come to the market that is "fun", because I see so many people do it, but in the long run you might as well go to Vegas and place chips on black or red. Myself, I'd always prefer to give up potential gains than give up capital.

Long Blackrock in fund; no personal position

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