BlackRock CEO Larry Fink Tells Fox Business The Killing Of Osama Bin Laden "Took The Risk Premium" Out Of Commodities Market

BlackRock CEO Larry Fink spoke with FOX Business Network's (FBN) Neil Cavuto today about the commodities market, impact the killing of Osama bin Laden had on the economy and the need for the United States to raise the debt ceiling. Fink stated that the killing of bin Laden “took the risk premium out of the market” which had a “big psychological impact on the Gulf region.” In terms of the debt ceiling, Fink said the United States “should not even think of playing games with our debt ceiling, this should be passed” and that we “cannot wait until 2013” to do so. Excerpts from the interview are below, courtesy of Fox Business Network. On whether the fall in commodities signals a bubble issue: “I don't know if it's a problem. I don't think it's a problem at all actually with oil falling down its going to end up helping the economy…I think what you saw in some of the commodities in base metals is that people are frightened of the dollar and you're seeing people run after a product in which people think this will hedge any dollar depreciation and so you're just seeing psychology change very quickly.” On how the killing of Osama bin Laden has affected the markets and commodities: “I think some of the changes in commodities prices has a lot to do with the killing of bin Laden. It took the risk premium out of the market. I think if you think about what bin Laden did, he thought terrorism and murder was a way of making change and in this year we've seen a revolution in Tunisia and Egypt, we're seeing social unrest in other countries. Most of it has been done in a peaceful way…but essentially we've seen government changes which were swift that did not occur though terrorism. I think that has a big psychological impact in the Gulf region and I think that is a really major impact in how we think about the issues around globalization.” On being bullish on commodities following the death of bin Laden: “I am more bullish than bearish. Most certainly. I think the world is becoming a safer place not a more worrisome place. However, democracy is a very hard concept for investors. We all talk about we love democracy. We understand totalitarianism easier. It's easier to gauge. You have certainty. And with democracy you are going to have a lot of noise. So the market has built this huge risk premium as we try to ascertain where will Egypt go in this democratic process. Is it going to go right or left.” On the risk premium being taken out of the commodities market: I think we are seeing a lot of that risk premium being taken out. I do believe the rise in oil and petroleum prices has slowed down the world demand for products and so we saw base commodities fall down. And I must say if you look at where Copper had been trading and other base commodities, they started breaking weeks before we saw the severe break in silver and in gold.” On the raising the debt limit: “I think there's one trend that's very negative for this country. We are highly dependent in foreign investing in our treasuries. We are looked upon with less favoritism as we historically have. We are still well loved and liked, but it is not as favorable as it was maybe ten years ago. And if we think we can play games as a debtor…I think that's a dangerous individual behavior and it's even a more dangerous business behavior for a government. We have a great deal of sovereign credit problems in Europe, they are going to get worse. We have the threat of a downgrade of our credit rating. And if the men and women in Washington think they can play that game as a debtor nation. If I was the supplier of that credit, I would not look in favor of that type of methodology of behavior. And so I would think that is a very bad thing to do. So I would agree with those who said we should not even think of playing games with our debt ceiling. This should be passed. We still have to address this deficit issue which is looming and getting worse and we have to address it this year. We cannot wait until 2013.” On whether the guilty verdict in the Raj Rajaratnam case scares Wall Street: “That's nonsense. There are always some bad guys. We got rid of a bad guy. The majority of the Street is very ethical and they're trying to make a living…I am not suggesting there's only one bad guy. There's always some form of bad behavior.” On wiretaps now being used to police Wall Street: “I think the mood has changed. If you just reflect back, everybody is attacking the banking system for some of their problems and I think the tenor of society today is saying we have to focus not just on drug lords but maybe there are some crooks in the financial markets and we have to do something about it. I think that's a society change and maybe we in finance don't like it. And I am not suggesting I personally like it in terms of my civil rights, but I am not surprised at the methods that are being employed. But I do believe it's an indication of societal view of the financial markets.” On the economy: “The economy is slowing, not slowing dramatically, but the economy is slowing from the pace we saw in the second and third quarter of last year. It's certainly less robust than people anticipated at the beginning of this year but we're ok. The economy is going to be growing a two and a half to three percent. It's good. It's growing because essentially the private sector is adding jobs. The private sector is building more factories. The reason you are seeing stocks continue to rally, when you have a five basis points funds rate and you have a ten year treasury hovering around 3.20%, equities are cheap versus bonds. And so you can be concerned about the economy and still see equities continue to rise.”