CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC’S MARIA BARTIROMO SITS DOWN WITH BLACKROCK CHAIRMAN & CEO LARRY FINK TODAY ON CNBC’S “CLOSING BELL WITH MARIA BARTIROMO”

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BARTIROMO: HE RUNS THE WORLD’S LARGEST, IN TERMS OF ASSETS MANAGER, AT MORE THAN $3.5 TRILLION. HE CURRENTLY OVERSEES MORE MONEY THAN THE FEDERAL RESERVE. JOINING ME NOW IN A CNBC EXCLUSIVE IS BLACKROCK CHAIRMAN & CEO LARRY FINK. GOOD TO SEE YOU.

 

FINK: HI, MARIA. HOW ARE YOU?

 

BARTIROMO: GOOD. THANK YOU FOR HAVING US HERE AT YOUR TRADING DESK.

 

FINK: I DIDN’T HAVE TO COMMUTE.

 

BARTIROMO: EXACTLY. YOU HAVE BEEN ON THIS CAMPAIGN FOR A WHILE TO TRY TO EXPLAIN TO PEOPLE THAT YOU’RE LOSING MONEY WHEN YOU HAVE MONEY IN FIXED INCOME. TAKE MONEY OUT OF THERE AND PUT IT INTO EQUITIES. YET, WE’RE SEEING OUTFLOWS. WHAT’S GOING ON?

 

FINK: IN EQUITIES

 

BARTIROMO: YEAH. WHAT’S GOING ON?

 

FINK: I SHOULD BE CLEAR, YOU’RE NOT LOSING MONEY IF YOU’RE IN FIXED INCOME THAT HAS HIGHER YIELDS. IF YOU’RE SITTING IN A FIVE YEAR TREASURE EARNING 60 BASIS POINTS AFTER INFLATION AND YOU’RE LOSING MONEY. SO WHAT WE BELIEVE PEOPLE HAVE TO START FOCUSING ON, AND I BELIEVE IT’S A CRISIS, THAT IF YOU DON’T START PUTTING MONEY AWAY THAT’S EARNING MORE THAN 60 BASIS POINTS BUT EARNING CLOSER TO 5, 6%, YOU’RE GOING TO HAVE A HARD TIME MEETING YOUR NEEDS WHEN YOU RETIRE. SO IF YOU’RE A 35-YEAR-OLD PERSON WITH A DESIRE TO RETIRE AT 65, YOU ONLY HAVE 30 YEARS TO BUILD THAT NEST EGG. AND TODAY WITH LONGEVITY BECOMING A BIGGER ISSUE AND LIVING BEYOND 90, YOU NEED TO BUILD EVEN A BIGGER NEST EGG THAN PEOPLE ARE SUGGESTING. SO WE’RE JUST TELLING PEOPLE THAT YOU HAVE TO THINK ABOUT KEEPING MONEY IN BONDS OR IN CASH RIGHT NOW, IT’S COSTING YOU A HUGE AMOUNT OF MONEY. PEOPLE TALK ABOUT, LIKE, FINANCIAL REPRESSION. YOU HEAR THOSE WORDS. WELL, YOU ARE REPRESSING SAVERS. SO WHAT WE WERE TRYING TO ALERT PEOPLE IS YOU DON’T HAVE TIME TO WAIT. YOU HAVE TO START FOCUSING ON INVESTING FOR THE LONG TERM. AND THAT’S WHAT WE ARE TRYING TO HAVE, THIS IDEA GERMINATE AND HAVE PEOPLE START ACTING. YOU NEED TO BE IN THE MARKET. YOU NEED TO HAVE INVESTMENTS THAT CAN SURVIVE OVER MANY YEARS. FROM MY VIEW, AS I SAID TO YOU LAST YEAR IN OCTOBER ON YOUR SHOW, I WOULD BE 100% IN EQUITIES. OBVIOUSLY IF YOU WERE 100% EQUITIES, YOU WOULD HAVE MADE 23%. NOW, MOST PEOPLE CAN’T DO THAT, BUT WHAT I’M TRYING TO INSPIRE PEOPLE TO START FOCUSING ON THE NEED FOR RETIREMENT, THE NEED FOR HIGHER YIELDING RETURNS.

 

BARTIROMO: I WANT TO FIND OUT SOME SPECIFIC STRATEGIES IN TERMS OF DOING THAT. FIRST, LET’S TALK ABOUT THE ECONOMIC BACKDROP BECAUSE HERE WE HAVE THIS MARKET RALLYING, YET THE FUNDAMENTALS SEEM TO BE QUITE ANEMIC. WHAT’S YOUR TAKE ON WHERE WE ARE NOW IN TERMS OF THE ECONOMY?

 

FINK: WE’RE ABOUT A YEAR AWAY FROM THE U.S. ECONOMY SHORT-TERM PROBLEMS RELATED TO THE FISCAL CLIFF. WHICH WE’RE GOING TO TALK ABOUT. THE FUNDAMENTALS FOR THE U.S. ECONOMY ARE QUITE STRONG. WE’RE ABOUT A YEAR AWAY FROM A FULL REBOUND IN AMERICAN HOUSING. WE STARTED OFF IN 2007 WITH 8 MILLION UNSOLD HOMES. WE NEED ABOUT 1 MILLION TO 1.5 MILLION NEW HOMES EVERY YEAR BECAUSE OF FAMILY FORMATION, BECAUSE OF REPLACEMENTS AND FOR IMMIGRATION. OVER THE LAST FIVE YEARS, WE HAVE NOW BROUGHT DOWN THAT INVENTORY TO A MORE MANAGEABLE LEVEL. IN STATES LIKE TEXAS, YOU’RE STARTING TO SEE RISING HOUSING PRICES. EVEN IN COUNTIES IN CALIFORNIA WHERE YOU HAD A HUGE GLUT OF HOUSING AND IN SOME OF THE COUNTIES YOU HAVE SHORTAGES AND HOUSING PRICES ARE GOING UP. SO HOUSING IS BECOMING A BETTER ECONOMIC ENGINE. PRESENTLY, WE’RE ONLY BUILDING ABOUT 500,000 NEW HOMES. IN A YEAR FROM NOW, I EXPECT US TO GO BACK TO THAT MILLION NEW HOME LEVEL, AND THAT’S GOING TO CREATE NEW JOBS. SECOND OF ALL, OUR BANKS ARE IN GREAT SHAPE. THEY’RE IN MUCH BETTER SHAPE THAN THE EUROPEAN BANKS, MUCH BETTER SHAPE THAN THE ASIAN BANKS. I BELIEVE THEY HAVE A CAPACITY TO LEND MORE WHEN THERE’S SUFFICIENT DEMAND. THREE, YOU KNOW, WE HAVE BEEN BLESSED WITH INCREDIBLE AMOUNTS OF ENERGY. WE’RE THE THIRD LARGEST PRODUCER OF OIL IN THE WORLD TODAY. OIL PRODUCTION IN THE UNITED STATES IS UP 8%. WE HAVE ALL THE NATURAL GAS. SO THIS IS GOING TO BE A HUGE JOB CREATOR. A FEW WEEKS AGO I WAS IN GERMANY AND SAW ONE OF THE CEOs OF THE LARGEST GERMAN COMPANIES WHO SAID THEY’RE GOING TO CLOSE A FACTORY IN ONE OF THEIR CITIES AND OPENING A FACTORY IN CHARLOTTE. THE REASON WHY, OUR NATURAL GAS IS NOW ABOUT $3.40 BTU. IN EUROPE, IT’S OVER $11. IN ASIA, IT’S OVER $18. BECAUSE OUR NATURAL GAS PRICES ARE SO MUCH CHEAPER HERE, THIS FACTORY IS GOING TO BE BUILT USING THE NATURAL GAS TO BUILD PLASTICS. THIS CEO, THIS WAS A BIG MULTICAP, LARGE MULTINATIONAL GERMAN COMPANY WHO SAID THERE’S GOING TO BE A RENAISSANCE IN U.S. MANUFACTURING BECAUSE OF OUR ENERGY SITUATION.

 

BARTIROMO: WELL, THIS CAME UP LAST NIGHT DURING THE DEBATE WITH MITT ROMNEY TALKING ABOUT ONE OF THE WAYS TO CREATE JOBS IS THROUGH ENERGY IN THIS COUNTRY.

 

FINK: IT’S HAPPENING. BY THE PRIVATE SECTOR RIGHT NOW IN THE NATURAL GAS AREA, IT’S HAPPENING. ALSO IN OIL. SO IT’S ALREADY HAPPENING. IT’S JUST GOING TO START ACCELERATING. BECAUSE NOW MANUFACTURERS ARE GOING TO TAKE THE NATURAL GAS AND CREATE DOWNSTREAM PRODUCTS LIKE PLASTICS AND OTHER ITEMS.

 

BARTIROMO: I KNOW YOU DON’T WANT TO TALK POLITICS, LARRY. I WANT TO GET YOUR TAKE ON REALLY WHAT WAS BEHIND THIS STRENGTH TODAY. A LOT OF PEOPLE SAYING IT WAS A ROMNEY RALLY. WE WANT TO RUN A SOUND BITE OF ROMNEY LAST NIGHT AND THE PRESIDENT, NOT TO GET YOU TO REACT TO IT, BUT TO PUT SOME PERSPECTIVE IN WHAT WE SAW TODAY IN STOCKS. LISTEN TO THIS.

MITT ROMNEY SOUND: MY PLAN HAS FIVE BASIC PARTS. ONE, GET US ENERGY INDEPENDENT. NORTH AMERICA ENERGY INDEPENDENT. THAT CREATES ABOUT 4 MILLION JOBS. NUMBER TWO, OPEN UP MORE TRADE, PARTICULARLY IN LATIN AMERICA. CRACK DOWN ON CHINA IF AND WHEN THEY CHEAT. NUMBER THREE, MAKE SURE OUR PEOPLE HAVE THE SKILLS THEY NEED TO SUCCEED AND THE BEST SCHOOLS IN THE WORLD. WE’RE FAR AWAY FROM THAT NOW. NUMBER FOUR, GET US TO A BALANCED BUDGET. NUMBER FIVE, CHAMPION SMALL BUSINESS.

 

BARTIROMO: WELL, THERE YOU GO IN TERMS OF MITT ROMNEY COMING OUT WITH FIVE POINTS IN TERMS OF AN ECONOMIC PLAN. DO YOU THINK THIS IS RESONATING WITH FOLKS OUT THERE? THE ISSUES THAT ARE IMPORTANT IN TERMS OF DICTATING THEIR VOTE, THE ECONOMY.

 

FINK: NO QUESTION. THE ECONOMY FOR SO MANY FAMILIES IN AMERICA HAVE BEEN VERY DISAPPOINTING. MANY PEOPLE ARE STILL LOOKING FOR JOBS. MUCH OF THIS IS STRUCTURAL UNEMPLOYMENT, AS WE’VE CREATED MORE EFFICIENCIES IN OUR FACTORIES, WHICH MEANS FEWER JOBS. SO WE HAVE — YOU KNOW, WE’RE STILL STRUGGLING WITH AN 8-PLUS PERCENT UNEMPLOYMENT RATE. TOMORROW WE WILL HAVE A NEWS JOBS REPORT SO WE WILL SEE HOW THAT GOES THAT HAS TO BE PART OF THE DEBATE AS TO HOW – WHAT DIRECTION WE GO IN THE FUTURE. SO IT IS MY VIEW, WHOEVER IS PRESIDENT IN 2014 — AND I’VE BEEN PUBLIC ABOUT IT. I AM A DEMOCRAT AND VOTING FOR THE PRESIDENT.

 

BARTIROMO: YOU MEAN 2013?

 

FINK: NO, WHOEVER IS PRESIDENT IN 2014, BECAUSE MY VIEWS OF HOUSING, MY VIEWS IN ENERGY AND MY VIEWS ON THE BANKING SYSTEM, I THINK WE’RE GOING TO HAVE A RISING ECONOMY. SO I DON’T BELIEVE — I THINK IT’S GOING TO BE — WE’RE GOING TO HAVE THIS SUCCESS IN OUR ECONOMY SUBJECT TO WORKING OUT OUR FISCAL CLIFF, WHICH WE COULD SPEND A LOT OF TIME TALKING ON. BUT I DO BELIEVE THE FOUNDATION FOR A STRONGER AMERICA IS ALREADY HERE.

 

BARTIROMO: LARRY, THIS FIRM HAS BEEN INCREDIBLY SUCCESSFUL. THIS IS LARRY FINK’S BLACKROCK. YOU HAVE LED THIS COMPANY, FOUNDED THIS COMPANY AND HAVE AN ENORMOUS AMOUNT OF CREDIBILITY. THERE’S WORD AND BUZZ OUT THERE THAT IF THE PRESIDENT WINS RE-ELECTION, YOU WANT THE TREASURY SECRETARY JOB. IF YOU LEAVE THIS POST, SHAREHOLDERS WANT TO KNOW, DO YOU WANT THAT JOB?

 

FINK: I THINK I’LL BE SURPRISING THE WORLD HOW LONG I STAY AT BLACKROCK. YOU KNOW, THIS IS MY HOME. I HAVE AN INCREDIBLE, INCREDIBLE POST HERE. I LOVE THE — WHAT THIS COMPANY HAS DONE. I THINK WE HAVE A LOT MORE OPPORTUNITY IN THE FUTURE.

 

BARTIROMO: IF PRESIDENT OBAMA ASKED YOU TO SERVE THE COUNTRY, WHAT ARE YOU GOING TO SAY?

 

FINK: I’LL BE SPEECHLESS AT FIRST.

 

BARTIROMO: LET ME MOVE ON. LET ME ASK YOU ABOUT BLACKROCK. ETFs HAVE BEEN ENORMOUSLY SUCCESSFUL. THIS IS THE WAY TO INVEST FOR TRANSPARENCY, TAX EFFICIENCY, AND YET IT SEEMS LIKE VANGUARD KEEPS UNDERCUTTING EVERYONE ON PRICE. IT S THERE A PRICE WAR GOING ON?

 

FINK: NOT REALLY BECAUSE THE MARKET IS EVOLVING. FIRST OF ALL, FEES ARE JUST ONE COMPONENT OF ETFs. THE BID ASK SPREAD BECAUSE THIS IS A STOCK. SOME ETFs HAVE MUCH WIDER BID ASK SPREADS BECAUSE THEY ARE LESS LIQUID. THAT SHOULD BE A COMPONENT OF HOW YOU ANALYZE AN ETF COST. ALSO, MOST ETFs ARE INDEXED PRODUCTS. NO ONE IS FOCUSING ON WHAT IS THE TRACKING ERROR. I COULD TELL YOU OUR I-SHARES ETFs HAVE FAR BETTER TRACKING THAN OUR COMPETITORS. WE’VE DONE A VERY GOOD JOB. SOME OF THE PRODUCTS WHERE THERE’S A DIFFERENCE IN FEES, WE HAVE TRACKING — A BETTER TRACKING, AS MUCH AS 40, 50 BASIS POINTS. SO I DON’T BELIEVE — I THINK AS ETF BECOME MORE COMMODITIZED BY NATURE, YOU’RE GOING TO SEE A DECLINE IN PRICES. BUT THE REALITY IS THAT, YOU KNOW, WORLDWIDE, WE’RE THE LEADER IN ETFs. WE’RE THE LEADER IN EUROPE. WE’RE THE LEADER IN ASIA. WE’RE THE LEADER IN SOUTH AMERICA. WE STILL REMAIN TO BE THE LARGEST LEADER IN THE UNITED STATES. VANGUARD IS A GREAT FIRM. THEY’RE ACTUALLY A BIG CLIENT OF BLACKROCKS. WE DO WORK WITH THEM. THEY’RE WONDERFUL IN WHAT THEY DO IN THE ETF AREA. I’M VERY PROUD OF WHAT WE HAVE DONE IN I-SHARES. I BELIEVE WE WILL CONTINUE TO BE THE DOMINANT LEADER IN ETFs.

 

BARTIROMO: BECAUSE BLACKROCK IS SO BIG WITH $3.5 TRILLION UNDER MANAGEMENT, DOES IT GET TOUGHER TO GET AS MUCH EXPOSURE AS YOU CAN TO OTHER MANAGERS? SOME MANAGERS JUST CAN’T HAVE SO MUCH EXPOSURE BECAUSE THEY’RE ALREADY WORKING WITH YOU, AND THEY’VE GOT THE EXPOSURE ALREADY. THAT’S WHERE WE SAW THE OUTFLOWS. YOU TOLD US THE LAST TIME THE OUTFLOWS ARE DONE.

 

FINK: YEAH THE OUTFLOWS WERE DONE.

 

BARTIROMO: BUT THAT WAS ONLY BECAUSE MANAGERS CAN’T HAVE AN OVEREXPOSURE TO ONE FIRM, RIGHT?

 

FINK: SOME OF OUR INVESTORS HAVE GUIDELINES THAT THEY MAY BE LIMITED TO 10 OR 20% OF ONE MANAGER.

 

BARTIROMO: SO I GUESS MY QUESTION IS, DOES IT GET TOUGHER FOR BLACKROCK TO GROW AT SUCH LARGE NUMBERS TODAY?

 

FINK: THERE’S ALWAYS A GROWING. IF YOU’RE TALKING ABOUT GROWTH IN REVENUES, YOU’RE GOING TO — I THINK WE HAVE HUGE OPPORTUNITIES. ON AUM, IT’S SOMETHING I DON’T FOCUS ON AS MUCH BECAUSE AT THIS TIME, OVER 70% OF OUR ASSETS ARE INDEX AND CASH-LIKE ITEMS. IF WE CAN NAVIGATE FROM OUR CLIENT, WHO WE ONLY HAVE ONE RELATIONSHIP WITH. LET’S SAY IT’S AN INDEX FUND. IF WE CAN WORK WITH THAT CLIENT AND TWO OR THREE DIFFERENT RELATIONSHIPS, AND YET WE’RE AT THRESHOLD OF 10%, I’D BE GLAD TO REDUCE SOME OF THE INDEX PRODUCTS FOR ALTERNATIVES, ETFs, AND SOME OF OUR ACTIVE FUNDAMENTAL PRODUCTS. BUT THE ANSWER TO YOUR QUESTION, CLEARLY, I THINK YOU’RE GOING TO SEE AUM GROWTH FOR BLACKROCK IN THE FUTURE PLUS REVENUE GROWTH.

 

BARTIROMO: AUM ON TOP OF $3.5 TRILLION IS PRETTY IMPRESSIVE. HOW WORRIED ARE YOU ABOUT THE FISCAL CLIFF? NOT NECESSARILY JUST FOR BLACKROCK, BUT THE ECONOMY.

 

FINK: THE FISCAL CLIFF IS PROBABLY THE BIGGEST PROBLEM FACING US. WE ARE ALREADY SEEING A SLOW DOWN IN THE U.S. ECONOMY. I KNOW MANY CEOs WHO ARE SITTING WITH LARGE SUMS OF CASH, PROBABLY COULD INVEST IN A NEW FACTORY OR ANOTHER STORE. MOST CERTAINLY THEY COULD BE MAKING MORE HIRES, YET THEY’RE REFUSING, THEY’RE HOLDING BACK. MANY SMALL BUSINESSES ARE SITTING ON ENORMOUS SUMS OF CASH, AND THEY ARE NOT INVESTING BECAUSE THEY’RE FRIGHTENED OF WHAT DOES THIS ALL MEAN. SO THIS OUTCOME, OUR FISCAL CLIFF, HOW IT’S GOING TO BE DESIGNED, IS GOING TO BE ENORMOUS. IF THEY DO A GREAT JOB, NO DIFFERENT THAN WHAT PRESIDENT DRAGHI DID AT THE ECB WHEN HE ANNOUNCED HIS PROGRAM THAT REALLY CAUSED A RELIEF RALLY IN EUROPE. IF WE SEE OUR GOVERNMENT DOING THE SAME THING, HAVING A VERY COMPREHENSIVE RESPONSE TO THE FISCAL CLIFF, SOMETHING LIKE SIMPSON-BOWLES, 4-PLUS, $5 TRILLION OVER A PERIOD OF TIME, IF THAT IS DONE IN A SENSIBLE WAY YOU’LL SEE A HUGE RALLY CAUSE ALL THAT MONEY IS SITTING ON THE SIDE. ON THE OTHER HAND, IF WE SEE THIS DRAGGING OUT, IF THEY HAVE TO HAVE IT DELAYED, IT DOESN’T HAPPEN AFTER THE LAME DUCK SESSION, AFTER THE ELECTION, IT DRAGS ON TO FEBRUARY, DRAGS ON TO MARCH. WE WILL HAVE A RECESSION IN THE FIRST QUARTER. WE’LL HAVE NEGATIVE GDP IN THE FIRST QUARTER. DESPITE MY BULLISHNESS OUT A YEAR, WE COULD HAVE SOME REAL VOLATILITY. I WOULD SUGGEST IF WE HAVE THAT REAL VOLATILITY, IT’S A GREAT BUYING OPPORTUNITY FOR EVERYBODY OUT THERE. BUT IN MY CONVERSATION WITH MANY OF THE MEN AND WOMEN IN WASHINGTON, I’M TRYING TO BE AS LARGE OF AN ALARMIST AS I CAN TO MAKE SURE WE FOCUS ON THE FISCAL CLIFF AND WE HAVE A RESOLUTION AS FAST AS POSSIBLE.

 

BARTIROMO: ABSOLUTELY. AND EUROPE, HAVE WE SEEN THE WORST THERE?

 

FINK: EUROPE IS A SEVEN-YEAR FIX. WE HAVE A GREAT PLAN THAT THE ECB HAS CREATED, BUT WE ALSO NEED POLITICIANS TO AGREE ON IT. WE NEED PRIME MINISTER OHOY ASKING FOR HELP

 

BARTIROMO: SIMILAR PROBLEMS.

 

FINK: THE DYNAMIC IS VERY ROUGH. THE PROBLEM IS THAT INVESTORS, HAVING POLITICS INTERFERING IN THE MARKETS, WE’RE GOING TO HAVE TO LEARN TO LIVE WITH THIS. HOPEFULLY WE, MEMBERS OF THE MARKETPLACE, CAN HELP THE POLITICIANS NAVIGATE THIS PUSH AND PULL. WE’RE GOING TO LIVE WITH THIS PUSH AND PULL. I THINK IT’S AN OPPORTUNITY TO INVEST DURING THE PUSH AND PULL. WE’RE NOT GOING TO BE SEEING A RELAXATION IN VOLATILITY. VOLATILITY IS GOING TO BE WITH US AND IT IS GOING TO CREATE FEAR. GETTING BACK TO OUR FIRST POINT, THIS FEAR IS A SHORT-TERM PERIOD OF FEAR. IF YOU ARE THAT 35-YEAR-OLD, YOU GOT TO START THINKING ABOUT WHAT DOES THIS MEAN WHEN YOU’RE RETIRING AT 65? HOW ARE YOU GOING TO BUILD THAT NEST EGG FOR THE NEXT 30 YEARS?

 

BARTIROMO: ALL RIGHT. WE’LL LEAVE IT THERE. PROBABLY AMONG THE MOST INFORMED MANAGERS OUT THERE. LARRY FINK, GOOD TO HAVE YOU ON THE PROGRAM.

 

FINK: THANK YOU, MARIA.

CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC’S MARIA BARTIROMO SITS DOWN WITH BLACKROCK CHAIRMAN & CEO LARRY FINK TODAY ON CNBC’S “CLOSING BELL WITH MARIA BARTIROMO”