BlackRock’s chief wants to rethink a fiscal time bomb
As the chairman and C.E.O. of the asset management giant BlackRock, Larry Fink commands attention from companies and governments, helping spearhead movements like socially driven business and the need for companies to fight climate change.
In his latest letter to investors, published on Tuesday, Fink weighs in on a new topic: a looming global retirement crisis, and what can be done to address it.
The way retirement is handled around the world needs to change, Fink writes. Many countries will hit an aging tipping point within the next 20 years, according to his letter, but most people aren’t saving enough for when they stop working.
In the U.S. in particular, people are living longer, a trend that’s likely to grow given the advent of weight loss drugs like Wegovy, Fink writes. But he adds that four in 10 Americans don’t have $400 in emergency savings, let alone proper retirement funds.
“America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity,” he writes, much as tech C.E.O.s and Washington banded together to shore up U.S. semiconductor manufacturing. Fink adds that he has a good vantage point for the problem, given that over half of BlackRock’s $10 trillion in assets are for retirement.
Fink said he wanted to kick off some hard conversations, and offered some initial suggestions:
Setting up retirement systems to cover all workers, even gig and part-time laborers, as 20 states have done;
Encouraging more employers to offer incentives like matching funds and making it easier to transfer 401(k) savings;
Creating systems that allow for 401(k)-like plans that provide pension-like predictable income streams, to reverse what Fink called a historical shift “from financial certainty to financial uncertainty.”
Fink also raises a politically fraught idea: raising the retirement age. The Social Security Administration has said that by 2034, it won’t be able to pay out full benefits, he notes:
No one should have to work longer than they want to. But I do think it’s a bit crazy that our anchor idea for the right retirement age — 65 years old — originates from the time of the Ottoman Empire.
Fink also defended climate-minded investing. His firm has become a target for conservatives for embracing the approach known as E.S.G. But the BlackRock chief said that the transition to green energy was inevitable. “It’s a mega force, a major economic trend being driven by nations representing 90 percent of the world’s G.D.P.,” he writes. (That said, he said he had stopped using the term “E.S.G.” because of its political toxicity.)
He is embracing what he calls “energy pragmatism.” That involves acknowledging the need for energy security, which for many countries will involve relying on hydrocarbons for years, along with cleaner energy sources. “Nobody will support decarbonization if it means giving up heating their home in the winter or cooling it in the summer,” he wrote. “Or if the cost of doing so is prohibitive.”
Fink added that BlackRock hasn’t advocated divesting from traditional energy companies, in part because some are investing in next-generation green tech like capturing carbon from the air.
HERE’S WHAT’S HAPPENING
The U.S. and Britain impose sanctions on elite Chinese hackers. The countries accused Beijing’s top spy agency of putting malware in key American infrastructure, including electrical grids and defense systems, and of stealing voting rolls for millions of British citizens. The moves represent an escalation of cyberconflict between Western powers and China.
Adam Neumann reportedly makes a formal bid for WeWork. The bankrupt co-working company’s former C.E.O. has offered more than $500 million to buy the business, according to The Wall Street Journal. It isn’t clear how Neumann will finance the proposal — Third Point, a hedge fund his lawyers had cited as a potential partner, isn’t involved — or whether WeWork’s management team will accept his approach.
A lawsuit by Elon Musk’s X against a research group is dismissed. A federal judge rejected claims that the Center for Countering Digital Hate, which published reports finding a rise in hate speech on the platform X since Musk took it over, had violated X’s terms of service. The lawsuit, the judge said, was “about punishing the defendants for their speech.”
The Francis Scott Key Bridge in Baltimore collapses. It was not immediately clear how many vehicles were on the bridge when a cargo ship rammed into the structure early on Tuesday. A White House official told Bloomberg that there was no indication of nefarious intent.
The Trump stock winners and losers
Meme-stock mania is back, and this time it has a political spin.
Investors and Donald Trump’s supporters are piling into Trump Media & Technology Group ahead of its first day of trading, extending a torrid rally that has bolstered the former president’s net worth on paper by roughly $4 billion.
Trump Media is the parent company of Trump’s social media platform, Truth Social. It closed its merger on Monday with a listed shell company, Digital World Acquisition Corp., creating a kind of proxy for investors to back a digital media business bearing his name as he runs for president.
“At some level, I’ve thought that many of the holders of D.W.A.C. viewed the stock as something akin to a call option on MAGA,” Steve Sosnick, the chief strategist at Interactive Brokers, told DealBook.
The rally has transformed Trump’s finances at a time when his business empire remains under threat from multiple legal troubles. The stock price of the loss-making company in its final day trading as D.W.A.C. spiked on Monday after a New York appeals court gave Trump a lifeline: It reduced the bond he needs to pay to protect his business interests while he appeals a civil fraud case to $175 million.
Trump has a big say in what happens next at Trump Media. He holds a class of shares that give him at least 55 percent voting power on some key board decisions. One question: Would Trump cash out — either to pay his legal bills, top up his campaign war chest or bank his return — once the lockup period expires in September? Or, would he lean on the board to waive the traditional six-month lockout period?
The board is filled with loyalists, including his elder son, Donald Trump Jr.; Devin Nunes, a Republican former representative of California; and Linda McMahon and Robert Lighthizer, who both served during the Trump administration.
Trump’s next move could move the market. He holds about 60 percent of Trump Media’s stock. Selling all or some of that stake could torpedo the stock, leaving its large band of retail investors on the hook.
Even if that gets regulators’ attention, pro-Trump shareholders may not care. “I can’t recall any company so driven by external political factors, certainly not in the U.S.,” Sosnick notes. “So even though allowing an early termination of the lockup would be counter to many shareholders’ financial best interests, they might not mind it anyway.”
Meanwhile, bets against Trump have soured. Traders who have shorted D.W.A.C.’s stock have racked up mark-to-market losses of about $96 million this year, Ihor Dusaniwsky, managing director of S3 Partners, a data firm, told DealBook. The recent rally, he said, “will definitely squeeze” them further.
“There’s no accountability on who has access to it and how it’s being used.”
— Emma Shortis, a senior researcher in international and security affairs at the Australia Institute, on SpaceX’s Starlink system. A Bloomberg investigation found a robust black market trade in service for the satellite internet system in countries where its use isn’t authorized.
What would fix Boeing?
Boeing finally buckled. Its C.E.O., Dave Calhoun, is planning to leave. The news came almost three months after a panel blew off a 737 Max jet and airlines, regulators and investors largely turned on the company.
But is a leadership shake-up enough to fix America’s aerospace leader after years of problems?
Boeing hopes that cleaning house will draw a line under the crisis. The company said on Monday that Calhoun — who took over in 2020 after a different safety crisis and vowed to fix the company — will be gone by the end of the year. The company chairman, Larry Kellner, will leave the board in May once his term expires, and its C.O.O., Stephanie Pope, will immediately replace Stan Deal, who is retiring, as head of the commercial airplane division.
Investors sent Boeing’s stock up on Tuesday, despite the company losing market share to a rival, Airbus, in recent years.
But its problems run deep. Lina Khan, the F.T.C. chair, wrote recently in Foreign Policy magazine that the decision to allow Boeing to become a “de facto national champion” by buying McDonnell Douglas in 1997 was “catastrophic.”
The deal slowed innovation, with R&D spending consistently below Airbus. Engineers came to be seen as “a cost, not an asset,” and too much work was outsourced or sent offshore. Boeing became too big to fail and vulnerable to foreign influence, she said.
Critics say fundamental changes are needed. Boeing demonstrates “the curse of bigness,” Tim Wu, a former antitrust official in the Biden administration now at Columbia Law School, told DealBook.
Boeing’s shortcomings are akin to the monopoly concerns in Big Tech and the telecoms sector, and regulators should consider a breakup, he added, pointing to the split of AT&T in 1984 as a precedent. “I wonder if Boeing would do it itself in light of its inefficiencies,” Wu said.
The U.S. is still highly reliant upon Boeing. More than a third of the company’s revenues comes from government contracts, Richard Loeb, an expert on government contracting law and a former government official, told DealBook. “They’re a sole-source supplier,” he said.
Such a deep relationship is problematic, with too much oversight ceded to the company over decades of deregulation.
What’s next? Pope was once seen as Calhoun’s heir apparent, but analysts now say that the company may need to look externally. General Electric, Calhoun’s onetime employer that’s gone through its own split, could be a model.
THE SPEED READ
Deals
The bankrupt crypto exchange FTX agreed to sell most of its stake in Anthropic, the artificial intelligence start-up, for $884 million to several buyers, including an Abu Dhabi investor. (WSJ)
The electric vehicle maker Fisker said talks for an investment from another manufacturer had ended, putting its future in doubt. Meanwhile, shares in a rival, Lucid, jumped after an affiliate of Saudi Arabia’s sovereign wealth fund agreed to another $1 billion investment. (Bloomberg)
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