Asia This Day:Where To Look for Asia-Pacific Success

Some rather disappointing data came out of East Asia last night.Japan's April Producer Price Index fell 4.2% on the year,versus an estimate of 3.2%;while China's industrial production grew 6.0% versus an estimate of 6.5%.China's April GDP slowed to 6.88% from 7.1% in March.Investors will naturally pause for a moment to consider these facts.*
As we move from a manufacturing-led Chinese economy to a consumption-led economy,we have to expect growth to slow down;but I still think you're going to find great assets to own in the China market,said BlackRock's Asia-Pacific Chairman Ryan Stork.
It's just going to take some time.You've got a very big economy;it's going to take years.I think the People's Bank of China is there;but we're going to be in a market of near-term volatility the next few quarters,there's no doubt.*
I think you'll see new,innovative investment solutions.I think China,India,Indonesia are three markets that we quite like at the moment.There's downward pressure on Japanese stocks-it's a bit overdone.From our perspective,Japan is still a really big part of our strategy,both from an institutional side and an individual wealth side.You look at the ability to own good companies in Asia.It's more of a fundamental story now,rolling up your sleeves and finding those companies.*
There's a lot of evolution that has to take place in Asia for the use of etfs.The Bank of Japan is a buyer of etfs.It creates a lot of awareness among wealth investors.The use of etfs and long/short investments will eventually find their way into wealth investor portfolios,the more tactical use of passive investing.In the multi-asset space,we have an enormous platform,great teams.We have been growing at an exceptional pace relative to the rest of the firm.We've expanded our team in the equity side;we'll be expanding in the alternative side,Mr.Stork explained.*
iShares Japan ETF (EWJ),iShares China Large-Cap ETF (FXI),iShares MSCI India ETF (INDA),iShares MSCI Indonesia ETF (EIDO),BlackRock Inc (BLK)

A Warning To High Yield Investors From Billionaire Carl Icahn

Billionaire activist investor Carl Icahn tweeted that a meltdown in high yield was just beginning.For example,Third Avenue Management is liquidating its Focused Credit Fund and preventing withdrawals,promising to distribute the bulk of investors' money on 16 December,and put the rest in a trust that will pay them interest and make distributions to them until its liquidation costs are covered.The fund was liquidated because so many investors were redeeming their shares at once,Third Avenue said in a letter to the fund's investors.*
We did have that Seeking Alpha conference,Mr.Icahn told CNBC.I warned then it's simple and self-evident that the high yield market is just a keg of dynamite that sooner or later will blow up.The etfs of BlackRock and other companies are very dangerous because there's no liquidity behind these etfs.I think that any person that goes into this should basically be warned.You're starting to see the danger that is manifest now that there is no liquidity for these high yield bonds.They were sold at very low interest rates.Because it's BlackRock,everybody believes there's going to be liquidity.
It's just beginning to be a major problem.The SEC sees danger because these companies that really should have had to pay higher interest rates borrowed a great deal of money,and I'd like to know how they're going to pay that back,or even how they're going to restructure the finances,Mr.Icahn explained.

Cybersecurity Innovator:Impermium Corporation

How do we protect ourselves on the Internet?To a large degree,it's the websites we rely upon that need to take care of us,according to Mark Risher,co-founder and CEO of cybersecurity gatekeeper Impermium Corporation.They need to look very broadly,not just at the password.How is she doing?What computer is she utilising?
We have to look at all the accounts and potential invaders.There has been a widespread increase in attacks.The hackers can act with impunity from anywhere in the world,and we're just gonna see more of them.Public broadcaster National Public Radio and asset manager BlackRock are among the recent victims of cyber attacks.
Impermium provides security for more than 300,000 websites worldwide.Tumblr,Pinterest,ESPN,CNN and The Washington Post are among their clients.The company uses social reputation to identify the actor behind each transaction.
With its Social SIGINT data set,the firm uses intelligent algorithms to identify threats.Malicious users look differently;visit different sites;come from different parts of the Internet;and behave differently,Impermium says.Social rep collected from its more than 300,000 sites provides invaluable insight into both known and emerging threats.
Impermium is backed by leading venture capital firms.
BlackRock,Inc(BLK)

BlackRock Favors Cash Flow Companies

BlackRock,the world's largest money manager,is favoring companies with lots of free cash flow,according to Vice President Bob Doll.These are in the telecom,health care and energy sectors.You need diversification,but clearly you've got to focus on that free cash flow.
BlackRock did buy some six million shares of GM on the initial public offering,but they continue to hold a bigger position in Ford.Ford continues to pay down their debt and improve their margins.
The whole story is a cyclical one,Mr.Doll believes.He thinks there's more cyclical improvement coming.GM stock could rise into the low 40s.
General Motors(GM),Ford Motor Company(F)

Investment Strategy Suggestions

What's behind the run-up in the stock market recently is the prospect of more quantitative easing,or asset purchases by the Federal Reserve,Russ Koesterich agrees with many other analysts.Mr.Koesterich,head of Investment Strategy for Scientific Active Equities at BlackRock,the world's largest money manager,thinks we're running up against a wall here-the upper end of the trading range.We're likely to see sluggish growth,which is not gonna support earnings growth.Expect 1.5-2% growth in 2011,which is way off 2009 levels.
The market's 2011 earnings expectations may be too high based on the predicted sluggish growth.The key thing for investors in handling slow growth is a barbell portfolio.This might consist of consumer staples and health care on one end,and industrials and tech on the other for global exposure.
Mr.Koesterich recommends avoiding stocks that are too closely linked to U.S. growth,given how slow that is likely to be.For example,several retailers are heavily exposed to the U.S. economy,as are many banks and utilities.

Accepting The Economic Conditions

Bob Doll,a Vice President at BlackRock,the world's largest money manager,notes that we had +10% growth from early 2007-early 2008,but we have to recognize we are now in a deleveraging world.We're gonna be in for a number of years of below trend growth of 2%,rather than 3.5% as it had been.
You can't target where this money is gonna go.If consumers are deleveraging,you really have to hit them over the head to change that,and Mr.Doll doesn't think that will be any time soon.People are being cautious,paying down the debt,and there's no confidence.The Federal Reserve has to buy time here,be steady as she goes,accept slow growth.
The Fed has announced it is maintaining its balance sheet,buying Treasuries to keep borrowing costs low in support of growth,or at least make a gesture to inspire confidence.
BlackRock(BLK)

BlackRock Viewpoint

Consumers spent a little more money last month,feeling a little better about the jobs they hold,notes Bob Doll,Vice-President and Chief Equity Strategist at BlackRock.We're seeing an improvement in business conditions,improving revenue and will add some jobs soon,but we've got to get past the tightening concerns,the Greek problem.There are more bad debts out there,and that means a sub par recovery.It will be slower than normal:two steps forward,and one step back.
The economy and markets can handle small rate increases.There are political worries,but manufacturing is doing pretty well and inflation is contained.We need to see some job growth.That would be the next step in a normal recovery.The rising price of oil is a sign of global economic recovery.
I've been impressed by the recent mergers and acquisitions,and I think there are a bunch more to come.It will spread lots of different places.I think we'll see continued mixed data,but leaning to the positive.My view is that European growth will be slow.They've got some punching to do to get out of the mess,Mr.Doll believes.
BlackRock,which acquired Barclays' iShares funds,has more than a trillion dollars under management.

What BlackRock Sees

The tone of regulators in the U.S. and Europe is pretty consistent:a more secure banking system with more capital,according to Laurence Fink,CEO of BlackRock,the world's largest money manager.In Europe,they're talking about Basel III,with lots of capital,and it's similar in the U.S.Most certainly banks are more reluctant to lend, because they're not certain about capital requirements in the future.Corporations are not hiring;not building factories;and not buying equipment.Huge pools of money are sitting in banks and corporations.This is the problem we're seeing today in our economy.They're seeing what the new regulations will be.
BlackRock is seeing increased appetite for mutual funds and exchange-traded funds.We're seeing renewed interest in equities,as opposed to fixed income.We're not concerned about our competition at all,Mr.Fink insisted.The etf market needs a lot of liquidity and research.It is our belief the etf market will continue to grow from both institutions and individual investors.
There's a healing in commercial real estate going on,Mr.Fink believes,but not fast enough.He's not terribly worried about it,although some of the regional banks will be destabilized.The Federal Reserve is aware of this.
Mr.Fink is one of the more forthright executives in the financial industry.His colleague at BlackRock,Bob Doll,follows the same path of openness.

BlackRock To Enlarge

BlackRock is purchasing Barclays Global Investors,which is comprised of the iShares investment products.BGI manages about 1.5 trillion dollars-or about half the exchange-traded fund industry.When the deal is consummated,BlackRock will be the largest money manager in the world,with more than 2.7 trillion under management.That is more than the Federal Reserve manages.Consolidation of financial firms is a typical response to crises.
Barclays PLC,the British bank which owns BGI,will hold on to a 20% stake in it.BlackRock is itself part-owned by Bank of America and PNC Financial Services Group.Laurence Fink is CEO of BlackRock.

Positives and Negatives

The cyclical positives and secular negatives are in a tug-of-war,in the opinion of Bob Doll,Vice-President and Global Chief Investment Officer of BlackRock.The market is acting a little tired.Volume has shrunk some.Maybe we take a little pause here.I think we'll see a thousand on the S and P-maybe the low hundreds-first,Mr.Doll said.
We are of the view that the recovery will be sub-par,Bob Doll stated.Equities are O.K.,but we're not going to have the normal recovery,given the deleveraging overhang and the reluctant consumer.As for inflation,a lot of the interest rate rise we've been seeing is plain old normalization of rates.The velocity of money has not yet picked up.We have all kinds of unused capacity in areas such as manufacturing and labor,and we have to fill those up before inflation becomes a problem,Bob Doll maintained.