Big Picture Fink-ing

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1:06Because at Schwab, you can invest your way. No matter your goals or appetite for investing, Schwab has everything you need all in one place. Visit schwab.com to learn more. Wake Up To Money from BBC Five Live. Hello, welcome. It is Wake Up To Money on today's show. We could have years, years of, you know, above$100, closer to$150 oil. There's more to come from the boss of the world's biggest asset manager, BlackRock, who was there describing the potential economic impacts of this war. Larry Fink had plenty to say in the latest Big Boss interview, including if there's a crisis brewing in the private credit market.

1:49We'll explain what that is and what he makes of this so-called AI bubble. Wake Up To Money with Sean Farrington. Good morning to you. It is Wake Up To Money on BBC Five Live on this Wednesday morning, the 24th of March. Just changing the clock in front of me so I can read it at this time of the morning. Welcome. It is almost five past five. Thank you, as ever, for choosing to spend your time with us on Wake Up To Money. We very much appreciate it. In the last few weeks, we've had a lot to talk about. We're on yesterday's show. If you missed it, get it on BBC Sounds. We had Minister of the Government on the programme.

2:25Many of you putting your questions to him. We heard bosses' thoughts on what the government should be doing at this moment in time. We have another with us this morning. Harriet Hastings is the co-founder of Biscuteers, the original hand-ice biscuit. I'm assuming that's a line from your website, Harriet. I'll allow you this one. Gifting company as well, based in London. Good morning to you. Good morning. Harriet, how are things? You know, we'll get into the latest oil price movements, the latest headlines from Donald Trump and all of that in a moment. But now that we're a few weeks into this war, there's a few more decisions that have had to be made by people like yourself running businesses around the country.

3:06How's it looking for Biscuteers? Well, we are actually in one of our sort of biggest sort of gifting moments of the year because we're a gifting company. So obviously we've had Valentine's Day, Mother's Day and now Easter. so it is actually a very busy time of the year for us. I think we haven't yet seen immediate impacts but obviously we're worried like everybody else about the long tail of this if energy prices can stay high. But that's interesting. It's a good time to chat to you for a bit of that hot take on how people might have been changing their habits or not and in which parts of the economy and where they're thinking of spending.

3:44So if you consider year on year Valentine's Day would have come just before all of this kicked off in Iran. But the planning for Easter, you will have been very much seeing whether people were changing their habits or not. And it seems spending still similar to last year, is it? It is. It is for us. I mean, I think, to be fair, you know, consumer confidence wasn't all that high prior to this war. so I'm just not sure yet to what degree that has kind of you know doubled down on that sentiment because I think the impact of it hasn't been fully felt by people yet um I think we would say generally that people are much more careful with their spending and it's been you know more challenging environment but I think that's been true for quite a few months.

4:32Did you see any glimmers we heard a little bit yesterday potentially of some glimmers of confidence whether it was just bosses thinking, OK, we've got 2025 out of the way. In January 2026, there doesn't seem to be anything hugely major on the horizon just yet. This could be the year for things to grow at a pace we would want them to be growing rather than all the battling we've done in previous years. Does it feel to you running the business that something has changed in the last few weeks? Well, yes, I mean, definitely. I think we were all feeling a bit more optimistic and things were a bit more settled.

5:10It looked like interest rates were coming down and, you know, that would generally create a better environment. And I think what this has done is just thrown the uncertainty back into the game all over again. And when we look this morning at, you know, where the oil price is right now, again, we can sit here and wake up to money and say, oh, it's around$100 a barrel for a barrel of Brent crude, which is pretty much where we're at. I think just$99 and a bit this morning. But again, there's been a little bit of a journey of that oil price overnight, which has been closely linked to various comments coming out of the Middle East.

5:47So you're waking up this morning to headlines that Iran's mission to the UN has said that non-hostile vessels can pass through the Strait of Humus, provided they coordinate with the competent Iranian authorities. Of course, this waterway being vital for global shipping. So that's one thing we've heard. US and Israeli media reporting that the Trump administration has sent this 15-point peace plan demanding the reopening of the Strait of Hormuzn, the end of uranium enrichment. President Trump insisting yesterday that negotiations with Iran about ending the war in the Middle East were happening right now.

6:22A lot of conversation yesterday morning about whether Donald Trump's previous comments of negotiations, to what extent they were happening, because the sounds from Iran were that they weren't particularly happening at the level that Donald Trump was talking about. Speaking of the White House, he hinted at a very significant prize gifted to the US by Iranian negotiators, adding it was related to oil and gas and the Strait of Hormuz. What it showed me is that we're dealing with the right people. Because, you know, you don't know, because the leadership was killed, all gone. Khomeini, all gone. And then the new Supreme Leader was racked up, at a minimum racked up pretty good.

7:02And everyone else was gone. And then many of the people in the third tier are gone. But we're dealing with a group of people that I think turn out. And the present, the gift they made to us was very significant. And they said they were going to do it. And it happened. Simon French also with us this morning. Chief Economist at Pamela Liberum. Simon, good morning. Good morning, Sean. We're having to sort of digest, figure out whether it's from Donald Trump's tone, the words he's using, the response from from others around the world to what he says about what actually might give people some confidence that the war is nearer an end than previously thought.

7:43Do you see investors moods changing this morning at all? Overnight comments are the continual roller coaster, aren't they, of claim and counterclaim. And I think it's very difficult, even if you take what the US president says at face value, and that comes with its own uncertainty. It then needs to be validated not just by the Iranians and who speaks for the Iranians, but also other interlocutors in the region. So I think all investors are looking at the volatility as the thing to navigate rather than necessarily a clear view on how to price assets, not just oil, but of course, interest rates, inflation expectations and all the assets across the investable universe that price themselves off that.

8:31and then that is what goes on in the Middle East and has that impact on wider markets around the world and of course that makes its way through to decisions that happen to be made here in the UK. The economic impact of the conflict has been a key talking point amongst MPs. We had the Chancellor Rachel Reeves yesterday telling ministers the government had promised help with energy bills for people who need it most if prices continue to rise because of the war. So she spoke a little bit about the economic challenges that could be significant. I can confirm to the House that contingency planning is taking place for every eventuality, so that we can keep costs down for everyone and provide support for those who need it most, acting within our ironclad fiscal rules to keep inflation and interest rates as low as possible.

9:22Mr Speaker, this is not a war that we started, nor is it a war that we joined, unlike the advice of the party's opposite. So Harriet, there's a bit of political chat that Rachel Reeves was ending with there, but the crux of what she was talking about there that has made a few headlines this morning in the papers, the Times, middle class will lose out as benefit claimants get energy help, the males way that they have put it, middle class to foot bill for Reeves' benefit streets, fuel bailout. this is a lot of ifs and buts about you know how whether energy prices do go up to certain levels if support is needed but the general idea that Rachel Reeves was laying out there about who might get the support and who won't what do you make of it?

10:12Well I think it was it was probably the only response and the pragmatic response I mean I think there's just absolutely no room for sort of universal support and we've we've got to get off that idea and so I think on balance it was the kind of pragmatic approach. Simon, have investors, you know, the people we talk about around the world who decide what interest rate to lend to the UK government at, those bond markets we talk about, the cost of borrowing for the UK, would those people have been listening and are listening closely to how the government might be responding to any price pressure problems?

10:50They absolutely are because as part of that clip, the Chancellor was talking about staying within her fiscal rules. And while she has a little bit more headroom or left herself a little bit more headroom back in November, more than£20 billion, that has been eaten away by investors already ascribing a higher interest rate on debt around the world, but particularly in the UK. And of course, any signal of a very, very expensive bailout of the type that we saw in 2022 would be concluded by investors saying, right, okay, there's going to be more issuance of UK government debt to stay within those fiscal rules, or there will be more inflation in the economy.

11:38And you would describe a higher interest rate as a result of both those scenarios. So I think the Chancellor, I happen to agree, the Chancellor struck just about the right tone in terms of saying we will offer support, but it's not going to be as universal or as expensive as four years ago. And Harriet, four years ago, we had that energy price spike with Russia's full scale invasion of Ukraine. Are you seeing any similarities, whether it's in the conversations you're having with your supply chain, what you're thinking about the months ahead what we need to be wary of as as people try to and we're hearing from the government a little bit there sort of say we're you know we're trying to get on top of this a little bit earlier than has been had in the past is there something you think that is a lesson that needs to be learned well i mean certainly the lessons that we learned about that were we you know we've always in terms of our direct power costs we've always fixed them because we just need that certainty.

12:40But obviously, in the end, if energy costs goes up, everything goes up. I just think that, you know, that hasn't actually kind of flowed through to our supply chain yet. And it entirely depends on how long this goes on for. I mean, we source pretty much everything in the UK except tins, which we can't source. So it will take a bit longer to kind of flow through. Where do you get your tins from? China. And has that been impacted at all when you talk about shipping? Well, there's delays on everything. So, yes, to the extent that we're having to factor in that we will have to order them earlier and allow longer time for them to get here.

13:24I don't think yet we've seen the increasing cost on shipping, surprisingly, but no doubt it's coming. Well, yes, we will see. If you haven't seen it yet, Harriet, keep my fingers crossed for you. You never know. It might not come, but we won't make that promise on Wake Up To Money. Right, we're going to get into our business editor, Simon Jacks, conversation with Larry Fink, one of the most powerful people in the world of investments. He runs BlackRock, which manages$14 trillion worth or£10 trillion worth if you need it in pounds to figure out that that is a lot of money. He manages that amount of savers and investors' money right around the world.

14:05So we'll hear more from Larry Fink and what he thinks about the war. Later in the programme, we'll hear more about what he thinks about the AI, whether there's a bubble or not, the impacts of it. I was really interested in some of his comments that actually this could be great for plumbers and electricians and this could be a real game changer away from the process of going to university and getting qualifications that way and maybe a reversion back to some of those trades that people potentially, it's interesting to hear what he has to say about, potentially could have had way better careers in trades rather than necessarily going through that university route and ending up in financial services or legal services or whatever it might be.

14:51So we'll get into that as well. So one of the things that Larry Fink was discussing was what might happen to the economies around the world if the oil price stays high. So we're still talking about Brent crude at this moment of talking and being live on Wake Up To Money being around$100 a barrel. Larry Fink was talking about oil prices. If they were$150 a barrel, that would trigger a global recession, he says. So as I say, he's the world's biggest asset manager. Simon, when you try and put into a bit of perspective the the influence blackrock has as a as a big investor like that how does that trickle through to the the companies we'll often talk about the when we talk about infrastructure projects in the uk and confidence in the uk what where's blackrock's role in all of that well it has its fingers in many many pies all all types of asset classes not just traditional stock shares, bonds, but also alternative assets.

15:55You mentioned infrastructure, private credit, private equity. It sets, not individually, but it is part of a group of very large asset managers that not just set the amount of liquidity, the amount of capital, the amount of cash available for businesses, but also where that money is allocated. And of course, the reason why we listen, as we're about to hear, I suspect, from people like Larry Fink and others, is some of the thematic ideas they talk about, you know, private credit, infrastructure. We've talked previously on this programme about cryptocurrencies and their appetite for those determine a lot of the valuations and where a lot of savers' money ends up in terms of the real economy.

16:42So Larry Fink's words are important. He's been talking about the future of the world economy, depending on whether Iran remains an ongoing threat to energy and shipping security as well. Security as well when the war ends, whenever it ends, when we get to that point. Larry Fink has been speaking exclusively to our business editor, Simon Jack. And Simon started by asking him how long the conflict needed to go on before we're looking at a serious threat to the global economy. I think it's too early to really determine what is the scale and what is the ultimate outcome. I could paint a scenario where I could see a year from now oil at$40 a barrel, or I could see it above$150 a barrel.

17:23We have two very extreme outcomes. And in my conversations throughout the world with the U.S. government and all that, to me, everybody has to recognize there's not going to be an outcome that's somewhere in the middle. It's going to either be two extremes. Is Iran a country that can be accepted by the international community? Can Iran be a country that participates in the world again? Could Iran be a country in which they are peacefully working side by side across the Persian Gulf with the GCC? That's one very big outcome. And if that outcome occurred, then you could have the Iranian oil back into the marketplace alongside the growth of the Venezuelan oil.

18:09And you could paint a picture where oil prices could be lower than they were prior to the Iranian war three and a half plus weeks ago. There's a cessation of war, and yet Iran remains a threat, a threat to trade, a threat to the Straits of Hormuz, this threat to this peaceful coexistence of the GCC region, then I would argue that we could have years, years of above$100, closer to$150 oil, which has profound implications in the economy. The$40 oil implication is one of abundance and growth. The other one is an outcome of probably stark and steep recession. So I don't think anybody knows what the outcome will be.

18:58And I try to tell everybody, it's not about whether it lasts a week or a month from now. It's the outcome. What is the result of this? And to me, you know, from my vantage point, there could only be one outcome, and that is the outcome of some form of resolution. It's not a—does it not need to be a regime change if that regime stays— becomes more, I would say, a part of the world community of some sort. You know, if you just think about what has transpired over the 40 years with Iran, one of the most productive economies in the world before 79. In fact, Iran's GDP per capita was so much larger than Abu Dhabi and Qatar and Kuwait and Saudi Arabia.

19:48It has flip-flopped today. Once again, you see how a government can systematically destroy the lives of the majority of their population. I mean, Iran is being controlled by a member group of a party. They're getting very, very wealthy on the backs of the majority of the Iranian citizens. And so, you know, it's a country of beauty. It's a country of opportunity, but it has not manifested itself. And I think about the same thing about Venezuela. Venezuela was a country that has enormous wealth, one of the largest oil reserves in the world, has huge amounts of natural resources. And yet if you looked over Iran over the—I mean, Venezuela over the last 20, 30 years, the degradation of the population because of a very bad government has really destroyed the fabric of it.

20:42In this case, the government that was there is still there, different leadership, and And now they're working with the international community to try to rebuild that as well. And so to me, you know, I don't know if we can have that type of outcome in Iran, if that's even feasible or not. Very different circumstances. But it seems less likely that you'll get that outcome, surely. If the leadership of Iran wants to continue to be an exporter of terrorism, an exporter of fear, then that's a very different outcome. And that outcome, you say it could be$150 a barrel. What happens to the global economy if that happens?

21:23How do we see it? We'll have global recession. Okay. I mean, it will be. Think about what it means for agriculture prices. fertilizers is a byproduct from gas. You make nitrogens and ammonia from gas. And so that is the main source of fertilizers for agriculture. And that would mean just a huge rise in fertilizer prices. So many different components that are made from hydrocarbons. The need for helium, them, especially in the manufacturing of chips and all that. So it really does really disrupt a lot of the supply chains. In that case, it behoves countries to be reliant, to build their reliance.

22:10You've talked about energy pragmatism. In your letter you say you need to expand energy supply, it needs to be abundant and affordable across all different sources, including oil and gas. The US is essentially energy independent. Should countries, other countries, including the UK, maximize their energy resources, including their oil and gas reserves? I believe, as you've framed it, energy pragmatism. You need to use what you have to provide more abundance in your country. And the only way you create abundance is having cheap power, cheap electricity to allow the the consumption in other goods and to build industry with cheap power.

22:55One of the fundamental problems of Europe per se, I'll talk about the UK in a minute, is it does not have a large source of power. And so you have different countries doing different things in Europe, like nuclear in France, and you have hydro in the Nordics. In Spain, you have solar. In the UK, you have some solar, you have some wind, You do have hydrocarbons. To me, it is about being pragmatic and trying to lift more of your population. Rising energy prices is a very regressive tax. It affects the poor more than the wealthy because it's the larger component of their pocketbook. And so we need to be much more thoughtful.

23:44How do we have a more pragmatic, more self-reliant energy? I mean, there's no question in my mind, if we had three or four years of$150 oil, you would have so many countries moving so rapidly towards solar and maybe even wind, but definitely solar. Should you ride all the horses that are available at your disposal then? I've said that for the last few years. We should, to create economic vitality in your country, you see real correlation between countries that can provide cheap power to their population. there's more resiliency in the economy. But I do believe, like in the United States, yes, the United States has enough hydrocarbons to be independent.

24:29In my letter, I talked about the need for the United States to fully embrace solar. We need to manufacture solar panels in the United States. We need to build battery storage and backup. And having a resilient power grid, the one problem of the UK and the United States and in Europe, we do not have interconnected power grids. We have more regionalized power grids. And if we're going to move into the AI world, which I talk about in my letter, we need resiliency and we need a lot more power. But on oil and gas, use what you've got is the message. Among other things, not just be totally dependent on one source.

25:08And that's what I'm trying to say for every country. Use what you have unquestionably, but also aggressively move towards alternative sources too. More to come from Larry Fink, who runs BlackRock, the world's biggest asset manager. So he's got£10 trillion worth of savers and investors' money around the world that he's putting into all kinds of different things and trying to get a return from them. Harriet Hastings is the co-founder of Biscuteers with us this morning. What do you make of what he has to say, Harriet, about the energy outlook and the impact of energy prices? um well i mean i think everything he says makes a lot of sense to me but um obviously it's it's a terrifying prospect i mean i thought was really interesting his focus on the outcome rather than the length of the war and just putting that emphasis there um because there's a massive difference obviously between a kind of bright future of 40 you know 40 dollars and a really you know really worrying outcome to put it mildly at 150.

26:13Simon just Harriet makes that point about you know the outcome of the war we've just had as we often do this time of the morning latest lines latest reporting you know them and a comment from the Iranian military spokesperson is that the United States is negotiating with itself they say. So the quote from Ebrahim Zolfikari who's a spokesperson for the unified command of Iran's armed forces has said, has the level of your inner struggle reached the stage of you negotiating in yourself? So a bit of a provocative line there. But then Simon, this line that jumped out at me and particularly when Harriet was saying that people like us can never get along with people like you is the comment from that spokesperson.

27:04is there a feeling that the consequences of this war will be felt for a lot longer than any announcement that the war is over i think that is correct if you look at the way that the iranian regime are trying to move away from processing oil transactions in dollars into chinese yuan you know there is a potentially structural shift of the type we haven't seen in in 50 years in the global economy, the dilution of the power of the petrodollar, which has dominated payments for, as I say, half a century. So yes, I'd also note that resilience of the economy to deal with$150 barrel of oil is rather more diluted than it was four years ago.

27:52There are lots of parallels of four years ago, but there are also lots of differences. at the start of 2022 households not all households obviously but a lot of households had built up excess savings unplanned savings during the pandemic because they couldn't go out they couldn't go on holiday and that was fueling some of their ability to deal with higher costs this time around that's not the same case similarly with the labour market similarly with where interest rates start at so if you like i think larry fink just reflecting on the interview if the end state is a protracted higher oil price, I think the chances of recession are considerably higher than they were four years ago.

28:34Got to put you on the spot with a question here, Simon. Adrian in Belfast has been in touch saying, how many noughts are there in 10 trillion before the decimal point? Oh, God. That's exactly what I thought. There's a reason I've put it in your direction. Too early in the morning for that one, isn't it? Come on, Adrian. We've got AI for those kind of things now. We don't need to use our brains to work that stuff out. Gavin in Manchester has been in touch saying, Good morning, Larry Fink and BlackRock have a seat on 80 % of the S &P 500 companies. So that's that stock market in the United States with those 500 massive companies on it.

29:05A bit sort of similar to, you know, our FTSE 100 in one way or another when we talk about our stock market. He's the most powerful person in the world, says Gavin in Manchester. 85058 as we continue to discuss more of Larry Fink's thoughts around could there be a recession on the way? what are the consequences of AI? He's really upbeat about some of the benefits that individuals will see, not just from using the technology. I mean, David has been in touch saying, regarding AI, tradesmen will be replaced by robots. That isn't what Larry Fink thinks, Dave. So stick with us for that. Also, I noticed I've just spotted a message on my phone that's come up trying to persuade me to make a claim for some missold car finance despite never having made a car finance purchase in my life.