WHEN: Today, Thursday, April 12, 2018
WHERE: CNBC's "Squawk Box"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with BlackRock Chairman and CEO Larry Fink on CNBC'S "Squawk Box" (M-F 6AM – 9AM) today, Thursday, April 12th. Following is a link to video of the full interview on CNBC.com: https://www.cnbc.com/video/2018/04/12/one-on-one-with-blackrocks-larry-fink.html?play=1.
All references must be sourced to CNBC.
ANDREW ROSS SORKIN: WELCOME BACK TO "SQUAWK BOX" THIS MORNING. BIG NEWS, BLACKROCK REPORTING EARNINGS THIS MORNING. LARRY FINK, BLACKROCK'S CHAIRMAN AND CEO JOINS US THIS MORNING BEATING ON THE TOP AND BOTTOM LINES. EPS OF $6.70 PER SHARE. THAT'S UP 28% YEAR OVER YEAR REVENUE. $3.6 BILLION, WHICH IS 16% YEAR OVER YEAR. AND THEN WE WERE TALKING THE MARGIN HAS EXPANDED RATHER THAN CONTRACTED, WHICH IS SOMETHING THAT THE INDUSTRY, AT LEAST OVER THE LONG-TERM, OR AT LEAST ANALYSTS AND INVESTORS HAVE WORRIED THAT IN YOUR BUSINESS THE MARGIN IS GOING TO COMPRESS. AND THEN WE HAD ALL THIS VOLATILITY. WHICH I THOUGHT LAST NIGHT WHEN I WAS THINKING ABOUT THIS MIGHT BE DIFFICULT FOR YOU. NONE OF WHICH SEEMS TO BE TRUE.
LARRY FINK: WELL, VOLATILITY DID CHANGE THE WHOLE DIMENSION, I WOULD SAY, OF THE MARKETS. BIG PARADIGM SHIFT. YOU KNOW WE WENT INTO JANUARY VERY EBULLIENT OVER THE TAX REFORM. WE ALL WENT TO DAVOS WITH INCREDIBLE ENTHUSIASM. IN DAVOS THERE WAS A LOT OF ENTHUSIASM –
SORKIN: THAT WAS THE HIGH SIGN.
FINK: THAT WAS THE HIGH SIGN. THAT WAS WHAT I WAS GOING TO SAY. AND SO WE DID SEE A SLOWDOWN IN BUSINESS IN FEBRUARY AND MARCH FROM THE HUGE VOLUMES OF FLOWS THAT WE SAW IN JANUARY. BUT I THINK THERE'S A BIG MYTH ABOUT PEOPLE WORRIED ABOUT RISING INTEREST RATES. WE MANAGED $2 TRILLION OF FIXED INCOME. OVER 60% OF THOSE ASSETS ARE LIABILITY MATCHED. AND SO YOU'RE NOT – YOU DON'T SEE THAT TYPE OF BIG CHANGE. WE ALSO SAW BIG REBALANCING OUT OF EQUITIES INTO FIXED INCOME BECAUSE EQUITIES RALLIED SO MUCH AND PEOPLE WERE REBALANCING INTO THE MODEL. BUT PROBABLY THE BIGGER SURPRISE IS WE SAW HUGE INFLOWS AND HUGE OUTFLOWS. WE HAD ONE CLIENT WHO SOLD A BIG POOL OF MONEY FOR AN M&A TRANSACTION. WE HAD OTHER CLIENTS WHO WERE SELLING ASSETS TO – FOR MORE CAPEX. WE SAW SOME OF OUR – SOME CLIENTS SELLING ASSETS FOR RISING STOCK REPURCHASES. SO IT WAS A COMBINATION OF EVERYTHING, BUT NEVERTHELESS WE DID SEE CONSISTENT INTEREST. WE'RE SEEING MORE AND MORE INTEREST IN GLOBAL INVESTING. MORE --
SORKIN: WHAT WAS THE RETAIL PICTURE LIKE? I'M LOOKING –
FINK: 17 BILLION –
SORKIN: 17 BILLION IN RETAIL, AND THEN YOU HAD $35 BILLION GOING INTO I-SHARES AS WELL.
FINK: 35 I-SHARES, 17 RETAIL, 3 NET POSITIVE IN INSTITUTIONAL. BUT THAT MASKED QUITE A BIT. WE DID HAVE A BILLION –
SORKIN: WHAT DID THAT RETAIL NUMBER LOOK LIKE A YEAR AGO?
FINK: SAME RANGE. I-SHARES WAS LARGER.
SORKIN: BECAUSE THAT'S WHAT I WAS GONNA SAY. I WOULD HAVE THOUGHT THE VOLATILITY WOULD HAVE –
FINK: NO.
SORKIN: NO?
FINK: NO. WE ACTUALLY HAD A BILLION AND A HALF OF NET NEW FLOWS AND ALTERNATIVES. 2 BILLION IN NEW COMMITMENTS. WE HAD A COUPLE BILLION DOLLARS OF INFLOWS IN CASH. SO IT WAS ACROSS THE BOARD.
KAYLA TAUSCHE: LARRY, THERE'S ALWAYS A FEAR THAT THE RETAIL MONEY COMES INTO THE MARKET RIGHT BEFORE THE BEAR MARKET BEGINS. AND WITH $17 BILLION IN RETAIL INFLOWS, I'M WONDERING WHERE YOU THINK WE ARE IN THE CYCLE AND WHAT YOU THINK THAT RISK IS? BECAUSE SO MANY AMERICANS MISSED OUT IN THE LAST DECADE OF GROWTH AND EQUITIES.
FINK: WELL, I HAVE BEEN CONSISTENT ON THIS SHOW SAYING YOU SHOULD BE 100% IN EQUITIES. YOU SHOULD ALWAYS BE INVESTED IN THE MARKETPLACE. LIKE MY CHAIRMAN LETTER IN MY – IN THE ANNUAL REPORT THIS – TALKS ABOUT THE LONG-TERMISM OF INVESTING IN EQUITIES. I'M NOT SURE WHAT INNING WE'RE IN. I MEAN, OBVIOUSLY WE ARE LATE IN AN ECONOMIC CYCLE. IT'S BEEN EXTENDED BY THE TAX REFORM, LET'S BE CLEAR. SO WE MAY HAVE BEEN IN THE SEVENTH OR EIGHTH INNING, IF YOU WANT TO PUT IT IN THAT VERNACULAR, AND IT'S EXTENDED INTO EXTRA INNINGS. BUT I THINK WE SPEND TOO MUCH TIME TALKING ABOUT MARKET TIMING, AND OUR BIG THRUST IS FOCUSING ON BEING IN THE MARKET ALL THE TIME, BECAUSE YOU'RE – MOST OF US ARE NOT GOOD ENOUGH AT MARKET TIMING, AND FOR THOSE WHO HAVE BEEN IN THE MARKET -- STAYED IN THE MARKET AFTER THE 2008 CRASH, 2009, REALLY BENEFITED. AND THOSE WHO RAN AWAY FROM THE MARKET REALLY WERE QUITE HARMED BY THAT ACTION. AND SO AT THE TIME WHEN YOU HAD THE GREATEST FEARS, THAT WAS PROBABLY THE TIME TO BUY THE MOST. SO THE KEY FOR INVESTORS IS STAYING IN THE MARKET. AND YOU KNOW, THAT'S THE BIG DIFFERENCE BETWEEN INSTITUTIONAL AND RETAIL. INSTITUTIONAL, THEY STAY IN THE MARKET. THEY'RE INVESTED ALL THE TIME.
SORKIN: YOU SPEND A LOT OF TIME TALKING TO FOREIGN TRADE MINISTERS, FINANCE MINISTERS. WHEN PEOPLE TALK ABOUT A TRADE WAR WITH CHINA, NOT JUST ON THE TARIFF SIDE, BUT WHAT DO YOU HEAR FROM THE CHINESE ON THE OTHER POSSIBILITIES OF WHAT THIS COULD MEAN?
FINK: I WAS IN CHINA TWO WEEKS AGO. I WOULD SAY THE CHINESE ARE VERY PATIENT. I THINK THEY'RE WILLING TO HAVE A CONVERSATION WITH THE U.S. AT THE SAME TIME THEY'RE LIBERALIZING THEIR MARKETS NOW. THE GOVERNOR OF THE CENTRAL BANK YOU KNOW, SPOKE THIS MORNING OR LAST NIGHT OUR TIME ON THE EXPANSION OF THE CHINESE MARKET FOR FINANCIAL INSTITUTIONS. THEY'RE EXPANDING THE LIMITS OF HOW MUCH FOREIGN PARTICIPATION WILL BE. STARTING IN JUNE ASSET MANAGERS WILL HAVE AN OPPORTUNITY TO HAVE 51%. SO, THEY'RE MAKING CHANGES. MAYBE NOT AS FAST AS OUR ADMINISTRATION IS LOOKING FOR.
TAUSCHE: THIS IS SOMETHING THEYVE BEEN PROMISING FOR QUITE A LONG TIME.
FINK: AND IT'S NOW HAPPENING.
TAUSCHE: CEOs ARE SKEPTICAL OF THAT. YOU THINK IT WILL REALLY HAPPEN THIS YEAR?
FINK: IT WILL DEFINITELY HAPPEN.
SORKIN: HOW DO THEY READ THE TWEETS?
FINK: I WOULDN'T KNOW. SAME WAY I READ THEM. I DON'T KNOW.
SORKIN: BUT, I WOULD ASSUME – DO THEY SAY WE'RE VERY PATIENT, WE UNDERSTAND THE WAY –
JOE KERNEN: PATIENT? WE'RE THE ONES WHO HAVE TO BE – THAT HAVE BEEN PATIENT. LARRY, LET ME ASK YOU THIS. SO, THEY KNOW WITH A WINK AND A NOD AMONG THEMSELVES, THEY KNOW THAT SOME OF THEIR PRACTICES COULD NOT LAST FOREVER. DO THEY JUSTIFY THAT BY THEM -- THEY'RE COMING FROM A DIFFERENCE PLACE THAN WE ARE AND THEY'VE GOT TO DO THINGS FOR THEIR PEOPLE. AND I UNDERSTAND IT'S TOUGH TO DO THAT. BUT THEY MUST KNOW CERTAIN THINGS DON'T FLY IF YOU'RE TALKING ABOUT A COMPLETELY FAIR PLAYING GROUND. SO, I UNDERSTAND YOU'RE SAYING THEY'RE PATIENT, BUT THEY KNOW THEY HAVE TO COME INTO THE REAL WORLD SOME DAY AND PLAY BY THE RULES.
FINK: I HAD DINNERS IN CHINA WITH MANY OF THE TOP U.S. CEOs. JUST US ALONE WHEN WE THERE. I WOULD TELL YOU THE PRACTICE OF CHINA WERE FAR WORSE ACCORDING TO THEM 5 AND 10 YEARS AGO. INDEED, MANY OF THEM SAID THE PRACTICES OF THE LAST TWO, THREE YEARS, AGAIN FROM CEOs WHO HAVE BEEN ON "SQUAWK BOX," THE PRACTICES HAVE TOTALLY CHANGED, IT'S MUCH MORE OPEN. AND THESE ARE SOME TECH COMPANIES, TWO CEOs FROM THE TECH SIDE TOLD ME THAT THE MANNER IN WHICH THEY'RE OPERATING, THE MANNER IN WHICH THEY'RE SUPPOSED TO BE INTERACTING WITH THE DOMESTIC COMPANIES HAVE CHANGED. THEY HAVE MORE OPPORTUNITY TO GROW. SO, I WOULD TELL YOU THEY ARE SEEING ON THE GROUND LEVEL AND I'M NOT THERE YET BECAUSE I'M INHIBITED STILL. BUT THESE TECH COMPANIES THAT ARE THERE, THEY SAID THEY'VE SEEN CHANGES. BUT, DIRECTLY TO YOUR QUESTION, I THINK THEY KNOW THEY HAVE TO NEGOTIATE.
SORKIN: I WANT TO START A QUICK CONVERSATION NOW, AND THEN WE'RE GONNA SLIP IN A BREAK. BUT LET'S JUST – I WANT TO BEGIN WITH ONE QUESTION WHICH IS THIS, YOU HAVE BEEN PROACTIVE AND PUBLIC ON BLACKROCK'S STANCE ON HOW YOU'RE APPROACHING GUNS AND SOCIAL ISSUES AND OTHER THINGS. AND I'M CURIOUS IF THAT HAS AN IMPACT ON THE POSITIVE OR NEGATIVE SIDE AND EARNINGS FOR THE LAST QUARTER. AND WHAT IT'S MEANT FOR YOUR BUSINESS.
FINK: I THINK WE HAVE MORE ENGAGEMENT WITH MORE CLIENTS THAN WE HAVE HAD BEFORE. SOME OF THAT ENGAGEMENT IS ON ESG ISSUES. BECAUSE OF THE SPECIFIC GUN ISSUE, WE DID CANVAS OUR CLIENTS THROUGHOUT THE WORLD ABOUT ARE THEY – DO THEY WANT A PORTFOLIO COMPOSITION THAT FILTERS OUT FIREARMS. AND WE CONCLUDED THERE WERE SOME INVESTORS WHO DO, MOST INVESTORS DID NOT. WE HAVE TO ALWAY REMEMBER: THIS IS NOT BLACKROCK'S MONEY, WE'RE AN ADVISER TO. SO, OUR JOB IS TO TRY TO HELP THEM NAVIGATE THESE COMPLEX ISSUES. THEY'RE THE MONEY OWNERS. SO, WHAT WE HAVE DONE AFTER CANVASSING, WE CREATED THESE OTHER ETFs THAT CREATE THESE FILTERS AND THESE SMALL CAP PRODUCTS. UNQUESTIONABLY WE ARE SEEING MORE ESG DEMAND WORLDWIDE AND PROBABLY THE BIGGEST NET CHANGES DEMAND IN THE U.S. AND SO, HAS THAT HELPED US? I WOULD SAY UNQUESTIONABLY BEING PART OF A DIALOGUE, TRYING TO HELP THEM NAVIGATE THESE –
SORKIN: BUT THE POSITIVE TO NEGATIVE CALLS, E-MAILS, CUSTOMERS – HOW MANY CUSTOMERS HAVE SAID TO YOU, "YOU KNOW WHAT, LARRY, I'M NOT DOING BUSINESS WITH YOU GUYS. I DON'T WANT YOU INVOLVED IN THIS. I'M TAKING MY MONEY AND GOING ELSEWHERE." AND HOW MANY HAVE COME TO YOU AND SAID, "I'M GLAD YOU'RE DOING THIS AND I ACTUALLY WANT TO DO MORE BUSINESS WITH YOU AS A FUNCTION OF IT"?
FINK: I WOULD SAY 90/10. 90/10 IN FAVOR OF WHAT WE ARE DOING. AND MAYBE IT'S 95/5.
SORKIN: WE HAVE TO SLIP IN A QUICK BREAK. BUT WHEN YOU'RE BACK WE'LL CONTINUE THIS CONVERSATION.
KERNEN: WHEN WE'RE BACK WE'RE GOING TO TALK ABOUT SOMETHING ELSE.
SORKIN: APPARENTLY WE'RE GONNA TALK ABOUT SOMETHING ELSE. BUT WE WILL BE BACK WITH HIM IN JUST A LITTLE BIT. AND THEN WE SHOULD ALSO TELL YOU AT THE TOP OF THE HOUR, DELTA AIR LINES SET TO REPORT. CEO ED BASTIAN IS GOING TO JOIN US IN AN EXCLUSIVE INTERVIEW. HE WEIGHED IN ON THE GUN ISSUE AS WELL. RIGHT NOW A QUICK CHECK OF WHAT'S HAPPENING IN EUROPEAN MARKETS.
KERNEN: ALRIGHT, WE ARE BACK WITH THE HEAD OF THE WORLD'S LARGEST MONEY MANAGER, LARRY FINK, CEO OF BLACKROCK. $6.3 TRILLION UNDER MANAGEMENT. $55 BILLION OF INFLOWS DURING A QUARTER. SO WE WERE JUST TALKING OFF CAMERA, SO $2 TRILLION IS FIXED INCOME, $4.3 TRILLION EQUITY. SO, JUST TALKING, IN THE PAST WE'VE HAD LOTS OF DISCUSSIONS, LIKE EVERYBODY HAS, ABOUT HOW LONG WE STAYED EASY. AND GLOBALLY, I GUESS, REALLY, I MEAN SINCE 2008 OR 2009. AND YOU KNOW, WE THOUGHT THE TEN YEAR WOULD BE, AGAIN, WE THOUGHT THE TEN YEAR WOULD BE 3%. AND IT'S STILL NOT. AND WE STILL DON'T KNOW IF IT WILL GET THERE AGAIN. SO A COUPLE YEARS AGO, THIS IS A SORT OF – IT'S NOT – EPISODIC. THESE AREN'T JUST THESE – ALL OF THE APPEARANCES AREN'T – THEY DON'T STAY ON THEIR OWN. SO THERE WAS A TIME WHEN YOU WERE CONCERNED ABOUT SAVERS AND INSURANCE COMPANIES AND TENSION ABOUT HOW LOW INTEREST RATES HAVE BEEN. AND I GOT THE IMPRESSION THAT YOU THOUGHT THAT MAYBE CENTRAL BANKERS WERE KEEPING THINGS TOO LOW FOR TOO LONG AND THAT IT WAS GOING TO CAUSE SOME DISLOCATIONS. BUT HERE WE ARE AND MARKET FORCES DID NOT CAUSE THINGS, DID NOT CAUSE RATES TO GO UP YET. AND I DON'T UNDERSTAND WHY, I DON'T KNOW IF IT'S ANY EASIER TO HELP SAVERS, EVEN TODAY.
FINK: RATES ARE UP A LITTLE BIT OBVIOUSLY, ESPECIALLY IN THE TWO YEAR AREA. I MEAN, THEY'RE UP CLOSE TO 2% YOU KNOW, FROM THE LOWS OF 30, 40 BASIS POINTS. OBVIOUSLY THE TEN YEAR HAS BARELY BUDGED. SAVERS ARE STILL BEING SOME PEOPLE HARMED BY – OR SOME PEOPLE CALL IT FINANCIAL REPRESSION. THE CENTRAL BANKS ARE STILL FOCUSING ON OBVIOUSLY THE QUALITY OF THESE ECONOMIES AND THEY ARE ALSO VERY MINDFUL OF INFLATION. INFLATION UP UNTIL NOW HAS BEEN VERY, VERY MUTED AND NOW IT'S STARTING TO PICK UP. AND I DO BELIEVE WE WILL CONTINUE TO SEE THE FEDERAL RESERVE ON THIS PATH.
KERNEN: SO HAS IT BEEN THAT INTEREST RATES AS SIMPLE AS THEY'RE PEGGED TO INFLATION AND INFLATION HAS TO THIS DAY STILL NOT REALLY COME BACK TO THE EXTENT PEOPLE THOUGHT IT WOULD YEARS AGO? IS THAT REALLY WHY RATES HAVE STAYED SO LOW FOR SO LONG?
FINK: I WOULD SAY GENERALLY THAT. BUT ALSO, THEY HAVE STAYED LOW BECAUSE AS WE'VE MOVED TO MORE OWNERSHIP IN FINANCIAL ASSETS, AS WE'VE EXPANDED CAPITAL MARKETS WORLDWIDE, WE'RE SEEING MORE GLOBAL DEMAND FOR FINANCIAL ASSETS. THIS IS ONE OF THE REASONS WHY BLACKROCK HAS BEEN ABLE GROW CONTINUOUSLY. BUT THE DEMAND FOR LONG DATED CREDIT IS UNBELIEVABLE.
KERNEN: STILL?
FINK: STILL. INSURANCE COMPANIES ARE STILL SHORT THEIR LIABILITY. THEIR LIABILITY – AS I SAID, MOST INVESTORS ARE A LIABILITY MATCH AND YET, MANY OF THEM, THEIR LIABILITIES ARE LONGER THAN THEIR ASSETS. AND SO EVERY TIME YOU SEE THE INTEREST RATES PERK UP A LITTLE BIT, OUR CREDIT SPREADS WIDER, THEY JUMP IN, IT COMES BACK.
KERNEN: THERE WERE PEOPLE THAT THOUGHT THE FED MISSED AN OPPORTUNITY TWO OR THREE YEARS AGO TO RAISE RATES. IN HINDSIGHT, WAS THE FED ACTUALLY RIGHT TO HOLD OFF?
FINK: THEY'RE NOT HOLDING OFF. THEY'RE ACTUALLY ON A PATH. THE KEY THEY HAVE TO BE MINDFUL IS THE SHAPE OF THE YIELD CURVE WHICH I TALKED ABOUT IN JANUARY. THAT'S SOMETHING THAT IS VERY WORRISOME TO ME.
KERNEN: BUT WE STAYED AT EMERGENCY LEVELS, ALMOST CRISIS LEVELS, WITH UNEMPLOYMENT DROPPING THROUGH 5%.
FINK: I AGREE, JOE.
KERNEN: BUT HOW DID IT – IS IT BECAUSE THE REST OF THE WORLD IS NOT WITH US AND NOW MONEY COMES FROM THERE AND OUR BOND PRICES GET BIT UP I GUESS?
FINK: THAT'S A MAJOR REASON BECAUSE WE HAVE NOT SEEN ANY CHANGE IN BEHAVIORS REALLY IN THE BACK OF JAPAN. IN FACT – MAYBE A COUPLE MORE YEARS OF THIS BEHAVIOR –
KERNEN: IT MAKES ME WORRY THAT IF OUR INTEREST RATES ARE BEING DICTATED BY OTHER PARTS OF THE WORLD THAT AREN'T AS FAVORABLE AS OURS, THAT – THAT ISN'T GOOD FOR US. THAT SOMEHOW WE CAN --
FINK: WELL, IT'S GOOD FOR THE U.S. TREASURY BECAUSE 40% ARE –
KERNEN: BUT DOESN'T IT CAUSE DISLOCATIONS IN BUBBLES?
FINK: IT COULD, YES.
TAUSCHE: WHAT IS THE HEALTH OF THE U.S. TREASURY MARK? THE U.S. NEEDS TO BORROW A TRADEMARK DOLLARS THIS YEAR AND THE STRENGTH OF THE AUCTION HAS BEEN INCONSISTENT.
FINK: I'M VERY WORRIED ABOUT WHERE OUR DEFICITS ARE GOING THE CBO CAME OUT WITH A $33 BILLION DEFICITS, $33 TRILLION DEFICITS IN TEN YEARS. THAT'S UP FROM $25 TRILLION THE LAST TIME I SAW THAT. SO AN EXPANSION OF OUR DEFICIT BY $8 TRILLION HIM. I THINK, JOE, YOU ARE RIGHT. I THINK THE PROBLEM WE'RE GOING TO HAVE IS WITH THE PRESSURE OF THE CONSTANT AUCTIONS, YOU KNOW, I WOULD CLEARLY SAY TO YOU WE MAY HAVE RATES MOVING FASTER THAN EVEN THE FEDERAL RESERVE WANTS IN THE FUTURE, IF WE START SEEING LESS PARTICIPATION BY FOREIGNERS IN OUR DEBT. THAT'S SOMETHING I WORRY ABOUT. WHEN WE TALK ABOUT TRADE WARS, I WORRY ABOUT THAT OTHER SIDE OF IT. ARE THEY GOING TO CONTINUE TO BUY OUR U.S. TREASURY? MOST PEOPLE SAY NO WAY IT WILL NEVER HAPPEN BECAUSE IT WOULD IMPACT THEM, AND THERE ARE OTHER WAYS TO AFFECT IF YOU'RE GONNA DO TIT FOR TAT. BUT THESE ARE THINGS THAT SHOULD BE A PART OF A NARRATIVE AND PART OF A DIALOGUE. WE ARE THE LARGEST DEBTOR NATION WHO IS DEPENDENT ON FOREIGN OWNERSHIP OF OUR DEBT. JAPAN, THEY HAVE A WORSE DEBT OF GDP THAN THE U.S., BUT 90% OF THEIR DEFICITS ARE FINANCED DOMESTICALLY. ONLY 60% DEFICITS OF OUR FINANCED DOMESTICALLY. AND I DON'T KNOW WHAT THE FORECAST IS, IF THE CBO IS RIGHT ABOUT HOW LARGE OUR DEFICITS WILL BE IN THE FUTURE, WE'RE GONNA HAVE MORE DEPENDENCY ON FOREIGN OWNERSHIP OF DEBT.
TAUSCHE: BUT YOU ARE NOT SEEING THOSE BUYERS A STEP AWAY, YET?
FINK: NO. NO, YOU'RE NOT. I MEAN, YOU'RE – IT'S ALL NOISE RIGHT NOW. BUT NOT – THE ARBITRAGE FOR FOREIGNERS TO OWN OUR DEBT VERSUS THEIR DEBT, AS JOE IS DESCRIBING IS REAL, IT IS ALIVE. IT'S BETTER FOR THEM TO OWN U.S. DEBT THAN THEIR DEBT.
KERNEN: ALRIGHT. THANKS FOR YOUR TIME TODAY, LARRY. IT WAS FUN.