Looking for a Silver Lining

“The key to making money in stocks is not to get scared out of them.”

—Peter Lynch

There are days when it seems like the only bull left in New York’s financial district is the famous statue that stands in Bowling Green Park, around the corner and down Broadway from the New York Stock Exchange. Some financial forecasters, however, are looking into their crystal balls and seeing rays of sunshine peeking through the clouds of gloom and doom.

In a recent BusinessWeek interview, Larry Fink of the investment firm BlackRock saw reasons for optimism despite the financial chaos. Fink notes that investors have put more than $50 billion into BlackRock’s money market funds in the past few months. When the stock market stabilizes, much of this cash will flow back into stocks, he says, creating a huge rally. While Fink acknowledges the risk of putting money into stocks in the current fiscal climate, he believes that now is the time to start.

Fink believes that the United States is in recession, but that the weak dollar is boosting US exports, which will make the recession less severe that it could have been. And while becoming more bullish on stocks, Fink is bearish on US Treasuries, reflecting his belief that the stock market turmoil has created a bubble in bond prices that is bound to burst.

$1 trillion—Total asset holdings of the investment firm BlackRock.(Business Week, 2008)