Tags: BlackRock | Uncertainty | Harming | Economy

BlackRock President: 'Uncertainty' Harming Economy

Monday, 07 Nov 2011 09:45 AM

U.S. businesses will continue to sit on piles of cash and refuse to hire until Washington politicians end the climate of uncertainty dampening economic recovery, says Robert S. Kapito, president of BlackRock, an investment management firm.

"Corporations today are sitting with more cash than they ever had, but they're reluctant to invest, they're uncertain about the future and regulation, they're uncertain about taxation," Kapito tells CNBC.

"Until we get some certainty that something in Washington happens instead of being locked down, they're not going to invest. and that's going to change how the economy is going to go forward in the future."

America needs leadership with a concrete growth strategy, Kapito adds.
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"Before we have the leadership to create a growth strategy, you can expect the economy to just muddle along, and, therefore, having money on the sidelines while it's muddling is really, really costly. It's a stealth tax on all of us," Kapito told CNBC.

In the meantime, investors should park their money in high-dividend paying stocks, which will provide income during today's cloudy market conditions.

"At BlackRock we're very big on dividend paying stocks. Dividends used to be a huge portion of your total return, and then, of course, during the bull market no one focused on dividends but were back to the basic investing," Kapito says.

Dividend-paying stocks in infrastructure companies will be especially attractive.

"I want to even focus a little further than that and say dividend paying stocks that are focused on infrastructure because if we're going to employ millions of people in America, we're going to have to invest in infrastructure sooner or later," Kapito says, citing Southern Company, an Atlanta-based utility, as an example.

"Here's a company paying a 4 percent dividend. This is a company that's involved in a huge nuclear project in Georgia, a coal project in Mississippi. These are the type of companies that are continue to pay a higher dividend. and then when the projects kick in, do even better."

Other dividend-paying stocks, utilities especially, continue to stand out.

If you want to invest globally, CCR, for example, builds all the roads and tunnels in Brazil. They have almost a 7 percent yield on their stock," Kapito says, referring to the Brazilian infrastructure company Companhia de Concessões Rodoviárias.

"Even here, communications — Century Link, you're almost at an 8 percent yield. It's the third largest telecommunications company.
Stock markets meanwhile, are starting to focus their fears more on Italy and less on debt-ridden Greece, as investor worry if the big European economy can streamline itself and manage its debts," he says.

"As soon as Greece looks like we can now sort of digest the risk right off the issues, in comes the 800-pound gorilla into the room. Italy is a much, much larger concern, with issues that have been lingering for decades," says Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, according to Reuters.

"This is not something you can cordon off. Italy is central to the European zone and it is going to force the European Union to recalibrate everything that has been taken for granted thus far in the conversation."

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U.S. businesses will continue to sit on piles of cash and refuse to hire until Washington politicians end the climate of uncertainty dampening economic recovery, says Robert S. Kapito, president of BlackRock, an investment management firm. Corporations today are sitting...
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2011-45-07
Monday, 07 Nov 2011 09:45 AM
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