Paint it Black... Rock

Is BlackRock so all fired great?

May 02, 2023

BLACKROCK. The big bank that owns everyone. BlackRock BLK 0.00%↑ has around $9 trillion in assets under management currently123. It is seen as the big bad company that will usher in a new world order.

Maybe that will happen, but it is important to understand what these numbers really mean. Let us look at stock market metrics and see what they mean in plain English.

The lawyers that I do not have want me to let you know: I am not a financial mogul, historian, or expert in anything. I read and listen to things I am interested in, and then write about it. I will learn as much as you do from this article… I hope. Maybe I am a future financial mogul, historian, or expert in anything… anyway, lets get to it.

Stock Price

Every company that is on the stock market (publicly listed) has a stock price. This price is determined by what the market thinks is correct. In other words, what traders are willing to pay. It is all down to basic economics: supply and demand.

When a stock has less demand, the price goes down, when there is more demand it goes up. Talking about a “sell-off” of a stock is somewhat deceiving, since there is presumably someone buying the stock from the “seller”. It is rather an excess supply and dwindling demand that drives a price down.

Okay, that was pretty basic. Let’s take it a step further.

Market Capitalization

When you click through on Yahoo Finance or other financial sites, you are going to come across the Market Cap metric. Whenever some intelligent stock analyst says “Apple, Inc. has reached $2 trillion in valuation” or “Alphabet, Google’s parent company, has crossed the $1.5 trillion mark”, they are talking about market capitalization.

This is basically measured by the stock price multiplied by the shares outstanding. Who decides how many shares are out there? The shareholders. These are the group of individuals who own stock in a company and actually take the company’s financial performance seriously.

Do you remember the whole GameStop/AMC fiasco a few years ago? A bunch of gamers got together and started to buy tons of GameStop (and later AMC) shares while they were super cheap. They then used those shares to vote at shareholder meetings, influencing the company.

The same thing happened with Elon Musk when he bought Twitter. He started with about a 8% stake, which gave him a lot of influence on the board of directors.

Did you get that? (Market Cap) = (share price) × (number of shares).

Cool, now we can talk about…

Net Worth

Whenever Dave Ramsey does an “everyday millionaire theme” call-in hour, he asks for those who have a net worth of $1 million or more. He explains this means that your assets exceed your liabilities by $1 million or more. This is seen as the ultimate metric of how much wealth a person has. If I took out a loan for $100 trillion, I would not be a trillionaire, I would be a man with a lot of debt.

Remember when you played Monopoly but did not have time to finish the game? You took all your money plus the mortgage value of all your properties plus all the houses or hotels you might have built and add them all up. Whoever had the most won. That is basically how net worth works.

In the real world, it works the same way for companies. They have assets and liabilities. A good company has more of the former and less of the latter. But it would be too easy for companies to just call it net worth like normal people. They refer to their net worth as their Book Value, Net Assets, or Shareholder’s Equity.

A company’s Balance Sheet is the the piece of paper that lays all of the values out for everyone to see. It may say “the London assets are worth $w and the Djibouti assets are worth $x, and we also owe Bank A $y and Bank B $z.”

Okay here are the formulas we have so far:

(Market Cap) = (share price) × (number of shares)

(Net Worth) = (assets) - (liabilities)

These are two metrics we have to measure a company’s value. Let us review and determine BlackRock’s value. You might be surprised.

BlackRock: the paper tiger

Now, with $9 trillion in assets under management (AUM), you would think that BlackRock might be the largest, most valuable company in the world. In fact if you listen to the media moguls on FOX Business, CNBC or Bloomberg you might think BlackRock is so big that it would be considered “to big to fail.”

In this you would be wrong. BlackRock is currently valued at:

Market Cap: $100 billion (which puts them at #139 on CompanyMarketCap.com)
Shareholder Equity: $37 billion (which puts them at #208 on CompanyMarketCap.com)

Now, I will admit, these are large sums of money… more than I have… but this does not put you on the most valuable list by any stretch.

To put this in perspective, Apple AAPL 0.00%↑ is worth about $2.6 trillion. Berkshire Hathaway has a shareholder equity of about $472 billion. Russian mining company Nonnickel has a shareholder equity of about $602 billion. These are really, truly, BIG COMPANIES. BlackRock is a small time player when you look at it like this.

Yeah? Well what about the $9 TRILLION in assets?

This is where BlackRock is interesting. What the heck is going on here?

Before we launch into this, let us look at our old friend, FTX.

Remember, FTX was a crypto exchange that traded your dollars ($) for bitcoin (฿). I go through some of the technical bitcoin stuff in my article I Fought the Law, but here I would like to just touch on the ponzi-scheme side of it.

Remember, Sam Bankman-Fried (SBF) ran FTX. FTX had a “stable-coin” (think cool-crypto-gift-card) called FTT. A lot of people used the FTX exchange to buy bitcoin and other crypto. FTT was used on the platform as a medium of exchange, since it was easier than using dollars.

What SBF and FTX neglected to tell their customers was that all the FTT and the assets backing it were held by a firm called Alameda Research, run by SBF.

When Binance (another crypto exchange that held a lot of FTT) and others started to cash in their FTT, FTX did not have the money to give them. They had gambled away all their FTT at Alameda Research.

And then we had all the big stink about everything that was going on at FTX yada-yada-yada.

The important part was that thing about where everyone thought their FTT was and where it actually was. FTX pulled an Obi-Wan and said “these are not the droids you are looking for”. People were deceived.

This is where we bring BlackRock back in to our discussion. BlackRock is what is called an asset manager. You give them your money and they invest it get you, the customer, a reasonable return on your asset. The amount of money that a company like BlackRock has under it’s control is called assets under management (AUM). BlackRock is often hired by governments to handle certain funds, like pensions.

Example might be California or the United Kingdom. Both had pension funds for government employees. Both governments hired BlackRock to manage the pension. This does not mean the pension was nationalized, since it was managed by a private entity.

But what BlackRock also does is take this money that you and others give them and make tons of investments. This might sound all well and good, but here is the interesting part.

Remember when we talked about shareholders at the beginning of this article? Well, BlackRock, with the money they get from their customers, is able to buy tons of shares in companies and vote in shareholder meetings. They can sometimes control a company more than the founder can (remember what happened with Steve Jobs? Don’t? Check this footnote4)

This brings up a paradox: BlackRock has a lot of control in companies because of other people’s money. They basically have a $9 trillion loan that they are using to buy up the world with. Dave Ramsey would be (or should be) upset about this.

Here is the low down: BlackRock takes money from people (or governments) and uses it to gain influence in the world. They make money not because they produce things, but because they use other people’s money... sorta like SBF and FTX…

But what does this all have to do with anything? So what, BlackRock owns everything with other people’s money?

SIFIs and TBTFs

One thing you find out when you look into finance is that everything has an acronym. Often, there is a colloquial term related to it that also has an acronym. Maybe it is because stock brokers have to talk fast on the trading floor, I don’t know.

Anyway, since 2008 and all that debacle, there has been a group of banks that have been deemed systemically important financial institutions, or SIFIs. Colloquially, they are referred to as “too big to fail” or TBTF. Examples of these banks are JP Morgan Chase and Citigroup. It is the Fed’s job to pull these banks out when something happens. The idea is that if these banks go belly up, the whole world ends.

Mostly, these are banks and also insurers like MetLife.

But some people think that BlackRock should be on this list as well.

Because… BlackRock owns so much… and has so many assets… and is so important… and… and… and… You can see the list of reasons going on.

But what does this boil down to? If BlackRock was “too big to fail”, the Fed would have to bail them out at the drop of a hat. BlackRock would essentially be nationalized or even more important government pension funds would be nationalized.

Taking sides

Cui bono? Who benefits from the rise (or fall) of BlackRock (or their puppet masters).

BlackRock is an influencer of major business sectors. They manage $9 trillion of other people’s money. They have ties to Davos and the WEF (see my article), where Larry Fink, the founder of BlackRock, is a speaker.

We know that the many in the Biden Administration, including Janet Yellen from the Treasury, are largely aligned with the interests of Davos. We know that the European Banking sector, that is the EU and the European Central Bank, are also aligned with the interests of Davos. They are Davos.

On the other hand, in our studies (here and here) so far of Jerome Powell, the Federal Reserve, and the Wall Street banking cartel, we have seen a manifest dis-alignment from Davos.

In other words, BlackRock and Wall Street are not aligned.

I think Tom Luongo says it best:

“You can see the game here, Janet Yellen can force Jerome Powell to bail them out when their balance sheet implodes for real, holding the holes in the pension funds hostage as blackmail.
Why would they do that? Why would Fink do this? Well, if you want to nationalize the US pension system and end the old US dollar system then you do that during a major crisis.
How did they tie Powell’s hands during COVID? The CARES Act.
How will they tie Powell’s hands during the European Sovereign Debt Crisis? Making Blackrock a SIFI before it happens.”
—Tucker, Blackrock and the SIFI Two-Step, on Gold Goats n’ Guns by Tom Luongo

In other words, could Yellen redefine SIFIs to include asset managers like BlackRock? If they could do that, they could curtail a lot of what the Fed is doing in terms of bringing down the European Banking system, which lives off of the exploitation of offshore US dollars (Eurodollars).

Could this happen? Yes. What would it take? It would require asset managers like BlackRock to be called financial intuitions, like banks and insurance agencies.

The problem with this is that BlackRock is just a gigantic investor. They do not give out loans, pay interest on deposits, or insure your assets. All they do in manage them. From what I have seen (here) BlackRock does not currently fall under that, and it would take an act of Congress to do it (correct me if I am wrong).

In conclusion

Contrary to what people imply, BlackRock is not a particularly large institution, it just has a lot of assets. Furthermore, the power it wields is not it’s own, but rather borrowed power. Finally, there seems to be a push to make BlackRock into a financial institution protected by the Federal Reserve.

This article feels like one of my large ones, even though it is much shorter. If you find any errors in this article, let me know, and I will fix it. As I said, I am no expert.

Thanks,

𝕭𝖔𝖓𝖎𝖋𝖆𝖈𝖊

I must remind you that I am just an 18 year old young man who is trying to figure things out. I am not a doctor, lawyer, financial advisor, or theologian. I read the doctors, lawyers, financial advisors, or theologians and try to understand what they are talking about, and then write about it. Don’t listen to me! Listen to the people I listen to.

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