$15 Trillion Money-Making Machine | How BlackRock Became Too Powerful to Ignore（原声文稿）

really the president of the United States if we look at the kind of influence essentially have a monopoly. Well, how big is black rock?

politicians the most evil company in the world the world He can get a meeting with any company on the planet Jensen Yuan built NVIDIA from scratch and today he owns 3.7% of NVIDIA.

But BlackRock? BlackRock owns 8.02%.

Steve Jobs owns less than 1% of Apple.

But BlackRock owns 7.97% of Apple.

Bill Gates owns 1.34% of Microsoft.

But BlackRock owns 8.18% of Microsoft.

Vanguard, They own a huge stake in almost every S&P-finding company.

And BlackRock alone controls over 15 trillion dollars in assets. Do you realize how much 15 trillion dollars is?

It is more than the GDP of India, Japan and France combined.

no factory and they have never made a physical product in their existence.

turned it into the most powerful company on earth.

But so powerful that the US government itself is now afraid of BlackRock.

The question is, how did a company that make nothing end up owning everything?

Why is the US government itself afraid of a failed banker's idea?

And what does it teach us about the dirty secret of American capital? This is a story that dates back to the 1980s.

because he designed a money printing machine. Now look how bankers make money from thin air.

Larry Fink saw that the banks had a unique problem.

loans, they had to wait for 30 years to get the money back.

So he used an instrument called collateralized mortgage obligations.

know how the Wall Street bankers make millions of dollars.

loans paying 9% interest on a principle of $100 million collectively.

split these $100 million into 100 units so that if a buyer buys one unit of this bond for $1 million, when the family pays their AMI to the bank, the buyer can get 9% interest or $90,000 in their first year and they keep getting the principal amount as the families keep paying their AMIs.

So it's a bond, but its underlying asset is a home loan.

million of interest in year one, plus principal as the family repays the loan.

because sometimes people might default on home loans. And this is where Larry Fink designed a genius strategy. He cut this asset into three parts.

slice of the loans, he sold three bonds with a payment queue.

For example, bond A has a size of 50 million dollars but only paid 6% interest.

Bond B had a size of 30 million dollars and paid 7% interest.

And lastly, bond C had a size of 20 million dollars paying 8% interest.

principal, the money first goes to bond A, that is why they are the safest. As a result, they also get the lowest interest.

the money goes to bond B and then it goes to bond C.

anybody defaults, they are the first ones to lose money.

As a result, they also get the highest interest rate in the queue, which is 8%.

bonds A, B and C together earn $6.7 million in interest.

homeowners, they are paying 9 million dollars in interest.

So this remaining 2 million dollars was Fink's pure profit.

restructuring math without making a single physical product.

And that is why this money was a money printing machine.

also the thing that killed Larry Fink's reputation. Now most people think the risk is when the home loans aren't paid. But the problem with this instrument was the complete opposite.

early that the interest completely vanished.

Millers borrowed $200,000 at 9% interest for 30 years.

Their EMI comes out to be $1,609 a month.

collects $1,609 every month from the Millers.

around the corner that starts offering fresh loans at just 7% interest.

will take a new loan of $198,634 at 7% take this cash, go to the old bank out so that they can now start paying their EMI at 7% interest. So, do you realize what just happened?

The 9% interest stream that was supposed to run for 30 years completely vanished.

That is how Fink lost 100 million dollars and eventually got fired. This is when he realized the importance of risk prediction.

And he saw that every other trader in Wall Street is making the same mistake.

When the Latin American debt crisis broke out in the 1980s, bankers lost money.

When the dot-com bubble happened, investors lost money.

When the 2008 crisis happened, bankers lost everything.

And strangely, no economist, no analyst or no banker could ever predict a crash.

Hormuz shook up the market and caused the bankers trillions of dollars.

Street's smartest traders make such a stupid mistake? And he found the answer in 1988.

started a company inside Blackstone Group's office Financial Management, later to be renamed as BlackRock.

And they built a magical risk machine in BlackRock.

can and as many variables as they possibly can.

oil crash all the way to wars and even tsunamis.

loans, credit histories, interest rates and millions of market data points.

And this software funnily is called Aladdin.

In simple words, Aladdin is like charge pretty but for market predictions.

to your portfolio if the interest rates rise?

will give you the most accurate information possible so that you can make your bets accordingly.

relevance and trust in the market was a goddamn recession.

And you know what? God actually gifted them a recession in 2008.

2008 was a tumultuous year for the economy.

It was the worst day on Wall Street since the crash of 1987.

instruments that Fink pioneered, which was mortgage-backed securities.

C and in 2008, homeowners stopped paying AMI and all these bonds started failing.

remember, a bank basically collates 5,000 home loans together into a hundred million dollar bond and then they sell it to the investors in three tiers, bond A, B and C.

which of those 5,000 home loans were actually risky.

Yes, the banks had no idea which of those people will default.

jobs and borrowers were actually walking away from their own homes.

So how could they predict who would pay the home loan and who wouldn't?

And this is where Fing's Aladdin became a magical tool for the American economy. You remember what I told you about it?

you about today's news because Aladdin had 20 years of context, data and variables.

loans are bad loans and which loans need to be written off.

management to 3 trillion dollars in assets under management. That is how BlackRock won the trust of America.

the most powerful financial machines in human history.

company called iShares and got their hands on a financial instrument called ETFs. ETF stands for Exchange Traded Funds.

but as of now, look at what Larry Fink spotted.

For decades in America and in India, the middle class pan was absolutely simple. You hand your money to a fund manager in a mutual fund.

She picks the winners, you pay her a 1.5% fee whether she wins or she loses.

So, if you start with $11,000 at a 2% fee, that's $220 in year 1.

$174,494, at a 2% fee, you have already paid $79,310.

Now, although 2% looks very little, there was just one problem.

Most of the time, the comparison for a fund's performance is done with S&P 500.

gives you a 15% return, he'll be considered an absolute genius.

But if he gave you a 9.5% return, he'll be considered a complete failure.

90% of American fund managers failed to be the S&P 500.

is the benchmark, why not just copy the S&P 500?

That is how the concept of index fund or later called ETF was born. Now, here's how ETF actually works.

of 500 of the largest publicly traded companies in the United States.

this, NVIDIA 7.29%, Apple 6.55% and so on and so forth. Now, the fund completely copies this list.

no meeting and nobody reads a balance sheet.

A simple program divides your money by those exact percentage points.

So $7.29 will go to NVIDIA, $6.55 will go to Apple, and so on and so forth.

all-finded companies in the exact proportion as the index says.

So now, if the S&P 500 goes up by 5%, your portfolio also goes up by 5%.

practically done what 90% of the fund managers failed to do.

are completely okay with it because the entire market is down.

that you are not paying for the brilliance of a fund manager.

You are simply paying a program to blindly shuffle your money in a pattern.

charge you 1.5% fee, the index ETF only charge you 0.03%.

At $10,000, the difference is $150 and $3.

At a million dollars, that difference is $15,000 versus $300. That is how ETFs work.

And this is what Larry Fing bet on way before anybody else at his kill.

And after 2008, he already had the trust of America.

bought iShares, the biggest ETF business on the planet.

Americans invested in BlackRock's ETFs, BlackRock got $6 trillion in ETFs and $15 trillion in total assets under management.

trillion with a 0.03% commission running on autopilot.

That is how BlackRock became a money making machine.

Microsoft Microsoft and 497 of the most powerful companies on earth.

Microsoft, 8.02% of Nvidia, 6.69% of Google and 7.75% of Coca-Cola and so on and so forth.

enormous stake in the fortune-finding companies.

So now the question over here is the story so far seems pretty good.

question is, why is BlackRock being called evil and are two more companies called Vanguard and State Street.

Together, these three companies roughly control 72% of every equity ETF dollar in America.

In they're the single largest shareholder in 438 of they're the largest shareholders in 438 of America's 500 biggest companies. And as such large shareholders, they also get voting rights.

extraordinary power to bend the markets for profits.

the attorney general of Texas and 10 other states case.

These three firms held massive stakes in producers.

This included 30% in Peabody Energy and 34% power companies that burned that coal.

They have 24% of Duke Energy, Power.

And lastly, amongst the BitTech companies that the miners, burners and the buyers at the same time.

And here's where the dots connect between 2020 and 2021.

and state street also signing on to climate action 100 plus.

And according to the lawsuit, they used those clubs to signal a shared commitment.

And this commitment was to cut coal output by more than 50% by 2030.

from these companies fell by 19%, coal prices rose by 25% and when coal and ordinary Americans had to pay more for using the same electricity.

the investment companies to produce extraordinary revenue gains.

verdict isn't out yet, think about how much power these three companies have on the American economy.

companies, they can practically manipulate any economy.

and healthcare will become a disaster for the common man.

where they can push banks to push student loans and universities to hike up prices.

common man in terms of affordability in the United States of America. And this is where capitalism becomes dangerous.

take a step back and think about the progress will realize something strange about capitalism.

needs no car, no service centers, no medicine, and he will also consume very less fuel and take person spends money on medicine, doctors, insurance, person is great for the economy and a cyclist is to ask yourself, what exactly are you building the economy for.

with sick people or a modest economy with healthy people? And then we learn to draw that line as a society.

We will draw that line between conscious capitalism and evil capitalism.

cross that line and life will become very, very difficult for common man.

the life of a common man will be absolutely disastrous.

the case and I just hope this does not happen in India.

we all need to learn and ensure that our country never gets into.

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