Have you heard about Blackrock?
Of course. This is one of the largest funds in the world. They have somewhere around $10 trillion in assets under management. Their influence is enormous. Not only do they have financial clout but also political.
Larry Fink is a well known Wall Street CEO who commands a lot of attention. One of the problems is when these institutions get too large.
Many feel Blackrock is untouchable. After all, they went on a buying spree the last few years, taking over a portion of the residential housing market.
How could something that is so large end up failing?
We might get the answer to that in the first quarter of this year.
Source
Freezing Withdrawals
Blackrock recently started to limit withdrawals. This is a bad sign. It is good to remember the fate of those cryptocurrency institutions that did the same thing. While nowhere near as large, it all stems from the same issue:
Liquidity
When a financial institution (or bank) freezes money, it is because it lacks the liquidity to meet the demand. This is something that the system tries hard to regulate. Naturally, banks have more stringent regulation as compared to Wall Street hedge funds.
The basic problem is long and medium term investing. This is contrast with demand deposits. When an individual (or company) can withdraw money, there has to be enough liquidity (cash on hand). This is difficult to do when the assets being purchased are invested on a long term basis.
For example, a bank can have a run if depositors want their money. They typically have their money tied up on loans, often real estate. These are non-liquid assets which cannot be turned easily into cash.
This is Blackrock's problem but on a larger scale. They purchased hunreds of millions in residential real estate, money that cannot be easily accessed. As entities are heading to Blackrock to pull their funds out, this is causing a major issue.
It got so bad that withdrawals are now limited to $125 million. This might sound like a lot of money yet the State of Florida withdrew $2 billion from Blackrock.
Too Big, No Liquidity
This should come as common sense but there is nobody there to make a $100 billion market. The liquidity required simply is not going to be there.
When running such a fund with numbers nearing $10 trillion, there is no liquidity to keep everyone happy. Simply following the idea of demand deposits (short term/immediate demand) with medium-long term investments shows how things will not work. It does not take too many clients who want out to create a run.
Obviously, this does not happen when things are going up. As markets are increasing in value, money managers are content with how things are going. Enter the bear and a different sentiment occurs. Suddenly, pension funds and other entities are suddenly reducing their exposure.
It is what Blackrock is facing.
We also can see how panic could also make the situation worse. While money managers are more patient and understanding than individual customers, there is a limit to what they are willing to put up with. Any sniff of insolvency is going to make them jumpy.
Blackrock is doing its part by trying to unload its real estate portfolio. Unfortunately for them, they are doing so in a market that is weakening. With interest rates going up, the strain is falling squarely on the shoulders of these Wall Street entities.
How much can they withstand? This is going to be a question to keep asking over the next few months. If the housing market dried up along with a stock market pullback, this could really put a dent in the value of Blackrock's holdings. This will only further upset the money managers, likely increasing the calls for redemption.
Fink is playing with fire here. The company lost $1.7 trillion in the first half of 2022. But then again, for him this is nothing new. As head of First Boston, he lost $100 million.
So losses are something Larry is accustomed to.
Nice to play with other people's money.
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BlackRock and other fund holdings are somewhat in the danger zone right now, but there is no way the FED and even the IMF would let them collapse, it would take down the entire system. So, they will be the first to be there with emergency loans to substand the short term demand in withdrawals. No doubt about that. Lehman Brother was nothing compared with BlackRock.
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Lehman was a bit different because of the counterparty on some of what they were involved with. With Blackrock, it is potentially a massive loss of money but I am not sure the systemic risk exists due to counterparty.
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It used to be called Too Big to Fail, but now it is too big no liquidity. I think there are many Italian banks that have no liquidity. This news about Blockrock surprised me, as I know it is one of the biggest banks in the world. I researched the news in Italian news outlets, but no one reports that BlackRock has liquidity problems. Thank you for the information you give us.
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As was pointed out above, Blackrock isnt a bank. This puts it in a different category.
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They are playing with other people's money so I don't think they are very concerned but I wasn't expecting Blackrock to have liquidity issues. During the pandemic, I saw a ton of them buy land and I know those are very illiquid. It makes me wonder what will happen because I have started seeing more housing market doomed videos.
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That was #BlackStone I believe not #BlackRock (same difference)
Buying housing I mean. I believe the Fed will let banks fail this time in order to bring in the CBDC.
Yea I made a mistake but it's also a company with a ton of funds. I just don't know if they will let them fail because the governments hate to see all those jobs go away.
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I wonder how big a black hole black Rock will make..🤔
That liquidity thing has a way of effecting a lot of other things around it...
At lwast unlike the unnamed case in the crypto space they did not throw investor money into weird leftist courses for clout. How much of these types of news can the world take?
trillions of dollars is really unimaginable to me that seems like a countries funding. How can enough not be available for withdrawal?
Unlike SBF, Wall Street is smarter; they hedge their bets by contributing to both parties.
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Oh, thought SBFhad more liberal friends
I mean for BlackRock CEO Larry Fink to say the Firm invested $24M in FTX says a lot about it’s impending downfall. Nice to play with other people's money - firms like blackrock are artists that paint a bad picture of crypto as a money loosing venture.
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$24 million to Blackrock is a rounding error. That is not causing a downfall.
The State of Florida just withdrew $2 billion.
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Politics has influence on a crypto price. But going on the freeze withdrawal of investment doesn't make it anymore a decentralized system. I just hope it doesn't take the fate of FTX. Thanks for sharing
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Blackrock isnt crypto.
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This is bad ,it’s bad in a scenario that if anything happens to black rock ,a lot of institution will be affected,inflation will now be 100%,i can’t just imagine what interest rate will be by then
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Wait, so this is not crypto-related? Here was I thinking (NOT!) crypto is a piece of sh*t and the fiat world is perfect! :P
This isnt even fiat because there is no currency in anything the likes of Blackrock does.
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I think that’s the problem with fractional reserve banking, they don’t have the assets that people are giving them because they use it all. Unless I’m missing the point here, I know they have crazy real estate holdings but weren’t they able to buy those because of fractional reserve?
In any case, it’s going to be painful that’s for sure.
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Yeah you are missing the fact that Blackrock isnt a bank. They do not operate under fractional reserve banking. They simply are taking money and investing it. Obviously, many investment are medium to long term. This is a problem if people suddenly want their money in large quantities.
This has nothing to do with leverage or creating money. Blackrock doesnt affect the money supply.
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This is actually quite dangerous, like you said the freezing of withdraws is what did over a lot of crypto organisations. Now we seeing a mainstream bank which is bad. Although here comes the printing of money to bail out more failed bankers.... Inflation through the roof and interest rates going up up up :(
Well, blackrock is not a bank. It is the biggest investment firm in the world.
Yet because of their size and the impact they have on the world economy, they might be saved by the banks as they are too big to fail?
Especially since they manage money for things such as pension funds and different states.
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Oh, that’s potentially very very bad
It’s the perfect set up. Let it all fail then they bring in the CBDC to save the day.
The cbdc is a coin, digital money.
Blank rock is an investment firm.
If blackrock falls, then the world economy will have a major recession or even a depression.
Digital money will not be able to boost the world economy.
They’re not the same kind of thing
Are we having a depression no matter what.
This time mwjy banks will be allowed to fail. To bring in the CBDC. The great reset is here. Blackrock has strong connections to Fed so may be veiled out but regular banking might fail and in purpose. We shall see
Banks will not be allowed to fail. Instead they will use the savings accounts from customers to save the bank if necessary.
What could happen is that governments buy those banks that are bankrupt, to prevent them from crashing the market.
Oh please. Stop with the nonsense.
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'Blockrock'
Nice typo :<)
Is that Blackrock on the blockchain? ;<)
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