Valuetainment - July 25, 2023


Larry Finkļ¼š The Most Powerful Man On Wall Street


Episode Stats

Length

14 minutes

Words per Minute

205.97643

Word Count

2,941

Sentence Count

207

Misogynist Sentences

1

Hate Speech Sentences

1


Summary


Transcript

00:00:00.000 Today we're going to take a deep dive into the man who pioneered the concept of ESG.
00:00:04.060 He is the reason why Dylan Mulvaney got a Bud Light.
00:00:06.360 He should actually thank Larry Fink.
00:00:08.440 Larry Fink and seven other people in 1988 start a company called BlackRock.
00:00:12.560 If you've never heard about it, it's a $10 trillion of assets under management company
00:00:17.760 that's more than any country in the world except for two.
00:00:21.920 Ready?
00:00:22.480 China and U.S.
00:00:23.960 1999, he takes the company public.
00:00:26.360 7,000% return today.
00:00:28.500 If you had a share in 1999 of BlackRock to today, you got 7,000% of return.
00:00:35.420 And he's now sitting around saying, you know, the concept of ESG is being weaponized.
00:00:40.020 There's a lot of people saying things about him.
00:00:42.060 Trump tried to get close to him in 2020.
00:00:44.240 Schwartzman said good things about him when they parted ways.
00:00:46.980 Elon Musk on January 16 tweeted, he said the word S in ESG stands for satanic.
00:00:54.160 And he's talking about Larry Fink.
00:00:55.780 I don't think those guys are best friends.
00:00:57.300 Who knows?
00:00:57.780 That may be the second fight after Zuck.
00:01:00.440 And here's what the great Charlie Munger said about him.
00:01:02.960 He says, I think the world of Larry Fink, but I'm not sure I want him to be my emperor.
00:01:09.600 Having said that, let's go learn a little bit more about this man, Larry Fink and BlackRock.
00:01:14.140 So earlier this week, a survey came out on central bank digital currencies.
00:01:17.440 And here's what it said.
00:01:18.480 The results show that 93% of central banks are working on a CBDC.
00:01:22.040 18% of central banks said they're likely to use a CBDC in the future.
00:01:26.840 And these banks represent 82% of world population and 94% of global economic output.
00:01:32.220 So why is this important?
00:01:33.380 Well, for me, I'm a pretty paranoid guy when it comes down to investments.
00:01:36.380 I got a lot of equities.
00:01:37.200 I got alternative investments.
00:01:38.240 I got some crypto.
00:01:39.420 I got things in them.
00:01:40.020 I got collectible cards.
00:01:41.000 But I also own a lot of gold.
00:01:43.220 Because for me, I like to control my money.
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00:02:24.980 Okay, so if you get value out of this video, give it a thumbs up and subscribe to the channel.
00:02:28.080 Let's get right into it.
00:02:28.860 Larry Fink majored in political science, originally wanted to get into politics and make an impact.
00:02:34.260 He decides to get into finance and starts working at First Boston Investment Bank in 1976.
00:02:39.240 Excels as a bond trader, very new compared to equity trading.
00:02:42.800 Top performer at First Boston.
00:02:44.680 Responsible for roughly a billion dollars to the bank's bottom line.
00:02:48.720 A billion to the bank's bottom line.
00:02:51.300 That's a lot of money at that stage of your career.
00:02:54.220 Identify the power of computers and trading very early.
00:02:56.720 In 1986, something happens.
00:02:59.220 Life-changing.
00:03:00.720 He loses a hundred million dollars.
00:03:04.640 He is humiliated and he quits First Boston after losing trust amongst his peers and the market.
00:03:11.880 But at the time he was 36 years old.
00:03:14.160 This experience for him was life-changing in his investment philosophy.
00:03:18.580 It took him 18 months to decide on what he wanted to do next.
00:03:22.000 Fink wanted to start his own business but needed investment money, meets with Steve Schwartzman
00:03:26.100 from Blackstone and makes a good impression.
00:03:28.440 They start a joint venture called Blackstone Financial Management in 1988, start making
00:03:33.140 money in two weeks.
00:03:34.100 By 1989, this is only a year later, Fink has $2.7 billion of money under management.
00:03:41.400 And by 1993, Fink had $8 billion of money under management.
00:03:44.740 Now, this time, Fink is obsessed with risk management.
00:03:47.660 He became a pioneer in using statistical model and algorithms to trade bonds.
00:03:52.180 By 1994, BlackRock was managing $53 billion.
00:03:56.700 The same year, Schwartzman and Fink had an internal dispute over methods of compensation
00:04:01.820 and equity.
00:04:02.860 Fink wanted to share equity with new hires to lower talent from banks, while Schwartzman
00:04:07.020 did not want to further lower Bankstone's stake.
00:04:09.900 Fink wanted to leave but needed someone to buy Schwartzman ownership.
00:04:12.840 PNC eventually ends up buying out Blackstone.
00:04:16.220 The one reputation Larry Fink had at this time is the fact that he knew how to restructure
00:04:20.040 toxic debt, and that's not an easy skill set to have, and he had.
00:04:24.160 So this area that he specialized, it causes Fink and BlackRock to become known as the place
00:04:29.300 to go to call for situations of wanting to restructure toxic debt.
00:04:34.080 BlackRock spends years developing risk management software called Latin, which launched in 1999,
00:04:38.700 the same year the company went public, offers Aladdin software to clients around the world.
00:04:42.960 December 2000, Congress passed Commodities and Futures Modernization Act banning regulation
00:04:49.040 on derivatives.
00:04:50.200 Big advantage, obviously, for BlackRock.
00:04:51.900 BlackRock acquires Merrill Lynch Investment Management, expanding its retail and international
00:04:57.840 presence.
00:04:58.580 So at this point, he's got his independent name.
00:05:00.960 People know who he is.
00:05:02.020 BlackRock, Larry Fink, no longer with Schwartzman.
00:05:04.100 And then 2008 crisis comes.
00:05:06.180 So this causes all the companies, including the government, to consult with BlackRock on
00:05:11.520 what to do with the debt.
00:05:12.600 Even Jamie Dimon called Fink for advice when the government asked him to buy Bear Stearns.
00:05:17.740 So imagine the U.S. government, as big as they are, the country they're running, they've
00:05:21.800 got all these options on who to call to consult them on this crisis that they're dealing with.
00:05:26.660 Who do they call?
00:05:27.680 Larry Fink from BlackRock.
00:05:29.160 And why Larry Fink?
00:05:30.380 Because they had to restructure toxic debt with Lehman Brothers, Bear Stearns, and Freddie
00:05:35.680 Mack.
00:05:36.080 And the next one, I remember this one, because I was at the dinner when the CEO of AIG, you
00:05:40.340 know, Bob Ben Moshe, and the CFO David Herzog were in Chicago at Ritz-Carlton having dinner.
00:05:45.920 They're talking about what they're doing when they collected $183 billion from the government,
00:05:50.020 which they later on paid with $21 billion of interest.
00:05:52.540 This next part, if you remember, AIG was like the biggest company.
00:05:55.040 Everybody was talking about AIG, and then all of a sudden AIG becomes the most hated
00:05:57.660 company.
00:05:58.080 So 2008 was a very big year for these guys, because in 2008, they were managing $1.3 trillion
00:06:03.180 of assets compared to now, 15 years later, $10 trillion.
00:06:07.520 So obviously, he sees this as an opportunity, and like, look, we dominated this whole toxic
00:06:11.340 debt restructuring market.
00:06:12.940 What's the next thing?
00:06:13.720 He sees ETFs as the next thing, and eventually, they own the ETF market.
00:06:17.720 Matter of fact, today, they own 35% of all ETF money is with BlackRock today.
00:06:25.260 So now watch the evolution.
00:06:26.380 He starts off, and while everybody else trying to do stocks and equities, this guy's like,
00:06:29.660 no, I'm going to go be a bond trader.
00:06:30.840 Literally, nobody says, I want to be a bond trader.
00:06:32.980 This guy does that.
00:06:33.760 And then afterwards, he loses $100 million, teams up with Schwartzman, make a bunch of
00:06:37.260 money.
00:06:37.700 Then he says, guys, we got to split up.
00:06:39.180 Then he's like, I don't know what I do next.
00:06:40.560 Then they go into learning how to restructure toxic debt.
00:06:43.760 Then ETFs.
00:06:44.720 And like, what do we do now?
00:06:45.860 Guess who starts knocking on the doors for help?
00:06:48.140 Ready?
00:06:48.320 The Federal Reserve calls him for help.
00:06:51.240 In 2020, the Federal Reserve calls Larry Fink and asks to help them with the Fed prop up
00:06:56.780 the entire corporate bond market by purchasing on the central bank's behalf.
00:07:01.200 When corporate bond rates spiked, the Federal Reserve went into panic mode.
00:07:04.540 So a spike in corporate bond rates creates financial instability because it makes it more
00:07:08.320 difficult for businesses to access credit, leaving them unable to fund day-to-day operations.
00:07:12.900 So this caused the Fed to want to buy bond ETFs, which BlackRock offers through iShares.
00:07:18.080 The Fed ultimately contracted BlackRock to strategically carry out the Fed's purchase of
00:07:22.620 commercial mortgage-backed securities and corporate bonds.
00:07:25.580 So you may ask, why does the Fed need BlackRock?
00:07:27.960 Isn't the Fed like the government?
00:07:29.280 Why do they need BlackRock?
00:07:30.280 Is this kind of like back in the days when the U.S. government needed Chase?
00:07:33.400 Very similar to it, but here's why.
00:07:34.980 For its expertise in evaluating and managing different kinds of debt-like portfolios and corporate
00:07:39.540 bonds, something that's not a main skill set of the central bank.
00:07:42.900 So what does BlackRock get in return for doing this?
00:07:45.840 Number one, $48 million per year for its work on behalf of the Fed.
00:07:49.040 Number two, unlimited social credit.
00:07:50.820 Number three, power.
00:07:51.980 Number four, influence.
00:07:53.620 Obviously, Larry Fink doesn't need another $48 million, but he does need the social credit,
00:07:58.460 the influence, and the power.
00:08:00.020 So some of you may say, Pat, $10 trillion, who cares about $48 million?
00:08:02.820 Of course, who cares about $48 million?
00:08:04.640 But does he care about social credit, power, and influence?
00:08:08.020 Yes, because that's how ESG got its influence because of this opportunity.
00:08:13.200 In his annual letter he sent on October 20th, here's what he said.
00:08:16.300 Larry Fink declared that a fundamental reshaping of global capitalism was underway and that his
00:08:21.640 firm would help lead it by making it easier to invest in companies with favorable environmental
00:08:26.620 and social practices.
00:08:28.980 Fantastic, right?
00:08:29.960 I mean, obviously, these ESG companies with high scores are definitely worried about the
00:08:34.220 climate and the environment.
00:08:35.500 Absolutely.
00:08:36.300 For example, Exxon, they're very worried about the environment.
00:08:39.240 Philip Morris, for sure, they're very worried about it.
00:08:41.480 But Tesla, uh-uh, not Tesla.
00:08:43.200 They have a terrible ESG score because, no, I don't think Tesla cars want to take care of
00:08:47.440 the environment.
00:08:48.000 Do you see the hypocrisy?
00:08:48.940 This is when people started saying, what is all this ESG stuff you're doing that's causing
00:08:52.880 this deal in Mulvaney to get a Bud Light?
00:08:54.680 Did Larry Fink cause that?
00:08:56.460 Based on what he did next with ESG, it was on him.
00:08:59.200 So it's important to realize why this took place.
00:09:01.200 BlackRock drove a significant part of that ship by inserting its primary ESG fund into
00:09:06.060 popular and influential model portfolios offered to investment advisors who use them with their
00:09:10.440 clients across North America.
00:09:11.660 The huge flows from such models mean many investors got into an ESG vehicle without necessarily
00:09:16.220 choosing one as a specific investment strategy or even knowing that their money has gone into
00:09:21.540 one.
00:09:21.800 Meaning, if you've got a 401k, if you've got a mutual fund, you've got an ETF, you may
00:09:25.120 have some of your money into a company that's one of these ESG funds.
00:09:28.640 In short, an apparent BlackRock-led rush of investors into ESG in the past two years has
00:09:34.460 been something of a self-fulfilling prophecy, at least when it comes to the biggest such fund
00:09:38.680 on the planet, a BlackRock exchange-traded fund that trades under the ticker, ready?
00:09:45.160 ESGU.
00:09:46.220 It's what the ticker is, according to the data from BlackRock and Morningstar.
00:09:50.120 So why is this important?
00:09:51.240 Why is it important to have all this control in these companies?
00:09:53.760 Let me explain to you why.
00:09:54.420 Because there's voting going on, right?
00:09:55.740 So the significant situation in these index funds vote could determine whether a vote
00:10:00.020 passes or not, both for proxy contests and for environmental, social, and governance
00:10:05.140 matters.
00:10:05.480 And even when votes are not close, the outcome of votes can play an important part in influencing
00:10:10.460 the behavior of corporate managers.
00:10:12.340 And by the way, what I just read this last part is from an article in Bloomberg titled,
00:10:15.600 How BlackRock Made ESG the Hottest Ticket on Wall Street.
00:10:19.620 The title should be How BlackRock Used ESG to Control 88% of S&P 500 Companies.
00:10:27.360 Why 88%?
00:10:28.400 Because BlackRock, Vanguard, and State Street combined are the largest shareholders in 88%
00:10:34.660 of S&P 500 companies.
00:10:36.560 So imagine these three are best friends at the top, and they get to push their weight
00:10:40.000 and say, hey, you guys got to do this.
00:10:41.560 Hey, you need a little bit more of this.
00:10:42.800 Hey, you better do this, or else we're not going to give you the money on the back end
00:10:45.320 when you need it.
00:10:45.880 Or 88% of the companies they can control.
00:10:48.320 So now you may say, well, come on, Pat.
00:10:49.880 Like, why do we have to be worried about this?
00:10:51.640 What's the big deal with this?
00:10:52.560 Look, in politics, a lot of times we'll talk Republican and Democrats.
00:10:55.640 But the reality of it is really it's establishment versus anti-establishment.
00:11:00.000 Establishment is driven by control and thinking they know what's best for you.
00:11:03.300 So let me give you an idea of what is establishment.
00:11:05.880 BlackRock employs several executives who came out of George Bush's administration and more
00:11:10.180 than a dozen from Obama's administration.
00:11:12.120 Let me give you an idea of who.
00:11:13.140 That's Obama's national security advisor, his senior advisor for climate policy, the
00:11:17.600 former Federal Reserve vice chairman, and several White House treasury and Fed economists.
00:11:22.840 Why is this important?
00:11:24.060 Because there's something called lobbying.
00:11:26.020 And take a look at what they're doing with lobbying here.
00:11:28.140 So if you look at this chart, you'll see how much money they've been spending every
00:11:31.320 year on lobbying.
00:11:32.080 And if you go to 2022, it was their biggest year.
00:11:34.340 And by the way, a former recruiter from BlackRock said it only takes $10,000 to buy a senator.
00:11:39.260 This is a big business model to get laws in there that they get to have more control and
00:11:44.240 influence over what happens with investments.
00:11:46.260 Pretty crazy when you think about it, right?
00:11:47.620 So this guy, again, goes from bonds, something nobody wants to do, teams up with Schwartzman,
00:11:52.520 then learns how to restructure toxic debt, then ETF, then 2020, Fed needs his help, then ESG,
00:12:01.100 and then all of a sudden, even though in 2017, he called Bitcoin an index of money laundering.
00:12:08.360 And he said this on Bloomberg in CNBC interviews.
00:12:11.620 You know what he just did?
00:12:12.560 He just shocked the world, by the way.
00:12:14.120 By announcing BlackRock applied for a spot on Bitcoin ETF as of June 15.
00:12:20.320 So he bashes Bitcoin.
00:12:22.540 Now he's like, guys, you kind of got to start a Bitcoin ETF because there's a lot of money
00:12:26.940 to be made here, guys.
00:12:28.080 But let's do it quietly.
00:12:29.160 Let's make sure nobody sees that 2017 quote.
00:12:31.340 None of us get everything right.
00:12:32.340 But this is a guy that knows what he's doing when it comes out.
00:12:34.780 Bitcoin is what he's looking at.
00:12:36.600 Very weird.
00:12:37.300 Very controversial.
00:12:38.500 But this could be his next big move.
00:12:40.120 So by the way, if you're watching this right now, is this guy a good guy or a bad guy?
00:12:42.820 You got to give the guy credit.
00:12:43.760 He went from where he was at to winning in so many different things, especially after
00:12:46.620 the big loss.
00:12:47.320 He had $100 million and he's humiliated for 18 months.
00:12:49.540 Then he comes back and recreates himself and boom, goes to the top and gets all this money.
00:12:53.480 He's a billionaire.
00:12:53.980 He's got all this power.
00:12:54.900 But is this guy a good guy?
00:12:55.840 We're talking amongst each other here.
00:12:57.040 We're talking about him versus Soros.
00:12:58.820 And, you know, he's saying Soros is like Joker.
00:13:01.620 You know, he's the agent of chaos.
00:13:03.460 And no, no, he's more Lex Luthor.
00:13:05.120 He is the guy that's low key professional, looks good on the outside, but he's going
00:13:08.400 up against Superman, who's a good guy.
00:13:10.320 But at the end of the day, he used capitalism to get capital to then control the companies
00:13:16.400 to impose certain philosophies.
00:13:19.160 ESG, you better have this many employees.
00:13:21.160 You better do LGBTQ.
00:13:23.120 That's none of your business to do that.
00:13:25.320 And it's got nothing to do with climate and social and let's take care of the world type
00:13:29.760 of stuff.
00:13:30.140 Because if that was the case, you should have given Tesla a higher score, but you're giving
00:13:34.900 Philip Morris a higher score than Tesla because Philip Morris follows your guidelines.
00:13:39.700 That's when you lose somebody like me.
00:13:41.500 So if you're watching this here right now saying, look, why would Elon Musk call ESG on January
00:13:46.320 16th on Twitter?
00:13:47.520 Why would he say the letter S is satanic?
00:13:49.320 I don't know.
00:13:50.240 So if you're a fan of Elon Musk, Elon is not a fan of what this guy is doing.
00:13:53.760 But if you're a fan of George Soros, George and this guy are on the same team trying to
00:13:57.560 control a lot of the companies in the marketplace.
00:14:00.080 They go about it in a different way.
00:14:01.680 But my biggest suggestion for you is to go do your own research and find out what's
00:14:04.900 really going on here.
00:14:05.860 So if you got value out of the city, give it a thumbs up and subscribe to the channel.
00:14:08.600 If you want to learn more about ESG, we did a complete different video on a history of
00:14:12.180 ESG and what's behind it.
00:14:13.540 If you've never seen it, click here to watch it.
00:14:15.420 Take care, everybody.
00:14:16.320 Bye-bye, bye-bye.