John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website DollarCollapse.com in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.
If you (like me) keep mixing up Blackstone and BlackRock, you can relax now. They’re both in serious financial trouble, so you can assert that either is “imploding” and be more-or-less right:
(Reuters) – BlackRock (BLK.N) said on Friday it has limited withdrawals from a flagship debt fund after a surge in redemption requests, as investor worries mount around the $2 trillion private credit industry.
Shares of the world’s largest asset manager fell 6.7% on the New York Stock Exchange, amid a broader market selloff after worse-than-expected U.S. jobs data and escalating U.S.-Israeli war against Iran.
Sentiment has soured around private credit in recent months, and retail investors are increasingly asking for their money back from funds like BlackRock’s $26 billion HPS Corporate Lending Fund (HLEND), which were designed to be open to wealthy individuals.
“It should serve as a warning sign for the industry and the rulemakers about the downside of illiquid funds for retail investors,” said Greggory Warren, senior stock analyst at Morningstar.
To meet all withdrawals, Blackstone and more than 25 senior executives injected $400 million of their own capital.
These moves come as peers in private credit show similar signs of stress, pointing to wider investor unease in the sector.
The above feels disturbingly like the “Great Taking” scenario in which Wall Street and Washington decide to just keep investors’ stocks and corporate bonds, and/or replace them with Treasury paper.
But don’t worry, says Blackstone president John Gray:
“What people sometimes fail to recognize is [private credit instruments] are designed as semi-liquid products. The idea that there are caps is really a feature, not a bug of these products. What you’re doing is trading away a bit of liquidity for higher returns. That’s the same trade-off institutional investors have made for a long period of time.”
We share investors’ concerns about the deterioration in the integrity of our legal and financial systems. One of our primary concerns are the devastating takings already well underway, including $21 trillion in missing taxpayer money, dollar devaluation through inflation (the result of unrestrained money printing resulting from fiscal and monetary policies), wars, and a “Great Poisoning” that is siphoning off trillions in family wealth and significantly more of the federal budget than defense.
Our most urgent concern is the specter of complete financial transaction control, which can facilitate a future general “taking” of all assets, including dollars and dollar-denominated assets as well as land, real estate, and other natural resources. We would also seek to recover the damage from past takings that have left the general populace drained and without purchasing power.
At present, central bankers have made their aims quite clear—they wish to control all transactions and strip us of all assets and property rights.
There is only one way to stop central bankers’ push for full financial control and to interrupt the asset grab and any other takings, including a taking of securities, and that is by working to ensure the necessary infrastructure and conditions of financial transaction freedom, especially at the state level. Financial transaction freedom is the ability to use multiple options to make contracts and effect transactions on a timely basis at reasonable cost without interference. We encourage investors and state residents who are mobilizing about “takings” to contact and support their state legislators, urging them to strengthen the conditions of state sovereignty in four areas that are vital to the protection of financial freedom.
So…Great Taking, not quite, but recession signal very possibly. The shadow banking and private equity sectors are huge and opaque (there are now more private equity firms than McDonalds restaurants in the U.S.). Let a few major players in this space fail, and investors who didn’t know what they were buying will stampede for the exits.
Return on Capital vs Return of capital
This is why we start with physical gold and silver. They’re free of counterparty risk, meaning no one has to keep a promise for them to hold their value.
The same can’t be said for a growing number of shadow banking system assets. Put another way, this is emphatically not the time to reach for an extra few basis points of yield in alternative assets.
STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio
delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.
