Transcription
Black Rockck just went into crisis mode, not allowing their investors to get their money back. Black Rockck now limiting withdrawals from one of its funds. So this is just another cockroach in the private credit disaster or in this case I think you could call it a full-on collapse. It went from Blue Owl to Black Stone now to the big daddy Black Rock. So, we have to ask the question, is there systemic risk that could lead to a GFC 2.0? I'm going to answer that question for you in three simple, fast steps.
Step number one, let's go over what's been happening with Larry Frink himself and BlackRock. I'm calling it not a bail-out from the government, but it's a bail-in from their actual investors. Let me show you what I'm referring to. We're going to start with a chart going from today's date all the way back to October, so about 6 months. On the left, we go from $800 up to $1,200. This is the share price for Black Rockck. Now, we must be clear. We're talking about one of their private credit funds. They have hundreds. I don't know how many funds they have, but they're wildly diversified. So when you see big big moves in their share price as a result of just one of their funds, you know it's a big big problem. So back in October, they were riding high over $1,200 bucks. They come down, they go back up to close to that high in January, but then they start to come down when you have the debacle with Blue Owl and all of these others. Oh, by the way, if you weren't paying attention, there's private credit funds in the UK that are now blowing up as well.
But getting back to Mr. Larry Frink here, the meister that loves his fees. More on that in just a moment. More recently, they came out and said, "Oh yeah, by the way, you want your money back? Uh, that ain't going to happen because we only allow 5% redemptions per quarter." And they had redemptions for about 10%. So a lot of those investors, Larry Frink told them, "No, you ain't getting your money back. Pound sand." So of course, what does that do to the share price? It absolutely plummets. And once again, I want to remind you this is a problem that they're admitting to in just one or two of their funds. So to move the share price this much, in fact, editor, go ahead and throw up a candlestick chart and you can see how dramatic this move actually was. It shows us kind of a visual representation of how big of a deal this actually is. It's not just George Gammon saying they're in crisis mode. It's their share price also saying they're in crisis mode.
So let's go over how this works to make sure that we are all on the same page. So, the Finkmeister comes out and halts redemptions over 5%. Now, the key here is why were the redemptions so high to begin with, right? Why were there so many investors asking for their money back? Was it just because the private credit space is blowing up? Not really. What happened is the Meister himself three months ago said he had all of these assets on his balance sheet. We'll call it the toxic sludge TS that he was saying were worth or valued at 100 cents on the dollar. These things are pristine. There's no risk here. And then just recently, a couple weeks ago, he comes out and says, "Oh yeah, those assets that I told you were worth 100 cents on the dollar three months ago are now worth zero. Sorry, thanks for coming."
So, if you get this news and you are unfortunate enough to be an investor with Black Rockck, what are you going to do? Of course, you're going to want your money back immediately. But the Finmeister comes in and says, "No, no, no, no, no. 5% because I love fees." So, let's go over how this ruse actually works. And for a lot of you watching this video, you'll probably come to the conclusion that, hey, George, that looks like a scam to me. And I wouldn't blame you for coming to that conclusion. So, what they do is they come out and we'll say this is their balance sheet with this fund. Obviously, not correct numbers here, but they got assets on the left, liabilities on the right. So, the liabilities are the money that the investors give them. We'll say it's $500. So then they take this $500 and they go out and buy the toxic sludge. Why are they buying the toxic sludge? Because it's so risky that it yields a very high return. That's if you get your money. So let's just say that this toxic sludge is yielding 12%. And currently a 10-year Treasury is yielding, let's say, 4%. So Larry Frink goes out to all the investors with his marketing and says, "Oh, why on earth are you buying those stupid treasuries? Just go ahead and give me your money and we'll invest it in all these private credit deals and we'll give you an outsized return. And yeah, there might be a little risk, but don't worry about that. Here's our performance over the last couple years and we haven't had to write down one of these loans. I mean, these are pretty much good as gold. This is the marketing from BlackRock."
So the game here that's being played is they're trying to get as much money as possible because they collect fees. So it's all about AUM, assets under management. So if he can sell you a story to get your money, he doesn't care whether you make money or not because he's collecting his fees. I say fees a lot in this one, but rightfully so. So, they'll sit there and tell you that this toxic sludge is valued at $500. But what if the value goes down to $250? Are they going to tell you? Absolutely not. Why would they tell you? Because the longer that they cannot tell you how poorly the fund is performing, the more fees there is going to collect. So, if he can just kick the can down the road and make you believe that the toxic sludge is still worth $500 when it's really worth $250, that means you're likely not going to redeem. And therefore, he's going to get mo money, mo money, mo money. And then eventually, once he can't kick the can down the road anymore, he has to admit that that asset on the balance sheet that he was telling you was worth $500 is actually worth zero. And you don't get any of your money back. Sorry about that. Thanks for coming. But let's remember that out of the $500 that originally went into the fund, Fink has probably pocketed $250 of them.
So, this is how the game is played. This is the ruse. And for many of you, you would probably label this as a scam. And I don't know this guy is a scammer. I'm not saying he is. I'm not saying he is, but I wouldn't fault you for coming to that conclusion, especially after they're pulling shenanigans like this. And it's deliberately deliberately to rip off their investors. But to be very, very clear, it isn't just Black Rockck doing this. There are hundreds, maybe thousands of these funds out there. So, we have to ask the question, if this is playing out right in front of our eyes, is there systemic risk that could lead to a GFC 2.0? And then, how do you protect yourself as an investor? I'm going to tell you exactly what I'm doing with my own portfolio at the end of this video.
So, now let's get into the possible systemic risks. Step number two. Now, let's get into a Wall Street Journal article which shows there are a lot of cockroaches out there and it isn't just Black Rock. And this is what we have to dive into as far as doing this research to determine if this is a systemic issue. So, going over to this Wall Street Journal article, "Black Rockck sticks to redemption minimum." That's a nice way of saying it. I prefer bail-in or hey, we need your money more than you do. That's what the headline should be. And this sends shares lower like we discussed in step number one. So, we scroll down and look at this chart which I think tells you pretty much everything you need to know. You have all heard about Blue Owl and if you've been paying attention, you've also heard that Blackstone is having big big problems as well. So you see their share price starting in 2026 right at the zero mark and this is the percentage performance since the beginning of the year. So even Blue Owl was humming along. Nothing to see here. No problem. Just whistling right by that graveyard. And all of a sudden or they come out and they say, "Oh, well, actually, we'd like to, you know, combine a couple funds. It's it's no big deal. We're doing it to add shareholder value." Remember that? And then they start to say, "Well, actually, maybe you can't have your money back." And then Blackstone doing the same thing. Well, getting they had a wave of redemptions.
So, just going back to Monday, Black Stone, and we're going to go back and forth between Black Stone and Black Rock. They're really the 800-pound gorillas in the space. They said they had received a record amount of withdrawal requests. And this isn't in one of their little teeny funds. This is their or one of their main funds, $82 billion known as BCRED. But they took a different approach from the meister and they actually said, "Okay, we have that 5% threshold. We have 7.9% of the amount that we have in the fund asking for redemptions. We'll go ahead and give everyone their money back." Now, we're going to switch back to Black Rockck. And I love this quote right here. And this is what they said in a letter to their investors. They said, "Placing limits on liquidity." In other words, not giving you your money back when you want it is key to their strategy. Well, at least they're coming out and admitting it, right? And remember how in step number one I said probably the shadiest thing that Black Rockck has done is they were valuing some of their assets or some of their loans at 100 cents on the dollar just three months ago. And then they came out and said, "Oh yeah, sorry. They're actually valued at zero." We take a goose egg. As if they didn't know that three months ago. And again, they're just blatantly lying to their investors. But here we see that it's Apollo Global Management doing the exact same thing. It says, "Meanwhile, both Black Rockck and Apollo Global Management have written bad loans down to zero that were marked at full value just a quarter earlier." And then they shine light on the fact that there are a lot of these cockroaches. We've got Blackstone, Apollo, KKR, Ares, Blue Owl, and that's just to name a few. Like I said in step number one, there's a lot of these private credit funds that are blowing up in the UK as well. This could be a global problem. They say that they're down 25% this year alone. And then they say Black Rockck is only down 11%. As if that's good, where I would say just give it time. Why? Because credit cycles are going to cycle. We've seen the boom and now we're seeing the bust.
Step number three, are there systemic risks and what am I doing with my own portfolio right now as we speak? Well, to answer the question, yes, there are a lot a lot of them, that's for sure. And I'll explain why I say that right now. So, let's start off by understanding how this business model, if you want to call it, works. We've got Wells Fargo right here, the bank. Everyone knows who they are. Right here, we've got your friend and family member, Fred. Everybody has a friend and family member, Fred. He's the one that tells you you're a conspiracy theorist for wanting to see the Epstein files. He's the one that tells you that the economy is booming and that we should just put all our trust and faith in the central planners because they have our best interest as their number one priority where you say, "No, I am independent. I'm standing up for freedom, liberty, free market, capitalism," and he just calls you a fear-mongering gold-hoarding conspiracy theorist. We all have a friend and family member Fred. And usually that friend and family member Fred ain't got a jobby job. He's like Snoop Dogg needs to get himself a jobby job. Snoop Doggy dog, you need to get a jobby job. So we'll say your friend and family member Fred has a 400 credit score, but he's got a great idea. Oh yeah. He came to you and said, "You know what? I'm going to stop being lazy. I'm going to stop taking welfare and I am going to start a business." You say, "Oh, really? Wow. What are you going to do?" He says, "I am going to create my own line of vape pens." Wow. All right. So, that's going to be wildly fantastic, of course. So, he goes to the bank, Wells Fargo, and he says, "Hey, I need a loan for $500 to start my vape pen business." And Wells Fargo says, "Not just no, but hell no. No way, partner. You got a 400 credit score." But insert Black Stone. No, no, no. Black Rock. No, no, no. Black Pebble. That's right. Their younger cousin, I guess. Why is it that every one of these big mega funds needs to be black and they need to be some sort of rock, whether it's a stone or I don't know, did one of the partners just somehow form his own company? I mean, it's kind of like Metallica and Megadeth with Dave Mustaine. But anyway, we got Black Pebble right here. They've got a 750 credit score. So, they go to Wells Fargo and say, "Hey, could I borrow some money?" And Wells Fargo says, "Absolutely, and we'll just charge you 5%." And then Black Pebble goes to your friend and family member Fred and says, "Hey, we'll go ahead and give you that loan, and we'll only charge you 20%." And your friend and family member Fred or let's say a subprime lender like says yes, absolutely, I'll take it. And then Black Pebble goes out to all of their investors and says, "Hey, go ahead and give us your money. We've got this great opportunity because they show the investor this spread that they're taking." This isn't the actual spread, just numbers for the sake of the example, between 5% and 20%. They're pocketing the 15%. What's not to like? So they go to all of these unknowing investors out there, we'll call them Mr. Bags because at the end of the day, they are the one that is holding the bag. That's for sure. It ain't going to be Black Pebble.
And so Black Pebble, it makes all the sense in the world. They're totally incentivized. Why? Because they have no downside. It's like a free call option when the only thing they have is upside. So they have this perverse incentive that is in no way aligned with their investors because they're getting the fees. Remember Larry Frink in step number one, plus they're taking the profit or a percentage of the upside profit. So let's say that the profit is 15%. Black Pebble gets five, the investor gets 10. So they're getting the 5% here with the upside and they're getting let's say a 2% fee. But if there's no money, if your friend and family member Fred goes tits up, which is like a 99% probability, then they don't have any downside risk at all, and they still collect right here, those juicy, juicy, juicy, lovely fees, which on $10 billion adds up.
So, I know a lot of you right about now are saying to yourself, "Okay, George, I get how this works, but how could this lead to a GFC 2.0?" Oh, great question. Let's go over that right now. First and foremost, let's remember that the labor market is deteriorating rapidly. The last non-farm payroll print was a negative 92,000. And that's before revisions. So, what are the chances right now that your friend and family member Fred's vape pen business works out? Probably the same chances that had lending to subprime auto borrowers. And that would be goose egg. So this guy goes bust. Okay. So then Black Pebble, they can't pay back the loan to Wells Fargo. So if Black Pebble can't pay back Wells Fargo, that blows a hole in Wells Fargo's balance sheet. Well, think about it. If Wells Fargo is having all of these loans that went to the private credit guys go bust, they're going to tighten lending standards. That's when money gets tight. And in an environment where you have the labor market deteriorating, when we're going through this credit cycle, where we're going from the boom phase into the bust phase, if we have a lack of liquidity, that creates a doom loop because as the unemployment rate goes up, there's less aggregate demand. If there's less aggregate demand, that means more of these guys go bust, which means more of these guys go bust, which means a bigger hole in the bank's balance sheets, which means lending standards get even tighter at a time when all of the entities in the financial economy need liquidity desperately. There are no certainties. There are only probabilities. But I can tell you that there is an extremely extremely high probability that we are not in the ninth inning of this credit cycle. We are probably in inning four or five. Now does it turn into a GFC 2.0? That nobody knows. But my base case is it definitely leads to an economic contraction, i.e., recession.
So, what am I doing with my own portfolio to not only survive this craziness, this insanity, but also try to profit from it? Now, let me be very clear. This is not investing advice. I'm simply telling you what I'm doing with my own portfolio. And over the last couple days, I have bought 2-year Treasury futures. So, I'm long the two-year Treasury. Now, if you want more insider intel, just like we've gone over this video, you've got to check out Rebel Capitalist Live. What is Rebel Capitalist Live? I'm glad you asked. Editor, cut to the clip. Hey guys, if you're tired of the BS from the mainstream media and you really want to cut through the noise and understand what's happening in markets and in the global economy and you want to meet and learn from the top macro thinkers and probably more importantly, the contrarian macro thinkers, then Rebel Capitalist Live is exactly what you're looking for. And to be clear, this isn't some boring finance seminar with corporate sponsorship and talking heads. This is going to be a high-energy, freedom-focused event that's going to help you not only protect your wealth, but grow your wealth as well. In the past, we've had speakers like Lyn Alden, Ron Paul, Robert Kiyosaki, Peter Schiff, just to name a few. And here's the best part. You're able to hang out with hundreds of your fellow rebel capitalists, people who actually get it, people who value the same things you do, like freedom, liberty, and free market capitalism. But here's the catch. These tickets are going to sell out very quickly. And as we get closer to the event, the ticket price goes higher and higher and higher. So, you're going to want to get your tickets ASAP. This is an event you're not going to want to miss. So, to get your tickets, you can go ahead and click the link in the description below. And I'll look forward to seeing you at Rebel Capitalists Live 2026 this May in Orlando.