How to Survive the Coming Market Crash

If you watch CNBC, you will see all the big name investing experts. And they are all basically saying the same thing. They all have a consensus that something bad is about to happen to financial markets, but they have no idea where it is going to come from. I will tell you where it is coming from. But first we have to understand a little bit about business history.

The most famous market crash happened in the 1600s in Holland and it was called the Tulip bubble. People were trading tulip bulbs and the prices skyrocketed. People thought the price would go up forever. People took out debt to buy tulips. When the price bubble burst, tulips became worthless.

Fast forward to the real estate crash in the US in 2008. Many of you remember this. People thought the price of homes would go up forever. People took out debt to buy houses. When the housing bubble burst, homes dropped in value.

With these examples in mind, I will tell you where the market collapse will come from, because the same activity is happening today in China. People thought the Chinese economy would go up forever. Investment banks used debt to invest in Chinese companies. With Chinese companies like Evergrande defaulting on their debt, people are not going to get paid.

So if this is happening in China, how is this going to impact the United States? The global bond market is interconnected. The amount of value in China that has disappeared is enormous. You cannot have those kind of losses without it trickling through the rest of the bond market.

We have seen this manifest this month in England with the near collapse of their pension funds. After the crisis, we saw Prime Minister Liz Truss resign after only six weeks in office. People’s retirement funds almost got wiped out, because interest rates were rising because of increased risk in the system. The pension funds were not going to be able to make their payments, and the system almost collapsed.

What is happening in England is a preview of what could happen in the US. So here is the big question, where are people’s retirement funds kept in the US? They are held by companies like Blackrock. Blackrock is one of the largest investment firms in the world. And it is common for states in the US to give Blackrock the retirement funds of their state employees to invest. It turns out Blackrock is also a large investor in China.

As reported in the Financial Times last year, Blackrock was urging investors to increase their exposure to China by as much as three times. Their statement at the time by chief investment strategist, Wei Li, described China as “It has the second-largest equity market, the second largest bond market. It should be represented more in portfolios.” Keep in mind, this statement was issued by Blackrock in August 2021, the same month that Evergrande halted construction projects across China because of overdue payments and China’s central bank issued a rare warning that Evergrande must reduce its debt.

If you read Blackrock’s financial statements, it is unclear how much exposure they have to China. But it was reported last month, that Blackrock has suffered a $95.3M book loss on its Evergrande holding. That is not counting their other investments in Evergrande debt or other Chinese companies. This raises a lot of questions. How much of the funds from American retirement accounts, are being used to prop up the stock of failing Chinese companies? Who is this person Wei Li, and why is she the chief investment strategist for Blackrock? This raises big questions about fiduciary responsibility.

But Blackrock’s China losses are not the only problem they are facing right now. Their other problem is ESG. Blackrock has been one of the most vocal leaders for ESG investing, which are investments that support climate and social causes that often align with the Democrat party in the US.

Republican states have been pulling their retirement funds out of Blackrock. Just this week, Missouri pulled $500M out of BlackRock. They have now joined the following states that are divesting from Blackrock because of ESG.

Missouri
West Virginia
Louisiana
Texas
Kentucky
Oklahoma
Florida
South Carolina
Arizona
Idaho
Utah
Wyoming
Arkansas
North Dakota

All these people are pulling their money out of Blackrock all at the same time when Blackrock is suffering big losses from China, and interest rates are going up. The Financial Times reported that as of last week, BlackRock has lost over $1B over ESG investing concerns.

If that is not bad enough, it gets worse. A large part of Blackrock’s portfolio is real estate, and the real estate market is in trouble. On Thursday this week, Diane Swonk, chief economist at KPMG went on Meet the Press and said the Housing market was crashing. When interest rates were low, Blackrock was using cheap debt to buy up enormous amounts of real estate. Under normal times, if Blackrock ran into financial trouble, they could just sell off real estate to make money. But now, with rates going up, debt is not cheap anymore. No one is buying real estate right now. So Blackrock could not even sell the real estate if they had to.

This is the perfect storm for Blackrock. Think of this company as a three legged stool. They are facing three main problems. Losses from China. ESG causing people to pull money out of the bank. And a failing real estate market. With all this happening at the same time, this is the type of situation that could cause Blackrock, the largest asset holder in the world, to collapse.

If Blackrock collapses, anyone who has retirement funds with them, could lose everything. You have to remember, a lot of these people are state employees. These are honest, hard-working Americans. A lot of these people do not even know that Blackrock is holding their retirement funds. These people, who have saved their entire lives, would be penniless.

Remember in 2008, when Lehman Brothers collapsed. No one expected it. That is the moment that started the market collapse. When it happened, if you had funds invested in Lehman Brothers, you lost a lot of money.

Now before you dismiss me as just some crazy person ranting on the internet, you should realize, I am not the only person raising warning flags. Just last week, a top analyst from UBS named Brennan Hawkens downgraded BlackRock from Buy to Neutral because of their loss of funds from ESG investing. Going from Buy to Neutral does not sound like a big deal, but it is when you are talking about the largest asset holder in the world.

I feel like I need to explain here that I do not have an agenda. Blackrock is a publicly traded company, but I do not own any stock positions in Blackrock. My YouTube channel is not funded by anybody. I am independent and am here to give you information that I think is helpful. I have no inside information about Blackrock. This is just information I have pulled from public sources about what is going on. The reason why you are not hearing about this in the news media, is that everyone is scared to speak out against China. China is a huge client for these financial companies. If they say anything negative about China, they lose one of their biggest customers. Unfortunately, by protecting China, they are sending Americans hurtling towards an economic cliff.

So, what do you do to survive a coming crash? Big picture, I would say you could limit your exposure to China. I think these states that have pulled money out of Blackrock, may have just saved their citizen’s retirement plans. During a crash, it is the people who pull their money out first, who get to keep their money. All the states that leave their money in, could lose everything.

Second, we need to learn our lessons from the crash in 2008. After Lehman Brothers collapsed, the government stepped in and bailed out the banks. Meanwhile, the American people got nothing. That was deeply unfair, and we need to make sure that does not happen again. We should be sending our politicians a message now, No Bailouts for Blackrock.

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Neither Zach De Gregorio or Wolves and Finance shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.