Posted by Karl Denninger
We counted over 1,800 13Gs that Blackrock dumped on Friday, which explains why EDGAR might have been a tad bit pokey. The stream started at just after 2 p.m. est and didn’t let up until just after 4:30, when the last one, which reported a 6.5% stake in Vodafone came in. For those less familiar with the 13G, since we don’t often write about these filings, it’s a requirement when ownership exceeds 5% of the outstanding shares. With few rare exceptions, these filings represented new positions for Blackrock since we only counted 11 amended 13Gs, which in itself seems very surprising, given the long list of stocks.
Let me see if I get this right. 1,800 companies (remember, the Russell 2,000 has 2,000 companies in total in it, the S&P 500 has 500 in it, etc) would comprise a very significant chunk of the entirety of the US stock market. Indeed, the Wilshire 5,000 is widely considered to be “the entire market” (and it more-or-less is.)
Blackrock took a position in that significant chunk to the tune of 5% or more, thus triggering the filing requirement for each of those firms.
Where did Blackrock get the money?
Blackrock has just $3.96 billion in cash on hand according to the most currently numbers on Yahoo Finance. The S&P 500 alone has a market cap of some $13 trillion dollars.
To take a 5% stake in the S&P 500 alone would require $650 billion, or some one hundred and sixty-four times as much money as Blackrock possesses, and yet that would account for less than one third of the filings!
You can’t margin (leverage) yourself 164 times legally in any form or fashion in The United States, and such a margin game, assuming you came up with some inventive way to do it, would make all of the firms that blew up in 2008 and 2009 look like pikers (Fannie/Freddie were 80:1 at the time they went boom, as was, roughly, AIG.)
Something “funny” is going on here folks, and it demands an inquiry – and answer.
UPDATE: It has been noted that they closed the acquisition of Barclay’s Global Investors and this dump is a consequence of the update of that transaction. Ok, well and good, but the point remains – they’ve got a book that is now trading against free cash of less than 1% of these disclosures alone. Indeed, it’s even worse – their total trading book, according to some sources, is approaching $4 trillion dollars, yet the firm has a market cap of $40 billion and less than $4 billion in actual cash.
The underlying question remains – if and when something goes wrong, what does Blackrock have available to them to deal with it when they’re managing an asset base larger than that of The Federal Reserve?