Blackrock owns America’s homes – and a whole lot else

Source: American Thinker.

I have a pet theory about the evolution of market economies. It derives from the proposition that process improvement is the fundamental origin of profits.

According to this view the Industrial Revolution was the biggest process-improvement event in history, and we should expect it to continue until human participation in the production of goods is all but eliminated.

As this evolution proceeds, our familiar income/expense-based systems for allocating the distribution of goods will have to evolve, as well. I predict there will be a shift away from general reliance on jobs for income to widespread reliance on ownership of the means of production for income.

This is the context in which I assess the story about BlackRock. The story alleges that BlackRock is committing economic evil by buying up assets like a robber baron. The danger this portends is the increasing concentration of ownership of the means of production in the hands of just a few asset management companies, BlackRock being the biggest: “For example, if you think Coke and Pepsi are competitors, they might be at a micro level but, at a macro level, both have the same primary owners: BlackRock and [one of its peers].”

This may sound scary in light of the potential for abuse so much financial power invites. On the other hand BlackRock isn’t really the primary owner of the assets it manages, its millions of shareholders are.

Many people today retire from work when their investments become sufficient to sustain the lifestyle they want. While there are risks and dangers involved, I see BlackRock and its peers as paving the way for retirement to become an option for greater numbers of people. What looks like a fearsome concentration of financial power also looks (from another angle) to be an expansion of the ownership economy.

9 thoughts on “Blackrock owns America’s homes – and a whole lot else

  1. If a person owns an index fund, for example, he probably “owns” a piece of hundreds of companies.

    Of course, that person had to have enough income or resources to buy that stake.

    Chicken or egg?

    Personally, I do see a major economic “revival” in the coming decades. A system that is based on unending growth has obvious problems on a limited resources planet.

    We already have an ownership society. “This Land is Your Land…” has meaning. But aren’t we supporting a form of socialism by making everyone an owner with little or no income?

    Liked by 1 person

    1. RE: “A system that is based on unending growth has obvious problems on a limited resources planet.”

      I don’t see how resources are limited in any practical sense. The idea is more fear porn than reality.

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      1. “I don’t see how resources are limited in any practical sense.”

        Recently you and Don jumped on the idea that resources were limited to increase production of and storage for renewable energy.

        Which it, Todd? Limited or unlimited. It cannot physically, or even metaphorically, be both.

        You tend to spread fear porn on things that you disagree with. SO that statement is really out there coming from you.

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        1. RE: “Recently you and Don jumped on the idea that resources were limited to increase production of and storage for renewable energy.”

          I don’t think we did. Since you don’t quote our statements, I suspect you are imagining them.

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    2. “Of course, that person had to have enough income or resources to buy that stake.”

      The price of a share of a Schwab Large Cap Index ETF is about the same as a carton of cigarettes.

      There is no reason anyone should not be able to invest, it’s just a question of priorities.

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  2. Not just blackrock.
    Take a $250,000 starter home, 3br/2.5ba.
    $25,000 down gets you a $1000 monthly mortgage payment.
    And north of $2000 monthly rent, 10% to a management company.

    You’re pulling in $800/month gross income. Anyway you slice it, that’s 38% annual ROI. That’s gross. Still, you’ll net 16 to 18%. Anyone with a 750+ credit rating and $25,000 can do it.

    Now, your a private equity firm with 10s of 1000s of retirees to whom you’re offering an 8% average annual return. If you pay 280,000 you don’t care because when the maket crashes you go BK after having taken in $1000s, the banks foreclose, short sell, the investors are out 50%, but how much the care will depend on how long the boom lasts.

    BTW 90% margin is what tanked the 1929 market.

    Liked by 1 person

    1. RE: “Now, your a private equity firm…”

      That’s fair. BlackRock’s incentives are certainly different from those of the individual homebuyer. On the other hand, paying off a 30-year mortgage is a lousy way to build income-producing wealth for retirement.

      I think the financialization of income is a trend we will see a lot more of.

      Like

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