Larry Fink, chairman and CEO.
Hi guys. How are you doing? I'm good.
All right. Look, I can start with a plus 38%. I can tell you, with the huge amount of money that has come in, there's some tremendous success. But I have to tell you, there's a line from your opening today, from the conference call — I'm just going to read it — which is: for the first time in my career, and that's 50 years of career, I'm seeing genuine shortages of capital. Governments are running historically large deficits while at the same time demand for private capital is rising across the economy. People need financing. This seems to be seminal to me.
Well, I think some of that is some of our success. I mean, we are seeing demand for capital in all different segments of the economy. You know, every quarter when I'm here, I talk about the spectacular nature of the US capital markets, and we're just seeing more and more of the economy flow through the US capital markets. I mean, even yesterday we announced a big transaction with Humanana, you know, in elderly care. Last week we announced a very large transaction with AT&T. I know everything related to AI and data centers is sexy and appealing and we want to talk about it, but more and more organizations are coming to the capital markets. BlackRock is at the center point of those conversations.
You know, I like to say about our quarter or year: markets move our assets, but our clients move our growth. And our growth quarter — if you think about it, the US equity market was flat in the third quarter, bonds were down 3%, and we grew $205 billion. So we are seeing more and more companies come to us and try to find financing, and that's the issue that we are seeing.
But let me step back and say, because I talk about this all the time: yes, we are at a point now where we are starting to unlock private capital. Jim, you and I have been yelling about this, yelling at opening the private markets, opening this up. But at the same time, our US deficits, which we don't talk enough about, are starting to have a serious impact. You know, we went from $8 trillion of a deficit in the year 2000, after 223 years—
Not deficit, yeah — national debt, and now it's $40 trillion. We grew $32 trillion in 26 years. So let's talk about that as a massive impact on the demand for credit. Our government is demanding more and more credit. The bond auctions are getting larger and larger and larger. Now, at the same time, I've talked about — I think even last quarter — we need to unlock private capital to grow the US economy by 3%.
You have the largest pool of capital in the world. And I also noticed more and more international investors are coming to the US to invest.
But Larry, there is this concern when it comes to what is driving, in many ways, our economy right now and our markets — that there's a capex that is not right. The capex numbers, which are numbers the likes of which we've never seen in our careers, are two-thirds of our economy. But what about this idea that there may be a shortage of capital — that some firms, maybe smaller than yours but still very large, are like, 'you know what, I'm full up when it comes to financing data centers,' and that could be a limitation.
And so this is why I speak about how we have to unlock new ways of financing this. You know, as a kid who started in Wall Street in 1976 with something called mortgage-backed debt that nobody had ever heard of — okay, we started that, and that was a few billion dollars, now at $15 trillion.
And you're the only one in all these different bank corners. I keep waiting for someone to talk about the compute. We have to secure it. Everyone in these banks has shied away from what they committed.
We have, because a lot of places are pretty full. But we need to unlock this compute because, yes, the big hyperscalers can afford this. But the foundation of the US economy is young startup companies. Every startup company is going to need computation — which, you were part of that big announcement right here on CNBC with Jensen Huang about creating a market that will essentially make a GPU a securitized...
And so we had to package them into ETFs and other things. Where are we in that effort?
We are working with all the different hyperscalers, all the chip companies, on securing more analytics and data so we understand how long a chip's life can last. And then once we understand that and we have good data to justify this, we can go to the rating agencies. We could secure credit ratings based on the value of the chip, the residual value of the chip.
The H100 — we know we have a 7-year H100. What's the matter with that?
Correct. And it's 10 years old.
Yeah. So why don't we just move — why are you the only one who's really speaking about this, which is just nuts?
Well, I know Jensen's talking about it. I've spoken to every one of the chip manufacturers in the last two weeks on this — you know, AMD, Broadcom, everybody is focusing on it. Now you have Google having a TPU chip. Everybody is now creating these new ideas, but if we're going to unlock this and create the enormity that we can have, the building out of our economy to the scale that we need, we have to do this.
But we'll unlock a lot of potential capital. Absolutely.
But how long? I mean, this is a major effort. It doesn't happen in days or weeks.
No, it's probably hopefully a year. I mean, hopefully. We're going to get the data, go to the rating agencies, work on it, and start it off.
And we're going to what — sit here one day and talk about an ETF that's going to be a CDS?
[laughter] I like that. But because of BlackRock's Aladdin, which again had 12% growth again, and because Aladdin and Preqin, you know, which is a private markets analytics data company — having that, I think we will have the foundation to build from. And that was the genesis of why we bought Preqin pretty quick, and that's why Wells probably would agree. Charlie talked about our first thing.
There are jokes, you know, on the tape about collateralized, collateralized chip obligations. MBS got us into some issues years ago. Sure they did. Why wouldn't this?
Keep in mind the MBS market is a $50 trillion market. No one is saying it's always perfect, and excesses happen all the time. But the foundation of the mortgage-backed security market has transformed housing in America. Let's be clear.
We have, you know, $15 trillion of home mortgages being financed in securities. $15 trillion. Okay? That took 50 years. There was an episode in 2007–2008 where it became obscene and they securitized poorly. So there's no question that was an anomaly over the course of 50 years, because I think over 50 years, other than that one moment, you saw basically a great market doing great things.
I am not here to suggest we're not going to find some times where maybe our assumptions on a chip life are wrong, or maybe there's going to be a new technology that transforms it that makes the duration—
Changes, right — changes the duration or the efficiency or the underlying value, one way or the other.
