The Secret Committee That Can Make or Break Elon Musk

On June 12th, Elon Musk's SpaceX, valued at nearly $2 trillion, officially went public. This is the largest stock offering in human history. To welcome this epic giant, the Nasdaq stock market rewrote the rules, granting special approval for it to join the Nasdaq 100 just 15 days after listing, setting aside $20 billion to support Musk. But just as the whole world was cheering for Musk, several Wall Street leaders secretly dealt him a heavy blow. S&P Dow Jones indices publicly refused to endorse SpaceX. The thing is, this isn't the first time Musk has been snubbed by S&P. When Tesla went public years ago, the two sides had a bloody confrontation. According to Wall Street insiders, behind S&P are several top-tier Wall Street old money figures. No one knows who they are, but in their hands, they control a staggering $7.5 trillion in global assets. And this group of old money seems to have always been unwilling to foot the bill for Musk's tech dreams. Why? Who are these people? Today, we'll take a look at the unknown Wall Street financial shadow war behind this epic IPO. The story in this episode involves a lot of information, and there are a few details I especially want you to notice. If you haven't subscribed to Real Viewpoint yet, please do so now so you won't miss the key parts later. First, we need to introduce a few basic concepts. There are two types of money in the stock market. The first is called active investing, which is when we or those fund managers make our own decisions to buy stocks. If we like a company, we buy its shares. The second type is called passive investing. The largest source of this money is social funds, pensions, and the 401k retirement plans most familiar to Americans. That's the portion automatically deducted from our monthly paychecks that goes into a retirement account. So when all Americans' retirement funds are pooled together, the vast majority eventually flows into a pool called index funds. The sole mechanism of an index fund is to replicate an index 100%. What does that mean? It means whatever stocks are in the index, and in whatever proportion, it buys and allocates them exactly the same way. In other words, index funds don't pick stocks. It's like a robot with a fixed shopping list. Whatever stocks are on the list, well, it has to buy them mindlessly according to the ratio. Mindless buying. So this leads to a major question. Think about it. The retirement funds of almost all Americans. That's a massive amount of assets, right? Mindlessly buying from a fixed list makes that list incredibly powerful. Who decides which stock gets on that list? Who has such great power? To make the final call, you smart people must have smelled the scent of a financial deep state by now. Let's hold that thought and talk about it in a bit. Now that the concept of index funds is clear, buy them index proportionally, what exactly is an index? Here, we'll only talk about the Nasdaq 100 and the S&P 500, which are most relevant to Musk's IPO. The Nasdaq 100 is the 100 largest non-financial companies on the Nasdaq exchange ranked by market cap, including Apple, NVIDIA, and Microsoft. And the S&P 500 consists of the 500 most profitable large companies in the U.S. This is Wall Street's recognized thermometer for U.S. stocks. First, Nasdaq absolutely dotes on Elon Musk. To give him the green light, Nasdaq allowed SpaceX to enter the Nasdaq 100 just 15 days after listing. You see, normally, a new company must go through a 3 to 12-month observation period before it's even considered for inclusion. But for Musk, Nasdaq completely rewrote the rules. This means that after only 15 trading days, the $600 billion in passive funds behind the Nasdaq 100 were forced to adjust their positions, freeing up tens of billions in cold hard cash to give SpaceX a major boost. However, the S&P 500 publicly rejected Musk. The money behind the S&P 500 is over 10 times the size of the Nasdaq 100's fund pool, reaching $7.5 trillion, which is like combining the annual GDP of Japan, Germany, and India. Musk's SpaceX must undergo at least a three-month review by the S&P index. The most direct loss? Missing out on that massive influx of passive capital. But beyond that, there's another important signal. And to understand this signal, we have to look back at Warren Buffett's bet of the century in late 2007. Back then, the Oracle of Omaha Warren Buffett made a bold claim. He bet that over the next 10 years, no group of elite hedge funds could outperform the humble S&P 500 index fund. When he said that, Wall Street's elite were absolutely outraged. One top investment bank stepped up to the plate to bet against Buffett. The manager's name was Ted. He handpicked five of the world's most elite hedge funds. It was like taking the world's smartest financial geniuses and selecting the absolute best of the best. For this million-dollar bet, both sides put up $320,000 each to buy zero-coupon treasury bonds, calculated to grow to exactly $1 million after 10 years. The rules were simple. From January 1st, 2008 to December 31st, 2017, a full decade. After all fees and expenses, the winner would donate the entire sum to charity. In the first two years of the bet, the 2008 subprime crisis hit and global markets crashed. Those Wall Street pros used complex shorting and leverage to take an early, massive lead over the S&P 500 index fund. All of Wall Street was popping champagne, thinking they had it in the bag. They thought they'd finally shown up that old timer, Buffett. But unexpectedly, in the fifth year, the tide turned. Buffett's simple index fund began to surge ahead like a heavy tank. And it never looked back. When the 10 years were up, the result was that the best of the best, those hedge funds run by the most expensive and brilliant minds in America, using every trick in the book, ended up with a measly average annual return of just 2.2%. And the fund Buffett bought, which simply replicates the S&P 500 list, had an annualized return that actually reached 7.1%. A 10-year bet. The world's smartest minds with top-tier resources constantly tracking earnings reports and making complex portfolio moves. In the end, it was all for nothing, outperformed by an S&P 500 robot that just buys stocks from a fixed list. So I'd like to ask you, are you convinced by Buffett's bet? If you're convinced that passive indices can indeed outperform most stocks in the long run, type an A for me. If you think this is just a result of a specific historical period and isn't reliable, type a B. Let's see what our friends choose. Buffett's bet of the century undoubtedly established the S&P 500's irreplaceable sanctity and absolute authority on Wall Street. Why? Because in the eyes of old money, the S&P 500 is a supreme temple of business, representing America's national destiny. Companies on this list must not only be the 500 most profitable in the U.S., but they must also be seen as having the highest safety factor, Once a company is accepted, it's like receiving a risk-free gold medal from the mainstream financial world. Trillions of dollars in the world's most conservative long-term capital will unconditionally support you. Conversely, at Musk's most glorious moment, with SpaceX's valuation soaring toward $2 trillion, the S&P coldly shut the door. This is tantamount to announcing to the world that, in the eyes of the Wall Street establishment, even if Musk's SpaceX has an incomparable asset scale, its high-risk nature remains undeniable. This is a class exile of Musk, the tech upstart, by Wall Street's old money. So this leads to a bigger question. Who decides which companies get in and which don't? Why is Nasdaq willing to give the green light while the S&P refuses? What if I told you this isn't the first time? The S&P and Musk had a bitter, cutthroat feud over five years ago. Let's turn back the clock to 2020. That year, Tesla was Wall Street's hottest success story, with its stock price skyrocketing nearly fourfold within a single year. Everyone was holding their breath, waiting for a historic moment, Tesla's official inclusion in the S&P 500. You should know, the highest hurdle for entering the S&P 500 is four consecutive quarters of profit. Tesla struggled for 17 years since its founding without clearing that hurdle until July 22, 2020, when Musk finally delivered a stunning second-quarter report, achieving profit for the fourth straight quarter. All of Wall Street was buzzing. Dan Ives, a star analyst who tracks Tesla daily, declared that Tesla's inclusion in the S&P 500 was a done deal. To win over the $7.5 trillion in capital behind the S&P 500, Tesla made constant moves during those few months. At the end of August, Musk specifically did a 5-for-1 stock split. What does that mean? Simply put, it's like swapping a $100 bill for five $20 bills. Basically, it slashed Tesla's sky-high share price to make it look more index-friendly. Everything was set. Countless retail investors poured hot money into Tesla ahead of time, just waiting for the S&P's quarterly rebalancing in September to grandly welcome Tesla into the fold. On Friday, September 4, 2020, as the U.S. market closed, the S&P issued an announcement under Wall Street's watchful eye naming three new companies to the S&P 500. Etsy, the e-commerce platform for handmade goods, a chip equipment manufacturer, and a pharmaceutical contract manufacturer. But Tesla was nowhere to be found. Keep in mind, Tesla's market cap had already topped $370 billion, making it the ninth-largest public company in the U.S. It was worth more than 95% of the S&P 500's veteran members, including century-old giants like Johnson & Johnson and P&G. Yet the smallest of the three companies added was only 1 25th the size of Tesla. See? The ninth-largest company in the U.S. lost to a rival 25 times smaller. A supergiant wealthy enough to rival a nation and the ninth-largest in the U.S. met every single hard metric, yet lost to a complete nobody. The following weekend was Labor Day, a public holiday in the U.S., so the market stayed closed for three days. All that shock simmered over the long weekend. When the market opened on Tuesday, September 8th, Tesla's stock plummeted 21%, its biggest single-day drop ever. $82 billion evaporated in one day. Wall Street went nuts. Countless retail investors and fund managers who lost their shirts began to besiege the S&P. Why on earth? Why skip the ninth-largest company in the U.S. to pick three small fry? What's the point? At the time, facing a tidal wave of public doubt, the S&P was forced to push an analyst named Howard Silverblatt into the spotlight. However, facing questions from the crowd, the spokesman's face was grim, his jaw tight. He refused to reveal a single detail about the selection process, just giving him a runaround by saying, the market is always changing and our index must keep up with that change. That vague answer basically said nothing, so industry insiders began to speculate that Tesla's growth at the time, up 400% in a year, was terrifyingly volatile. If the committee put such a wild stock into the face of the U.S. market and it crashed one day, it would ruin the reputation of the entire S&P 500. There's one huge but easily overlooked detail in that statement. If the committee put Tesla in... The committee? Where did this committee come from? What's the deal with this committee? It was Tesla's $82 billion bloodbath that first turned the world's attention to this mysterious organization hidden behind the S&P 500. The S&P Index Committee? This isn't some tabloid conspiracy theory. Listen closely, friends. S&P's official blog explicitly states that, unlike most indices, the S&P 500 has no rigid, absolute rules. The committee has a certain amount of discretion. Top author Robert Arna, who wrote The Fundamental Index, has also said that many people believe the S&P 500 isn't an index at all. It's an actively managed super portfolio handpicked by a committee. And who are the members of this committee? It's a closely guarded secret. Bloomberg's chief ETF analyst has said something similar. This thing operates more like a mysterious, actively managed fund than an index running on rules. The University of Chicago later conducted a quantitative study, and the conclusion was chilling. The discretionary power of this committee behind the S&P 500 can directly influence a flow of about 5% of the entire United States stock market's value today. That's roughly $1 trillion. So you must be curious. Who exactly are the members of this committee? According to years of tracking by The Wall Street Journal and Bloomberg, there are only nine members of this committee. And S&P's protection of these nine people is comparable to the Department of War protecting nuclear codes. Scour in all public documents on Wall Street, you won't find the names of these nine members. There's no background on them, no one mentions them, let alone admits to being a committee member. These nine people have no fixed office. According to Wall Street rumors, their meetings have a cold codename, Black Packet Time. 48 hours before a meeting, specialized armed guards deliver an all-paper encrypted black packet with no electronic trace to the secret residences of these nine people. On the day of the meeting, they set out from different corners of Manhattan, New York, quietly entering a secret room in an exclusive private club. Once inside, everyone must pass military-grade electronic scans. Even mechanical watches must be removed, and all electronics like phones are confiscated. In the secret room, they dine on the finest steaks and drink $1,000 Petrus wine. Amidst the clinking of glasses, if any five people cast an anonymous yes vote, the flow of tens of trillions of dollars of human wealth can be rewritten in an instant. This is Wall Street's most famous old money club. It's said that these nine masked invisible referees are super proxies planted at the core of the United States stock market by giants like BlackRock, Vanguard, and those centuries-old traditional powerhouses from the East Coast in Europe. Their purpose isn't to reflect the market, but to build a class-based moat, keeping out those disobedient upstarts who try to subvert the traditional order, like Elon Musk. In recent years, finance professors from Harvard and the University of Chicago have proposed a chilling national-level conspiracy theory. Through big data modeling, they found that some of the S&P committee's discretionary decisions align with the Federal Reserve's monetary policy and even the U.S. Treasury's bailout plans, with terrifying synchronization. So these scholars boldly estimate that the S&P Index Committee is not a purely commercial organization at all. It is an invisible financial front for the Federal Reserve and the U.S. government. This was evident during the 2008 subprime mortgage crisis and the 2020 stock market crash, when the S&P Committee's list adjustments precisely helped the Federal Reserve stabilize specific financial lifelines. Let's get specific. When the 2008 financial crisis broke out, Wall Street was shaken and Lehman Brothers declared bankruptcy. That very night, the S&P Committee exercised its discretionary power and kicked Lehman Brothers and the index in a flash. That's normal, right? But the weird part comes next. Immediately after, the world's largest insurance giant, AIG, the American international group, also found itself in a desperate situation. At that time, 90% of the S&P's constituent stocks, that is, 90% of the S&P 500 shares, had bought insurance from them. AIG was losing so much money it was dying, and its stock price plummeted by over 90% in just a few days. By S&P rules, it should have been ruthlessly kicked out. But at that moment, the Federal Reserve and the U.S. Treasury were planning one of the craziest bailout operations in human history, with the government providing $85 billion to urgently take over AIG. Why? Because if AIG collapsed, the entire U.S. financial system would be paralyzed. How so? We all know the 2008 crisis was the subprime mortgage crisis, where people couldn't pay their mortgages. At that time, clever Wall Street investment banks like Lehman Brothers, Goldman Sachs, and Morgan Stanley had already packaged mortgages into financial products and sold them to the whole world. But these big banks were also nervous. What if these people really couldn't pay back the money? Wouldn't we go bankrupt? So they turned to AIG, the largest and most financially powerful insurance giant in the world at the time. The big banks said to AIG, hey, I have hundreds of billions in mortgage assets. I'll pay you a huge monthly protection fee. If something goes wrong one day and these assets blow up and lose money, you have to compensate me in full. AIG thought at the time that housing prices wouldn't fall. So they figured, why not take the easy money? They confidently signed trillions of dollars in counterparty guarantee agreements with all the major banks on Wall Street. So AIG became the fuse that tied all the banks together. The U.S. government absolutely could not let AIG fail. So they had to step in and save it. So what did the S&P committee do at that time? They also tacitly, collectively turned a blind eye. Even though AIG had completely turned into a junk stock, it was still kept on the S&P 500 list. This is the unspoken understanding between Wall Street old money and the U.S. government. If you agree with me, give me a like to let me know. In March, 2020, it happened again when the United States stock market hit circuit breakers repeatedly. Friends, if you're interested in these kinds of financial stories, be sure to leave a comment and let me know and I'll arrange to tell them to you. But don't forget to subscribe or else you might miss out. So the S&P 500 is the ultimate showcase of America's national fortune and dollar hegemony. It is the Jerusalem of American finance. Back to the Tesla story. At that time, another three months passed and Tesla had five consecutive quarters of profit. Only then did the S&P relent and agree to include Tesla in the 500 index. Musk's net worth skyrocketed overnight because of this. It was also at that time that his wealth surpassed Zuckerberg's, making him the world's third richest person. Five years later, Musk returned to the gates of the S&P 500 with SpaceX, valued at nearly $2 trillion. This time the S&P coldly imposed another one-year observation period. This here will be a litmus test for whether humanity's future and its wallet can truly merge. It tests more than just SpaceX's financial metrics, but whether the traditional old money controlling global wealth dares to write technological faith into the core ledger. When the conservative order managing billions in hard cash meets the sea of stars that bets on human destiny, old money's compromise or acceptance of technology will directly determine the flow of humanity's future wealth. This Wall Street financial shadow war has only just begun. We shall wait and see. All right, that's all for today. Friends, if you found this interesting and learned something new, please remember to give me a like. New friends, don't forget to subscribe to Zen Viewpoints so you can see my new videos on your YouTube homepage. Also, feel free to forward and share my show with your friends. Every interaction helps trigger YouTube's recommendation algorithm, allowing more people to see the videos I've worked hard on. So, Zhenfei would like to thank you all in advance. All right, thanks for watching. And don't forget, we'll see you again at the same time this Saturday on Zen Viewpoints.