Hello and welcome to Alts Cafe
This is your weekly briefing on the world of Alts investing. Buckle up, it’s bumpy.
TLDR:
- Unemployment claims in US are at their highest levels since Nov 2021. Could a drop in rates come soon?
- More people live at home than they used to. It’s going to affect the shape of the Real Estate investment market.
- Terrible week for ETH and NFTs, but institutions are optimistic about the longterm future of BTC.
Caffeine up and let’s go.
Wyatt
Table of Contents
Macro View
A quiet week from a macro point of view as earnings continued to roll in.
Bullish News
- Recurring US unemployment benefit claims jumped to the highest level since November 2021. More unemployment = lower rates.
- More prime age workers are entering the workforce, which should drive unemployment stats up.
- More than 90% of companies reporting this quarter beat estimates.
Bearish News
- Unemployment among high-earning households is up 500% since last year.
- More than 25% of people aged 59 and older have no money set aside for retirement.
- England and Wales are setting records for business insolvency.
- Consumers are starting to fall behind on their credit card and loan payments.
- More American consumers are using Buy-Now-Pay-Later apps to pay for groceries than ever before.
What are we doing?
ALTS 1 fund news:
Our quarterly report went out last week.
Real Estate
I read an Urban Institute report this week that, as a Real Estate investor or analyst, sheds some light on upcoming trends that would affect my investment thesis.
The key takeaway is: The behavior that drives home-buying is changing.
Over 20% of Americans aged 25 to 34 live with their parents. It was half that in 2000.
One of the reasons?
In 2021, only 38.6% of young Americans were married, compared to 59.4% in 1990.
Further, of young Americans who have married, more than a third have subsequently got divorced before the age of 34. Back in 1990, only one in nine had divorced by the same age.
Overall, this feels like a trend that’s going to continue to escalate, which means there will be more demand for:
- Parental homes that can accommodate an ADU
- More rental apartments
- Smaller, cheaper starter homes
- Longer duration (50 years) mortgages
The study I looked at didn’t break out the data by geographic region or urban vs. rural, but I suspect there’s a lot of variation here. People marry earlier in the country and divorce more in cities, etc.
Bullish News
- Redcar Fund Management announced it closed on $418 million to convert warehouse spaces in LA and Texas into “creative offices.” I hope they’ve also invested in “creative accountants.”
- Cap rates for Class A multifamily properties saw their first significant quarterly deceleration since the Fed started raising rates last year, suggesting the asset class could be less risky for investors going forward.
- After positive inflation news last week, the market expects mortgage rates to drop.
- Cities are giving away money to help developers transition offices to residential spaces.
- China’s new home prices rose in March at the fastest pace in 21 months.
Bearish News
- A $161.4 million commercial mortgage-backed securities (CMBS) loan backing nine Brookfield-owned Class B office buildings defaulted.
- Office space vacancy rates hit a record high in March.
- Some are calling for office buildings to be demolished, because conversions are too difficult.
- Around 14% of investors sold their homes for a loss in February and March. A bit more depth on this:
- That’s the highest since 2016 but well off numbers from 2009 to 2011, which saw two thirds (66%) of investors take a loss.
- Phoenix and Las Vegas were hit hardest, with 31% and 28% of investors losing money.
- The typical investor who sold a home in March sold it for 45.9% more ($145,714) than the price they paid, down from 55.3% ($173,458) a year earlier and a pandemic peak of 67.9% ($199,274) in June 2022.
- 10% of homes currently on the market are owned by investors. That’s down from 12% late last year but up from 3.8% in 2013.
- The top three US markets at risk for home declines are in Utah. Florida and Idaho round out the top five.
- The median US home sale price fell 3.3% in March to $400,528, the largest year-over-year drop since 2012.
- Opendoor fired 22% of its staff — 560 people. Redfin fired another 201 members of staff in its third round of layoffs since last summer.
- WeWork is facing delisting from the NYSE.
How to invest in real estate right now:
I’m still out of the real estate market [no change].
Crypto & NFTs
Here’s what you need to know:
Big time correction last week as both BTC and ETH shed recent gains.
We’re back to neutral, as the F&G index slid to 53.
And it was an awful week for NFTs as they followed ETH down.
Bullish News
- Standard Chartered thinks Bitcoin may hit $100k by the end of 2024.
- A Hong Kong court has recognized crypto as property.
Bearish News
- Coinbase may leave the US.
- Crypto companies are struggling to find banking partners.
- Sweden is abolishing tax incentives for data centers in July – potentially putting the last nail in the coffin for the Bitcoin mining industry in the region.
How to invest in Crypto & NFTs right now:
Buy the dip!
Taking a quick break here to talk to you about Athyna, a super-smart, AI-based startup who are closing a raise on 29th April, and I don’t want you guys to miss out.
They’re raising via Republic, and In a nutshell, this looks like a no-brainer to me 🔥
- They’re building a talent-matching platform driven by AI – smarter matches = better value for hiring companies
- They’re already profitable at $5.2M ARR, with 15% MoM revenue growth for 2.5 years
- The team is made up of Ex-Amazon, Meta, WeWork, Uber, DiDi etc etc
- Angel backers in this round are working at Google, AWS, Deel, YouTube, Uber etc etc, and they’ve already put in over $500k for this raise so far (note: you won’t see that on the Republic site as they’re angel investors)
Having worked and hired remotely since 2011, this is something I’d 100% use. And in terms of purpose, I like the globalization of opportunity which comes through as a key raison d’etre for these guys; the founder lives in Argentina 🇦🇷
And I mean, anyone with a growth story like this, who can see it and tell it as clearly as this, is worth a look.
Check ’em out on Republic here.
Startups
Inspired by the above, perhaps you’re looking to found a startup? Or are you a tech employee considering a change of scene? Miami was rated the number one city in the US for Gen Z tech workers.
Miami was cited for its percentage of Gen Z residents, 22.7%, average tech salary of $105,790 and overall internet connectivity.
The entire top ten:
- Miami
- Orlando
- Cincinnati
- Richmond, Virginia
- Atlanta
- Pittsburgh
- Rochester, N.Y.
- Norfolk, Virginia
- Tampa
- Newark, N.J.
Florida takes three spots, and nothing west of the Mississippi made the top ten.
Bullish News
- Female-led Versey Ventures closed its first fintech fund with $78m. This fund doubled the amount raised by women-led firms in 2023.
- Global fintech funding totalled $15 billion in the first quarter of this year, growing 55% from the fourth quarter
- But…fintech companies raised over $131B in 2021.
- But…$6.5B of that was Stripe’s slightly strange raise to pay taxes.
- The European Investment Bank (EIB) group and the governments of five EU countries have announced a new €3.75bn fund of funds to invest in VCs that back European scaleups.
Bearish News
- In Europe, PE deal value fell 6.8% YoY in Q1 while VC deal value fell more dramatically, by 32.1% YoY. More detail:
- Buyout multiples are at their lowest level since the 2008 global financial crisis.
- Exits were down more than 69%
- There was only one FinTech unicorn in the first quarter, the lowest in seven years.
- Startups in India raised just $2 billion in the first quarter of 2023, 75% lower than the same period of last year.
- First Citizens’s takeover of Silicon Valley Bank is not going well.
- Launched on 4/20, Elon’s spaceship blew up, possibly because he was high or busy trolling celebs on Twitter.
How to invest in startups right now:
I’m hearing chatter about pre-seed index funds. Perhaps there’s something to it.
That’s all for this week. I hope you enjoyed your coffee and this edition of Alts Cafe.
If you have any comments, questions, or concerns – let us know.
And, at the risk of boring you, please share this wherever you have a platform. Twitter, LinkedIn, the pub… I’m not fussy.
Cheers,
Wyatt
Disclosures
- This issue of Alts Cafe was brought to you by our friends at Future Cardia and Athyna.
- We are holding BTC and ETC in our ALTS 1 Fund. Apart from those, we don’t own any other assets or vested interests in the companies mentioned in this email.
