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How many AI tools do we need?

November 21, 2022
Read time: ± 6 minutes

Hello and welcome to Alts Cafe

This is everything you need to know about what’s going on in the world of alternative assets, best enjoyed with your morning coffee.

Let’s go!

Macro View

The equities market continued to climb last week, despite ending on a slight low.

Prices are up, volatility is down, and maybe that’s why the risk trade is coming back after spending 2022 in the doldrums.

Bullish News

  • Jobless claims  fell  again, despite tech layoffs.
  • US retail sales  increased  1.3% in October.
  • The Atlanta Fed  boosted  its fourth-quarter GDP growth estimate to a 4.4% annualized rate from a 4.0% pace.

Bearish News

  • The UK has its highest level of taxation since WWII, a record fall in the living standards, whilst rates are set to rise further (potentially to around 4%). Inflation just pointed above 11%.
  • Production at US factories  barely  rose in October, and output in the prior two months was not as strong as initially thought.
  • The Russian economy  shrunk  4% in the third quarter, according to official estimates (DYOR).

What are we doing?

 ALTS 1  fund news:

We exited a crypto stablecoin yield position and moved our existing BTC and ETH allocations to a cold wallet.

Crypto

Here’s what you need to know:

The fallout from the FTX drama continues as its contagion spreads.

Bitcoin has hit a two-year low, while Ethereum remains around 10% above its late spring nadir.

It’s looking to go lower, though.

The fear and greed index is often a (slightly) leading indicator of where crypto is moving.

Bullish News

  • As with NFTs (below), now is a great time to buy if you believe in crypto. I’d wait until the rest of the FTX ETH is dumped on the market before buying, though.

Bearish News

  • FTX CEO John Ray  declares  Sam Bankman-Fried’s management a “complete failure”.
  • The Ethereum price has dropped by 7.5% in the past 24 hours, as proceeds from  last week’s FTX ‘hack’  have begun being dumped on the market.
  • Given the  size  of the hacker’s remaining wallet, Eth prices could easily plummet another 20% to 30%.

What to do with that info:

Some advice from last week:

Get all your crypto into a  cold wallet  ASAP.

Real Estate

Here’s what you need to know:

The  stats  are out for October, and they’re not good:

Year over year, there were 30.7% fewer closings, 36.8% more homes for sale, and the average home took nearly a week longer to sell, at 35 days on market. As a result, the Median Sales Price was pushed down 0.3% to $399,000 from September’s $400,000 – the third straight month of decline.

There are also several macro indications that the real estate market still has plenty of room to drop.

The real house price index, the house price to rent ratio, and the house price to income ratio are all expected to be higher in 2022 than they were in 2006.

Bullish News

  • Homeowners are still  spending  on renovations, as home equity remains at high levels. Good news for Lowe’s and Home Depot.
  • The US plans to bring microchip production back to the US, which is a  boon  to several tech-based markets.
  • There are still buyers out there — PE firms are  swooping  in with all-cash offers for homes worldwide.
  • US mortgage rates  posted  the biggest drop since 1981, falling to 6.61%

Bearish News

  • The iBuyer experiment has  failed , and it’s devastating the SW real estate market.
  • US home sales  fell  for 9th month in a row in October.
  • U.S. homebuilding  fell  sharply in October, with single-family projects dropping to the lowest level in nearly 2-1/2 years.
  • Homebuilder sentiment  dropped  to a decade low

What to do with that info:

Wait for prices in the SW to crash, then pick up the iBuyer’s scattered remains.

NFTs

Here’s what you need to know:

Everything in NFT Land is on sale right now, with loads of blue chip projects (and VeeFriends) at or near 2022 lows.

Given the price action, we’ve added that stat to the bottom of our NFT Index chart (below).

The best picks here for me are Moonbirds, Doodles, and The Currency (ALTS 1 owns a copy of the Currency).

Bullish News

  • If you’re a buyer, this is a great time to buy.

Bearish News

  • FTX is smash-hammering NFTs in two ways: 1) confidence in the sector is at an all-time low, and 2) the price of ETH is going to continue to fall until the hacker’s unwound his wallet.
  • Ronaldo is  launching  an NFT.

What to do with that info:

There’s probably more room for prices to fall over the week, but keep an eye out for opportunities.

Startups

Here’s what you need to know:

While  layoffs  continue apace, there are green shoots out there for everything not called web3 or crypto.

I’m seeing lots of anecdotal reports that the ecosystem is healing, builders are building, and funding is dripping back in.

AI is, of course, where it’s at right now, and I see dozens of new applications for the tech launching each week. This all feels very early days. Do we really need twenty five AI-powered tools to help improve your writing? How long until Grammarly snaps up the best one or two and the rest pivot or perish?

If you’re investing in AI-powered tools, the watchword is moats.

What can this company do that no one else can? Are they a pretty face painted on top of GPT-3?

Bullish News

  • Plaid is  moving  into payments.
  • Nu Holdings, the Warren Buffett–backed Brazilian banking firm that offers credit cards and personal loans and that is more commonly known as Nubank,  posted a nearly threefold jump  in Q3 revenue. Nu’s total revenue in Q3 reached $1.3 billion, up 171%, while profit climbed to $427 million, up 90%.
  • Revolut  hit  25 million customers globally as the firm prepares to expand into new markets, including India, Mexico, Brazil, and New Zealand.
  • There’s a  new  credit card out there for startup creators.
  • US banks are going  shopping  for fintech startups.

Bearish News

  • 72% of startup founders are  affected  by mental health issues.
  • The global charge card market is expected to  grow  from $1.91 billion in 2021 to $1.96 billion in 2022 at a compound annual growth rate (CAGR) of 2.9%. The market is expected to grow to $2.04 billion in 2026 at a compound annual growth rate (CAGR) of 1%.
  •  RIP  Evernote.

What to do with that info:

Due diligence.

That’s all for this week. Hope you enjoyed your coffee and this edition of Alts Cafe.

Any comments, questions or concerns – let us know.

Cheers,

Wyatt

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Author

Wyatt Cavalier

Wyatt Cavalier

With a background in finance & intelligence analysis, Wyatt has an unhealthy obsession with finding the best blue chip investment opportunities. His previous newsletter, Fractional, resonated deeply with subscribers, bringing actionable insights and unconventional trading strategies. His rare book collection specializes in banned editions. He currently lives in Spain with his beautiful wife, three young boys, and dog Monty.

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