How much will equities and crypto diverge this year?

Hello and welcome to a special Super Snarky Because Nothing is Happening So Let’s Get Back to Work week edition of 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

No Santa Claus rally for us as the markets ended 2022 not with a bang but a whimper.

 

Also. Tesla is no longer in the top ten biggest companies in the US. It was down around 70% in 2022.

Bullish News

  • NY State increased its cap on pension fund investments in alternative assets from 25% to 35%.
  • The Biden administration passed a $1.7T spending bill to keep the lights on. Despite bipartisan support, Republican speaker-hopeful Kevin McCarthy said it’s “a monstrosity that is one of the most shameful acts I’ve ever seen in this body.”
  • Noted macro-economists, “American consumers”, expect inflation to finish 2023 at around 4.4%.
  • Because they can’t possibly do worse than they did in 2023, institutional investors think bonds will do well in 2022.

 

Bearish News

  • Despite ticking up slightly last week, jobless claims are still historically low. Rate increases will continue until unemployment rises.
  • Last week, global equity funds saw their largest outflows since March 2020.

 

What are we doing?

ALTS 1 fund news:

Nothing new here

 

Crypto

Here’s what you need to know:

Crypto finished up 2022 as it began — equities but a bit more.

 

The sentiment around the crypto space has been flat for several weeks.

The Fear & Greed Index is often a (slightly) leading indicator of where crypto is moving.

 

Still wondering how SBF got ahold of $250m to post bond? The short, and laughable, answer is that he didn’t. He signed a “personal recognizance bond,” which means if he doesn’t turn up to court on the appointed day, he pinky promises to pay $250m.

(This is especially bizarre, because the whole point of bail money is that it gets invested by cities…)

Nothing about anything makes sense.

My biggest question in 2023 is “how much will crypto and equities diverge this year?” Were the correlations around 2021 and 2022 an anomaly, or have enough crypto tourists been flushed out that the two asset classes can properly diverge?

Bullish News

  • Bitcoin miner Argo won’t have to declare bankruptcy.

 

Bearish News

  • Solana finished 2022 down 94%.

 

What to do with that info:

Have a look at The Block’s 2022 wrap up while drinking alone in the dark. Then come out swinging in 2023.

Real Estate

Here’s what you need to know:

It’s been a quiet week on the real estate front with everyone looking at 2023 and hoping things get slightly less terrible. We’ve been saying this for years now, though, and things keep getting worse.

Here’s what’s in store next year:

  • Foreclosures will be up
  • Home prices will be down despite though the notably impartial National Association of Realtors says prices will increase 5.4%.
  • Mortgage rates will come down slightly
  • Sales volume will be up
  • Offices will continue to be vacant and many will sell at a loss

 

And quite a lot more. Check out Wednesday’s The WC for more insights into the coming year.

Bullish News

  • New home sales increased in November as mortgage rates retreated slightly and builders offered more incentives.

 

Bearish News

  • The US Pending Home Sales Index fell by more than 4% in November, a larger decline than expected.
  • Home prices fell in October for the fourth straight month.
  • Chinese real estate is still overvalued, but it could get better in the second half of the year.

 

What to do with that info:

Stay on the sidelines; invest elsewhere.

NFTs

Here’s what you need to know:

The year finished quietly, slightly off lows for the year.

 

If you’re looking to harvest some losses on your unsellable NFTs, check out Unsellable. They’ll give you a receipt for your worthless JPEGs so you can claim the losses on your taxes. See their entire “collectionhere.

Bullish News

  • OpenSea CEO Devin Finzer is doing his best to distance NFTs from the Crypto Winter.

 

Bearish News

  • Kia raised $100k for a pet adoption charity, which is nice.

 

What to do with that info:

Check out NFTPlaza’s 2022 wrap up if you’re feeling brave.

Startups

Here’s what you need to know:

TechCrunch wrapped up 2022 with a look at the top ten US funding rounds, which ranged from $1B to $2B and featured a wide variety of industries including gaming, space travel, logistics, defense, retail / collectibles, autonomous and electric vehicles, financial services, and cybersecurity.

The two biggest rounds in 2022 were outside the US, though.

 

It was a solid 1H, and we’re not likely to see those numbers again in 2023.

It wasn’t all peaches and cream, of course. “In the third quarter of 2022, global venture funding dropped by more than 50% year over year…. Late-stage funding has plummeted even more dramatically by 63% year over year.”

They’ve also come out with a few forecasts featuring intellectual leaps like:

  • Fundraising will be tough in 2023 but may get better later in the year.
  • Investors will prefer good defensible companies.
  • Companies will have to raise down rounds to extend their runway.
  • 15 companies that may go public in 2023. There are a couple surprises in there.

 

Bullish News

  • Franklin Templeton has increased the valuation of Canva, which it wrote down significantly earlier in the year.
  • Major New York-listed Chinese tech stocks are dropping plans to also list their shares in Hong Kong, signaling the companies no longer feel the need to hedge against future regulatory conflicts between the U.S. and China.

 

Bearish News

  • Instacart cut its internal valuation by another 20% to $10 Billion.
  • Facebook finally settled the Cambridge Analytica affair, paying out over $700m.

 

What to do with that info:

Invest in good companies with sustainable competitive advantages that throw off a lot of cash and are deep into a defensible niche of AI.

 

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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