Sam Altman out at OpenAI

Hello and welcome to Alts Cafe

This is a quick-fire look at what’s driving your alts week.

What’s on deck today:

Macro View

Bad news is good news. Both the CPI and PPI came in cold.

Bullish News

  • The CPI print came in colder than expected, with inflation up less than expected, year over year.
  • The PPI, which measures wholesale prices, fell 0.5% in October against the expected 0.1% increase. That’s the ​biggest​ decline in more than three years.
  • Money market traders are now ​forecasting​ a 62% chance of a Fed rate cut of at least 25bps by May.
    • And UBS ​thinks​ the Fed will cut nearly three full percentage points in 2024 (I disagree).
  • A Labor Department report showed weekly ​jobless​ claims rose more than expected, cementing bets that the Fed will not need to raise rates further.

Bearish News

  • Bad news is good news for the Fed, but it may mean ​a recession is imminent​. Weakening jobs data, souring retail sales, worsening NFIB data, and rising credit card delinquencies will become a problem at some point.

Forecasts

Get $25 to play around with invest on Kalshi using this link.

📈

99%

​Chance the Fed will hold rates steady in December.​

📈

97%

​Chance credit card defaults will rise in Q3​

📉

1.95%

​National average house price increase in 2023​

The Fed is locked into holding firm in December, and credit card defaults are on the rise. House price increases keep decreasing, too. So what’s new?

November unemployment numbers will be released on Dec 8th. ​Kalshi is forecasting 178k new jobs​ against 150k from October.

The next CPI report comes out on 12th December, and ​Kalshi is forecasting a 3.22% YoY rise​, just a hair above the previous print.

Finally, Kalshi is predicting a ​76% chance of a rate cut by July 2024​, which sounds a bit low to me.

What are we doing?

​ALTS 1​ Fund news:

We’re drawing up the paperwork for our art acquisition.

Real Estate

Bullish News

Bearish News

  • German housebuilding is on the brink of ​collapse​ as construction projects are being canceled and orders are slowing.
  • The size of ​unfinished​, pre-sold homes in China is about 20 times the size of developer Country Garden as of the end of 2022. “We estimate that there are around 20 million units of unconstructed and delayed pre-sold homes,” said Nomura’s Chief China Economist Ting Lu.
  • After being the poster child for the booming American housing market during the pandemic, Austin has seen its fortunes ​reverse​.
  • Private lenders for CRE are getting ​tighter​. “Debt is available, but not in the same amount as before, and it is also meaningfully more expensive.”
  • The 69 total leases WeWork wants ​to abandon​ in North America as part of its Chapter 11 filing are tied to roughly $1.85 billion of commercial mortgage-backed securities (CMBS) loans.
    • Related, the current ​delinquency​ rate for loans in CMBS is 4.76%, but it is expected to approach 10.51% in the coming years.
  • Realtor.com parent company Move Inc.’s revenue ​declined​ 16% to $142M in the fiscal first quarter.
  • Two ​copycat​ lawsuits (in SC and NYC) have cropped up in the wake of the landmark Sitzer/Burnett suit. Surely more to come.
  • Private real estate investor Hazelview ​halted​ redemptions on its $1.4-billion fund.
  • Shorting REITs perceived as vulnerable to higher rates has been a popular trade this year but not a ​successful​ one.

How to invest in real estate right now:

Don’t

Startups

Sam Altman, who many consider the face of AI, was ousted as CEO at OpenAI. After a dramatic weekend that can only be described as the next “Barbarians at the Gate,” he was ultimately replaced by former Twitch CEO Emmett Shear.

Satya Nadella, CEO at Microsoft, ​hired Altman to “lead a new advanced AI research team.”​ Former OpenAI President Greg Brockman and other “colleagues” will join him. Nadella has acquired OpenAI’s most useful components (the talent), promising them unlimited resources and computing power, and left a husk behind for Shear.

New OpenAI CEO Shear has ​said​ he wants to slow down OpenAI’s development to ensure proper guardrails are in place. Sheer has said some fairly…​problematic​…things in the past, which will probably be an issue at some point.

Bullish News

  • Because consumers are bad at maths, Affirm is ​thriving​ in the high-rate environment.
  • After five consecutive quarters of negative performance, venture capital funds ​delivered​ a return of 0.2 percent in the second quarter this year.
  • Menlo Ventures has ​raised​ $1.35 billion for funds targeting AI startups, and Khosla Ventures is closing in on raising $3 billion across three funds.
  • Coatue ​raised​ a $1.4 billion growth fund
    • But had to reduce fees to get it across the line.

Bearish News

  • Over the last 15 years, the FDIC has ​spent​ over $45 billion bailing out VC firms and other wealthy depositors. Signature Bank, Silicon Valley Bank, and First Republic Bank cost over $31 billion alone.
  • Kyle Vogt ​resigned​ as CEO of Cruise late Sunday following the recent suspension of Cruise’s operations on public roads. Perhaps he’s looking for a job with his former co-founder at OpenAI.
  • As bad as 2022-23 have been for both startups and VCs, The Information ​found​ some analysts who think 2024 will be worse.
  • In the third quarter of 2023, 178 VC funds raised an ​aggregate​ of $16.5 billion, the lowest quarterly total since 2015.
    • And seed rounds are set for their ​worst​ year since 2017.
  • Mike Rothenberg, a former VC known for hosting lavish parties, was ​convicted​ on 21 counts of defrauding investors.
  • Brex revenue ​growth​ slowed to 1% in Q3 against a tough post-SVB blowup comp in Q2.

How to invest in startups right now:

Give Sam Altman all your money.

Private Equity and Private Credit

Bullish News

  • BridgeInvest, a private CRE mortgage lender, is on track to ​receive​ applications for $40 billion of loans in 2023 compared to just over $20 billion in 2022.
  • Private equity could be ​targeting​ the NFL, women’s teams, and stadiums next.
  • Germany’s football (soccer) league, the Bundesliga, is ​selling​ up to a 10% stake in its media rights for up to €1bn.
  • There’s a ​private credit buying spree​ going on.

Bearish News

  • Private equity firms that amassed more than $1.5 trillion of assets in China in just two decades are now struggling to ​offload​ once-promising investments.
  • Carlyle is ​reducing​ the target for its pan-Asia PE fund by 30%, citing a lack of demand.

How to invest in PE and Private Credit right now

Invest in sports.

Crypto & NFTs

Here’s what you need to know:

Crypto gave back some gains before popping back into the green.

Slightly less greedy.

NFTs slumped into the weekend as well.

Bullish News

  • Central bank digital currencies have the potential to replace cash, but adoption could take time, said ​Kristalina Georgieva, managing director of the International Monetary Fund​.
  • Prominent crypto analyst Benjamin Cowen has ​predicted​ BTC will go to $100k by 2025.
  • Cathie Wood expects trillions of investor dollars will flow into spot ​bitcoin​ ETFs and the ​digital-asset​ industry at large in the next decade.
  • Bitcoin derivatives markets are ​pointing​ to a 2021-esque bull run.
  • Net crypto inflows have ​surpassed​ $1 billion this year. There have been more inflows during the last seven weeks than all of last year.
  • NFT ​volume​ hit a three-month high.
    • But it’s still less than 10% of 2022 numbers.
  • A new stablecoin called ​Midas​ is launching soon. It’s backed by US Treasuries.
  • In January, CBOE will ​become​ the first regulated U.S. exchange to offer spot and future BTC and ETH markets on a single platform.

Bearish News

  • Someone ​fraudulently​ filed documents for a new iShares XRP Trust under BlackRock’s name, which set XRP alight. BlackRock confirmed it wasn’t them, which caused XRP to come back to earth.
  • Cryptocurrency exchange Poloniex has had its hot wallets ​drained​ by hackers with an estimated loss of around $114 million.

How to invest in Crypto & NFTs right now:

It’s accumulation season.

That’s all for this week

Cheers,

Wyatt

Disclosures

  • This issue of Alts Cafe was brought to you by our friends at ​EquityMultiple​
  • We hold BTC and ETH in our ​ALTS 1 Fund​.
  • There are a couple of affiliate links above. If you click them, we may get a couple of bucks.

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Author

Picture of 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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