Hello and welcome to Alts Cafe
This is a quick-fire look at what’s driving your alts week.
What’s on deck today:
- The USG didn’t shut down (yet)
- Few bright spots in Real Estate, but the AI boom is helping
- Cracks are forming in one for the first AI unicorns
- Private debt is on a tear
- Two more big crypto thefts
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Wyatt
Table of Contents
Macro View
The market threw up all over itself in anticipation of a shutdown that didn’t happen (yet).
Bullish News
- Against all odds, the US government didn’t shut down over the weekend. The continuing resolution gives Congress 45 days to work things out.
- And betting markets think there’s a 45% chance it’ll shut down then.
Bearish News
- Small biz bankruptcies are on the rise.
- Twitter is cutting half its election integrity team ahead of the US presidential elections next year. Chaos is bad for everyone’s business.
- More bad news for consumers and those who service them:
Forecasts
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📈
81%
Chance of Fed hikes rates in November
📈
77%
Chance mortgage defaults will rise in Q3
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2.32%
National average house price increase in 2023
Kalshi markets are forecasting a 45% chance the USG shuts down at the next possible opportunity — in mid-November.
What are we doing?
ALTS 1 Fund news:
No change
Real Estate
Bullish News
- The AI boom is bringing a few folks back to the office in SF.
Bearish News
- Sales of newly built homes decreased 8.7% last month, well below expectations of a 2.2% decline.
- Overall US housing starts were down 14.8% in August.
- And multifamily units were down 44% YoY.
- Single-family rental growth fell to a three-year low in July.
- But St Louis fell the most, rising over 7% YoY.
- Things keep getting worse for China’s Evergrande.
- Fitch is forecasting hotel revenue to decline in 2024.
- The rent-stabilised multi-family market in NYC is so bad developers are taking 44% haircuts to unload the properties.
- Now Atlanta’s office market is in trouble.
How to invest in real estate right now:
avoid
Startups
Bullish News
- Competition for top AI startups is so hot VCs are leveraging relationships with chip providers to get on the cap table.
- Apple’s Jony Ive may be teaming up with OpenAI to build a phone (or other piece of hardware or nothing at all).
- Meanwhile OpenAI is set for a $90 billion valuation.
- Spacetech startups are thriving in countries like India, Japan, Saudi Arabia and the UAE.
- Amazon is investing $1.25 billion in AI startup Anthropic, with the option to increase the investment to $4 billion. The move pits Amazon against other tech giants like Microsoft and Google in the competitive AI field. via SuperPower Daily
Bearish News
- Jasper, an AI company that raised at a $1.5 billion valuation in June, has cut its valuation by 20%.
- 11% of 2023 fundraises have been down rounds, the highest since 2020.
- But down rounds hit 36% in 2008 and 59% in 2002.
- Enterprise SAAS deals are down 55% YoY.
- And if you remove Stripe and OpenAI, and it looks much worse.
- Both a16z and Sequoia lost ±75% on their late-stage investments in Instacart. They each invested $50 million at a $39 billion valuation.
How to invest in startups right now:
avoid secondaries
PE & Private Credit
Bullish News
- Private debt fundraising has overtaken VC and is second only to PE among private market strategies.
- And the sector is on pace to raise more than $200 billion in new capital for the fourth year in a row.
- 80% of PE funds are targeting investments in the $730 billion fashion and luxury industry.
Bearish News
- Billions of dollars are locked in zombie PE funds.
- Just five distressed debt funds have closed so far this year, a big drop from last year’s pace.
How to invest in PE and Private Credit right now:
Wait, probably.
Crypto & NFTs
Here’s what you need to know:
Crypto smashed it last week.
And confidence rose to boot.
Even NFTs were up.
Bullish News
Bearish News
- Less than a month after Ripple said it had agreed to acquire custodian Fortress Trust, the crypto company is backing out of the deal.
- JPMorgan’s British retail bank Chase will ban crypto transactions.
- Hackers stole around $200 million from crypto firm Mixin.
- And DPRK hackers stole $70 million from CoinEx.
How to invest in Crypto & NFTs right now:
It’s accumulation season.
Thanks for reading.
Cheers,
Wyatt
Disclosures
- This issue of Alts Cafe was brought to you by our friends at Strategic Metals Invest and Cortex Technology Capital.
- 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 bucks.
