The cracks are getting wider

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

Macro View

The market threw up all over itself in anticipation of a shutdown that didn’t happen (yet).

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Bullish News

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:
    • Credit card companies are ​racking​ up losses at the fastest pace in almost 30 years, outside of the Great Financial Crisis.
      • And it’s going to get worse with losses peaking in late 2024 or 2025.
    • Student loan payments’ restart will ​pull​ $100 billion out of the economy.

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

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.

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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

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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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