📰 This Week…

• New inflation numbers.

• Macy’s is closing more stores, potentially reshaping malls across the country.

• What if AI startup founders just ignore copyright and legal issues around building AI products?

• UMG and Meta have a new partnership.

And so much more!

📊 Markets

• Interest Rates, Federal Funds: 5.33%

  • Next FOMC meeting starts September 17

• 30 Year Mortgage Rates: 6.49%

  • (+0.3% WoW, -4.1% MoM, -8.5% YoY)

• Single Family Home Price Index: 424.6

  • (-0% MoM, +5.7% YoY)

  • July report, data is through May

• Commercial Real Estate Index: 123.6

  • (+0.0% MoM, -5.2% YoY)

💸 Economy

Bottom Line: There are continued signs that inflation is easing. The latest CPI measures came in at a 2.9-3.2% yearly increase (depending on which you prefer). That’s the lowest in years, and it’s pretty close to The Fed’s 2% target. Speaking of The Fed, we’ll hear more from Jerome Powell this week from their yearly Symposium. Some newer data suggests that people can be a bit less worried about unemployment and the labor market than previously thought.

• Inflation continued to slow in July. The CPI measure was a 2.9% yearly increase, the best since inflation started to increase in 2021. Core CPI came in at 3.2% yearly, which also reflects continued improvement. (The Washington Post)

• On August 23rd, we’ll hear from Jerome Powell speaking from the Fed’s yearly convention. It will be an important opportunity to prepare the public for a greater focus on the economy (as opposed to inflation) and upcoming interest rate cuts. (Barron’s)

• The number of new people applying for unemployment fell again last week. That continues to help calm nerves after the last unemployment jumped to 4.3%. The timing of Hurricane Beryl and other weather events may have contributed to the increase. (Barron’s)

• There are some areas of the economy where consumers are seeing prices decrease. That includes some food categories, energy, used cars, cookware, some types of clothing, some types of electronics, and more. (CNBC)

• This matches the view of the consumer from Bank of America’s CEO. He notes that consumers are still spending on things like vacations, but now they’re looking for bargains. They’re no longer willing to splurge as much. That’s causing businesses to adjust and reduce their prices where they can. (Fortune)

🏠 Real Estate

Bottom Line: While some are starting to feel more bullish about the space, the fallout in commercial real estate is not over yet. UBS is going to liquidate $1.8B of office space. Macy’s closing ~30% of their stores nationwide will present a mix of challenges and opportunities for malls.

The overall housing market continues to grow with Redfin projecting a major milestone and new record values next year. Home insurance continues to be an important risk to monitor for investors. In addition to premium increases, Texas is also seeing deductibles rise. Insurance costs are becoming one of the most important things to forecast before making an investment decision.

• UBS is winding down a $2B commercial real estate fund. Unable to meet investor redemption requests, the bank has decided to liquidate the entire fund. Its holdings are 83% offices, spread across the globe. As office space struggled after the pandemic, the fund has had a -10.6% annual return over the past 3 years. (Reuters)

• Macy’s will be closing approximately 150 stores over the next few years. In many cases, Macy’s actually owns the store space in the shopping mall. Most other retailers rent. This means that mall owners will have the opportunity to reclaim and transform that space for the first time in decades. It could shake up the foot traffic and value of mall real estate across the country. (CNBC)

• Redfin projects that the US housing market will reach a total value of $50 trillion (yes, trillion with a T) next year. (Business Insider)

• Homeowners in Texas are starting to see insurance deductibles rise from 1% to 2% of the home’s value. (The Dallas Morning News)

💡 Startups

Bottom Line: Eric Schmidt argues that maybe copyright issues surrounding AI products shouldn’t matter to entrepreneurs. OpenAI loses a co-founder. Defense Tech funding tops 2023 levels. Venture capital is still making huge bets on completely unproven AI companies.

• The former CEO of Google suggested that technology entrepreneurs ignore the legal complications around AI. He positions it as a bit of a no-lose situation. If the product is unsuccessful, no one cares and there’s no value to extract from a lawsuit. If the product is successful, then it can be used to generate enough money to pay for lawyers to fix the legal problems. (The Verge)

• OpenAI continues to see talent churn. The co-founder has now left the company to work at a rival AI firm - Anthropic. (Business Insider)

• Anduril Industries raised $1.5B at a $14B valuation. That pushes the amount of funds raised for defense technology startups in 2024 above their 2023 total. (Crunchbase News)

• World Labs was founded in April by an AI professor at Stanford. It’s already raised funds at a $1B valuation… in 4 months. (TechCrunch)

🎵 Music Royalties

• UMG and Meta have a new partnership. Financial details weren’t disclosed. However, the partnership focuses on artist compensation and unlicensed generative AI content. Additionally, the new agreement includes WhatsApp for the first time. (Billboard)

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