📰 This Week…

• The US economy is weakening

• Banks are still feeling the weight of their commercial real estate debt

• AI companies continue to become unicorns

• Spotify is removing music from some artists

• Some information on my investment returns

And more in this shorter, holiday week newsletter

📊 Markets

• Interest Rates, Federal Funds: 5.33%

  • Next FOMC meeting starts July 30

• 30 Year Mortgage Rates: 6.95%

  • (+1.3% WoW, -0.6% MoM, +2.1% YoY)

• Single Family Home Price Index: 423.3

  • (+0% MoM, +6.3% YoY)

  • June report, data is through April

• Commercial Real Estate Index: 123.6

  • (+0.7% MoM, -5.2% YoY)

💸 Economy

Bottom Line: More data that the US economy - and especially the labor market - are weakening. Investors are increasingly expecting the Fed to cut rates in September and maybe December too.

• New economic data shows broad-based weakness in manufacturing. Construction also saw a 0.1% decrease in May. (Reuters)

• There were 206K new jobs created in June, about what was expected. However, the unemployment rate increased to 4.1%. While still a relatively low figure, that’s an 11% increase from January’s 3.7%. It’s also the third month in a row that unemployment has increased. The yearly increase in hourly earnings also appears to be continuing a 2+ year downtrend. (CNBC)

• Markets are increasingly expecting the Fed to cut interest rates this year. Investors are expecting about a 2/3 chance rates are cut at the September meeting. (New York Magazine)

🏠 Real Estate

Bottom Line: The summer is seeing an increase in housing inventory, which is starting to reduce prices in some markets. Commercial real estate debt is still weighing down on small and medium sized banks. Rising home insurance costs and an increased focus on potential climate-related losses are already impacting the real estate market.

• Manhattan is said to be a buyer’s market now. This is due to higher inventory levels. That’s made homes take longer to sell, resulting in more price cuts. Though sellers are beginning to adjust to the market conditions, resulting in more deals happening. (CNBC)

• Shares of First Foundation bank plunged 22% earlier this week. The crash came after they announced they needed to raise $228M of additional funds. First Foundation has the majority of its loans in commercial real estate with $5B in multifamily housing alone. (Reuters)

• Home insurance premiums look set to continue rising across the country. Extreme weather from climate change is causing greater and greater losses for insurance companies. This is already disrupting some residential and commercial property sales across the country. (CNBC)

💡 Startups

Bottom Line: More (multi) billion dollar valuations for AI startups. AI is still mostly where the money and attention is. However, I cannot help but wonder if these valuations are really justifiable. Quantum computing continues to be amazing in theory, but unimpressive in practice.

• Another AI company you’ve likely never heard of is seeking a unicorn valuation. Magic, which is an AI coding tool, is looking to raise $200M at a $1.5B valuation. That would be a 3X increase from its valuation in February. (Reuters)

• Abnormal Security, an AI startup that helps users avoid cyber threats is going to be worth $5B after its funding round completes. The company said they had $100M in recurring revenue in 2023. (Business Insider)

• Another potential setback for quantum computing. Google claimed in 2019 that they had a quantum computer that outperformed a traditional one. Traditional computers have since surpassed Google’s quantum processor - and use less energy too. (NewScientist)

🎵 Music Royalties

Bottom Line: Spotify decides to remove music from some Russian artists. WMG doesn’t want anyone (but them) to use their songs for training AI.

• Spotify has removed music created by Russian artists that are supportive of the country’s war in Ukraine. Politics aside, it’s a reminder how much artists (and investors) are dependent on stream companies content moderation decisions. (Billboard)

• Similar to Sony, Warner Music Group has now issued a notice demanding companies not to use their music to train AI. (Billboard)

Other

Investment giant BlackRock has agreed to acquire Prequin for $3.22B. Prequin is a recognizable name in data and analysis of alternative assets and markets. This is part of BlackRock’s continued push into private-market investments. (The Wall Street Journal)

📈 My Investment Results

If you’re a newer subscriber, you may have seen this already. For those that haven’t, I now have a report that details some of my returns across a few different alternative investment platforms.

The document is based on information I gathered in May. You can download a copy here:

As a brief summary, my top 3 alternative asset classes by allocation are Startups, Farmland/Timberland, and Music Royalties. I share my results from:

Masterworks, Pokemon Cards, AcreTrader, FarmTogether, ANote Music, SongVest, Groundfloor, Ark7, Arrived Homes, Fundrise, Landa, Lofty, Energea, Vinovest, and Vint.

If there’s any other information I can provide in the report that would be valuable to you, please let me know!

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