📰 This Week…

• The economy is now in better balance

• Housing prices could continue to rise for the next couple of years and beyond

• Google is reportedly considering it’s largest acquisition ever

• Blackstone now owns the Hipgnosis Songs Fund

And so much more!

📊 Markets

• Interest Rates, Federal Funds: 5.33%

  • Next FOMC meeting starts July 30

• 30 Year Mortgage Rates: 6.89%

  • (-0.9% WoW, -0.9% MoM, -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: The Fed believes the economy is now in a more neutral place. This further supports the potential for rate cuts later this year. There are some signs of weakness. Consumer debt is increasing, which may be a sign of financial stress (much of the economy is driven by consumption). Advances from AI, among other factors, might keep us out of a recession though.

• The economy isn’t “overheated” anymore, according to Jerome Powell. With inflation cooling, the Federal Reserve will now be weighing risks to slowing the economy too much. (Reuters)

• Federal Reserve data showed an $11.4B increase in consumer debt in May. Recurring debt (like credit cards) jumped by $7B. That’s the biggest increase in 3 months. (Bloomberg)

• State Street’s Chief Investment Strategist thinks we will avoid a recession. There are 3 reasons. Productivity increases from AI, continued immigration to help stabilize the labor market, and wealthy consumers that still have plenty to spend. (Business Insider)

🏠 Real Estate

Bottom Line: Real estate markets continue to be threatened by climate change. Bank of America thinks housing prices will keep rising. Investors are making up a larger portion of home buyers. Commercial real estate is still messy. The current market conditions are exposing more fraud. SF sees record vacancies and dropping office rents. But private equity has billions ready to deploy when the timing is right.

• Bank of America is bullish on house prices. They expect a 4.5% gain this year and another 5% gain next year. (Business Insider)

• The island of Nantucket has seen erosion severely damage the value of some waterfront property. Recent sales have seen one unit sold for $200K that was once worth $1.9M. Another that was once worth $2.2M sold for $600K. It’s a small example of the significant effect climate change can have on real estate. (Axios)

• Investors purchased a record share of homes (~15%) in 2023. That’s less meaningful though given the slowdown in the number of homes sold during that year. Investor activity is still down from the post-pandemic peak. (Fortune)

• Private equity is waiting to buy the dip in commercial real estate. Firms reportedly have a record $250B waiting to be deployed in North America. (Business Insider)

• As high interest rates and hybrid work put more pressure on the commercial real estate market, more fraud is being exposed. The fall in the value of some commercial properties may be accelerated by this. If the building is actually less profitable than reported, it will be worth less - on top of an already difficult market. (The Wall Street Journal)

• Not even AI can save office real estate in San Francisco. Office vacancies hit a new all-time high with rents back down to 2015 levels. (CNBC)

💡 Startups

Bottom Line: Google is reportedly considering their largest acquisition ever. Funding in Q4 2024 was up yearly. The environment is still tough though and startups are merging to keep going. AMD acquired an AI company, significantly expanding their total investments in the space. Investors gave a company $300M to try to build a general intelligence platform for multiple types of physical robots. Robotics has been a bright spot in VC, so it’s no surprise the combination of robotics and AI drew significant interest.

• Google is rumored to be considering acquiring cloud cybersecurity startup Wiz. The reported price is a staggering $23B. It raised funds at a $12B valuation earlier this year. If the deal goes through, it would be Google’s largest acquisition ever. They purchased Motorola for $12.5B in 2012. (The Wall Street Journal)

• What do you do when funding dries up? Merge. A number of startups are doing just that in industries that are now receiving less funding. (Crunchbase News)

• Thankfully funding in Q2 of this year was up significantly when compared with 2023. However, there are fewer companies receiving those investment dollars. (Axios)

• AMD announced it will purchase a European AI company for $665M as it attempts to compete with Nvidia in AI chips. (Entrepreneur)

• Skild AI raised $300M at a $1.5B valuation to create robot brains. Their hope is to build a more general purpose “brain” that can power a large variety of different robots. This is counter to the traditional approach of specialized development for each robot. (Crunchbase News)

🎵 Music Royalties

Bottom Line: Hipgnosis Songs Fund shareholders overwhelmingly approve Blackstone’s purchase offer. Music AI companies have retained top legal counsel for their consequential legal battles with the music industry. An updated legal decision ensures songwriters will receive streaming royalties after invoking their termination rights.

• The Hipgnosis Songs Fund is now owned by Blackstone. Shareholders approved their $1.6B takeover bid. (Billboard)

• Songwriters achieved a meaningful legal victory. They have a legal right that allows them to regain control of their copyrights from labels and publishers (with limitations). Now, if they invoke that right, they will be able to earn royalties from streaming. This ruling clears up a complicated legal ambiguity. (Billboard)

• Suno and Udio have lawyered up. They have retained a well-regarded firm that also represents other AI companies like OpenAI and Anthropic. This is in response to the lawsuit raised by UMG, WMG, and Sony Music. (Billboard)

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