📰 This Week…

• Retail sales data disappoints

• Condos are seeing significant jump in HOA dues

• Semiconductor companies are having more luck raising funds this year

• UMG and others might sue AI music startups

And so much more!

📊 Markets

• Interest Rates, Federal Funds: 5.33% 

  • Next FOMC meeting starts July 30

• 30 Year Mortgage Rates: 6.87%

  • (-1.2% WoW, -1% MoM, +3% YoY)

• Single Family Home Price Index: 423.4

  • (+0.1% MoM, +6.7% YoY)

  • May report, data is through March

• Commercial Real Estate Index: 122.7

  • (+0.7% MoM, -6.6% YoY)

💸 Economy

Bottom Line: Various pieces of data suggest the US economy is slowing. There are outside factors like climate change that are threatening to keep inflation higher.

• Retail sales data for May was below expectations. Month-over-month growth was only 0.1%. April’s data was revised to -0.2% when compared to March. (Barrons)

• Businesses are increasingly failing to repay their loans. In Q1 of 2024, Banks wrote off 0.43% of these loans. That’s about 3X the low set post-pandemic. It’s also a higher-than-average amount, but not alarmingly so. But, it’s another source of strain on banks and credit. (American Banker)

• New jobless claims declined slightly over last month. They’re still at the highest levels since fall of 2023. Continuing jobless claims increased by 15K. Homebuilding activity also slowed. (Reuters)

• In addition to insurance prices, climate change is driving inflation in other ways. Output from agriculture is dropping due to heat and drought. Sugar and juice are pricier due to extreme weather in Florida. (Slate)

🏠 Real Estate

Bottom Line: The US housing shortage isn’t getting better. It’s driving more built-for-rent communities and threatens to push rents higher. Condos are feeling the heat of raising insurance premiums. Second mortgages are still owed even if you go bankrupt, or the lender fails.

• Condos are getting hit by spiking insurance costs. HOA dues rose 20% over the past two years according to analysis from Rexera. Climate risk and soaring rebuilding costs are driving premiums higher. In some cases, HOAs are seeing a 4X increase in a single year. I’ve personally seen this as well. Rising insurance costs are the main driver behind my monthly HOA dues nearly doubling in the past 3 years. (The Wall Street Journal).

• Second mortgages are pretty hard to kill. Even if the lender fails or it’s included in bankruptcy, the loan is still owed. These “Zombie Mortgages” are purchased by debt investors for cheap. If they can collect anywhere close to the full amount, it can be very profitable. That’s plenty of motivation for individuals and companies to try to locate and collect on these debts. (Kiplinger)

• In Q1 of 2024 there was a 20% increase in construction on build-for-rent single-family homes. This shift in construction could gradually rework the housing market. (CNBC)

• The US is reportedly 4.5 million homes short as of 2022 based on new analysis from Zillow. That was a 4.7% increase from 2021. (Zillow)

• Rents are showing signs of rising again. They’re already up in some cities. Shelter is a significant part of inflation. Rising rents would put upward pressure on those numbers. That could complicate future plans for cutting interest rates. (The Wall Street Journal)

💡 Startups

Bottom Line: Semiconductors are drawing more investor interest, AR and the metaverse is seeing less. Cybersecurity companies are still receiving solid funding, even when they’re focused on more niche or futuristic problems. AI is still a key area of investment. OpenAI has made an acquisition as competition heats up.

• Decagon has raised $35M to change customer support. They help enterprises use AI agents to provide a more “human-like” experience than traditional chatbots. (Business Insider)

• PQShield has raised $37M in their efforts for post-quantum cryptography. Cryptography is part of what secures all digital communications. It’s designed around using encryption that’s “hard enough” to break… using conventional computing resources. There’s a fear that quantum computers will be powerful enough to easily break existing cryptography. That’s what PQShield is aiming to solve. (TNW)

• With the surge of AI, investors are giving greater attention to semiconductors. Semi companies are on pace to beat the $8.8B raised last year. Augmented reality and the metaverse aren’t faring well though. Only an estimated $464M has been invested into these companies so far this year. (Crunchbase News, Crunchbase News)

• OpenAI has acquired Rockset, a startup focused on data analytics. Terms of the deal were not disclosed. Could this be a sign of a maturing business model? (Quartz)

🎵 Music Royalties

Bottom Line: The music industry and AI continue to have a complicated relationship. UMG and others want to sue AI companies for training on unlicensed songs. UMG is also working on giving their artists access to personalized AI technology. Another AI company is trying to build using licensed music. Small artists are trying to release physical and digital downloads before debuting on streaming.

• AI music startups Suno and Udio might have legal trouble coming their way. UMG and two other major labels are believed to be considering a lawsuit. Their complaint centers over the use of unlicensed music in training data. (Billboard)

• UMG has entered into a partnership with SoundLabs. It will allow artists under the UMG label to use custom AI voice models. (Billboard)

• Some artists are waiting to release new music on streaming services. Like with movies, they’re selling physical and digital copies first. If successful, this tactic could help small artists optimize their earnings. (Billboard)

• Futureverse has developed an AI music model with licensed music. They are hoping to have a good working relationship with the music industry. (Billboard)

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