Alts Cafe, Apr 25

?? April 24, 2023

?? Read time: ± 8 minutes

Hello and welcome to?Alts Cafe???

This is your weekly briefing on the world of Alts investing. Buckle up, it's bumpy.

TLDR:

1. Unemployment claims in US are at their highest levels since Nov 2021. Could a drop in rates come soon?
2. More people live at home than they used to. It's going to affect the shape of the Real Estate investment market.
3. Terrible week for ETH and NFTs, but institutions are optimistic about the longterm future of BTC.

Caffeine up and let's go.

Wyatt ??

Macro View

A quiet week from a macro point of view as earnings continued to roll in.

Bullish News ??

• Recurring US unemployment benefit claims?jumped?to the highest level since November 2021. More unemployment = lower rates.
• More prime age workers are?entering?the workforce, which should drive unemployment stats up.
• More than 90% of companies reporting this quarter?beat?estimates.

Bearish News ??

• Unemployment among high-earning households is?up?500% since last year.
• More than 25% of people aged 59 and?older?have no money set aside for retirement.
• England and Wales are setting?records?for business insolvency.
• Consumers are?starting?to fall behind on their credit card and loan payments.
• More American consumers are?using?Buy-Now-Pay-Later apps to pay for groceries than ever before.

What are we doing?

ALTS 1?fund news:

Our quarterly report went out last week.?Let us know if you missed it/want to talk about it.

Real Estate

I read an Urban Institute?report?this week that, as a Real Estate investor or analyst, sheds some light on upcoming trends that would affect my investment thesis.

The key takeaway is:?The behavior that drives home-buying is changing.

Over 20% of Americans aged 25 to 34?live?with their parents. It was?half?that in 2000.

One of the reasons?

In 2021, only 38.6% of young Americans were married, compared to 59.4% in 1990.

Further, of young Americans who have married, more than a third have subsequently got divorced before the age of 34. Back in 1990, only one in nine had divorced by the same age.

Overall, this feels like a trend that's going to continue to escalate, which means there will be more demand for:

• Parental homes that can accommodate an ADU
• More rental apartments
• Smaller, cheaper starter homes
• Longer duration (50 years) mortgages

The study I looked at didn't break out the data by geographic region or urban vs. rural, but I suspect there's a lot of variation here. People marry earlier in the country and divorce more in cities, etc.

Bullish News ??

• Redcar Fund Management?announced?it closed on $418 million to convert warehouse spaces in LA and Texas into "creative offices." I hope they've also invested in "creative accountants."
• Cap rates for Class A multifamily?properties?saw their first significant quarterly deceleration since the Fed started raising rates last year, suggesting the asset class could be less risky for investors going forward.
• After positive inflation news last week, the market?expects?mortgage rates to drop.
• Cities are?giving?away money to help developers transition offices to residential spaces.
• China's new home prices?rose?in March at the fastest pace in 21 months.

Bearish News ??

• A $161.4 million commercial mortgage-backed securities (CMBS) loan backing nine?Brookfield-owned Class B office buildings?defaulted.
• Office space vacancy rates hit a?record?high in March.
• Some are calling for office buildings to be?demolished, because conversions are too difficult.
• Around 14% of investors?sold?their homes for a loss in February and March. A bit more depth on this:
• That's the highest since 2016 but well off numbers from 2009 to 2011, which saw two thirds (66%) of investors take a loss.
• Phoenix and Las Vegas were hit hardest, with 31% and 28% of investors losing money.
• The typical investor who sold a home in March sold it for 45.9% more ($145,714) than the price they paid, down from 55.3% ($173,458) a year earlier and a pandemic peak of 67.9% ($199,274) in June 2022.
• 10% of homes currently on the market are owned by investors. That's down from 12% late last year but up from 3.8% in 2013.
• The top three US?markets?at risk for home declines are in Utah. Florida and Idaho round out the top five.
• The median US home sale price?fell?3.3% in March to $400,528, the largest year-over-year drop since 2012.
• Opendoor?fired?22% of its staff -- 560 people. Redfin?fired?another 201 members of staff in its third round of layoffs since last summer.
• WeWork is facing?delisting?from the NYSE.

How to invest in real estate right now:

I'm still out of the real estate market [no change].

Crypto & NFTs

Here's what you need to know:

Big time correction last week as both BTC and ETH shed recent gains.

We're back to neutral, as the F&G index slid to 53.

And it was an awful week for NFTs as they followed ETH down.

Bullish News ??

• Standard Chartered?thinks?Bitcoin may hit $100k by the end of 2024.
• A Hong Kong court has?recognized?crypto as property.

Bearish News ??

• Coinbase may?leave?the US.
• Crypto companies are?struggling?to find banking partners.
• Sweden is?abolishing?tax incentives for data centers in July – potentially putting the last nail in the coffin for the Bitcoin mining industry in the region.

How to invest in Crypto & NFTs right now:

Buy the dip!

Startups

Inspired by the above, perhaps you're looking to found a startup? Or are you a tech employee considering a change of scene? Miami was rated the number?one?city in the US for Gen Z tech workers.

Miami was cited for its percentage of Gen Z residents, 22.7%, average tech salary of $105,790 and overall internet connectivity.

The entire top ten:

1. Miami
2. Orlando
3. Cincinnati
4. Richmond, Virginia
5. Atlanta
6. Pittsburgh
7. Rochester, N.Y.
8. Norfolk, Virginia
9. Tampa
10. Newark, N.J.

Florida takes three spots, and nothing west of the Mississippi made the top ten.

Bullish News ??

• Female-led Versey Ventures?closed?its first fintech fund with $78m. This fund doubled the amount raised by women-led firms in 2023.
• Global fintech funding?totalled?$15 billion in the first quarter of this year, growing 55% from the fourth quarter
• But...fintech companies raised over $131B in 2021.
• But...$6.5B of that was Stripe's slightly strange raise to pay taxes.
• The European Investment Bank (EIB) group and the governments of five EU countries have?announced?a new €3.75bn fund of funds to invest in VCs that back European scaleups.

Bearish News ??

• In Europe, PE deal value?fell?6.8% YoY in Q1 while VC deal value fell more dramatically, by 32.1% YoY. More detail:
• Buyout multiples are at their lowest level since the 2008 global financial crisis.
• Exits were down more than 69%
• There was?only?one FinTech unicorn in the first quarter, the lowest in seven years.
• Startups in India?raised?just $2 billion in the first quarter of 2023, 75% lower than the same period of last year.
• First Citizens's takeover of?Silicon?Valley Bank is not going well.
• Launched on 4/20, Elon's?spaceship?blew up, possibly because he was high or busy trolling celebs on Twitter.

How to invest in startups right now:

I'm hearing chatter about pre-seed index funds. Perhaps there's something to it.

That's all for this week. I hope you enjoyed your coffee and this edition of Alts Cafe. ?

If you have any comments, questions, or concerns - let us know.

And, at the risk of boring you,?please share this wherever you have a platform. Twitter, LinkedIn, the pub... I'm not fussy.

Cheers,

Wyatt ??

Disclosures

• We are holding BTC and ETC in our?ALTS 1 Fund. Apart from those, we don't own any other assets or vested interests in the companies mentioned in this email.