Alternative Investing Report - September 19, 2024

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As expected, the Federal Reserve decided to cut interest rates today for the first time in four years, but the size of the cut was somewhat unexpected. The market had expected a quarter-point cut, but the committee agreed to go with a more aggressive half-point cut, though there was one dissenter, which was the first “no” vote by a Fed governor since 2005. The Fed also expects another half-point of cuts by the end of 2024, and a another full-point of cuts by the end of 2025. Stocks reacted to the decision with a short-term spike, but ended up slightly lower by the end of the day.

➨ TAKEAWAY: The investing world has been anticipating these rate cuts for some time, and though it was bigger than expected, it has already been priced in to some extent. More importantly, Fed chair Jerome Powell said the economy is in “good shape” and that he does not believe the likelihood of a recession is high, with inflation coming down and a stable labor market. Mortgage rates should decrease further, which will boost the flagging real estate market and make it easier for commercial debt holders to refinance. Cheaper borrowing could lead to more M&A activity, which could boost the pre-IPO market. All in all, this is a welcome development for investors in alternative assets.

While most believe believe that the Fed rate cut will be good for asset classes like real estate and venture capital, the market is split on how crypto will be affected. Arthur Hayes, the co-founder of the exchange BitMex, thinks the market will crash in the next few days. He pointed to inflation risks and possible appreciation of the Japanese yen, which led to a fall in the market in early August. On the other side SkyBridge Capital’s Anthony Scaramucci expects Bitcoin to reach a new all-time high, as it has historically performed well in low interest-rate environments.

➨ TAKEAWAY: More and more, the crypto market and particularly Bitcoin has mirrored the rest of the market’s price movements. A stronger economy and cheaper borrowing should lead to more people with money to invest in all asset classes, including crypto. The crypto market was mostly flat in the aftermath of the Fed’s announcement, but whether it has an effect one way or the other will become clearer in the next few days.

🏡 Top RE investment markets: Dayton, OH, ranks first on Realtor.com’s 2024 Top Markets for Investors list, which points out markets that are both affordable and have high renter demand. Other cities at the top of the list include Rochester, NY, Cleveland, OH and Pittsburgh, PA.

🚀 Microsoft and BlackRock teaming up: The two giants are partnering with the UAE’s MGX investment arm to raise $30 billion of private equity capital to invest into infrastructure to support the growing AI sector.

🎨 Art for under $20,000: Heritage Auctions has two upcoming events that feature reasonably priced artwork for people who want to start building their collection, and Heritage’s experts shared a list of their favorites up for sale.

🏡 Homebuilder confidence rises: The NAHB/Wells Fargo Housing Market Index (HMI) rose two points to 41, breaking a streak of four consecutive monthly declines, with sales expectations over the next six months increasing the most.

👛 Le Bruun Collection: The first auction of coins from the famed collection brought in $16.5 million in total, led by a 1496 King Hans Gold Noble Danish coin that sold for $1.33 million, setting a new record for a Scandinavian coin.

🎨 Hokusai’s Wave: A woodblock print of the famous 19th century image sold at Christie’s for $856,800, above the pre-sale estimate of $500,000-$700,000.

🚀 Pet startup funding: Around $500 million of funding has gone to pet and vet-care related startups so far this year, which is on pace to be the lowest yearly number in at least five years. While pet-related spending continues to grow, the VC appetite for related startups has diminished.

One recurring criticism of AI is that much of what is accomplishes is unnecessary, and that it is an industry being propped up by VCs looking for the “next big thing.” However, a recent 18-month study at a Canadian hospital found that their use of Chartwatch, an AI system, cut unexpected deaths by 26% in that timeframe. AI tools for healthcare is one of the more promising use cases for the technology, and while this is just one system in one hospital, more than 30 hospitals are now using Chartwatch, which will create more data points to study.