Alternative Investing Report - September 2, 2024

_{*as of market close 8/30, Bitcoin as of 9/1}

As news broke that ChatGPT users have doubled since last November, OpenAI is looking to raise a major funding round that would value the startup at $100 billion, which would make it the 3rd most valuable startup in the world (behind ByteDance and SpaceX). Reportedly, Thrive Capital would lead the deal and Apple, Microsoft and Nvidia are in talks to invest.

➨ TAKEAWAY: While OpenAI has become the biggest and most well-known AI startup, it is going to need a lot of capital to sustain its pace, as it’s apparently on track to lose $5 billion this year. Meanwhile, its competitors like Anthropic continue to the close the gap, and big tech companies like Meta and Google have released their own AI models. The competition is ongoing, and investors should be cautious about trying to pick winners rather than invest in the industry as a whole.

The office vacancy rate hit 13.8% in July, a record-high, and leasing activity is down 63% from the pre-pandemic average. Industrial properties are also seeing a slowdown, as the vacancy rate rose from 5.1% to 6.5% and rent growth fell from 8.1% to 3.6%. However, retail vacancies continue to remain low, and demand for rental units has kept vacancies steady for multifamily properties.

➨ TAKEAWAY: Expect the office vacancy rate to continue to climb, as net absorption rates remain negative, meaning that more offices are being vacated than leased. This is not going to give any respite to owners and investors, who are already seeing property values plummet while facing an enormous amount of debt maturing by the end of 2025. The other areas of commercial real estate are holding up better, and even as industrial has slowed, it is still showing growth.

In this episode of Smart Humans, Slava Rubin talks with Hiive CEO and Founder Sim Desai about trading private securities and launching a new private market index.

📊 Inflation holds steady: Another measure of inflation, the Personal Consumption Expenditures (PCE) price index, rose by 0.2% in July and 2.5% year-over-year, in line with expectations. It now looks increasingly likely that there will be a Fed rate cut later this month.

🎨 Fake Warhols: A Florida family is suing a Miami art dealer, claiming he sold them $6 million worth of forged Andy Warhol paintings. The gallery owner has a past history of selling forged paintings, so the lesson is to always do thorough research.

🚜 Farmland values cooling: After years of steady growth, farmland prices in Illinois fell by between 5-10% in the first half of 2024, with higher quality land holding its value better.

💵 Media lending: Content Partners, a private equity firm specializing in entertainment IP, is launching a new private credit arm aimed at financing content development, as traditional lenders have been pulling back from the industry.

🪙 Bitcoin ATM fraud: People reported losing over $110 million in scams involving Bitcoin ATMs in 2023, with 2/3rds of the money coming from those over the age of 60.

🚀 Pershing Square IPO?: Bill Ackman is trying again to launch a public offering for his closed-end fund Pershing Square USA, after cancelling it in July due to a lack of investor interest.

Today: Goldin Elite Auction closes, featuring a rare 1984 Michael Jordan rookie card.

Wednesday: Federal Reserve Beige Book is released.

Thursday: The NFL season begins, U.S. jobless claims.

Friday: August U.S. employment report and unemployment rate.

Saturday: Memory Lane Summer Rarities auction, featuring a 1925 Lou Gehrig rookie card.