Cooling
“Live every day as if it were your last because someday you’re going to be right” – Muhammad Ali
The Buzz
On Wednesday, the July Consumer Price Index increased 0.2% for the month, putting the 12-month inflation rate at 2.9%, its lowest level since March 2021. Core CPI, excluding food and energy was +0.2% month-over-month and up 3.2% on the year, meeting expectations. A 0.4% increase in shelter costs was responsible for 90% of the “all-item” inflation. Food prices were up 0.2% while energy prices remained flat.
The takeaway from Wednesday’s CPI and Tuesday’s PPI is that there doesn’t seem to be any obstacles in the way of the Fed beginning a rate reduction campaign next month. As seen below, the futures market at the CME is now pricing in a 56.5% probability of a 25 basis point reduction in the Fed’s target range and a 43.5% probability of a 50 basis point cut in September.
source: Bloomberg, WSJ, CNBC, CME Group
Crypto
Earlier this week, the largest Bitcoin miner in N.A. shares fell on weaker than expected earnings. Hut 8 reported a loss of over $72 million in Q2 compared to a profit of $251 million the previous quarter. The coin prices did fall, most of the loss was due to an accounting change requiring companies to reflect market prices on their balance sheets (seems reasonable). The company’s disappointing output also hurt earnings as it produced only 270 Bitcoins in the quarter, a drop from 740 in Q1.
source: Snacks
Real Estate
Times are about to change for real estate transactions. Earlier this year, the National Association of Realtors (NAR), reached a settlement over commissions. Most of the association’s 1.5 million members will be impacted by these new rules, which go into effect August 17th. Here’s what you need to know.
Historically, the seller has typically paid the agents on both sides of a transaction and decides how much both agents get paid. The main changes that are happening are:
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Listing sin local databases called MLS will no longer display when a seller is willing to pay a buyer’s agent, or how much.
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Buyers will be required to sign agreements specifying how much their agents will get paid. Buyers will have to sign this before they begin touring homes with agents. This means that buyers should negotiate directly with their agents instead of letting the seller decide how much the buyer’s agent will earn.
These rule changes don’t necessarily mean that real-estate agents commissions will go down. That will be up to the buyer and what deal they negotiate with their agent. Should commissions fall, buyers could benefit or sellers could benefit by keeping more of the profit, depending on the market environment.
source: WSJ
Private Equity & Venture Capital
Radical Ventures, a Canadian VC that historically has made early bets on AI startups, has reported secured $800 million in commitments for a new fund according to sources. The new fund will be the firm’s first experience investing in later-stage companies. Throughout its seven year history, Radical has back very early stages startups, writing small checks in the seed rounds.
This new fund will enable Radical Ventures to write bigger checks for larger companies and control deals. Upon closing of the new fund, Radical will have approximately $1.8 billion in AUM.
source: Bloomberg
Speaking of AI
AI related corporations have been routinely besting analysts expectations for the second quarter of 2024, despite theirs shares being down 5% on average over the period. Part of the pressure on tech shares has been the widely publicized unwinding of strategies using borrowed money (think Yen-carry trades).
But the market seems, for now, to be recovering and AI infrastructure stocks, like Nvidia which sell chips, data centers and training software have been outperformers, with profits well above analysts’ consensus expectations. These infrastructure companies have been outpacing others in their space, such as AI Implementation companies that develop LLMs or products that utilize AI, e.g. most of the “Mag 7.”
source: WSJ
And then…
Disclaimer
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