Real Assets Adviser

February 1, 2024: Vol. 11, Number 2

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From the Current Issue

Liquid assets: Four ways to invest in the bourbon boom

There’s no doubt that the bourbon business is booming. Consider the zooming sales volume in the super premium American whiskey segment of the liquor market, which grew at a 15.9 percent compounded annual growth rate from 2003 to 2022, as tracked by the Distilled Spirits Council of the United States.

Five bitcoin and digital asset predictions for 2024

Like the market in general, bitcoin has notched a strong ending to 2023 after trading rangebound for most of the year. The king of digital assets returned about 155 percent, marking the best year since 2020, when it rose a phenomenal 305 percent. With the start of a new year, I figured now would be an ideal time to share my top five bitcoin and digital asset predictions for 2024. As a reminder, these are my personal predictions and do not reflect those of U.S. Global Investors.

Biomimicry in real estate design and development

Mother Nature has evolved solutions to demanding environments for eons, relentlessly driving flora, fauna and whole ecosystems to ever more resilient, sustainable and efficient results. By emulating natural designs, real estate developers and architects are creating increasingly functional and efficient structures and infrastructure. Evolved designs in nature are as varied as life itself, but in general a recurring theme is the harnessing of the environment to gain a benefit, as opposed to sustaining a conflict with surroundings. The sunflower turns skyward for the solar energy to convert in the making of seeds, while the fish develops a streamlined body to streak through water.

5 Questions: Taking a fresh measure of retail real estate

Is there a property type that has taken more body blows than brick-and-mortar retail? For starters, retail has long been considered overbuilt in the United States. Then there is the fickle consumer whose preferences change quickly from formats such as department stores and shopping malls to big-box stores and outlet stores. When ecommerce came along — with all its convenience and discounting — some started ringing the death knell for traditional retailing and its physical stores. That was followed by the COVID-19 pandemic taking its pound of flesh out of the sector.

Commercial real estate debt market faces increasing challenges from rising interest rates and maturing loans

The wall of rolling commercial real estate loans is turning up the temperature in a debt market that is already feeling significant heat from higher rates and less liquidity. Loan maturities have pushed to the forefront as a hot topic for good reason. The looming wave is substantial, with near-term maturities that represent more than 40 percent of the $4.4 trillion of outstanding commercial real estate (CRE) mortgages. According to estimates from the Mortgage Bankers Association, roughly $725 billion in commercial and multifamily mortgages were set to mature in 2023, followed by another $1.2 trillion in loans coming due over the next two years.

Profile: Rich Byrne, president of Benefit Street Partners and Brazilian jiu-jitsu champion

While a research analyst in the high-yield bond group at Merrill Lynch, Rich Byrne covered Bally’s Manufacturing Corp., a casino company that also made pinball machines and operated a chain of health clubs. In reviewing the financials, he noticed the company was seriously overleveraged and heading toward a financial cliff. He wrote a “sell” report predicting the company, groaning under the weight of more than $1.86 billion in debt, would go bankrupt.

Retail stores helping power ‘digitally native brands’

What exactly is a digitally native brand (DNB)? In short, a DNB refers to retailers that began their retail journey exclusively online, selling their product line direct to consumers through their digital channel. Although all these businesses start as pure ecommerce plays, many DNBs eventually move offline, choosing to leverage the benefits of brick-and-mortar channels to grow their business even further.

Problems to the MAX: Boeing’s MAX 9 grounding busts previous momentum

Prior to Jan. 5, Boeing appeared ready to start the new year on steady footing, building on a wave of momentum it had built up throughout a relatively successful fourth quarter 2023. Deliveries for the month of November reached a five-month high and put the American aviation giant on track to reach full-year targets related to its 737 and 787 jets. Though Boeing’s tally of new orders will certainly lag European rival Airbus’s pace for a fifth straight year, with the former trailing by roughly 800 aircraft through the first 11 months of the year reported, 2023 will still be the best annual period for Boeing’s order book since 2014. All of this helped Boeing shares surge by 39 percent through the fourth quarter.

Tax Update: Americans moved to low-tax states in 2023

Americans were on the move in 2023, and many chose low-tax states over high-tax ones. That’s the finding of recent U.S. Census Bureau interstate migration data and commercial datasets released by U-Haul and United Van Lines.

Talking Points: Quotations from people in the news

Stuart Brown, psychiatrist and play researcher: “The opposite of play isn’t work, it’s depression. The adult-play deficit is becoming a public health crisis. ... When I interviewed Nobel laureates, I was struck by how most of them didn’t separate work and play. Their labs were their playgrounds.”

The green mirage: Unmasking the harsh realities of renewable energy investments

In late 2021, we made a bold and deeply contrarian call: We predicted massive capital flows into renewable energy could potentially become history’s worst malinvestment ever. Our call looks correct three years later, and the consequences have emerged with a vengeance. Over the past six months, several notable wind and solar projects have been canceled, delayed or impaired due to rising costs. Stocks that were once market favorites have now pulled back hugely. Wind turbine manufacturer Orstead is off 73 percent from its peak and 47 percent in 2023 alone. Renewable provider NextEra is off 50 percent from its peak and 30 percent during 2023. Hydrogen maven Plug Power is off an incredible 95 percent from its peak and 68 percent for 2023. The Invesco Solar ETF is off 58 percent from its peak and 35 percent for 2023.

Regulation Update: Deciphering SEC rules for RIA books and records requirements

SEC Rule 204-2 mandates RIAs’ books and records should be true, accurate and current — whether they are stacked in physical storage units or exist in the digital clouds of the 21st century. In this era of heightened scrutiny and digitization, it’s imperative to make sure your recordkeeping is both meticulous and aligned with the complex regulatory landscape governing the industry.

Opportunities in the era of commodity scarcity

Throughout history, commodity demand has been a function of population and economic growth. This relationship is becoming supercharged, as powerful secular forces are increasing the intensity of commodity use globally.

Research Roundup: February 2024

RCLCO Real Estate Consulting sentiment survey has tracked U.S. real estate market conditions for more than 12 years. The events of the past four years have generated unprecedented volatility in the index, with significant swings in sentiment (both positive and negative) resulting from COVID-19 and the initial recovery, followed by inflation and rising interest rates. Read the firm’s latest sentiment survey here.

Mass timber to drive mass benefits: A Q&A with Gwen Busby of Nuveen Natural Capital

In many parts of the world, wood was the go-to material for housebuilding for thousands of years, until it was supplanted by concrete and steel in the 20th century. Now, however, wood is making a comeback in the construction sector, with mass timber an increasingly popular alternative to more carbon-intensive materials. Gwen Busby, head of research and strategy at Nuveen Natural Capital, tells us that the growing market for mass timber has the potential to significantly increase demand for timber. The climate benefits of mass timber, she says, is a major factor in drawing climate-conscious investors toward including sustainably managed timberland in their portfolios.

Retailers flee to suburbia: Big-box was never a solution for U.S. downtowns

City dwellers may have fewer options for buying in person than they did a few years ago. That’s because many large chain stores are pulling out of central cities. This trend has been building for several years. Target made national headlines in 2018 when it closed its store in a predominantly black Baltimore neighborhood after just 10 years of operation. COVID-19 sped things up by cutting foot traffic in city centers and boosting online commerce.

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