💰 5 Fact Friday: Blackstone's $10 Billion Real Estate Bet

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Hey Money Maniacs,

Welcome back to another edition of 5 Fact Friday! Here are this week’s biggest stories in the world of money:

1. Blackstone Bets Big On Housing 🏡

Blackstone, not to be confused with BlackRock, is a private equity powerhouse with a bullish view on real estate.

Last month, Blackstone President Jon Gray expressed confidence that real estate prices are bottoming out. His firm plans to “take advantage of this time” and “move onto offense… while people are still nervous.”

This week, Blackstone underscored its strategy by announcing a $10 billion acquisition of Apartment Income REIT. This bold move comes after its earlier acquisition this year of the single-family landlord Tricon for $3.5 billion.

Already the third-largest U.S. single-family homeowner, Blackstone is now adding 27,000 luxury apartments to its expansive portfolio.

This aggressive expansion is largely driven by:

1. A post-Covid correction, with apartment prices down 18% from peak

2. The expectation of rate cuts

3. An ongoing national housing shortage

Blackstone's investments reflect a strong belief in the rental housing market's recovery and growth potential. Yet even more importantly, Blackstone's confidence could catalyze more institutional investment.

Real estate investors take note. 

This AI Startup Investment is Winning

Otherweb is the fastest-growing AI platform on the internet. They have developed technology that transforms a $565 billion market.

Investors are taking notice, and here’s why: 

1) They raised $1.9M+ from 2,000+ investors, including founders with $100M+ exits, VCs, angels, executives from Google and Amazon, and more.

2) They grew to over 8 million users in just 15 months. 

3) They are riding a $15.7 trillion wave of AI innovation.

2. CPI Re-Ignites Inflation Concerns 🔥

On Wednesday, the Consumer Price Index (CPI) threw cold water on hopes for a June rate cut.

The report revealed that prices rose by a hotter-than-expected 0.4% last month and 3.5% annually. This uptick, driven largely by surging energy and shelter costs, marks the third consecutive month of significant price increases.

Even core CPI (which removes food and energy) was up by 0.4% in March and 3.8% annually, indicating that inflation isn't cooling off as quickly as hoped.

This unexpected heat has thrown a wrench in the whole “cooling inflation” narrative. As a result, expectations of a 0.25% June rate cut plummeted from 60% to 20%.

The Fed's recent minutes echo this sentiment, revealing that “recent data had not increased their confidence that inflation was moving sustainably down to 2 percent.”

The ripple effects were immediate: stocks took a dive, particularly in the rate-sensitive real estate sector. Meanwhile, the 10-year Treasury yield spiked, crossing the 4.5% threshold.

Despite stubborn inflation, we do not see any sign of investors fearing further rate hikes. Instead, the Fed’s September meeting is now the earliest expected window for relief.

So far this year, the market has proven overzealous on every possible rate-cut opportunity. However, this time investors may have finally learned their lesson.

By kicking the can 5 months down the road, we may have truly embraced the “higher for longer” message.

3. Small Business Confidence Suffers 📉

Hold onto your hats, entrepreneurs and dreamers! The confidence among our small business comrades has tumbled to its lowest level in over a decade.

The National Federation of Independent Business (NFIB) just shared that its Small Business Optimism Index dipped to 88.5 last month, marking its lowest point since December 2012.

For 27 long months now, this index has fallen below the 50-year average benchmark of 98.

So, what's bothering our small business friends?

A whopping 25% point to inflation as their top challenge, with costs climbing up not just for inputs but for keeping their team compensated too. Perhaps that’s why hiring plans among small businesses in March were the weakest since May 2020.

With the Fed’s interest rate cut possibly delayed to this fall, small businesses are watching with bated breath. In fact, 60% of owners say inflation and interest rates will be their ballot box deciders this November.

But let's not underestimate the voice of these businesses. They're anything but small in impact.

The Small Business Administration (SBA) estimates that there are more than 30 million small businesses in the U.S., employing 46% of all private sector employees.

4. Last-Minute Tax Filing Tips ⏳

Tick-tock, the tax clock is winding down! Tax day is right around the corner, so it's crunch time for filing those 2023 tax returns.

If you're among the procrastinators, here's your friendly nudge.

When Is The Deadline?

Monday, April 15th is the deadline for filing your 2023 tax returns. It's also the last day for:

• Health Savings Account (HSA) contributions

• Individual Retirement Account (IRA) contributions

• Q1 estimated tax payments, if you don’t have taxes automatically withheld

Remember, filing for an extension by this date gives you until October 15, 2024, to submit your return, but it doesn't extend the time to pay taxes owed.

What If You Can’t Pay In Full?

It's best to file your return or extension by April 15 to avoid a late filing penalty.

• Late Filing Penalty: 5% of unpaid taxes per month, up to 25%

• Late Payment Penalty: 0.5% of unpaid taxes per month, up to 25%

• Interest: 8% per year, compounded daily

Even if you can't pay the full amount, submit your return and pay what you can to reduce additional interest and penalties. You can always request a payment plan for the balance to spread out your payments over time.

When Will You Get Your Refund?

Filing electronically and opting for direct deposit is the quickest way to get your money – usually within 21 days. Paper filers and those receiving checks by mail will wait longer (often 4+ weeks).

How To File Taxes

If your adjusted gross income is $79,000 or less, take advantage of IRS Free File. This program offers free tax-prep software from major brands such as TaxAct and FreeTaxUSA.

If you live in one of the following states and have a simple return, you can also try the new IRS Direct File system.

• Eligible states: Arizona, California, Florida, Massachusetts, New Hampshire, New York, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming

• Eligible income: W-2, unemployment, interest of $1,500 or less, and Social Security and railroad retirement income

For everyone else, consider using an online tax filing software (like TurboTax or H&R Block) or hiring a professional tax preparer.

Where To Get Help

The IRS has reportedly ramped up its customer service, opening more taxpayer assistance centers and improving call response times.

For questions or help filing, visit the IRS website or find a free tax clinic near you at 888-227-7669 (to start, press 1).

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5. Asset Classes: Volume 8 – Venture Capital 💵

Venture capital (VC) is the financial fuel for startups that dare to dream big.

It's where investors, typically firms or wealthy individuals, put their money into young companies with the potential to grow rapidly. In exchange, these early-stage investors receive equity ownership in the companies.

What's the Money For?

The capital provided is used for everything from product development and market research to scaling operations and hiring key staff. It's the crucial cash injection that can take startups from concept to commercial success.

Who's Involved?

On one side, you have venture capitalists, the investors looking for high returns on high-risk investments.

On the other, the recipients: startups that are too young and too risky for traditional bank loans or public markets.

Generating Returns

The returns for venture capitalists come from "exits" – when a startup goes public (IPO) or is acquired by a larger company.

During these liquidity events, investors may see returns of 100x or even 1,000x their initial investments. Of course, very few startups ever reach this stage.

Distribution Of Returns

Because exits are rare yet highly lucrative, returns in venture capital are not evenly distributed. Instead, they follow a "power law." This means that a few key investments generate the majority of the industry’s profits.

In fact, nearly 65% of investment rounds return less than 1x capital and only 4% return greater than 10x capital.

If you land the right investments, the returns can be life-changing. But if you miss the next Uber, AirBnB, or Doordash, you might as well have stuck with the S&P 500.

Incentives Created

This high-stakes distribution model incentivizes venture capitalists to seek out startups with the potential for exponential growth.

It's not just about finding a company that can succeed – it's about finding the ones that can become market leaders or create entirely new markets.

This ongoing search for the "next big thing" drives innovation, but also means VC funding focuses on sectors like technology and biotech where rapid scale is possible.

Ultimately, VCs place many high-risk high-reward bets and hope that just a couple of their investments pan out. If successful, even a small investment can become a multi-million dollar windfall.

That’s all for today! For more insights, follow me on Instagram, Twitter, and at TheMoneyManiac.com.

Also, I’d love to hear your feedback. So please reply with comments – I read everything.

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.