Weekly Briefing No. 88 | Reimagining Real Estate and Cryptocurrency Mining

To ring in our 88th week, we’re featuring an exclusive CEO interview alongside our commentary on the most interesting financial innovation stories that hit our screen. Here’s what’s jumping:

Los angeles cityscape
  • Fundrise’s outspoken Ben Miller brings a new vision to real estate investing
  • Cryptocurrency mining costs and politics; Auto sales vs. apps
  • Roboanalyst rising; Singapore cuts (another) fintech deal
  • JP Morgan goes window shopping; Tezos power couple breaks an ICO record
  • Company of Note: LifeYield

IN DEPTH

A bold bid to reimagine real estate investing.

Too many real estate professionals are traditionalists who believe that simply owning a block of air is enough. That’s the view of Fundrise CEO and co-founder Ben Miller, a former developer with several high-profile real estate projects under his belt. But Miller isn’t just throwing rocks at the way things are done in his industry. He and his growing technology company are taking action by reimagining the real estate industry’s modus operandi, which he believes is inhibiting individuals from accessing attractively priced private real estate investments. Recently, The FR’s Gregg Schoenberg sat down with Miller in the company’s Washington, D.C. office to gain a better understanding of Fundrise’s offerings and the megatrends guiding the company’s strategy. Miller also shed light on a range of real estate-related topics including “reverse white flight,” why Amazon’s recent purchase of Whole Foods was a smart move and the importance of bringing a new voice to city zoning debates. If you’re a real estate middleman who benefits from non-transparency, a public REIT CEO or a pharmacy owner, you may not like Miller’s blunt commentary. But we were impressed by his distinctive approach to building a company that aims to do big, bold things for the benefit of its growing investor base.

Will cheap energy lead to more cryptocurrency mining in America?

These days, California is producing so much solar energy that it’s paying Arizona to take its excess supply. Meanwhile, the Trump administration has moved forward with plans to ease oil and gas drilling rules on federal lands, and fracking continues to yield abundant new supplies of oil and natural gas. Add it all up, and the US seems poised to be awash in cheap energy for the foreseeable future. (What is Warren Buffett thinking?) So, given China’s and Japan’s growing influence over/involvement in the cryptocurrency markets, and Russia’s seeming desire to become a “haven” for digital currencies, it may only be a matter of time before would-be US cryptocurrency mining entrepreneurs take notice. Mining for cryptocurrencies, after all, can be expensive and some amount of control follows where mining occurs. With Washington State’s domestic supremacy in doubt, and with the increasing intersection between cryptocurrencies and global affairs, it should be interesting to see if a greater “Mine in America” trend follows.

Is an easier way to buy autos a good thing?

Autogravity looks like a smartly built, well-funded tech startup that has empowered consumers to finance car purchases with a smooth mobile experience. To further the company’s considerable traction and forge closer relations, Volkswagen's credit arm recently announced that it would be taking a stake in the company. But if you believe Morgan Stanley’s lead auto analyst Adam Jonas, a “stretched auto consumer, falling used [car] prices and technological obsolescence of current cars” is going to create an unprecedented buyer’s strike poised to soon wallop the auto market. Who knows if Jonas is right, but it does speak to the idea that fintech startups aren’t detached from the underlying subsector they’re targeting. Can a more frictionless mobile solution prosper if auto sales sink from their current lofty and leveraged heights? Sure, and strategic investors in the company (also including Daimler Financial Services) have different considerations than typical VCs. Still, we wonder if making it dramatically easier to buy a car will help or worsen longer-term trends seeking to upend the auto market.

IN BRIEF

There’s gold in filing footnotes.

Planet Earth probably doesn’t need many more roboadvisors. However, that doesn’t mean that “robo” technology has run its course. In an opinion piece written for The FR, New Construct’s David Trainer offers his view on how automated technology can tackle one of the most important keys to enabling value investing at scale. Specifically, Trainer argues that analysts and advisors need to look beyond “unscrubbed” accounting earnings and focus on economic earnings. Natural Language Processing and parsing technologies such as those employed by New Constructs can uncover nuggets of insight about a company’s true economic health. What’s the key? Using technology to handle the busy work so that humans have the time to scour the unsexy (but important) footnotes and other usual items that lie deep within financial filings.

Singapore slings a fintech partnership with the hyggest nation on earth.

When it comes to punching above its weight in financial innovation, Singapore seems to be in class of its own. Perhaps it’s because the financial hub is in the “wrong” time zone ─ it should be GMT+7, but it’s GMT +8 ─ putting it one step ahead. Or maybe it’s due to the resourcefulness required to thrive as one of the world’s last sovereign city-states. Whatever the reason, Singapore’s Monetary Authority (MAS) is on a global fintech mission, having signed partnerships with the UK, Australia, South Korea, India, Abu Dhabi, Japan, France, Switzerland and Australia among others. This week, the Lion City announced its newest partner when it signed a pact with Denmark, home to a growing fintech scene, LEGO and the happiest (i.e.,“hyggest”) people in the world.  

JP Morgan window-shops Worldpay.

On July 4th, UK payments processor Worldpay disclosed that it had received expressions of interest from rival US payments firm Vantiv and JP Morgan. The next day, Worldpay announced that it had agreed in principle to merge with Vantiv in a $9.9-billion deal. Vantiv-Worldpay looks to be a classic but perhaps pricey merger, but JP Morgan’s interest added notable spice to the story, as it would have been one of the bigger acquisitions for a major US bank in recent years. Perhaps the bank was just window-shopping, but in the wake of the triumphant Dodd-Frank stress tests set amidst a backdrop of financial deregulation, we expect to see US banking giants in shopping mode. Many of the future deals could be for technology-driven companies that would expand the scope of services provided and/or bring greater tech capabilities in-house.

The ICO world’s new brainy power couple.

The initial coin-offering frenzy continues as word hit that the upcoming Tezos crowdsale would be the biggest ICO offering to date, having already raised over $200 million with more days left in the offering. If you’re in the camp that believes all ICOs are schemes destined for zero, the euphoria around Tezos will provide fodder. But the crowdsale in question is built on a new blockchain protocol which has generated significant interest. Another noteworthy fact: Tezos was started by brainy Arthur Breitman, a former Morgan Stanley and Goldman trader, and his equally razor-sharp wife Kathleen Breitman, a former R3 CEV, Accenture and Bridgewater employee. But If you’re still in the “every ICO is a sham” camp, check out the saucy piece below by Chris MacIntosh, in which he uses the tragic example of Zimbabwe as a way to explain the underlying rationale fueling ICOs.

COMPANY OF NOTE

“Low cost investments and diversification are important, but they’re not everything.” That’s the perspective offered by Jack Sharry of LifeYield, a Boston wealthtech company that helps financial advisors optimize the tax efficiency of their clients’ portfolios. Founded by CEO Mark Hoffman, Paul R. Samuelson and Michael Benedek, the company’s team looks to have a few decades’ more experience than most fintech founding teams. In LifeYield’s case, the team’s experience (which also includes several start-ups) appears to have enabled the company to offer software solutions for the financial complexities that life brings with time. Several of the nation’s largest private banks and brokerages agree, as the company has built an enviable client roster that most enterprise fintech startups could only dream about. An additional boost to the company’s traction is expected to take place in the latter part of 2017, on the back of a still-unannounced partnership that will see a leading investment bank’s wealth division automatically add LifeYield’s tax optimizer feature to every account holder at the firm. “We think the roboadvisors have done a great job in introducing investing to millennials,” said Hoffman. “However, over the long run, technology will not completely replace the need for real-life experts. Our proprietary software suite gives a wealth advisor the ability to provide digitally enhanced advice that can make an enormous difference in what the investor keeps.”

QUOTE OF THE WEEK

"Yeah, I know I'm ugly. I once said to a bartender 'Make me a zombie.' He said 'God beat me to it.'"

~ Rodney Dangerfield