· Economic Trend: Federal Reserve Lowering Interest Rates
o Source:https://www.cnbc.com/2019/09/16/fed-decision-expectations-rising-that-rate-cut-might-not-happen.html
o This leads me to believe that an opportunity exists to diversify investment portfolios since the Federal Reserve is continuing to decrease interest rates on its bonds. With many speculating that interest rates could potentially reach the negatives, this provides an opportunity for investors to diversify their portfolio through the stock market, real-estate, mutual funds, or alternative investments.
o The prototypical customer to take advantage of this opportunity would most likely be middle-upper class Americans with disposable income to invest for the future. I do not think the opportunity is that difficult to exploit, especially with how easily accessible resources are to learn how to invest and diversify into these different asset classes. Also, there are a variety of services such as “Robinhood” that make it easy to track stock prices and invest so this economic trend provides an opportunity for people to learn about these different assets and how to invest in them.
o I saw the opportunity because I am currently taking FIN3403 and I have been learning more in my free time about investing in the market and identifying arbitrage opportunities. With interest rates continuing to get cut, this makes treasury bonds a less attractive investment option, providing an opportunity to learn more about different investment types and to find other ways to continue to grow their wealth. I am a finance major so I find it interesting to analyze these economic trends and identify ways to profit off of them.
· Economic Trend: Rising Oil and Gas Prices
o This leads me to believe that an opportunity will exist in terms of developing alternative energy sources. The US Energy Information Administration energy outlook predicts the price of oil will rise through 2050. This provides an opportunity to take advantage of the growing emphasis on climate change and develop sustainable and renewable energy sources.
o The prototypical customer to take advantage of this opportunity would be entrepreneurs or energy companies that are looking to grow economically and develop a product that could become a cornerstone in US energy usage within the next 50 years. If the prototypical customer can take advantage of this opportunity, they will have no issue selling their product to every homeowner or car owner in the US and beyond.
o I think that it is still mildly difficult to exploit, however it is becoming easier. The media’s coverage on climate change is placing more stress on developing sustainable energy sources and with oil projected to rise, this is the perfect opportunity to capitalize. Companies like Tesla and Sono Motors are working on developing solar paneled cars so it will not be too long before we start to see this opportunity grow even further.
o I saw this opportunity with how much climate change is being covered in the media today. The media is placing the spotlight on this controversial issue and I think this creates the perfect environment to develop and create a product that is energy-efficient and sustainable, minimizing the carbon footprint we are leaving on this planet. The news of Tesla and Sono Motors working on developing solar paneled cars has me interested in the future of energy efficiency and I think looking at hydro-power or even wind power and solar power provides some opportunities to exploit this need for sustainability.
· Regulatory Changes: Legalizing Marijuana in the United States
o This leads me to believe that there is an opportunity to begin to create and develop marijuana products as all the issues with vaping continue to get exposed. Over the past decade, the government has continued to relax its view on marijuana, as a whole, and this leads many people to believe that soon marijuana will be legal everywhere in the United States. Also, the issues with vaping and illegal marijuana vaporizers that contain harmful chemicals may push the government to legalize marijuana and become more regulatory of the industry, similar to tobacco.
o The prototypical customer to take advantage of this opportunity would be current marijuana producers, tobacco companies, or entrepreneurs looking to expand and capitalize upon the marijuana industry. The tobacco industry in the US is worth $750 billion so there is no reason that marijuana can’t reach that worth, especially considering that marijuana is seen to have less dangerous side effects associated with usage.
o This opportunity is still difficult to exploit, as it is still unclear when/if marijuana will be fully legalized in the United States. As long as marijuana remains illegal, issues will continue to grow associated with products not being tightly regulated. When marijuana does become legal, the opportunity will be extremely easy to exploit as there is already a market of people who would like to smoke and who do smoke consistently and making it legal will make it easier to purchase/consume products.
o I saw this opportunity with how much I see vaping occurring on a daily basis. In recent news, the Juul and other vaping devices have been heavily criticized as people are starting to die or experience serious health issues as a result of these products. This leads me to believe that there will be an increase in regulation within the smoking/vaping industry, but that the government may decide to turn to marijuana since it is a more natural product. I also see that the market for marijuana has continued to grow, increasing tourism in areas like California and Colorado where recreational marijuana is legal, and that by legalizing it everywhere, this will make it much easier for consumers to access these products.
· Regulatory Changes: Regulation of Cryptocurrency
o This leads me to believe that there is an opportunity to invest in cryptocurrency as the value will rise if the United States take a pro-crypto approach and decides to regulate the market. The regulation of cryptocurrency in the US will reaffirm the value and recognize it as an official asset. Currently, cryptocurrency has mixed reviews resulting from the lack of regulation within the market and the fact that some companies have yet to decide whether they want to acknowledge the presence of crypto within the country.
o The prototypical customer would be middle-upper class Americans with disposable income to invest or eventually every American with income. Crypto could become the future of currency and there could come a time in the future where paper currency is completely removed and we get by paying for goods in stores with crypto on our cell phones.
o I think it is still difficult to exploit this opportunity as crypto still has to get accepted and recognized in the US. Another difficulty may be that there continues to be a growing number of different cryptocurrencies that makes accepting them difficult. If cryptocurrencies can eventually be consolidated to a few and become regulated, this will certify their value and allow them to rise.
o I saw this opportunity as I have friends that have invested/traded cryptocurrency like Bitcoin and have made a lot of money. I think the opportunity is there to invest in crypto as the value will rise if the US decides to step in and regulate the industry. The growing coverage on cryptocurrency allows it to start gaining recognition in people’s mind, but without government validation the value is quite limited.
Hey Javier,
ReplyDeleteI really like how creative you were in finding your trends. For example, not many people would think of cryptocurrency when trying to find regulatory trends in today's marketplace. I agree with your point that it will become more valuable in the near future and people with a lot of discretionary income could exploit this trend now.