6A - Identifying Opportunities in Regulatory and Economic Trends

Economic Trend Opportunities

1.     Fed’s Evans Sees One or Two More Rate Hikes This Year, New York Times (https://www.nytimes.com/reuters/2018/09/14/business/14reuters-usa-fed-evans-rates.html)

a.     I found this article published by the New York Times and written by Reuters News Agency headquartered in London.

b.     What leads me to believe that an opportunity might exist with potentially rising rates is the information that I have learned through school and work experience over my time in college. In a changing rate environment, the opportunity for interest rate arbitrage also may exist as an investing strategy. Charles Evans, the President of Chicago Federal Reserve Bank is a highly credible source. Asset mispricing is difficult to spot, but using research and software it is possible.

c.     The most likely customer for this opportunity will be investment funds or even an experienced trader.

d.     This opportunity is relatively difficult to exploit

e.     I saw this opportunity due to my curriculum over the last 3 years related to economics and finance. I understand the basic concepts of finance and when interest rates fall or rise, opportunity exists to profit over the changes.

2.      U.S. Household Income Rises to Pre-Recession Levels, Prompting Cheers and Questions, New York Times (https://www.nytimes.com/2018/09/12/us/politics/median-us-household-income-increased-in-2017.html)

a.     I found this article published by the New York Times.

b.     This article discusses and describes the income levels of American Consumers and the fact that income levels are back to pre-recession like levels. This bodes well for the economic environment because consumer income levels directly correlate to economic success. I believe an opportunity exists here because this economic indicator suggests that it may be a great time to invest more in the US economy or even explore the idea of owning and operating a business.

c.     I believe this opportunity is geared toward entrepreneurs that hope to take advantage of a healthy economy.

d.     The level of difficulty it is to exploit this opportunity depends on the way you attempt to take advantage of it. If you decide to invest in US based mutual funds, it is relatively easy. If you are an entrepreneur that is looking to start a business, it is significantly more difficult and riskier.

e.     I saw this opportunity because a common understood economic indicator is consumer sentiment. If consumer income levels have risen back to pre-recession levels, that means that consumer sentiment is in a positive place right now. This would then indicate that a healthy economy exists right now.

Regulatory Trend Opportunities

1.     Legal Marijuana is Coming to Canada. Investors Catch the Buzz. New York Times (https://www.nytimes.com/2018/07/08/world/canada/canada-marijuana-businesses.html)

a.     I found this article published by the New York Times.

b.     This article discusses the legalization of marijuana throughout Canada. This is something that the United States has started to see occur in a few different states across the country. A result of those legalizations was the creation of billion dollar industries within those states such as Colorado and California. The success of these industries in other states/countries I believe is a great indicator to how future legalizations of marijuana will affect other economies.

c.     The trend is moving towards the legalization of the long-banned drug, which offers a lot of opportunities to investors and entrepreneurs.

d.     Depends on the approach but I believe it is relatively easy in areas where the drug is still illegal and the barriers to entry for new businesses are minimal.

e.     Other people may see the opportunity as well, yes, but this regulatory trend opens the door for a number of different possibilities.

2.     Trump Wants Tariffs on $200 Billion More Chinese Goods Despite Talks: Source, New York times (https://www.nytimes.com/reuters/2018/09/14/business/14reuters-usa-trade-china.html)

a.     I found this article published by the New York Times.

b.     For the last few months, an tariff war between two of the biggest economies in the world, the United States and China, has progressively heated up. In this article, Reuters reveals that President Trump is looking to impose even more tariffs amounting to another $200 billion of Chinese goods. Despite both sides of the political aisle desperately attempting to convince President Trump to end the trade war, the President is persistent in his attempt to even out the world trade stage. I believe that an opportunity exists because just like with all wars, there are winners and losers. Some domestic industries in the US will benefit as a side effect of the trade war.

c.     The prototypical customer would be the US companies that are the competitors of the industry that Trump decides to target in China. For example, in the past Trump has gone after Chinese steel. This has helped domestic steel companies as consumers look for the cheapest product. Investors could also make trades that correlate with the tariff implementation.

d.     This is a more difficult opportunity to exploit because it takes financial expertise or the willingness to enter a market that may already be extremely competitive in the US.

e.     Other people most likely do see the opportunities to profit in a trade war as well.