Identifying Opportunities in Economic & Regulatory Trends

1. Opportunity One: Regulatory Trend

Article from the Wall Street Journal: “Most Economists See Tariff Effects on U.S. Economy as Limited” by Harriet Torry

Date: Sept. 13, 2018

Link: https://www.wsj.com/articles/most-economists-see-tariff-effects-on-u-s-economy-as-limited-1536847200?mod=searchresults&page=1&pos=6

A. With all the talk over the newly imposed trade tariffs President Trump has been planning, the name of the article caught my eye as it is a regulatory trend that I would love to learn more about.

B. In this article, the author surveyed 50 business, financial and academic economists to share their opinion about tariffs impact on the U.S. economy; with the majority believing these tariffs have had minimal significance, an impact that is overall less than 1% of the U.S. GDP.  Some important insights include: nearly 70% of economists said there was a risk that economic growth would come in short of their forecasts in the next 12 months; the Trump administration is expected soon to impose tariffs on $200 billion of Chinese imports - on top of tariffs already in effect on $50 billion in goods from China. From these two separate findings, it is obvious that new and recent tariffs might be an opportunity to exploit or meet unmet customer needs.

C. The prototypical customer are all industries and respective markets across the world that are directly impacted by these tariffs, and the international policy makers signing them.

D. The opportunity is relatively nearly impossible to exploit in the big picture because there are too many players at hand around the world who will never be affected by my actions. Although, if you focus on local levels of opportunity, as in industries within state counties, then opportunity presents itself more efficiently.

E. I noticed this opportunity because I like to keep up to speed with regulatory trends that involve international economies. There are several layers to the problems or success involved with tariffs, and thus becomes easier to handle the smaller opportunities that may exist locally (such as education of tariffs within a community, or a service dedicated to help the affected companies).

2. Opportunity Two: Economic Trend

Article from the Wall Street Journal: “Global Oil Supply Hit a Record High in August as OPEC Ramps Up Production” by Christopher Alessi

Published: Sept. 13, 2018

Link: https://www.wsj.com/articles/opec-ramps-up-output-making-up-for-iranian-oil-lost-to-sanctions-1536825605?mod=searchresults&page=1&pos=7

A. Before reading the title, I would like to share that I have been watching many videos consisting on topics of electric vehicles and solar energy, and therefore this article felt like an opportunity for me to become updated on global crude oil.

B. This piece, similar to the last one about the impacts of U.S. tariffs, dropped many statistics regarding OPEC, the United States, Russia, and the Middle East. Four critical statistics write: (1) crude oil output in [OPEC] climbed in August by 420,000 barrels a day, to average 32.63 million barrels a day; (2) Iranian crude production fell month-on-month by 150,000 barrels a day in August; (3) U.S. decision [to back out of a 2015 nuclear agreement with Iran] helped bolster oil prices amid investor concerns about a supply deficit, with Brent crude temporarily breaching the $80 a barrel threshold for the first time in 3 ½ -years; (4) Russian output was steady at just over 11.2 million barrels a day last month, a 300,000 barrels a day increase on a year ago. Although these four statistics appear as a deluge of information, each one is an individual opportunity that can be further examined to find unmet customer needs in more specific, local sectors.

C. The prototypical customers include OPEC or companies involved in crude oil, oil manufacturers, transportation of products, gas stations, consumers who depend on gasoline, the automobile industry… in reality, there are countless prototypical customers for this opportunity.

D. The same scenario applies to this opportunity as I wrote in section 1D.

E. As I mentioned in section 2A, my recent interest in solar energy and electric cars was most likely the reason I saw an opportunity with crude oil. Crude oil is naturally in constant competition with solar energy companies and electric car innovation, and as long as this continues to be the case, the opportunity will still remain.

3. Opportunity Three: Regulatory Trend

Article from the Wall Street Journal: “The Volcker Rule Needs Transparency More Than ‘Simplification’” by Sheila C. Bair and Gaurav Vasisht

Published: Sept. 9, 2018

Link: https://www.wsj.com/articles/the-volcker-rule-needs-transparency-more-than-simplification-1536524547?mod=searchresults&page=1&pos=6

A. Honestly, nothing really led me into forming this opportunity - I started reading the article because the term “Volcker Rule” caught my attention and I went with it. Upon browsing through the first few paragraphs, I realized how significant the Volcker Rule is to monitor risks, spotting problematic trends, and preventing a recurrence of the 2008 mortgage crisis that shook the U.S. economy.

B. As described in the article, the Volcker Rule (2014) prohibits commercial banks from engaging in certain speculative trading activity, helping to reduce moral hazard and conflicts of interest between banks and their customers, while fostering stability in the financial system. The metrics found with use of this rule help policy makers “to gauge the rule’s effectiveness and monitor potential risks in the trading operations of the largest banks.” Implications of banks not releasing data connected to the Volcker Rule include: depriving the public of the most basic information on the rule’s impact, with regulatory authorities becoming unable to spot problematic trends in a timely fashion.  

C. The prototypical customers are investors, banks, hedge funds, policy makers, and American regulatory agencies such as the Federal Reserve, the Office of the Comptroller of the Currency, the FDIC, the SEC, and the Commodity Futures Trading Commission.

D. Perhaps I am choosing opportunities that are very broad in scale, but once again, my insight in section 1D applies here as well.

E. For this opportunity, I believe there are various subsets of opportunities because this problem involves financial valuation and advising companies (along with investors) that depend on public data, such as data collected by the Volcker Rule, to discover opportunities in the market to then make executive decisions.

4. Opportunity Four: Economic Trend

Article from the Wall Street Journal: “U.S. Cities Will Be Able to Compete for Funding From JPMorgan” by Emily Glazer

Published: Sept. 12, 2018

Link: https://www.wsj.com/articles/u-s-cities-will-be-able-to-compete-for-funding-from-jpmorgan-1536724860

A. Although not such a large-scale economic trend as the crude oil market, this trend is rather quirky, in the sense that American cities - not companies - will be competing to share $500 million. This initiative, named “AdvancingCities” is being funded by JPMorgan Chase & Co. with plans of accelerating economic growth in over 30 U.S. cities. This new funding for cities to grow their infrastructure and reach new economic heights is exactly the opportunity an entrepreneur would want to hear.

B. This initiative plans to focus on four philanthropic areas: job training, neighborhood revitalization, small-business growth and consumer financial health. With the mentality in place that governments cannot do it alone, JPMorgan is looking for “public-private partnerships in cities that have a lot of nonprofits and government entities, along with a commitment from the business community to work together.” In all, JPMorgan is providing the resources necessary for cities that showcase their desire for planning and economic development, a process that tends to be multi-layered and time consuming in nature. With the inflow of cash and potential of new business revitalizing cities, the opportunity to meet prior unmet customer needs in these cities is up for grabs.

C. The prototypical customers are city officials and planners, and entrepreneurs located in the city or traveling from another city to take advantage of this opportunity.

D. In comparison to the other three opportunities, I would say this is a much easier opportunity to exploit. Once JPMorgan Chase & Co. deems a certain city worthy of investment, city planners will look inward (existing businesses or opportunities that have been long overdue) to utilize this inflow of cash.

E. This opportunity can be seen a mile away, and city planners will be openly searching for new opportunities of investment - the entrepreneur must locate those unmet needs that city planners ultimately desire.