Economic Trend 1:
Rising interest rates are slowing housing starts.
Source: WSJ
There might be more opportunity to rent apartments/houses as the price of actually owning a house goes up. As a real estate investor, you might shift your focus towards this mindset to make a better return. This could be anyone who invests in real estate full time or on the side, or is thinking about their own living situation. This might be hard to exploit if interest rates stay high in the longer term and you eventually want to own equity. I thought of this because I enjoy following the FED and the housing market.
Economic Trend 2:
Consumers are spending more and gaining more credit card debt than ever over the past 10 years.
Source: WSJ
There might be an opportunity to help consumers understand their aggregate debt load and how their payments could be effected in a rising and floating rate environment. Many consumers spend as times are good and rates are low, but get squeezed when payments rise and the going gets tough. Maybe banks could offer a platform to their customers to be better informed but it would likely need to be a third party. I think I thought of this because I read about high debt loads and get concerned for families that may be unable to pay for their rent.
Regulatory Trend 1:
The new tax law says companies can only deduct 30% of EBITDA for interest deduction.
Source: WSJ
This will impact private equity firms who use a lot of leverage to buy a company. With lower deductions, the company will have to pay more in taxes. There might be an opportunity to change the way society invests in private companies. Perhaps, instead of PE firms investing, we could also have individuals invest too. There could be a platform to help private companies raise money from the person with extra savings looking for some level of risk. This might be hard to exploit due to current regulations around private investors having to have a certain net worth. I thought of this idea because I like to read about Private Equity and think the investor environment could change going forward.
Regulatory Trend 2:
Facebook, Google and others mishandling private customer data.
Source: WSJ
An opportunity might exist to either help these big companies be smart with the customer data or to help customers protect themselves against data leakage. I think the second one is a viable business opportunity where a startup can help rewrite some legal terms instead of customers blindly excepting the contracts. It might be hard to implement because these big companies have a lot of money and a lot of lawyers. I think I saw this opportunity because I was invested in Facebook when the Cambridge scandal blew up the company in the short-term.
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Grant,
ReplyDeleteThese are some great observations! One thing I particularly enjoyed is that you actively viewed the rising interest rates in Economic Trend 1 through the eyes of a real estate investor, allowing you to get a feel for the decision-making processes that would be applied to that opportunity in the real world. Additionally, I like that you were able to identify a potentially disruptive change in Regulatory Trend 1. Given the information you've found, it certainly seems possible that such a disruptive change could occur, providing you with an excellent opportunity. Great post!
Zach
I really enjoyed each of the trends you have listed because these all lead to genuine problems. In particularly, your Regulatory Trend 1 is going to impact a lot of businesses and force them to rework their finances. It would be difficult, but there is definitely something there. I think some sort of business aid could benefit these companies and be the solution to a new opportunity. Good job!
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