Trends to Take Note Of

On a recent 6 week tour across the USA, I paid close attention to the media and business fraternity to see if I could pick up on some of the major global trends emanating from with the worlds largest economy. After 6 weeks of reading the Wall Street Journal, NY Times and watching CNN and CNBC I picked up on some clearly evident trends that are going to have a major impact in 2007.

1. The Rise and Rise of Private Equity
As the traditional equity market cools off a little and investors yearn for higher and higher returns in more exciting investment vehicles, private equity has become the investment of choice. For investors, private equity offers good returns for solid investments in existing companies with solid track records. Most of these companies can get access to debt and with lots of debt and a small, well leveraged equity investment; the company can offer excellent returns over a 3 - 5 year time horizon. Businessmen like it because they are able to run their business in private. They are not subject to the public scrutiny that public companies face and they are able to just get on with the job of running the business without appeasing the media and analysts at every turn. 2006 was a mammoth year for the raising and investing of private equity funds in the USA and some of that money is now flowing to SA - Brait raised a fund in the USA and Edcon in being bought out by US Private Equity Players. Over time private equity will become a sought after asset class across the world and I predict that this will be followed by an increase of flows into venture capital once again (many people are over the bubble bursting hangover of the turn of the century and ready to explore the riskier asset classes once again)

2. Web 2.0 - It's an Individuals Game
Web 2.0 is fueled by Google, YouTube, MySpace and other sites that enable individuals to continually contribute to the web and express themselves in creative and interesting ways from videos to pod casts to blogs. Initially everybody thought the web was about facilitating transactions but slowly people are realizing that the web is about expression, it’s about empowerment and it’s about social networking. People are willing to share so much of themselves on the web and the more they share the more info marketers have to market appropriate products to them and the more the web becomes part of their everyday existence. Business people and venture capitalists are realizing if they can work out how to monetize this new trend of putting your life on the web, then they have a winning formula. Google worked out how to turn internet search into a profitable exercise, they have now purchased YouTube for 1.6 billion and need to work out how to turn online publishing (video; audio and text) into a profitable activity. To reinforce that that this trend is taking root, time magazine named you (an me and everyone else) their person of the year http://www.time.com/time/magazine/article/0,9171,1569514,00.html

3. Executive Pay - Make it Stop
The media and broader investing public are no longer going to put up with exorbitant CEO pay packages - especially when CEOs and other executives are under performing. There has been a huge backlash to the re-pricing of options to make them more attractive, the payment of huge severance packages for CEOs asked to leave and the inappropriate use of company assets for personal use. Bob Nardelli (Home Depot CEO) was the final nail in the coffin after weeks and weeks of bickering and complaining that CEOs are getting paid way too much for underperformance. I expect that directors deciding pay packages are going to have to be more accountable when options are re-priced and severance packages are declared. The media have declared war on the upper echelons of US business and they are now clearly in the spotlight for being overpaid.