• The SEC adds roadblocks to this blockchain startup’s launch
  • Walmart steps up with a two-hour delivery service
  • We’re a step closer to having our own personal AI

Dear Reader,

By the time you read this, Nicholas Calio, the CEO of Airlines for America, will have already given his testimony in a U.S. Senate hearing concerning the North American aviation industry. His testimony should paint a stark picture for the near future.

Continuing with our discussion yesterday, Calio provides a broader picture of the impact that the lockdowns have had on the air travel industry.

U.S. airlines are now losing more than $10 billion a month, as U.S. passenger traffic has fallen 95% from normal levels. The average number of passengers on each flight is a mere 17 on domestic flights and only 29 on international flights.

No airline can come anywhere near breakeven with those kinds of numbers. At this stage, putting aircraft in the air for so few passengers is practically a public service for those who have a critical need to travel.

The industry is going to go through a radical transformation post-COVID-19. There will be significantly fewer flights, passengers may be spaced throughout the plane, and several airlines are now requiring passengers to wear masks for the duration of the flights.

Infrared scanners will be used at airports and boarding areas to detect if passengers have an elevated temperature. Passengers perceived to have a fever will not be allowed to board the plane.

Imagine what that will feel like when we don’t feel ill and really need to get on a flight.

Air travel will be a less-desirable means of travel. Business trips will largely be scaled back, and personal travel will change as well.

For the foreseeable future, most families will opt to take trips within driving distances to avoid the hassle and discomfort of the “new” air travel. Travelers will also avoid the risk of breathing the same air in confined spaces with people they don’t know.

After all, we already have data indicating that as much as 95% of those who contract COVID-19 are asymptomatic. There is no way to tell who is infected and might be spreading the virus.

Sweeping restructuring will take place this fall, beginning in October, after the restrictions from the U.S. Treasury grants are lifted. More job losses are coming to the airline industry and companies that supply the airline industry, like Boeing, Airbus, GE Aviation, and so many others.

This is not an area to invest in now. Please steer clear.

Some of these companies may look like incredible bargains right now, but there is more pain to come. Economic activity will recover quickly. But the impact on air travel will be long term. And capital and consumption will be reallocated to companies thriving in this new world order.

And before we turn to our insights, I wanted to remind readers about a special event tonight…

My friend and colleague Teeka Tiwari is hosting a free cryptocurrency training event tonight at 8 p.m. ET. Longtime readers know I choose not to follow cryptocurrencies in my research. But I know this is still an area of interest for some readers.

If investors are interested in cryptocurrencies, I recommend you hear what Teeka has to say tonight.

He believes that a looming market catalyst – one that won’t happen again until 2024 – could send a handful of cryptocurrencies higher.

You’ll have to get the full analysis from Teeka. Go right here to tune in.

The Telegram saga continues…

Telegram has become one of the most interesting stories in the world of blockchain technology. It started as a highly secure messaging application. It wasn’t even a blockchain company. Yet people were drawn to the platform because it isn’t controlled by Google or Facebook.

After it grew in popularity, Telegram decided to launch its digital asset as a medium of exchange over its messaging platform. Telegram put out a whitepaper explaining how its digital asset would work, and then it held an initial coin offering (ICO).

For the sake of new readers, ICOs have enabled many blockchain companies to raise money. They are like IPOs (initial public offerings) except investors don’t receive equity in the company. Instead, investors receive a digital asset that will hopefully grow in value if the blockchain project is successful.

Telegram’s ICO was wildly successful. Its ICO raised $1.7 billion back in 2018. That’s an incredible raise, especially considering Telegram is owned by just a single individual with no venture capital backing. And the platform wasn’t even among the top five messaging apps.

At the time of its ICO, Telegram had about 200 million monthly active users (MAUs). Compare that to WhatsApp, Facebook Messenger, and WeChat, which each had more than one billion MAUs at the time. Telegram was way behind the competition.

So the ICO was a big success. But then the Securities and Exchange Commission (SEC) got involved. The SEC claimed that Telegram conducted an unregistered securities sale, which is illegal. We talked about that back in October. That started a back-and-forth legal battle.

Well, Telegram just announced that it will delay the launch of its digital asset to April 2021. It hopes to settle its dispute with the SEC by then. And this happened when the company was just days away from launching its digital asset – the TON.

And here’s where it gets interesting – Telegram offered to give investors back 72% of the money they invested in the ICO. That is a move meant to appease the SEC.

And Telegram also offered a second option. If investors agree to leave their funds with Telegram through its legal battle, Telegram will give investors 110% of their original investment when its digital asset launches next year. What’s more, it was discussing converting the investment into equity.

I say “was discussing” because – within 24 hours of announcing this plan – the company was forced to take a separate path.

Telegram is now informing all U.S. investors that they should leave the project and take the 72% refund. It informed U.S. investors that they are not eligible to leave the investment in Telegram for another year.

That’s because Telegram is a private company. Today, there are only two legal ways for private companies to allow U.S.-based nonaccredited investors to invest – Reg CF and Reg A structured deals.

Telegram’s ICO was neither. That is why Telegram is being left no choice but to force U.S. investors out of the deal.

Why do I mention all this?

It demonstrates the onerous regulations that the SEC has in place for U.S. investors and early stage companies. Even with a successful product with 200 million users, a company like Telegram would be forced to raise private capital from venture capital firms, private equity, and high-net-worth individuals.

That’s because Reg CF deals are limited to $1 million now, and Reg A deals are highly impractical for most companies.

This causes two problems. First, the United States has been losing its competitiveness in the blockchain industry, as capital formation has moved overseas since late 2017 due to the SEC’s stance on ICOs.

Second, individual investors, like us, are blocked out of potentially very lucrative investment opportunities.

Think about it. Telegram’s userbase has doubled between the time of the ICO and today. Telegram is now worth almost $7 billion, and U.S.-based investors who have already profited on paper are being kicked out at a loss.

This is so disheartening.

It is so ironic that the SEC is perfectly OK with U.S.-based nonaccredited investors gambling their money (a guaranteed loss over time), yet we are not allowed to invest in companies that we believe in with incredible growth potential (a great way to become wealthy).

The outcome of Telegram’s battle with the SEC will have a major impact on the current regulatory environment, and it will give us a better idea of what kind of token sales will be possible in the U.S. going forward.

Walmart is stepping up its grocery delivery service…

We are seeing an explosion in grocery delivery services right now, thanks to the COVID-19 pandemic. But there’s just one problem…

This record demand for grocery delivery has led to delayed orders. And it’s been difficult for customers to even book a delivery window.

I’ve personally experienced this problem for the last six weeks. We haven’t been able to get any delivery slots. That has forced my family and me to go shopping.

Some tech-savvy people are even making software bots that go online and reserve delivery times when they become available. That’s made it even harder for “normal” shoppers to book grocery deliveries.

Walmart has decided to do something about this problem. Yes, the stodgy old discount retailer is getting serious about its grocery delivery service.

To meet consumer demand, Walmart just launched “Express,” which is a service that promises delivery in two hours or less. It is testing Express at 100 stores right now. And Walmart plans to expand the service to nearly 2,000 stores in the next couple months.

But it comes at a price. Express will charge customers an extra $10 on top of the normal delivery fee. That means Express deliveries will cost just under $20 on average.

This is an interesting move.

Walmart built its business on low prices. Its core customer base consists of consumers who want cheap goods, not premium service.

Yet Express caters to consumers who don’t mind paying an extra $20 for special service. It’s the opposite demographic. And I suspect Walmart may get some backlash from its core customers for this.

But Walmart is taking the steps it needs to take to compete with Amazon.

This is especially important in light of COVID-19. We are moving into a world where consumers will prefer contactless payments. They’ll avoid going to busy places outside of the daily routine.

The writing is on the wall, and Walmart appears to realize that.

So I’ll be watching how Express does closely. If it is successful, we’ll see more and more stores roll out their delivery services. And new personal shopper delivery services will pop up left and right.

And we shouldn’t be surprised to see an expansion of the self-checkout lines that we already see in many stores today.

And because those self-checkouts can be inconvenient and time-consuming, we’re going to see a migration to the “grab and go” technologies that are already being employed by Amazon in its Amazon Go stores.

Facebook’s chatbot one-ups Google’s…

Back in February, we talked about Google’s big breakthrough in conversational artificial intelligence (AI). The company had just launched a new chatbot called “Meena” that could hold conversations with humans.

At the time, I said that Google’s breakthrough would lead to rapid improvements in this area. It turns out that this may have been an understatement…

Not to be outdone, Facebook just released its new AI chatbot called “Blender.” It trained Blender on 1.5 billion Reddit conversations to make it as humanlike as it could.

For readers who don’t know, Reddit is a free online message board where users can talk about any topic they want. Facebook chose Reddit because the discussions are conversational.

That gave the AI a great base of understanding. Then it fine-tuned the AI to understand things like emotion and empathy.

And the results are stunning… and much better than Meena.

In blind testing, 75% of evaluators said they found Blender more engaging than Meena. 60% found Blender to be more humanlike. Have a look at the realistic conversation below. The human is on the left in gray, and Blender is on the right in blue. It is impressive.

Conversation With Blender

Source: Facebook

And here’s the best part – the evaluators couldn’t tell if Blender was a human or an AI 49% of the time. In other words, Blender sounded exactly like a human about half the time. That’s just remarkable.

So this is yet another breakthrough in conversational AI. And this is crucial because we are moving into a world in which humans and AI work together day in and day out.

We are rapidly approaching the point where everybody will have their own personal AI that they interact with daily. The AI will be trained to know us personally based on our data profile. It will know our likes, dislikes, goals, hobbies, and interests.

That will enable our AI to provide us with relevant information as well as pleasant conversation. Interactions will be stress-free. There will be no conflicts or disagreements. Simply put, people may enjoy talking to their AI more than they enjoy talking to most humans.

For that reason, I believe we’ll see mass-market adoption of conversational AIs happen very quickly when the time is right. We aren’t there yet, but it is in the near future. Stay tuned…


Jeff Brown
Editor, The Bleeding Edge

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