- It’s official. The “Fed Coin” is coming
- This robot will put perfect produce on your table
- The nightmare is real: Say hello to AI telemarketers…
It was bound to happen.
While it only lasted for a few hours yesterday, Apple was the first company to achieve a market capitalization of more than $2 trillion.
Hard to believe.
I remember when companies with a market cap in the tens of billions were a big deal, but now we’re looking at multitrillion-dollar market caps.
Even crazier is that Apple isn’t alone. Amazon and Microsoft aren’t far behind. It’s only a matter of time.
And Apple’s recent announcement of a four-for-one stock split has been fueling excitement. With the current price at $464 a share, this stock split will result in shares priced around $116 on August 31 when the split takes effect.
In theory, Apple’s motivation is to make it stock “affordable” to a wider range of investors. A word of caution, however.
The stock price – whether its $464 or $116 – doesn’t determine how “expensive” or “cheap” those shares are. The nominal share price has nothing to do with the relative value of a company.
What tells us if a company or a stock is “expensive” or “cheap” is the valuation.
Investors should understand whether the enterprise value of a company is at a reasonable level. Does the valuation overestimate or underestimate the value of all future cash flows?
In the case of Apple, the company is trading at all-time-high valuations. At an enterprise value-to-sales (EV/sales) ratio of 7, Apple’s current price is equivalent to 7 years of sales (not profits).
That’s the highest valuation that Apple has ever had in its own history.
Apple is one of my all-time favorite tech companies, and it still has a bright future ahead of it. But investing at these elevated, “expensive” valuations is just speculation right now, not investing.
And Apple is not alone in this regard…
Five very popular tech stocks right now are on the verge of falling by as much as 92%. This will come to a surprise to many…
I gave a recent interview where I discuss this as well as the current state of the market. I recommend you check out this interview (you can see it here).
Now for our insights…
The digital dollar is coming…
It’s official. A “Fed Coin” is on the way.
Federal Reserve governor Lael Brainard just announced that the Fed is working closely with the Massachusetts Institute of Technology (MIT) to develop a central bank digital currency (CBDC). In fact, Brainard revealed that they have been working on this project for several years now.
So there we have it – the digital dollar is coming. And that means the days of paper currency and coinage are numbered.
The team working on this project said that the CBDC platform is “agnostic” – it could be decentralized (not controlled by a single entity or entities) or left under the control of the U.S. government.
Of course, we know that’s just posturing. The U.S. government would never give up control over the dollar. I doubt any major country would ever consider doing so. Do we really think a central bank digital currency would be decentralized? No way.
The CBDC will be managed just like the dollar is today. The Fed will control the money supply as it sees fit.
And it will even have new ways to implement monetary policy because it will now be able to deposit funds directly into consumers’ digital wallets. That would have been a huge help at the start of the pandemic when the government sent out stimulus checks.
On the flip side, a CBDC also makes things like negative interest rates possible. The Fed could deduct interest from our digital wallets each month to encourage spending in hopes that it would stimulate the economy.
Plus, the Internal Revenue Service (IRS) – the tax agency of the U.S. government – must be foaming at the mouth right now. A digital dollar would allow it to monitor and tax every transaction we make. Doing business “off the books” won’t be possible with the digital dollar.
So transitioning to a CBDC will be a major change. And it is coming fast.
The fact that they have been working on this for several years already means the digital dollar is much further along than anybody realized.
In fact, this appears to run counter to what Fed Chair Jerome Powell said in November 2019. At the time, Powell wrote, “We are not currently developing a central bank digital currency.” Was that just a bit of sleight of hand? Or was Powell not on the “inside”?
I believe we will see this project rolled out within the next few years.
That said, the U.S. won’t be the first to launch a CBDC. As we have discussed before, China is on track to be the first major country to transition to a 100% digital currency system.
In fact, China is already testing its CBDC in the real world. It may even be ready for launch as soon as later this year.
In addition to the U.S. and China, Sweden has made a lot of progress on a CBDC. It will be one of the first European countries to go digital. And we have seen several island nations developing their own state-backed digital currency as well.
In my mind, these state-backed and even company-backed digital currencies are inevitable. But 99% of investors are so distracted by a “Fed Coin” that they’re missing the bigger picture.
When these new digital currencies do arrive, it will raise the profile of one technology: blockchain. It is still early days, but the revolution in applying blockchain technology to the world of finance is well underway.
Behind the scenes, incredible progress has been made this year with several promising blockchain projects focused on financial applications. I expect to be doing a lot more research in this space in the months ahead, especially as we enter 2021.
And I’ve outlined some of my favorite blockchain investments in a free presentation. You can watch it right here.
Checking back in on Root AI…
We first talked about Root AI last year. This is the robotics and artificial intelligence (AI) company that spun out of MIT in 2018. It is developing a crop-picking robot named Virgo.
Well, Root AI just pulled in $7.2 million in a seed venture capital (VC) round to power its development and expand deployments. And look at the progress this company is making:
Root AI’s Crop Picker
Source: Root AI
As we can see, Virgo has gotten quite good at its job. Its robotic arm has all the dexterity of a human now. And using computer vision (CV) and AI, Virgo can determine ripeness in real time so that it only picks the ripe produce.
This is absolutely the future of agriculture. And it solves a major problem in the industry…
Yesterday, we talked about how FedEx is employing automation to solve its labor shortage problem. It’s the same story in agriculture.
Large machines called grain combines harvest some crops like corn, but more delicate produce like tomatoes, blueberries, strawberries, and cucumbers still require human pickers.
But who really wants to spend all day picking fruit and vegetables? It’s boring and physically taxing work.
That’s part of why agriculture operations all over the country have a hard time finding enough labor. That’s especially true now that the COVID-19 pandemic has delayed the arrival of seasonal immigrants who normally help with harvests.
That is where Root AI’s robot comes in. It’s electric powered and can run day or night. And machines like Virgo will even be able to operate in the rain.
This efficiency will lead to greater productivity for agricultural operations, all while reducing labor costs. That will lead to cheaper, more abundant food for consumers. It’s a win-win.
And just like we saw yesterday with FedEx, this will create higher-value jobs. We will need people to manage and maintain these robots. That’s much more attractive than picking fruit all day in hot, humid summer weather.
So we’ll keep a close eye on Root AI from here. We are very close to seeing widespread adoption of robotics and automation in the agriculture industry, and that makes this a great early stage company to watch for a potential investment opportunity in the future.
AI-powered telemarketers have arrived…
Speaking of automation, we will wrap up today with an incredible story that demonstrates how far AI – and more specifically, natural language processing – has come.
In China, telemarketing firms have combined AI with advanced natural language processing to create the most feared creature in the world – the AI-powered telemarketer. I know – it sounds like a nightmare, right?
These AIs can make over 3,000 calls every single day. And China doesn’t have strong consumer protection laws in place, so many of these calls are made directly to consumers’ cell phones even if the number is blocked. Chinese consumers report getting as many as eight telemarketing calls every day.
That sounds like a terrible annoyance to us in the West. I’m sure most of us would simply stop answering the phone.
But the culture in China is different. There, when the phone rings, many people answer it every time.
When I was a corporate executive working in Asia, phone calls always interrupted business meetings several times. My customers and partners never let the call go to voicemail so they could take care of it later.
Because of this dynamic, the AI-powered telemarketers have increased sales as much as 140% for their firms.
And get this – consumers usually don’t realize they are talking to an AI. In fact, the AIs can speak many different Chinese dialects. That’s how good the tech has gotten.
From here, it’s easy to envision this technology being paired with the behavioral data collection practices of companies like Facebook and Google.
For example, I recently went online to research an interesting new home rowing machine called Hydrow.
Within 24 hours, I was getting ads for the same system on my Instagram feed. Once AI-powered telesales spread, a phone call would likely follow those ads: “Hello, Mr. Brown. I am calling to see if I can answer any questions you may have about our product.”
It makes perfect sense.
So this is yet another example of how AI is powering the business process automation trend. And while it is likely that this kind of obtrusive telemarking will be restricted in most countries, this same technology will be applied to AI-powered customer support, technical support, and even sales.
When we can receive the precise information that we need in a way that we can understand it, it no longer feels like a sales process and it vastly improves the overall customer experience.
Given how much progress has been made on natural language processing this year, I believe we’re in for a very exciting 2021 from both a consumer and investor perspective.
Editor, The Bleeding Edge
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