Dear Reader,
It has been a couple of weeks since we looked at the U.S. jobs numbers. It is always good to check in every once in a while and make sure the numbers continue to move in the right direction.
I’m happy to say that they are…
Initial jobless claims fell by 130,000 from the week before to 881,000, the lowest that we have seen since the beginning of the mid-March economic lockdown.
Equally as important is that the number of people collecting unemployment benefits fell even faster by 1.24 million. This number is now down to 13.3 million, which is the lowest that we’ve seen since April.
Given the great progress in August, we can expect the unemployment rate to drop below 10% when the full month numbers are released for August. This will be fantastic news.
I remain very optimistic about the recovery.
Additionally, there are other positive developments.
Published just yesterday, clinical trials determined that common steroids like dexamethasone are effective in treating the small number of people who are hospitalized due to COVID-19. Dexamethasone reduces the risk of death by one-third.
The world now has three cheap and readily available medicines that are clinically proven to reduce death and shorten the time of recovery from a COVID-19 infection:
Hydroxychloroquine
Dexamethasone
Azithromycin
And as we also know, we have Gilead’s antiviral therapy remdesivir. It is not as cheap as the above three, but it is effective.
It is becoming very difficult for the mass media to suppress the truth about COVID-19 and all of the options that we have to care for the very limited number who become severely ill from the virus.
This is great news for the U.S. economy, which is also great news ultimately for us as investors.
Now let’s turn to today’s insights…
Jeff Wilke is a 20-year veteran at Amazon and one of its top executives. In the past, Wilke has been considered a possible successor to Jeff Bezos as CEO.
However, it appears that won’t happen – Wilke just announced that he will retire early next year. But not before launching one final project…
Wilke just announced that his last job at Amazon will be to oversee the rollout of Amazon Go technology to Whole Foods stores, which Amazon acquired back in 2017. I can’t think of a more exciting capstone project.
We first talked about Amazon Go technology back in June of last year. And I went to a store in New York City to go shopping, check out the technology, and see what it was like. It was a fantastic experience. Completely seamless, pleasant, and a real time saver.
For the benefit of newer readers, Amazon Go stores are small convenience stores powered entirely by artificial intelligence (AI) and computer vision (CV). There are cameras strategically placed throughout the store to track the activity of each customer.
To enter the store, customers scan a barcode on their smartphone that links them to their Amazon account. Then they can take whatever they want off the shelf and simply walk out. Amazon charges the credit card on file for the goods taken and emails a receipt. Talk about convenient.
But there’s a problem…
Amazon is having a hard time making its Go stores profitable.
Because these stores are so small, they mostly stock lower-cost items. And Go stores are in urban areas where they rely heavily on foot traffic during business hours. It appears this combination doesn’t provide enough sales to offset the high cost of deploying and managing the advanced technology.
The solution is to bring this tech to the Whole Foods supermarkets. Whole Foods stores already generate enough cash flow to offset the cost of installing the technology.
Plus, the tech will lead to reduced operational costs as cashiers, credit card terminals, and point-of-sale systems are eliminated. That will make Whole Foods even more profitable.
And get this – the first Whole Foods store will be equipped with Go technology in the second quarter of next year. We’re only seven or eight months away.
And this represents a major shift in strategy…
At first, we thought that Amazon would focus on automating midsized grocery stores before doing anything with Whole Foods. The company was experimenting with a mid-sized store in Los Angeles – something between the size of a Go store and a Whole Foods.
Bringing this tech to Whole Foods will accelerate adoption. Once consumers experience it, they won’t want to use anything else. That will ultimately force other grocery chains to deploy this kind of technology sooner rather than later as well.
In a sign of the times, social media giant Pinterest just pulled the plug on its state-of-the-art office complex in San Francisco. There’s no question about it – remote work is the “new normal”.
With 416 million active monthly users and a market value of $21 billion, Pinterest is one of the most successful social media companies outside of Facebook, Twitter, or Instagram.
To accommodate its growth, Pinterest was in the process of designing a massive 490,000-square-foot campus. It had even leased the office space. Here’s an artists’ rendering of what the office complex would look like:
Pinterest’s Proposed Office
Source: IwamotoScott Architecture
As we know, it costs a lot to break a large lease – especially when it comes to commercial real estate. Pinterest had to pay a one-time fee of $89.5 million to back out of this lease. Ouch.
Now, Pinterest was sitting on $1.7 billion in cash on the books. So this fee isn’t going to hurt the company in any meaningful way.
Still, $89.5 million is over 5% of the company’s cash balance. That’s a hefty price to pay without receiving anything in return.
And this shows us that Pinterest does not expect the traditional work environment to come back. Remote work is the present and the future.
What’s most interesting about this to me is that we now know that COVID-19 was nowhere near as dangerous as we were led to believe back in the spring. The numbers bear this out, as we talked about on Monday. Yet we continue to see signs that this shift to remote work is here to stay.
Many companies are seeing this as a way to reduce overall facilities costs and improve their gross margins. This is especially true in places like San Francisco, Silicon Valley, and New York City, where office space is incredibly expensive. Companies will reap massive savings by getting those expenses off their books.
And employees will gain a big boost to their quality of life by leaving those cities for areas where the cost of living is cheaper and the streets are safe.
The bottom line is that things aren’t going back to the way they used to be. Most things that can be done remotely will be. And that’s leading to a massive splintering in the market.
Legacy companies whose businesses aren’t geared toward the economy of the future are going to seriously struggle. But the high-tech companies built for a digital-first world are going to produce incredible investment gains for years to come. That’s a trend we are going to capitalize on every step of the way.
In fact, I recently gave a presentation on this dynamic. In it, I talk about the tech companies that are leading us into the future. These companies should be the cornerstone of every investor’s portfolio. Just go here to learn more.
We’ll wrap up today by following an interesting trail of breadcrumbs in the financial services industry.
Thanks to a Securities and Exchange Commission (SEC) filing that came out, we just learned that Peter Jubber, the chief strategist at Fidelity Investments, quietly registered as the president of a Delaware corporation called Fidelity Digital (FD) Funds.
And FD Funds is the general partner of the Wise Origin Bitcoin Index Fund LP (limited partnership).
Let’s not get hung up on the complex entity structure. The important thing is this: Wise Origin Bitcoin Index Fund LP is an index fund set up to allow institutional and accredited investors to invest in bitcoin and potentially other cryptocurrencies.
And the minimum buy-in is $100,000. No small investments allowed.
Why is the chief strategist at Fidelity Investments, a traditional financial services firm, quietly spearheading a bitcoin index fund?
The answer is obvious – Fidelity is moving into the digital asset space. It is not playing around and experimenting any longer. The legacy firm is developing financial services around bitcoin and other digital assets.
This is what the industry has been waiting for.
Digital assets experienced a major crash that started at the end of 2017 and lasted pretty much all of 2018. It was a real bear market in digital assets that continued well into 2019.
It’s only in recent months that interest has started to pick up again, largely with the rise of decentralized finance (DeFi).
DeFi brings traditional banking functions to the world of digital assets. These platforms bring borrowers, savers, and lenders together, much like a traditional bank does.
Borrowers can borrow money using their digital assets as collateral. Savers can “deposit” digital assets and earn interest income. And lenders can generate revenue by facilitating loans and managing capital on the platform.
DeFi is clearly a threat to the traditional financial services industry, and it is also a catalyst for companies like Fidelity to start doing something more tangible in the space.
These traditional firms can bring digital assets to millions of investors who otherwise would not be interested in them. And that means we may finally be on the cusp of widespread adoption.
If companies like Fidelity don’t figure out this space quickly, they risk becoming obsolete over the course of the next few years.
Please stay tuned…
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
