Among the many most promising technologies is something called deep learning. A simple definition of deep learning is the use of artificial intelligence (AI) to carry out a form of advanced pattern recognition or advanced analytics. Deep learning has become the hottest subsector within AI thanks to technological breakthroughs in both image and language recognition that is approaching human levels of comprehension.

The potential scale of deep learning’s impact on business was laid out last month in a report from McKinsey Global Institute called Notes from the AI Frontier: Insight from Hundreds of Use Cases. The study from McKinsey found that, for some industries, deep learning has the potential to create value equivalent to as much as 9% of a company’s revenues.

One of the most promising areas for the use of deep learning, according to McKinsey, is marketing and sales for consumer-facing industries. Examples would include customer service management, creating individualized offers, acquiring customers and honing prices and promotions. Frequent interactions with customers generate the huge amount of data needed to feed the AI systems. The winners will be the companies that can sweat the largest amount of data the hardest.

Airlines Go ‘Deep’

One consumer-facing industry that is turning to big data and deep learning to improve its profitability is the airline industry. Profit margins are already narrow because of the intense competition between the airlines and now rising fuel prices are adding even more pressure.

So the industry is seeking to personalize experiences for as many travelers as possible by using the vast amount of data the airlines have on their passengers. And think about it – the airlines do have a lot of data about you – name, address, phone numbers, birth date, credit cards, favorite seating assignment, how often you visited their website, etc. In fact, some researchers say that an average transatlantic flight generates about 1,000 gigabytes of data!

Two of the airlines moving down the technology path are American Airlines Group (Nasdaq: AAL) and United Continental Holdings (NYSE: UAL).

Earlier this year, American Airlines came out with an app that allows its flight attendants to offer passengers “a gesture of goodwill”, such as air miles, when there are any sort of minor problems (such as the flight entertainment system not working). That instant customer service is a lot better than having flight attendants telling passengers (that probably have a million other things to do) to contact a customer relations representative when the flight lands. As the airline said when it rolled out the app, “Our goal is to improve the customer experience, particularly when things don’t go as planned, to make it a little bit less painful for them.”

Poor United Airlines has had a number of customer relations nightmares, such as a passenger being dragged off a plane or a dog dying. So it definitely needs to step up its customer relations game. Its flight attendants have handheld devices that give them access to customer details, such as when they last flew with the airline, whether they have a tight connection and if they have dietary requirements. And like American, United offers customers a bag-tracking service to alert them if their luggage is lost or delayed.

And United employees’ “in the moment” app will allow United personnel to compensate passengers immediately for things like flight delays or spilled drinks. Hopefully, United employees will make use of this data and technology to make passengers’ flights as easy and comfortable as possible and repair the company’s image.

Even overseas-based airlines are going ‘all in’ on big data and deep learning. Ryanair Holdings PLC (OTC: RYAAY) wants to become the “Amazon for travel” by using its customers’ data to cross-sell items, such as hotel rooms, from a one-stop-shop platform.

I expect more airlines to follow the route Ryanair is taking. Think about it – shopping an online store, while still in flight, filled with everything from ground transport options to tours to other destination-related activities. Passengers returning home could even do their grocery shopping while in-flight to have the groceries delivered when they arrive home. The possibilities are almost endless.

A study conducted by the London School of Economics and Inmarsat said that in-flight broadband – offering streaming and online shopping to passengers could create a $130 billion global market within the next 20 years.

Related: Buy These 3 Stocks Warren Buffett Used to Hate

The study estimated that the airlines’ share of that total could amount to $30 billion in 2035. That’s quite a jump from the forecast $900 million in 2018 and is just what this profit-squeezed industry needs.

Warren Buffett said famously in 2002, “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money.” And indeed the industry has been a chronic money-loser.

But even Buffett bought stakes in the four major U.S. airlines in 2017 – American and United as well as Delta Air Lines (NYSE: DAL) and Southwest Airlines (NYSE: LUV). With airlines adopting technology and using deep learning, their profitability longer-term should become more stable. That makes them an interesting investment, good enough even for Buffett.

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You can work your tail off, live below your means, save like a miser, invest like the experts, build a great retirement nest egg – and still end up with virtually nothing!

Don’t take the bait!

The hypocrisy of some financial professionals isn’t funny when you are talking about your life savings.

When I have discussions with licensed financial professionals, one of the first questions I ask is if they believe in diversification. The answer is emphatically “Yes!” Next question – “Why?”

I normally get an education about investing in non-correlated assets for protection. “Protection from what?”, I ask. The common answer is, “To protect from a catastrophic loss in your portfolio.” OK, so far….

I then ask about stop losses. I’d urge all readers to ask these questions to your financial advisor. While the answers vary; all too often they tell me not to worry, the market always comes back. They may produce graphs to prove their point, and the market does come back – eventually!

I’ll then ask, “If the market suffers a 40% drop or more, can you guarantee it will come back in my lifetime?” No, they can’t!

Here is what they leave out

NASDAQ.com tells us that on March 9, 2000 the NASDAQ set a new record – $5,046.86. The next time it set a new record was on May 27, 2015. In real numbers it took 15 years to come back.

How much buying power was lost to inflation over that 15-year period?

The US Inflation Calculator gives us a better picture:

When adjusting for inflation, the buying power of NASDAQ recovered on January 11, 2018. On 3/31/2018 the NASDAQ closed at $7,063.44. While the NASDAQ briefly passed the previous (inflation-adjusted) high, today it has less buying power than 18 years ago.

The S&P 500 fared a little better. Reuters reports:

• “March 24, 2000: The S&P 500 index reaches an all-time intraday high of $1,552.87”

• “March 9, 2009: S&P 500 closes at $676.53.”

Once again, let’s factor inflation into the picture:

When adjusted for inflation, it took almost 17 years (Dec. 2016), and a wild ride, for the S&P to recover the same buying power.

Some believe diversification, coupled with a commitment to buy and hold, is the ultimate protection. How many baby boomers would have the willpower to hang on while their portfolio drops almost 60% between 2000-2009? Can you afford to have your life savings remain stagnant for almost two decades?

Stop losses protect against a catastrophic loss resulting from a market crash. Instead of riding the market all the way down, and hoping/praying for it to return, you sell and limit your losses. Baby boomers have a shorter time frame and may not be able to patiently wait for the market to come back.

Another danger seldom discussed

A market crash isn’t the only threat to your life savings. Ask your financial advisor about how you are protected against inflation like we experienced during the Carter years – or perhaps worse.

You’ll likely get a variety of responses. Don’t be fooled with Treasury Inflation Protected Securities (TIPS). By design, they do not offer any “portfolio” protection; they only protect the money you have invested in them. The rest of your portfolio is still at risk.

Ask about gold and precious metals. Many financial professionals warn me gold is much too risky and pays no interest or dividends. I know of only one financial advisor that strongly recommends gold.

Many will point to quotes like this:

“These are people who believe that gold is, to use John Maynard Keynes’s famous description, a “barbarous relic”. Many world-class investors (such as Warren Buffett) believe that gold is just a shiny rock that has little or no intrinsic value.”

Which is it, a great inflation hedge or “a shiny rock with little or no intrinsic value”?

In 2008, when the market tanked, interest rates set historic lows. Investors were inundated with pundits predicting inflation spiraling out of control while gold and silver prices skyrocketed. I also felt it was just a matter of time before our currency collapsed. The Fed is continuing to print money hand over fist, yet somehow, the inevitable collapse has not happened.

Should gold be looked upon as a stop loss – another form of insurance protecting from a catastrophic loss? Should investors be glad we’ve not seen high inflation, despite holding a percentage of their portfolio in gold?

In this article, “Inflation Is Quietly Poisoning Your Retirement Nest Egg”, I outlined a difficult truth:

THE DIFFICULT TRUTHSaving a lot of money to supplement your social security/retirement income is merely a start. Investing wisely and protecting your buying power are major factors in allowing you to retire comfortably.

I looked at inflation of several items over the last 50 years; Federal spending, a gallon of gas, a dozen eggs, a gallon of milk, a loaf of bread, an ounce of gold and the S&P 500.

The first two columns show what each item cost in 1967 and in 2017. Column 3 (Cost-inflation adjusted) calculates what each item would cost if they rose at the government reported inflation rate. Column 4 is the difference between the actual cost and the inflation-adjusted cost. It was an eye-opener.

Federal government spending increased by approximately 146% above the inflation rate. Gas prices followed inflation. Eggs, milk, and bread are actually lower. Gold rose approximately 300% above the rate of inflation. The S&P was up approximately 175% over the 50-year period.

I’d be speculating why the inflation-adjusted price of food declined. I was surprised; particularly because of the high cost of federal regulations piled upon American businesses. Perhaps it is through efficiency and market competition. If that’s the case, free market capitalism appears to be alive and well.

The “Great Society” was launched by President Johnson in the mid-1960’s. At the time, I said the government was incentivizing out of wedlock birth and the welfare population would rise. Regardless of the cause, government spending has far surpassed the inflation rate and is doing so on borrowed money.

The stock market has outpaced inflation. A conservative investor will have a portion in the market for that reason; just keep your stop losses current.

When comparing the buying power of an ounce of gold versus gas, eggs, milk and bread over the last 50 years, gold has performed very well.

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What does this mean?

In the aforementioned article, we looked at the Carter years. Inflation between 1977 & 1982 was 59.9%.

The S&P 500 increased from $96.86 to $133.00 (37%) and gold rose from $133.77 to $400.00 (300%). Unfortunately, many diligent savers and investors lost a lot of buying power in a five-year period due to inadequate inflation protection. In many cases, the buying power was lost forever!

Stocks and gold have historically performed well. I’m sure investment artwork, farmland, and other collectibles also have a history of keeping up with inflation.

While no one can predict the future, a well-diversified portfolio should provide adequate income, protect the investor against long and short-term market corrections, and adequately hedge against inflation.

Following is a list of questions you should ask yourself, your broker and financial advisor:

• Is your portfolio diversified offering realistic protection against catastrophic losses?

• After a major market drop, are you comfortable that it will return to its previous inflation-adjusted high in your lifetime?

• Do you have stop losses in place to protect from a significant market downturn?

• Do you feel that runaway government spending will inevitably cause high inflation?

• If we experience 60% inflation like we did during the Carter years, is the buying power of your life saving adequately protected?

Vague answers and “trust me” won’t cut it, get the facts and make sure you are totally comfortable!

I’ve come to the conclusion that gold serves the same role as a stop loss – helping to insure and protect my life savings from the most catastrophic threat of all – runaway inflation.

With government spending and debt exploding as it has, I’m surprised we haven’t already experienced Carter type inflation once again. The Federal Reserve has magically managed to keep the market levitated and inflation reasonable. How much longer can this continue? No one knows; it’s uncharted territory.

I hope to never experience the horrible Carter year type of inflation again; however, I’m not selling any of my metals. Inevitably the dollar will lose a great deal of value in a short period of time. If not in my lifetime – our heirs will find their precious metal coins to be quite valuable.

Help keep us on the air!I’m committed to keeping our weekly letters FREE. I was humbled when readers suggested we add a donations button to help us offset the cost of our publication. We are grateful for all the help we can get. It’s strictly voluntary – no pressure – no hassle! Click here if you’d like to help. You do not have to sign up for PayPal to use your credit card. And thank you all!

The old way of providing healthcare in the United States is fast disappearing and being replaced by new technologies, which is changing the way healthcare is dispensed. And many of these new providers of healthcare are not your traditional healthcare companies. These are among the findings of the latest research from PricewaterhouseCoopers (PwC).

Some interesting data garnered by PwC illustrates the changes occurring. PwC found that only 17% of doctors used EHRs (electronic health records) and 11% of people in the U.S. had a smartphone in 2008. But now those percentages have risen to 87% and 79%, respectively. That essentially opens the door for technology firms to step through and deliver what patients want and need, faster and more effectively than traditional healthcare providers.

No wonder then that PwC said it found that the U.S. healthcare system is undergoing “seismic change”.

This seismic shift in how healthcare is provided is being led by very familiar technology names – Apple, Google, Microsoft, IBM and, of course, Amazon.com (Nasdaq: AMZN).

Amazon AI and Healthcare

I have written about the latter’s forays into the healthcare field several times and for good reason. A recent survey (2018 Healthcare Prognosis Survey) from the venture capital firm affiliated with the Rockefellers, Venrock, found that 51% of participants thought Amazon would have the biggest impact on the healthcare industry in 2018 among the technology firms. The next closest was Apple at 26%.

Among the healthcare initiatives coming from the company are Amazon, JPMorgan and Berkshire Hathawayannouncing (in December 2017) the formation of a new healthcare company which would use technology to provide high-quality healthcare to patients and families more simply, and at a more reasonable cost. The initial focus of this company would be the employees of the three companies.

This move and just the rumor of Amazon’s entry into pharmaceutical and medical supplies distribution sent the stock prices for more established healthcare companies and pharmacy chains tumbling a few months ago.

Amazon is well-known as a disruptor into whatever industry it gets into, so it is intriguing because the U.S. healthcare industry is so ripe for disruption. Just consider this…

In 2016, U.S. per-person healthcare expenses were $10,348. That was more than double that of other first-world countries that offer universal health coverage. Here are some examples from other developed countries: $4,752 in Canada, $4,600 in France, $4,708 in Australia, and $4,192 in the U.K. And for all that money here in the U.S. in many ways our healthcare below that of other advanced nations. For example, medical errors kill more Americans annually than motor vehicle accidents.

Much of what Amazon (and others) are likely to do will center around the use of artificial intelligence (AI). This is the model followed by the Chinese tech giants, Alibaba and Tencent, which have been experimenting with employee healthcare software for years now.

The New York Times reports that over 130 Chinese tech firms were using AI to increase efficiency and accuracy (right diagnoses) in the overburdened Chinese health system. The Amazon venture with JPMorgan and Berkshire Hathaway will likely go down the same path, perhaps using AI to forecast patients’ needs based on data collected from patients with a similar health history.

Alexa, How Am I Feeling Today?

If Amazon does go down the AI path, a big part of that will involve its smart assistant, Alexa. There are lots of rumors around that Amazon is building a “health & wellness” team within its Alexa division.

Alexa is already being used in a number of healthcare-related ways. Here are just a few…

In September, Amazon announced that basic health information and advice provided by the Mayo Clinic would be available on Alexa. Users can download the Mayo Clinic First Aid skill on their device and then voice their concerns to the machine, which will give answers to dozens of everyday health issues or other self-care instructions. In a similarly vein, in March 2017, people looking for quick answers to care questions could also integrate the WebMD skill on any Alexa-enabled device. Next on Amazon’s list for Alexa may be diabetes care. Last autumn, the winner of the Alexa Diabetes Challenge was a voice-enabled diabetes support platform called Sugarpod.

The ultimate goal is to make Alexa more “useful in the healthcare field” with information on health for expectant mothers, newborn infants, people with disabilities, people with chronic diseases and tools for our aging population.

The main obstacle may be the government’s HIPAA requirements to ensure users’ data remains private. But I suspect Amazon will work through this and become HIPAA compliant. After all, they are not Facebook.

Investment Implications

Besides investing in Amazon, what are the investment implications of this upcoming change in how healthcare will be delivered?

Some on Wall Street say that Amazon has lost all interest in the distribution of drugs and medical supplies to hospitals and other healthcare facilities. I think these are just hopeful wishes coming from people that own the traditional healthcare supplies provider stocks.

Related: Sell These Healthcare Middlemen About to Get Amazoned

In other words, the companies that I told you before that are vulnerable to disruption from Amazon still are. Some of these I’ve mentioned before including drug distributors Cardinal Health (NYSE: CAH) and McKesson (NYSE: MCK). But it also includes companies that move basic supplies to doctors, dentists and veterinarians such as Henry Schein (Nasdaq: HSIC) and Owens & Minor (NYSE: OMI). Just a few months ago, the CEO of Owens & Minor, Paul Cody Phipps, said on a conference call that Amazon was talking to many large hospital systems, “including our customers.”

Two ETFs that are loaded with middlemen stocks, the iShares U.S. Healthcare Providers ETF (NYSE: IHF) and the SPDR S&P Health Care Services ETF (NYSE: XHS), should also be avoided.

Amazon will make it a tough environment for the middlemen that have fed at the healthcare trough for many years. And even President Trump’s recent speech on healthcare took aim the middlemen, and he vowed to eliminate them. These companies will be at the epicenter of the seismic change in the U.S. healthcare system and should be avoided.

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With Chinese trade war turmoil rocking Chinese stocks on American markets, many investors are wondering if they should still consider buying Alibaba Group Holding Ltd.‘s (NYSE: BABA) stock.

If Wall Street is to be believed, investors should stay far away – between January and May, Alibaba’s stock dropped 18% as the White House pushed for aggressive trade restrictions on Chinese firms.

But Wall Street is overreacting…

As the company’s recent earnings report illustrated, Alibaba’s growth potential has only gotten stronger over the last year. Earnings increased 44.4% year over year, while revenue increased 61% to $9.87 billion.

According to Money Morning Executive Editor Bill Patalon, Alibaba is “one of those rare companies that is so well-positioned, and that has such a great management team, and that has the benefit of serendipitous timing with a powerful, transformational trend” that even something as significant as a trade war can’t stop it.

Here’s why now is a great time to buy China’s best retail stock…

Alibaba Is Trade War-Proof

Alibaba’s key to success is China’s immense middle class.

According to Forbes, China has more than 500 million middle-class consumers – twice the population of the entire United States.

And analysts estimate that this number will balloon to well over 600 million by 2022.

This demographic growth has turned China’s retail industry into a $6 trillion dollar business – a 400% increase from 2010 and a 900% from 2000.

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This growth is expected to continue as China’s middle class does an increasing amount of shopping online.

In the last three months of 2017, online retail sales in China soared 35.4%. By the end of the decade, China is expected to account for 60% of all global e-commerce.

Last year, Chinese shoppers spent more than $1 trillion online for the first time ever. For context, the United States spent $455 billion – less than half of China.

Alibaba, already China’s largest digital retailor, is raking in profits from this explosion in digital commerce.

The company controls over 50% of the Chinese online retail market, and its competitors aren’t even close to matching it.

That’s why we’re not sweating the threat of a trade war or Wall Street’s overreaction.

As Bill puts it, “these issues are really just ‘speed bumps’ when viewed from the context of a stock that will create generational wealth in the decades to come.”

This company is simply too dominant in a massive, and growing, e-commerce market.

With such tremendous tailwinds behind it, Bill has an easy trade strategy for Alibaba that promises huge returns…

For years now, Alibaba has one of Bill’s favorite stocks to buy.

That’s why when Alibaba was trading for $69 shortly after going public in January 2016, Bill recommended the stock as a “strong buy.”

Even when shares soared to $180, Bill still recommended the stock as a “strong buy” despite it having already returned 162%.

Today, with trading back at $180, Bill sees Alibaba as the perfect “on sale” buy.

Bill recommends what he calls an “accumulate” strategy when it comes to Alibaba.

“Buy a stake now, and add to that stake on pullbacks – or even when you have some ‘spare change,'” he says.

In other words, because Alibaba’s growth potential is still undervalued by the market, buying shares at any near-term price decline is a steal.

Alibaba is currently trading around $183. However, Wall Street sees the stock heading to a 12-month high of $259 – a gain of 41%.

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Source: Money Morning