Finance: Wanna Know A Secret?

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People familiar with the company say it reminds them of an intelligence agency, collecting and analyzing data about everything.  Some believe that it has placed sources in virtually every major company, who then report on the developments at those firms and the unfolding trends they discover.  The CIA, FBI, and police departments around the country are among their blue ribbon clients and it collaborates with major institutions about the latest economic and market trends.

Yet, despite all of these capabilities, many people have never heard of Palantir Technologies (symbol: PLTR).  Although the company has been the focus of many business headlines lately, many of its activities remain under wraps.   

But what is known is that this is a unique company, deeply entrenched in gathering and analyzing information about events unfolding around the world and possibly even some that are yet to happen.  That’s why investors are undoubtedly intrigued by everything it does, and in all likelihood most everyone else too.

These are a few of the reasons Barron’s reported Palantir›s recent filing for the second quarter, why many investors read that report and why they were surprised by what they learned.   

The report said that in August alone Palantir had invested $50.7 million in gold bars — not mining shares, not a precious metals ETF, but physical gold.  In other words, Palantir is now hoarding piles of 100 oz. gold bars. 

Why is it doing this?

Scary Stuff

The company’s explanation for this decision raised even more eyebrows.  “You have to be prepared for a future with more black swan events,” Shyam Sankar, the company’s COO said in an interview.  Investopedia defines the term “black swan” as an unpredictable event that could potentially have severe consequences.

A comment like this would be unsettling no matter who makes it.  But when made by Sankar, a senior executive at a company involved in intelligence gathering and analysis, it’s even more disturbing.  After all, Palantir’s business is to prepare for the unexpected.      

So why did Palantir buy gold, why now, and why did it opt for the physical metal?  These are relevant questions.  But there are others, too. 

According to the company’s filing, their gold will be stored in the Northeast.  Why not at the Denver headquarters, where it can be accessed any time the company wants? 

A few other questions also come to mind.  A $50 million investment is certainly significant when made by an individual or by a small company.  But Palantir has a market cap of nearly $50 billion so additional details need to be clarified.  Is this only their initial investment in gold and to be followed by others?  Do they have any holdings in Bitcoin and/or other cryptocurrencies? 

Unfortunately, there are many additional reasons to be concerned about an upcoming black swan event and following are just a few of these: 

*Both stocks and real estate are at or near all-time highs.  A growing number of experts are warning that some prices have become so overvalued that they could drop sharply and possibly even crash;

*At various points in the fairly recent past the US dollar, British pound, Australian dollar and the Euro have experienced significant weaknesses.  More recently, the Iranian Rial, the Vietnamese Dong and Indonesian Rupiah have been exceptionally weak.  Other currencies completely collapsed because of political and/or economic developments, including those in Zimbabwe, Turkey, Venezuela, Lebanon, and Argentina.  Major economic upheaval could follow if people continue to lose confidence in fiat money;

*China has clearly become very authoritarian, clamping down on some billionaires and on companies that already have or that are planning to go public.  This is one of the reasons many tech stocks there  crashed by 50% or more.  A continuing selloff could spread to markets in the US and elsewhere;

*Less than a year ago major rioting and looting broke out in cities across the US.  Thankfully, those have stopped.  However, tensions remain high regarding vaccine mandates, de-funding police, and other social and political issues.  Given the fragile calm, any unexpected events could set off renewed rioting, jolting the economy, the market, and having unexpected consequences. 

In other words, there are no shortages of very serious issues out there that could cause a black swan event.  Is this why Palantir has purchased gold bars?

Beating The Street

Meanwhile, the company is enjoying strong growth.  Revenues for the second quarter ended June 30 grew by 49% to $376 million, beating both their own forecast and the Street’s estimate as well by a wide margin. In mid-August Palantir forecast that sales will grow 33% in the third quarter.

Given all these positive developments it’s no surprise that Wall Street has taken notice.  Cathie Wood, the well-known fund manager of ARK Invest and other funds, has started purchasing shares at least six months ago, and after second quarter results were released began purchasing shares for every ARK Invest fund she manages.  Of course, what Wood believes is good for ARK funds doesn’t necessarily mean that it is a good idea for everyone else. 

There is a growing trend of companies using their cash to purchase unconventional assets like gold bars and Bitcoin.  For example, earlier this year Tesla invested $1.5 billion in Bitcoin, and also said it would purchase gold under certain circumstances.  Other well-known companies have expressed similar views.

Given the uncertainties and risks in the markets these days, this trend could simply be an example of companies taking advantage of opportunities that come up.  Still, one can’t help but wonder if they are making these purchases because they know something the rest of us don’t.  

Sources: barrons.comfindwords.infoyahoofinance.comwsj.com.  You Tube: Why Palantir And Tesla Are Adding Gold And Bitcoin To Reserves; Cathie Wood Buying Palantir For All ARK Funds.