BATISHT CRAZY!

We scratched our collective heads over a number of “growth” darlings in these notes over the past years. But probably none of them as nutty as Palantir, which — considering we covered egregious examples like Zoom (more on this one in a second), Beyond Meat, and Peloton — is saying a lot.

Ignoring for a moment the fact that Palantir, with its controversial shady background and technology, is a perfect contender for the world’s most unsavory business...

The stock is currently trading at a… deep breath… 600x earnings and 100x revenues. Truly batisht crazy!

To put this into perspective, here’s what the CEO of Sun Microsystems had to say about his company’s valuation at the peak of the dot-com bubble:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

If Sun Microsystem’s 10x revenues valuation was ridiculous, what do you call Palantir’s 100x multiple? But hey, it’s probably different this time and Palantir’s actually a bargain.

 ZOOMING IN ON ZOOM

While on the topic of investor darlings...

Let’s quickly check in on Zoom, shall we? You might remember Zoom was a COVID staple and one of the poster children of the ensuing market mania.

At the time, Zoom had a market value of more than $150 billion (and trading at 50x revenues). And now?

Oy vey!

Having crashed 90% from its pandemic peaks, Zoom is today a shadow of its former glory. In fact, it has been going absolutely nowhere for some 3 years now. Talk about a prolonged bottom formation!

Now, it can be incredibly frustrating watching stocks trade sideways go nowhere for years on end. But the irony is that the longer a stock (or any asset, really) remains in a trading range the greater the magnitude and duration of the breakout.

At this rate, Zoom could soon make for an interesting asymmetric candidate, where it wouldn’t take a lot of the stock to double or triple. Probably not something you’ve ever expected us to say, huh?

 BONDS? BUYER BEWARE

Now, if there’s one asset we wouldn’t be touching with a 40-foot barge pole right now, it’s bonds.

If you’re a long-time reader, you’ll know we’re no fans (and haven’t been for a while). For decades, Western governments have tried to solve all growth-related problems with debt, creating the greatest financial bubble of our time.

Case in point (and keep in mind that the chart doesn’t even include the trillions of dollars of new debt the pointy shoes have tacked on since COVID)...

And keep in mind that this debt orgy coincided with a 40-year bond bull market. Worse, the bulk of the debt was issued at the lowest rates in history (looking at the below chart, we shudder to think how expensive mortgages for single-family pyramids were in ancient Egypt).

As Chris wrote back in 2022...

Because there’s so much debt in the world at such low interest rates, when reality reasserts itself and interest rates start heading back into double digits, the bond market is going to collapse. Now, I know we’ve been saying this for the last three years now at least, but it is now here.

At the time, the bond market had just started to roll over. And what a tragedy they have been since then!

Down almost 50% in just a few years (so much for a safe haven).

A rule of thumb which has served us well over the years is that the longer the bull market the longer the bear market that follows. And after 40 years of rising bond prices, is it too far-fetched to think that this bond bear market has much longer to go?

 GOING FOR PLATINUM

Let’s move on from bear markets and look at something more exciting, shall we? Specifically, platinum.

Since 2015, platinum prices were going practically nowhere (more or less). In fact, gold has outperformed platinum by some 200% over that time (so much for platinum being more precious/rare than gold).

But something has changed recently, and platinum started moving sharply higher — beating just about every major asset so far this year, including gold (h/t to @marketplunger1 for this chart).

As an MSN article described it:

Platinum is staging a spectacular rally this year, rising more than 30% in June alone and hitting $1,390 per ounce—its highest level since September 2014—putting it on track for its best monthly performance since 1986.

Of course, nothing goes up (or down) in a straight line. But our thinking is that platinum prices could double from here and still be undervalued compared to gold.

We have a small exposure to soaring platinum prices in our Insider portfolio — through a platinum producer that has nearly doubled since we added it to the portfolio in August last year (and that’s after being down 40% at some point just a few weeks ago). These aren’t trades for the fainthearted!

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