Most SV companies are trading at at double digit price to sales ratios. Palantir is at almost 30x.

You'd think the best thing for SV to do with cash is pass keep passing it around in same circle of companies or create new companies. If every dollar spent is creating $30 of valuation, you don't stop spending under your umbrella of corporations.

The music isn't showing any signs of stopping.

Currently the US economy has the stimulus knob turned to max.

It’s almost expected to see this kind of stuff in the interim as markets are awash in liquidity.

Check out the Fed RRP use lately…

There is over $1 TRILLION dollars going through the Feds reverse repo system right now.

If you’re interested in this stuff I’d suggest following @arishisays

When Palantir buys $50 million in gold, it means that $50 million dollars has flowed to some gold broker, who will now spend it buying something else (labor, inventory, market research, sales, etc...)

Not really. Gold is an asset and has very little utility. Unless the gold broker physically dug up the material from the ground themselves (unlikely) then they would likely have had to put up dollars themselves to acquire the asset in the first place. Worse, if they bought the gold a year ago, they would have created negative value.

Wealth creation (which then flows to those things you mentioned) is typically seen when you use a scarce material to create goods and services that drive profits that then are used for those activities.

For example, let's say you bought $50M worth of gold bars, melted them and and sold them as earrings for $100M. NOW you have $50M to pay for labor, inventory, sales, etc.

I think you misunderstood, if you buy any amount of gold the amount of currency in circulation is identical before and after sale. The only difference is who has that cash and who has gold. Essentially the gold seller must value gold at or less than the sale price and the buyer values gold at or more than the sales price just like every other transaction.

I didn't misunderstand. We're sort of saying the same thing.

Palantir had $50M to spend on "something else (labor, inventory, market research, sales, etc...)" and simply shifted this opportunity to the gold broker.

The parent comment implied that this new found $50M was somehow going to magically create new opportunities for the current circulating capital. It's not.

The price of gold is speculative which means its very possible (and very likely) they lost money on the transaction.

Yes, but it’s clear Plantier had zero interest in using this money to make productive investments. The question then becomes what the gold seller is willing to do now.

Essentially a huge pool of unproductive assets like Artwork, Gold, Bitcoin, even Cash etc which seemingly hold a great deal of economic value, but fundamentally their economically irrelevant. Buying and selling them doesn’t really consume significant resources it’s just a handoff, every dollar going in is a dollar going out to either a middleman or a previous owner.

> Yes, but it’s clear Plantier had zero interest in using this money to make productive investments.

"productive investments" - what does that even mean? When a business has cash on hand it needs to decide what it is going to do with it to produce the greatest return possible. It doesn't matter whether you put it in an appreciating asset (gold bar potentilla) or an employee salary, businesses are just looking to get the highest return on the cash they have left from operations.

> Buying and selling them doesn’t really consume significant resources it’s just a handoff,

Do you think Fort Knox is free to operate?

> Do you think Fort Knox is free to operate.

Compared to value stored it was. The base was already there, they built a small building, effectively reused military manpower, and stored almost 13,000 tons of gold. We are talking well under 1/1,000th the amount stored in expenses per year. At that point fluctuations in golds value are significantly more important than storage costs.

Consider in a more modern context how much security you put around an arbitrary amount of gold vs armed ICBM’s. Store them both in the same building and the gold is practically an afterthought.

The gold broker likely bought them for $49.5 million and sold them for $50 million, much like market makers in any other market. (Or it could have just been a private party transaction).

Either way, the $50MM still exists and is circulating, facilitating the buying and selling of things. It did not disappear or go out of circulation.

> The gold broker likely bought them for $49.5 million and sold them for $50 million

If they bought a year ago, they not only would have lost money on the transaction just from the transaction alone, but would have lost even more money due to inflation.

This is why assets that provide no utility (gold) rarely create value long term.

You should google "uses of gold".

If gold was a useful raw material then the vast majority of it wouldn’t be sitting in basements.

Personally I think we should be gilding more religious icons and applying leaf to pages of college text books so they don’t seem like such a raw deal.

Palantir is going to start making earrings and selling cable wire?

well no one is saying a metal create value, they're a store of value

FYI - the parent comment implied that $50M of value was created.

Well, yes, obviously the money doesn't vaporise. My question is whether these companies are taking a bearish position by investing into assets (instead of employees/new ventures), and whether this could be a sign of an economic storm approaching.

To add to that: when people buy gold to hold onto it as an investment, it takes gold off the market and puts dollars into the market. Gold is more scarce, and dollars are less scarce. This has two effects.

1) reduces the price of dollars and increases the price of gold.

2) Incentivizes more gold mining, which means that purchasing power that could fund science or innovation is instead being used to dig metal out of the ground. Maybe gold miners are getting higher wages while some professor has less money to pay grad students. Oil is being directed to power mining machines which makes all other energy use more expensive. And so on.

Still, on the other end of the trade the capital remains parked or "hoarded" in gold. It is removed from circulation.

I don't understand what you're saying.

If Palantir buys $50MM in gold, they are not removing $50MM from circulation. They are giving $50MM to another entity, and receiving a piece of paper that says they own x number of gold bars in a vault somewhere. The gold doesn't move. The gold isn't doing anything different than it was before Palantir owned it.

The fifty million dollars continues to flow and buy goods and services. It is not removed from circulation. If you go out and buy a bar of gold do you think you are removing money from circulation?

It's not as if it always re-circulates. People often sit on cash if there are no obvious productive investments.

By "sit on cash" you mean put it in a bank account where it is loaned out to businesses and homebuyers and governments who then spend it and continue circulating it.

Or simply held as excess reserves, as has been happening recently: https://en.wikipedia.org/wiki/Excess_reserves#/media/File:Fe...

Something else could be more gold if it looks like another stupid asset bubble.