Hi Reader, here's what you need to know for May 12th in 3:12 minutes.

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Today's big stories

Palantir revealed big plans for bitcoin when the big data firm reported its quarterly earnings
Junk bonds have gone from risky and rewarding to just plain risky, so there might be big money in betting against them – Read Now
Gaming platform Roblox posted strong earnings in its first set of results as a publicly listed company

Bro Code

What’s Going On Here?

Software firm Palantir reported quarterly earnings that met analysts’ expectations on Tuesday, and ambivalent investors shrugged off the – wait, what was that about bitcoin?

What Does This Mean?

Palantir – which makes analytics tools for major corporations and the defense industry – saw its revenue grow 49% compared to the same time last year, beating both the company’s own forecasts and analysts’ expectations. But ballooning costs – salaries, mainly – kept its profit from doing the same, and investors were feeling pretty lukewarm about the whole thing.

That is, until Palantir mentioned the magic word in its conference call: the firm’s decided to accept payment in bitcoin, and it’s even thinking of buying the OG cryptocurrency to bolster its own balance sheet. That might’ve done the trick: investors initially sent its shares 5% higher.

Why Should I Care?

For markets: Palantir’s focused on quality, not quantity.
One of investors’ biggest worries about Palantir is its dependence on a small number of big contracts. Lose one, and it’ll massively dent its profitability. But the company had some good news on that front: it added 11 new customers last quarter, bringing the total to 149. Those new additions might also be why the company’s forecasting 5% more sales this quarter than analysts were anticipating.

The bigger picture: Big Tech will be the first to go.
Palantir’s shares actually fell to their lowest level so far this year at the start of the week, in what was part of a wider pattern: the Nasdaq index – heavy on Big Tech names – is down around 5% this month. That’s mostly down to a key measure of US inflation expectations, which hit heights not seen since 2006 earlier this week (tweet this). After all, if prices rise too high, too fast, the US Federal Reserve is more likely to step in and boost interest rates to slow down the climb, which would make riskier stocks – tech stocks like Palantir among them – suddenly look more expensive.

You might also like: How to work out if you could profit from Palantir’s shares

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2. Analyst Take

Should You Bet Against Junk Bonds?

What’s Going On Here?

One man’s trash is another man’s treasure, and junk bonds have certainly promised untold riches over the last twelve months.

Now, though, some of the world’s biggest hedge funds seem to have smelled a rat.

For one thing, the reward from junk bonds is pretty low these days, with the influx of new investors pushing yields below 4% for the first time ever earlier this year.

The risks, meanwhile, are only growing: company debt is at new highs, for one, making junk bonds vulnerable to any potential snag in the economic recovery.

That’s why hedge funds have taken their biggest short position on them since 2008, and it’s a bet you might want to replicate for yourself.

So that’s today’s Insight: how you can go about betting against junk bonds.

Read or listen to the Insight here

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