The Investment Banking Bubble

Peter Thiel is an ass. 

Like Mark Cuban, who made his money selling a bogus proposition called Broadcast.com to Yahoo during the Internet bubble, Thiel is a guy who got lucky and thus thinks this makes him both a genius and your lord. (In his case he sold as the bubble popped, something I urged at A-Clue.com even before he did it.)

Thiel's latest nonsense is that higher education is the new bubble. Which is silly. Because American college education is the world's gold standard.

It costs billions to build just one Rice or Stanford. And you can't scale it. That's why the world's elite all has one goal for their kids – to get them through an American college. The French Ecoles, Britain's elite colleges, the trial-by-examination hotspots of Germany, China and India, none provide the opportunity even a Texas A&M in Kingsville does to a Third World elitist.

Now it's true there are anomalies. The education at Harvard isn't really better than that at Rice, not really much better than at the University of Texas. What sets it apart are the fact that admission tells someone they're smart, which is a continuing boost to self-confidence, and then there are the networking opportunities. The “Old Boys” network is real, America is not really a meritocracy.

Still, the value-for-money my son is getting at Georgia State University far exceeds what he would get at Rice right now, especially if he were paying full tuition (which admittedly hardly anyone does). A B.A., by itself, isn't worth what it was 35 years ago. Now it's just the price of admission. What matters isn't where you start but where you finish. The President didn't start at Harvard. He started at Occidental College in California.

If Peter Thiel wants to see a real bubble, of course, I got one for him.

Goldman Sachs. And the other big investment banks.

Goldman is in the position of the casino dealer who not only gets a cut of every hand, but also gets to play the game, and palm the cards so he takes many of the pots. The investment banks have abused this position throughout the last decade, and when the current social media bubble bursts (and it will) – that's when the fecal matter really hits the rotating blades.

The reason is that Goldman is now fleecing, not just rich people, but the world's elites. There is no way on Earth that Facebook, Twitter, Groupon and the rest are worth what these guys are claiming. The game ends as soon as they try to get Joe Public to play the Greater Fool, a role we've been playing for years. They got away with the Big Shitpile and Great Recession because the bottom 98% took most of the hit. Now their top customers are going to take the hit, and suddenly the banks have no protection anymore.

What's been going on for years is that the game has been moving as the banks have been disintermediated by technology. These days you can make big trades on most exchanges for $10. Good companies have gotten tired of paying the 6% vig investment banks take to go public. There are fewer deals. That's why trading is the place for bankers to play. There the game is rigged in their favor. Heads I win, tails you lose. You don't have to come from Harvard to play, you just have to be invited, and (unfortunately) it's Harvard guys who have the invites.

No more. Because when the Big Boys get hosed by the Social Media crash, Goldman loses all the political protection it's enjoyed these last several years. So when Eric Holder starts dropping subpoena bombs and perp walks on the Street, the Koches and their brethren won't be telling Mitch McConnell to make it stop. Even Maria Bartiromo will be saying “you go, boy.” Which makes all the difference.

There are days when I'm really disgusted with my own Baby Boom generation. In our youth we dominated the culture, smoked and toked until we puked (and decided to stop only when we chose to), and in our later years we rigged all the games to suit our own greed.

That's over. Judgement day is coming. And if it takes kid jokers like Peter Thiel down with it, I'll be ROFLMAO.