IFB25: Tulip Mania, Intrinsic Value, and the Student Loan Bubble

 
Welcome to session 25 of the Investing for Beginners podcast. In today’s show, we will discuss bubbles and how they pertain to student loans and whether or not we have a bubble in the student loan arena.

* Whether or not we are in a student loan bubble
* Different types of bubbles in the past
* How investments can impact your thought processes in regards to school.
* Determining your best intrinsic value and return on investment for a college education
* Finding your way during bubbles by practicing value investing strategies

Andrew: Yeah, so I kind of personally see a bubble that is going on right now, I know it might be kind of a crazy idea, there are some people who agree with me. Experts are putting their name out there, claiming this to be true.
I am not the kind of person to say that yes, this is going on, but this is the way that I perceive the world.
I see a sort of bubble going on with the student loan space; I just see it if you look at it the way that prices for education and colleges have risen, and the amount of debt that is accumulating at my age and for my generation.
We haven’t seen the effects of people defaulting or anything like that as of yet. But it’s no secret, you talk to the media or online, or out in the real world. The return on investment on a lot of college education these days is not what it used to be. And with the growing costs and the ease of borrowing it’s becoming awful as the days go on.
It’s hard to say if it will ever pop or if it’s going to be more a deflate thing. Or it could even continue into the future. Obviously, student loan debt is different in the sense that it’s not excused in bankruptcy, as all other debts would be.
It is interesting to watch this play out. But I think it makes for an interesting lesson. Number one we can look back at history and see where there are other parallels. Number two, it’s happening right now so something that we can observe.
Third, there is something that we can do for ourselves or for our children that can mitigate this.
And number four, it does give extra insights into how intrinsic value kind of works. And how I see the way that some of these big financial decisions that we make as individuals draw and have a lot of similarity to the types of decisions you should be making if you’re going to buy individual stocks.
And it is not black and white and drawing that to light today can potentially help some people that are, having some trouble conceptualizing everything that we talk about. When we talk about intrinsic value and buying at a discount to that value and having a margin of safety and getting the best part of buy low and sell high.
I look at the student loan bubble, and it makes me want to look at past bubbles. If you want to understand the stock market, understanding how Mr. Market works, you can find that in episode 20. It’s a great way to find confidence in the fact that you can realize that the future is always uncharted and everything is going to be new.
There is always these dependable cycles or seasons. These things that are predictable and consequences and effects of a financial market. Something that is as big and expensive as the stock exchange.
One of those things is bubbles; there is a great movie that I watched years ago, I don’t remember what exactly the name of it was. Shia Lebouef was the main character; there is a scene where he main character is inside this old Wall Street dude’s apartment, and there is some painting on the wall.
And it’s mostly making up this bubble, and the character asks about it and gets a whole lesson about how all the different bubbles, I don’t remember if he talked about the Tulip bubbles which are the fi...