Thiel's Clarium Capital was down 16.4 percent through November, the New York Post reported, with assets down to $1.6 billion from a historic high of $7.3 billion, capping a string of monthly declines we reported previously. And yet, in a lengthy interview with Big Think (embedded below), the PayPal co-founder sounds as imperious and sanguine as ever, calling Baby Boomers "the dumbest generation" for launching two massive financial bubbles in a row , and saying the country needs to get over its immediate financial pain and invest for the next 20 years (see excerpt above).

Both points have some merit. But a dot-com executive needs balls of steel to cast financial judgment on the generation whose recklessness made him hundreds of millions of dollars, particularly when he took that money and used it to start a now-flailing hedge fund.

And that bit about long-term thinking is scarcely comfort to Americans in financial peril — like Thiel's own managing director Jack Selby who, a Clarium insider tells us, ended up in heated fights with Thiel earlier this fall "about how blasé we can be about our recent performance." Thiel thinks Clarium can think long term; Selby purportedly thinks the bleeding must be stanched more quickly.

Jack is the one who has to market the fund; Selby actually has very little to do with performance. Peter's responsible for this mess himself and he knows it, as he vets all our big moves.

Selby reportedly said Clarium had to turn around its performance by the end of the year; Thiel retorted that this was short-term thinking. Selby then took offense, and Thiel — blowing his constant, almost robotic even temper — "blew up at him. We are under a lot of tension here."

With the end of the year fast approaching, it's inconceivable that Thiel's fund can meet his managing director's would-be deadline. Judging from his Big Think video, it doesn't look like Thiel is letting this affect his holiday spirits. Well, maybe he's on to something, again. Obsessing over money will do few people any good this Christmas. Even if they're supposed to be "managing" hundreds of billions of dollars.

Our favorite fake answer is tech investor Peter Thiel's theory that the interent is a harmless network of FAX machines. Always running PR for our future robot overlords, that one.

Ranked the 377th richest American last year, with a net worth of $1.3 billion, Thiel has dropped off this year's Forbes 400 list entirely. In the middle of last year, he could brag that his Clarium Capital had averaged an annual return of 30 percent, net of fees, over six years; these days Thiel is quoted in the Wall Street Journal blaming the irrational economy (when is not?) for his fund's outflows and double-digit declines. These things tend to come in threes, so we're waiting for the next shoe to drop.

Then Thiel can speedily move on to the inevitable next phase: Redemption and comeback. At 41, he's got many more acts still to come.

(Pic: Andrew Mager)

The S&P 500 is up to 1,060 from a February low of 666. But Thiel's fund keeps getting battered. Clarium Capital is down 16 percent through mid-September, by the Wall Street Journal's calculation, and Thiel admits to the paper he's not eager to join the stock rally: "The recovery is not real... deep structural problems haven't been solved" said the entrepreneur, who in similar comments recently branded as "fraud" major tech research, as well as the dot-com boom in which he started his fortune-making company.

If Thiel's concerned with underlying fundamentals, it's odd he's placed himself in the corner of financial services most obsessed with market sentiment, expectations and gyrations: hedge funds, the sector given a face by Mad Money host and former hedgie James Cramer. If Thiel doesn't want to chase fake bubbles like a clown, perhaps it's time to leave the circus.

(Thiel pic via David Orban)

O'Keefe told the Washington Post he acted independently in making his ACORN videos. But the Village Voice has traced a series of benefactors to the firebrand: The Leadership Institute conservative think tank appears to have given O'Keefe $4,000 for a monitor with which to make his movies, and $500 to start his conservative newspapers. Then there's the "small government group" through which the money of PayPal co-founder and Facebook investor Peter Thiel came.

Thiel's people told the Voice that Thiel didn't know of O'Keefe's videos until he saw them on YouTube. But they acknowledged that $10,000 of his contributions reached O'Keefe. O'Keefe's estranged friend Liz Farkas apparently told the publication that Thiel ponied up a full $30,000, and that the money was used to produce the ACORN video. Thiel's people disputed that larger sum, to the Voice. But they acknowledged that the group Thiel funded was behind another O'Keefe video, in which fake, oversized "Sweepstakes" checks are delivered to various families and revealed to be bills, a stunt designed to illustrate the scale of recent federal bailouts.

Any modestly resourceful college kid knows how to stretch $10,000, so it's quite possible Thiel's money ended up being used on the ACORN video, even if he didn't know it. Why not embrace the fact? Here is a young man whose clever reporting stunt showed up the mainstream national media and may well be the undoing of its subject. O'Keefe started a conservative college publication, just like Thiel, and wants to bolster right-wing politics using YouTube, just like Thiel.

Besides, with his funding of O'Keefes earlier video, Thiel has gotten over his earlier disdain of media producers who "try to be gratuitously meaner and more sensational than the next person... like a terrorist who is trying to stand out and shock people." Those were the words Thiel used to condemn Valleywag as "the Silicon Valley equivalent of Al Qaeda;" they would seem to fit O'Keefe nicely.

(Thiel pic by Auren Hoffman)

The $1.5 billion hedge fund — one-fifth as large as it was a year ago — fell 4.5 percent in August, a tipster whispers to us, virtually the same loss it posted in June; StreetInsider.com hears the same thing. The fund is now down 8.3 percent for the year, the tipster said. That's versus versus 6 percent at the end of June. If Thiel can't turn things around soon, why not consider unwinding the fund altogether? He's still got his early Facebook investment to cling to, and the unshakable confidence that he's surrounded by "frauds" who aren't half as smart as him. Sounds like a once and future startup founder to us.

(Pic: by Robert Scoble)

Musk and his private rocket company, SpaceX, are "urging the White House to come up with... financial support" for their Falcon 9 heavy rocket, the Wall Street Journal reports. SpaceX would then charge the government to send astronauts and space-station parts into orbit. Luckily for Musk, the president appears to have a soft spot for profligate futurists. In addition to funneling $465 million to help Tesla manufacture an electric sedan, the Obama administration is also considering hiring private companies — like SpaceX — to launch and supply a forthcoming space station, the Journal says.

The bailout could hardly come at a better time; despite private infusions totaling at least $120 million, and millions in fees from government customers for its first few launches, SpaceX has become famous for its failed launches. The company notoriously sent the ashes of Star Trek actor James "Scotty" Doohan into the South Pacific rather than toward the stars, giving the startup a perfect 0-for-3 record. In the intervening year, the company has successfully launched exactly one satellite, and been bailed out by PayPal co-founder Peter Thiel. Thiel, a libertarian, no doubt relishes the thought of displacing NASA bureaucrats. But he'll have trouble explaining to his pro-oil-drilling, anti-immigrant political buddies why he's helping a Democratic administration grow the federal debt through a massive pork-barrel subsidy to an environmental entrepreneur, from South Africa.

Come to think of it, the administration in question might have trouble explaining that, too.

(Pic: Musk, lower left, observing a rocket launch, via SpaceX)

Zivity made several big mistakes:

• No hardcore: Zivity clung to artistic pretensions, screening pictures for "tastefulness," "respect," and "promoting female beauty." Which is morally commendable, but proved disastrous from a business perspective; free tasteful nude pictures are chock a block on the internet; as even Arianna Huffington knows, people only pay for the fetish stuff.
  
• Suicide Girls: As Fleshbot noted when Zivity launched (NSFW link), amateur-y SuicideGirls.com already had a large online adult community when Zivity entered the fray. Suicide Girls also had a large user base of people interested in amateur, or at least amateur-looking, porn.
  
• It cost money: Really good amateur content has proven it can attract readers; really good professional content can make people pay. Zivity tried to combine amateur content with a $10/month subscription model — before it even had any breakout hits.

One thing you can't blame for Zivity's crumble: Brain-dead, sexually repressed male patriarchy. The site was started by Cyan Banister, a seasoned tech exec and sysadmin — and one of her site's first models (see picture at top). And its early investors included none another than Peter Thiel, Silicon Valley's most prominent gay venture capitalist.

Thiel has said there are "only a handful" of companies "truly innovating" in tech today; perhaps he can show Zivity how to unlock its inhibitions and push the envelope while there's still a little time left for the vastly reduced site.

(Top pic via Fleshbot, NSFW link)

Clarium Capital lost 4.4 percent in June, taking it to a 6 percent loss for the year, a source with knowledge of the fund tells us. The New York Post heard the same numbers. Fund assets, our source adds, are at $1.5 billion.

As the chart above shows, that's quite a fall. Clarium had $7.8 billion at the end of June 2008, the Post reports, a figure in line with other media reports at the time. It was only a few months before funds fell to $4 billion; by the end of last year they had fallen to $2 billion and would skid still lower.

The dwindling assets are fueled in part by investors withdrawing their money; the withdrawals, in turn, must have something to do with uninspiring monthly returns, shown in the chart below.

Maybe Thiel should blame the government. He is said to reign over a Silicon Valley "mafia" of former acolytes, but the libertarian has never been particularly comfortable with power when it's wielded by the government. Tech-savvy Thiel may have been smart enough to invest in Facebook, but he's had trouble navigating an economy increasingly run out of Washington.

Clarium Capital boss Thiel was an early investor in Facebook, where he sits on the board of directors. But Thiel, an outspoken campus conservative at Stanford, has had trouble reconciling his self-professed faith in science and innovation with the "fraud" he argues "major research is turning out to be."

So perhaps it's no surprise Thiel is eager to fight climate-change legislation grounded in "major research." He's a key backer of American Solutions for Winning the Future, Newt Ginrgrich's group to support oil drilling and coal mining. The political organization just produced a new attack ad to try and derail the Waxman-Markley climate change bill, which would cap greenhouse gas emissions and charge energy companies for exceeding them.

And boy is it terrifying! Maybe after all the bridges fall down, everyone's homes are foreclosed and millions of families starve, John Doerr can personally apologize to Thiel for trying to get rich off cap-and-trade.

Thiel's Clarium Capital was gutted during the financial meltdown last year. This year has been slightly kinder; Clarium fell just 1.7 percent January through May as the S&P 500 gained as much. Last month, Clarium fell 1.4 percent even as the S&P rallied, rising 4 percent. (See fund report below.)

No gain means no money for Clarium; the fund reportedly derives its fees only from earnings, rather than as a percentage of assets.

That might explain Thiel's sour comments at a recent Wall Street conference, where minutes (left) reveal the Facebook investor declared major research "to be fraud" and described the "tech boom of the late 1990s as fraud." Does this mean Thiel will refund the fortune he made selling PayPal, which made its name during said boom?

Thiel also apparently "discussed large-cap tech names in a pejorative manor [sic], stating that betting on established technology companies like Cisco, Microsoft and Intel is a bet on no innovation."

"He thinks we should be looking for companies that are truly innovating, of which there are only a handful."

Presumably, only Thiel knows who the truly innovative companies are. Too bad he's not been able to translate that knowledge into cash lately.

(Top pic: Steve Maller for TechCrunch 50)

The hedge-fund chief today answered a series of questions about his press on PE Hub, a website for the private-equity industry. Valleywag's coverage of Thiel figured prominently. Some choice quotes:

I think they should be described as terrorists, not as writers or reporters. I don't understand the psychology of people who would kill themselves and blow up buildings, and I don't understand people who would spend their lives being angry; it just seems unhealthy.

Awww, he thinks we're angry!

It's like terrorism in that you're trying to be gratuitously meaner and more sensational than the next person, like a terrorist who is trying to stand out and shock people.

It's odd that Thiel would equate provocative writing with terrorism when the arch libertarian seems so comfortable saying sensational things to get attention. Last month, he wrote that women's suffrage ruined democracy in the early 20th Century. At Stanford Law School, Thiel started a conservative newspaper and is said to have had some kind of noisy fight with campus liberal Rachel Maddow, now of MSNBC fame.

So it's surprising that Thiel is so tight-lipped after saying "what gets written is half right, and half entirely wrong." We'd love to hear specifics. Sadly, as in our past attempts to get comments from Thiel, none have been forthcoming.

Thiel is hardly alone in trying to turn tech blogs into a rah-rah chorus. There is now an entire media ecosystem dedicated to disseminating CEO and investor spin. Thanks to Thiel, anyone who questions the publicist-approved message can now be labeled a terrorist. Whatever: Valleywag will continue to be a place that prints the truths that others are too polite to say out loud.

And Peter, on this my first day as the Valleywag, you couldn't have picked a better welcome gift.

I still remember the day I called you up and tried to recruit you to Valleywag — only to learn that that sneaky rapscallion Nick Denton had beaten me to the punch by one whole day in offering you the night shift at Gawker. It all worked out in the end — and perhaps better than I could have imagined back in 2007. But the main lesson I take away from that is that you can get Denton to do pretty much whatever you want if you're patient enough.

Denton, who has a weakness for idle truisms, likes to say that gossip is a young man's game. But you're old enough to remember the first dotcom bubble, and how it popped. That's going to be key in the next few years. We may escape a depression, but Silicon Valley is facing a reckoning nonetheless. Too much venture capital chased too few idea for far too long — and a buoyant economy can no longer hide the startup factory's mistakes.

The biggest mistake you can make is getting too close to your Valley sources and fall for their groupthink in order to ingratiate yourself. (You know how I've scolded you for gullibly buying the hype that Twitter is an amazing source of real-time news. Okay, perhaps it was — for five seconds, before the blowhards, spammers, and self-promoters found it.) At least your schooling will help you remain an outsider: As a Berkeley grad, you'll have an instinctive dislike for the Valley's Stanford in-crowd.

At the same time, don't forget that your years living, studying, and working in the Bay Area give you a better understanding of your beat than anyone can have from 3,000 miles away. Gabriel and Nick, though well-intentioned, have the Manhattan media habit of confusing proximity with relevance. Gawker is much more than New York now — and Valleywag's unique place therein must be firmly grounded in northern California's shaky soil.

Remember: Love is far more powerful than hate. Keep a clear-eyed passion for the Valley. Most tech reporters here secretly loathe their subjects, but try to disguise it with a supine gladhandery as they beg for scoops about new startup website features. They hate themselves and the people they write about. Sad, right? By loving the Valley, you can write about it more honestly than any of them. Just prepare to have your heart broken again, and again, and again. To truly love something, you must love it with all its failings.

For example, the Valley's Alice-in-Wonderland economics — why is Twitter worth more than most startups precisely because it has no revenues to speak of? But the thing you must love most about Silicon Valley — the part of the story the local press corps always skips over in favor of buzzwords, punditry, and lazy analysis — is its people.

The Valley's story is not one of chips and code. It is not a tale of technology. It is the always-running tragicomedy of the people who make technology.

Here are a few characters to watch. I hope it helps — but I can't wait to see who you add to the list.

Marissa Mayer Valleywag's first story remains its best. The public face of Google, Mayer also runs search, the only business that matters there. The cupcake frosting of her girly image — one she assiduously advances at every opportunity — may humanize the otherwise robotic computer scientist. But it is a distraction. The real question to ask about Mayer: Does her spreadsheet-ridden management style scale to new problems beyond search? Are her strengths now turning into limitations?

Mark Zuckerberg Ignore the nerd façade. Facebook's 25-year-old CEO is headstrong and ruthless. Here's the grand irony of Zuckerberg's revolutionary venture: He claims to be all about openness and sharing. But his imperious, my-way-or-the-highway management style has created a fractious culture of dishonesty, delusion, and disillusionment at the social network. His underlings either learn to say things they don't believe, or they move on. This is why Sheryl Sandberg is exactly the wrong COO for Zuckerberg. The veteran of the Clinton Administration has forgotten her Google training and reverted to Washington-player form, where staying on message is all that counts. Facebook's best hope is that Zuckerberg learns from his mistakes — but first he has to recognize them as mistakes.

Carol Bartz Yahoo's CEO swears like a sailor. At last, a boss who has found the right language to describe Yahoo's plight! Bartz brings a refreshing frankness to Yahoo. But the already demoralized troops she inherited will need to start seeing results. Otherwise, Valleywag will continue to be a steady recipient of leaks from Sunnyvale.

Elon Musk The CEO of Tesla Motors and SpaceX is living the geek high life, playing with fast cars, rocket ships, and other people's money. It's wonderful that Musk has realized even a small part of his childhood fantasies. But he risks destroying his dreams by refusing to reconcile them with reality. Factcheck everything Musk says. For example, was he actually running either Zip2 or PayPal, the previous dotcom successes he likes to cite in his bio, when they were sold?

Owen Van Natta Everyone is going to give MySpace's new CEO a pass, because the so-called "social portal" is so clearly troubled. If the former Facebook executive succeeds in a turnaround, it will be viewed as an astonishing achievement; if he fails, people will say no one could save MySpace. That's not fair. Hold his feet to the fire, and judge this disturbingly tan rock-star boss like anyone else on the list.

Peter Thiel Thiel, the PayPal cofounder, likes to brag about how he recruits only the best brains from the best schools to work at Clarium Capital, his hedge fund. Oh, really? Take a look at their résumés on LinkedIn. Like so many of this outspokenly harebrained libertarian's theses, the claim sounds good on paper but doesn't stand up to inspection. Valleywag, alone in Silicon Valley, can take a keen look at Thiel's rhetoric without being dazzled by his inflated wealth.

Tim Armstrong Like Van Natta at MySpace, Armstrong, a Google golden boy now charged with running AOL, will be enjoying a honeymoon. Don't worry: There are plenty of disgruntled AOLers who will gladly help you break up the lovefest.

Jimmy Wales Remind me: What does Wikipedia's founder actually do to earn his keep, besides give speeches? In all this time, I was never able to figure that out. Maybe you can!

Eric Schmidt When did Google's CEO turn into such a raging egomaniac? When the blogosphere was the only corner of the Internet that criticized him, he dismissed it as a "cesspool." But now everyone from Hollywood to the New York Times to the Federal Trade Commission is looking askance at his online empire's practices. "Don't be evil" has turned into "don't get caught." He will, though. Be ready when he does.

Larry Page and Sergey Brin Google's wonder twins have achieved geek nirvana, creating a cloistered campus with free food, lava lamps, and exercise balls to spare. They have a fleet of jets to transport them to rocket launches or rendezvous with Richard Branson and Bono. They've even managed to get married and reproduce. Just one question: Are they still sane? Were they ever?

There are many people who will help you — many of the same people who helped me so much, I hope. They include:

• Nick Denton, for putting up with three years of playing hard to get — and then putting up with much more besides.
• Brian Lam, Choire Sicha, Noah Robischon and Lockhart Steele, for tag-teaming me into taking the job.
• Gabriel Snyder, for expertly steering Valleywag into Gawker's welcoming arms.
• All the Valleywaggers: Paul Boutin, Nick Douglas, Megan McCarthy, Tim Faulkner, Mary Jane Irwin, Jordan Golson, Nicholas Carlson, Jackson West, Melissa Gira Grant, and Tim Woolery. You guys, we've been through so much together!
• Richard Blakeley: We made sweet Photoshop magic together.
• Everyone at Gawker Media: How much do I love you? Far more than just five milligrams.
• Sarah Lacy, Kara Swisher, and Peter Kafka: My peers and fellow purveyors of Valley gossip, you constantly inspired me.
• Countless sources, tipsters, and fellow scribes: Please understand that I esteem you none the less for not naming you here. In fact, your continued anonymity is the best sign of my abiding affection.

The image associated with this post is best viewed using a browser.Good luck, Ryan. I'll be reading eagerly.

Don't screw it up.

Yours,

Owen
The Valleywag

(Photos by Brian Solis and Scott Beale/Laughing Squid)

Thiel, according to a 2006 Bloomberg profile, has invested his entire liquid net worth in Clarium. That's not quite technically true: Thiel has actually invested his money in a separate account managed by Clarium according to the same strategy his firm uses for outside investors. (Clarium has two other such separately managed accounts, but they are small in value.)

These matters are disclosed to the investors Clarium courts. One forwarded a copy of Clarium's marketing materials to Valleywag. Figuring out Thiel's holdings is a simple matter of subtraction.

Clarium LP, the name of Clarium's main fund, had $1.7 billion in assets under management as of March. The firm's "strategy assets" — total assets, including separately managed accounts — add up to $2.1 billion. So the ceiling on Thiel's liquid net worth is $400 million. (That's not counting his 5 percent stake in Facebook, recently valued at around $100 million.) After losing roughly $5 billion in assets from bad trading and client withdrawals in the second half of 2008, Clarium has continued to perform poorly, entirely missing the recent market rally.

So who cares if he's a hundred-millionaire instead of a billionaire? Thiel does, for one. He did not make nearly as much from the $1.5 billion sale of PayPal as he believes he deserves, according to people familiar with his thinking — the source of a long-simmering feud with top Valley venture-capital firm Sequoia Capital, one of PayPal's backers.

And a perception of outsized wealth is the source of his newfound social standing in Manhattan, where he recently relocated. It's the reason why he gets impromptu dinner invitations from the likes of New York Mayor Mike Bloomberg. It's the reason why people pay the slightest attention to his crackpot social theories. Take away that crucial tenth digit on his net worth, and he's just another indistinguishable member of the averagely ultrarich.

Clarium's strategy is to take advantage of supposed distortions in the market caused by government intervention. But the New York State Common Retirement Fund has intervened more directly in Thiel's fund, investing $8 million over the course of three months last spring — just in time for Clarium's holdings to crater from $7 billion to $2 billion. The market meltdown didn't help, but Clarium's stated strategy should have thrived in last year's environment, given the Bush administration's repeated attempts to prop up Wall Street. But perhaps it's a sneaky stratagem to bankrupt the government!

While mismanaging public money, Thiel has also made sure he won't be refilling the state till anytime soon. Thiel is actually far less rich than people think. (A Clarium insider tells us, for example, that there's no way he's a billionaire, as Forbes has reported.) His single best-performing investment is not Clarium, but rather his personal 5 percent stake in Facebook, which he purchased for $500,000 and is now conservatively worth $100 million. Sources at Facebook and Clarium confirm that Thiel holds his Facebook shares through a Roth IRA, which allows tax-free withdrawals on his retirement. He'll have paid at most $175,000 in taxes on that fortune. Getting the government out of one's pocketbook — it's every libertarian's dream!

And perfectly legal. Thiel believes neither death nor taxes are inevitable. (When he's not hacking the IRS code, he also funds longevity research.) The only downside? He might be too clever by half. When word gets to Washington of his tax maneuver, populist-rage-filled Congressmen may well call for an end to the Roth exemption. The taxman cometh.

Both Maddow and Thiel went to Stanford. They overlapped for a couple of years in the early '90s. Thiel, who had already gotten his undergraduate degree and was enrolled in law school, had started the Stanford Review, a conservative newspaper, to campaign against the college's move away from a curriculum which favored the great works of Western literature. Maddow was a progressive activist stomping around in combat boots and a shaved head. We hear that Thiel and Maddow had some kind of noisy on-campus altercation. Through a spokeswoman, Maddow says she doesn't remember a run-in with Thiel. Any Stanford grads care to enlighten us on what the two had to say to each other?

Thiel, who has suggested America would be better off if women had never gotten the vote, now calls his views on women's suffrage a "commonplace statistical observation." We think these two school chums are overdue for a reunion. They both now live in Manhattan. Isn't it time Thiel pops over to the studio for an interview on the Rachel Maddow Show? There's so much for them to catch up on!

(Maddow photo by Frederick M. Brown/Getty Images; Thiel by davidorban)

Thiel is the former CEO of PayPal who now runs the $2 billion hedge fund Clarium Capital and a venture-capital firm called the Founders Fund. His best-returning investment to date, though, has been Facebook. His $500,000 investment is now worth north of $100 million even by the most conservative valuations of the social network.

On the side, though, his pet passion is libertarianism and the fantasy that everything would be better in the world if government just quit nagging everybody. But, now he's given up hope on achieving his vision through political means because, as he writes in Cato Unbound, a website run by the Cato Institute, all those voting females have wrecked things:

The 1920s were the last decade in American history during which one could be genuinely optimistic about politics. Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women - two constituencies that are notoriously tough for libertarians - have rendered the notion of "capitalist democracy" into an oxymoron.

So there you have it: The problem with women is that they don't vote like their menfolk tell them. We would have so much more freedom, Thiel suggests, if only we'd deprived women of it.

You may wonder: Is Thiel on drugs? The answer, according to Thiel, is yes:

As a young lawyer and trader in Manhattan in the 1990s, I began to understand why so many become disillusioned after college. The world appears too big a place. Rather than fight the relentless indifference of the universe, many of my saner peers retreated to tending their small gardens. The higher one's IQ, the more pessimistic one became about free-market politics - capitalism simply is not that popular with the crowd. Among the smartest conservatives, this pessimism often manifested in heroic drinking; the smartest libertarians, by contrast, had fewer hang-ups about positive law and escaped not only to alcohol but beyond it.

"Positive law" is Libertarian-speak for laws which proscribe certain activities, such as taking drugs. Translate Thiel's language, and you'll see that he's saying anyone in his generation who wasn't taking drugs was an idiot. Which squares with rumors we'd heard about Thiel during his PayPal days, especially while he was fitfully coming out as a gay man. With a life like that, we can understand Thiel's visceral dislike of the government. But what did women ever do to him?

These should be heady times for Thiel, whose Clarium hedge fund sparked glowing press coverage (and more than a little envy). His strategy was different from most of the private pools of cash run out of places like Greenwich: Using relatively little debt, he sought to profit in times when governments meddle with markets. That should be now, right? Instead, he has been as hard hit by the credit crisis as most other hedge funds. He is down a mere 4.5 percent for the year — but that includes his phenomenal 58 percent rise from $4 billion in January 2008 to $7 billion six months later.

From July to December, Clarium's assets cratered. According to performance data obtained by Valleywag, Clarium's main fund returned negative 39 percent. Put simply, an investor who put in the fund's minimum of $1 million would have ended six months later with $600,00.

By the numbers, most did not wait around that long. Thiel's fund ended the year with only $2 billion under management, which suggests that investors took out another $2 billion, in addition to Clarium's $3 billion in investment losses. (Click to see the full document.)

No surprise there: Risk-averse investors have been pulling out of hedge funds everywhere. Thiel was right about the mortgage bubble, and right about the rising role of governments in markets. But was he right about how to make money off these developments? So far, the answer's no. And to investors, that's the only kind of vision that matters.

Morrow is a controversial figure within Clarium, a hedge fund Thiel founded after leaving PayPal, the payments company he cofounded and sold to eBay for $1.5 billion. Morrow was once chief investment officer at the San Francisco-based company, but was pushed out of Thiel's inner circle after he had a nervous breakdown on the trading floor. Morrow slowly worked his way back into Thiel's good graces, and was assigned to run the company's then-small New York office. Recently, his influence over Thiel and Clarium has grown.

Earlier this year, Morrow wrote a paper called "The Bull Market in Politics." His thesis was that "government influence — over trade policy, social programs, decisions of war and peace — becomes much more important" to investors. One key policy area: immigration, where Morrow thinks there is a rising consensus for restrictions.

A politically driven drop in immigration has broad economic implications, especially on the housing market; with less population growth, housing prices will continue to suffer for much longer than most anticipate.

But Morrow is not merely forecasting the market. He has cajoled his influential boss to spend money to make his forecast a reality.

A NumbersUSA spokesman called me to deny that Thiel had made a donation. But the money trail out of Clarium is clear, insiders say, and it would be a simple matter for Thiel to have arranged to make his donation through a third party like DonorsTrust, a conservative foundation through which charitable grants can be directed. The reason why Thiel would want his donation to be anonymous is simple: Even while he's betting against immigration with his hedge fund, he's making money off of immigrant-run startups in Silicon Valley.

However Thiel is getting the money to NumbersUSA, it has specific goals: upgrading NumbersUSA's computer system; hiring a full-time fundraiser to solicit large donations from the wealthy; and hiring Luntz Maslansky Strategic Research to run focus groups on public attitudes toward immigration.

So Thiel, like many wealthy sorts, is getting into politics. What's interesting about this is his shift from outspoken Libertarian. At PayPal, he had ambitions of using his payments startup to undermine illiberal economies and create a new world financial order. Many of his employees, first at PayPal and then at Clarium, were attracted by this powerful (if outlandish) vision.

That he's now fallen under the sway of a right-wing Christian conservative is a bit crushing to the true believers Thiel attracted to his cause. Thiel once aimed to overturn the system. Now he just wants to work within it. As much as his anti-immigration views render him noxious to the Northern California mainstream, his turning away from an embrace of freedom make him an enemy to the rebellious thinkers he's hired.