Barton Biggs spent years as a top strategist at Morgan Stanley. But, several years ago, he left the firm to start his own hedge fund. In fact, he even wrote a book about his doings in the hedge fund world, Hedgehogging.

In his early 70s, Biggs certainly has seen the Wall Street manias. And, according to a speech he gave earlier this week at a Deal Flow Media conference, the latest spark is all about private equity.

His analysis is very simple. Firstly, there has been a huge inflow of capital into private equity funds. So far this year, the amount has reached about $178 billion.

Keep this in mind: a typical deal value is about 5X the equity. Thus, for the private equity raises this year, there is close to $1 trillion in purchasing power.

Now, this brings-up the next point: Are there enough good deals to put this money to work?

Obviously, Biggs doesn't think so. Basically, he thinks private equity will start doing bad deals.

After all, the fees on these transactions are lucrative for all players, such as investment banks, attorneys and so on.

Interestingly enough, back in the 1980s, there was a private equity bubble. That is, a ton of money came into the funds and bad deals got done. The pinnacle was the massive buyout of RJR Nabisco.

Wall Street has a short memory -- especially when there is lots of money being made. In the case of private equity, it does not seem to be a case of "if" but rather "when" a meltdown occurs.

Tom Taulli is the author of various books, including the Complete M&A Handbook. He operates InvestorOffering.com.