It's four-and-a-half years since the term "irrational exuberance" entered the lexicon of economic commentary and, during much of that time, the exuberance was even more irrational than US Federal Reserve chairman Mr Alan Greenspan ever expected.
During the late 1990s he did everything he could to help businesses prosper, while warning of the dangers of inflated share prices. Now, with US exuberance well and truly deflated, his Humphrey Hawkins testimony was analysed for signs that the economy was ready to resume a positive trend again. But despite the fact that US consumers are still spending (while they can), Mr Greenspan didn't strike any irrationally optimistic notes.
Because, although consumers are shelling out, businesses are not. He noted that there had been large-scale reductions in capital spending and that growth in equipment and software was negative. He hasn't ruled out more rates cuts but there is a definite inference that more cuts will not necessarily help.
That won't suit the banking and brokerage industries where things are looking uncomfortable following the boom times. Charles Schwab (the biggest online brokerage) and Merrill Lynch both reported steep falls in their earnings for the second quarter.
Not that poor results are, as yet, affecting bonuses in other industries - at least in the UK. More controversy over "fat-cat" payouts last week, this time at Cable & Wireless where 20 per cent of shareholders voted against a proposal to give the chief executive, Mr Graham Wallace, share options worth £2.2 million sterling (#3.6 million). Why was he getting this award? Simply because C&W performed "in line" with the sector. This actually means shares in the company have fallen by 65 per cent this year!
The heartening news is that fund managers themselves voted against the bonus package - finally those people who are managing our money have decided to put their heads above the parapet and say that average performance doesn't merit above-average rewards.
Naturally the usual bleating of "paying what the market demands" and "rewarding top people so that they stay" are trotted out. In the current climate, I'm not sure how many other companies are prepared to shell out ridiculous sums for so-so chief executives but I suppose they're out there. I hope that I'm not invested in any of them.
Unfortunately the captains of industry want to reap the rewards when times are good and reap just as much when they aren't. For the investor, though, it's the market and only the market that matters. In order for people who own shares in companies like C&W and Marconi - which recently tumbled following a poorly managed profit warning - to make money, we need to see the phoenix rise from the ashes again. The chances of that are somewhat remote at the moment, although a rather interesting study from researchers in the Ohio State University and University of Michigan correlates rises in the markets to sunny days and falls to overcast ones. Hardly surprising, I guess but, given the awful summer we've had so far, it doesn't augur well for a bounce in the ISEQ.
Meanwhile, there's been a lot of talk about an "investment scheme" called Women Empowering Women, which is supposed to help women make money by investing in a "gifting club". I first heard of it when listening to news reports from Britain where, apparently, the entire population of the Isle of Wight had bought into it.
Many people who read this column are already aware that schemes like this are a disaster. You don't need a knowledge of business and finance to realise that this scheme is absolutely NOT an investment.
When you invest money you get something in return. It may be shares which then halve in price, but you still have the shares. It may be property which goes up in price (and then comes down again). It may even be bonds in emerging markets, which ultimately pay you very little. But you do actually own something afterwards, even if the value is not what you expected.
In schemes like this you don't get anything other than other people's money and you might not even get that depending on when you join. Making money is totally dependent on getting someone who can probably ill-afford it to give it to you. It certainly doesn't empower anybody and will probably fracture your relationships with friends and relatives forever.
Apparently this scheme is beginning to take hold in Ireland. Irrational exuberance is still out there. Please don't fall for it - not if you've escaped the TMT carnage, the Russian debt default, Argentina, emerging markets . . .
