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Shares: the dot-com un-bubble insanity

The reason the wireless market is slow-moving, despite its obvious potential, isn't hard to find. The problem is with finance: nobody will lend money to a "communications" or "Internet" based company - it's the dot-com unbubble.

Actually, I feel pretty sore about this, because when I first wrote about it, back in the days of the dot-com bubble, I warned readers that the idiots who were hyping the Internet were fooling with our pension funds - and several worthy City analysts ticked me off for being alarmist. But the fact is that the people who talked the dot-com prices up, are currently pushing everybody's share down.

Oh, it's not deliberate, this time; it's done out of genuine fear that they will lose their investments if they don't sell before the bottom. But it's no less crass as it was when they talked the shares of Lastminute.com up because there weren't enough of them to make their bonuses unless they sold for inflated rates.

What I see happening, right now, is a stock market which is actually trading pretty near rational price levels.

What is actually going to happen, however, is that it will carry on down, because things are coming out of the closet. And people don't need to jump to the obvious conclusions about what is there.

Yes, it's true: ordinary, everyday businesses like banks and building societies and energy companies have been falsifying their profit figures. And yes, it is widespread, and technically, yes; it is fraud.

The reason they were doing it, however, is that in the insanity of the dot-com years, if you didn't do it, you were toast.

No large corporation can manage without finance. Few large corporates can, or should, finance from within. So they have to go to merchant banks, and borrow, or launch shares on the stock market.

At the time of the dot-com insanity, if they'd published honest figures, nobody would have bought a single share. They were all tripping on hard drugs; they were actually saying, in public, that electronics were all "growth" stocks, justifying share prices of 50 and 80 times earnings. Against that, ordinary corporates simply had to inflate their own performance figures.

Now, of course, the rot in the bottom of the freezer is starting to ooze out. And ordinary, honest people - as opposed to financiers - assume that this was ordinary honest fraud. As a result, they are going to chase the stock market down beyond any rational level.

If this just meant that a few greedy brokers had to do without their two million pound bonus come year end, it would be amusing. But it doesn't. It means that innocent people will die. People are going to starve. They will starve because companies which could employ them, won't be able to raise the money to carry out ordinary everyday, honest business.

The shortage of finance is going to starve business on a massive scale over the next two years. The panic caused by current failures will make it worse; and that will lead to more failures. And by the time the markets start functioning properly again, we could be as far below rational market levels, as we were above them two years ago.

The wireless and IT markets, strangely, may well come through this better than most. People with money do need growth stocks to invest in; and when it becomes clear that IT is essential as money, and wireless more exciting than PCs, our industry will start moving. But our industry can't employ all the millions who are going to get thrown out of work in the next 18 months.

It is going to stink out there.