January 11, 2012

Irrational Financial Exuberance in Investment.

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Industries, firms and companies are the ones that are mostly concerned
with the phenomenon of irrational financial exuberance. This term
simply means a kind of business operation under a higher spirit with a
very high expectation of profit returns but with a lower or less
required amount of capital investment.

             The expectation of every individual in any business
organization, industry, firms and company is maximization of profit;
and the tendency to make profit at all cost seems to be the topmost
priority of most firms and organization
.
So in a situation whereby
there is less financial capital availability, what they do most is to
hold the bull by the horn and invest the money irrationally. For
instance, an investment that is about three billion dollars in worth
is being executed by a company that has only five hundred million
dollar for the investment with the expectation of having the same
profit returns at the end of the day.

            What these companies usually experience at the end of the
day is unprecedented form of losses that cannot be controlled. In most
cases, what has always been the end of these organizations is
bankruptcy and foreclosure of properties as the case may be
individually.
      Irrational financial exuberance has always been the problem of
many companies and investors
. This has served as the major reason why
most of the investors have experience the kind of failure they have
encountered in their businesses and investment. This reminds me of a
particular company in the Middle East. This company seems to be the
best most making company in the region. Every business they embark
upon they always have recorded victory and the things were going on
for the company as well as for the entire staff.

          As a result of their several instances of their recorded
victory that cannot be quantified, they spontaneously gained the
attention of big industries and bigger companies. And so they
experience a continuum form of progress as a result of the new
development, courtesy of the resultant effect of their international
figurine.

         The event that spelt their doom was when they decided to
engage in what we call irrational financial exuberance. What happened
was that they discovered a particular lucrative business that could
turn the fortune of the company in sextuple fold. But the problem is
that they never had required capital expected to embark on the
investment nevertheless they could still risk going into the
investment with the little they had.

The fact is just that the outcome
result will be left on the basis of probability. That is, the outcome
could be loss or gain. But as fortune would turn against them, the
investment which required about two billion dollar failed to go in
their favor because they only invested about two hundred million
dollar. They lost their money and the resources they put into the
business which have them in some other maintenance expenditure as well
as venturing into an investment that is tolerant to the amount of
money they have for investment.

        The statistical growth of a company begins to decelerate the
moment they engage in irrational spending lifestyle. The company in
our story suffered a great deal of retrogression at the beginning of
their losses. They management only managed not retrench some of their
important workers whose services are integral to the progress of the
company.

      The advice we are introducing in this article for every C.E.O
Company and firms is that they must never engage in any business that
would be highly detrimental to the progress of their company.
Venturing into the business or the investment that demands huge amount
of money that is greater than the amount you have in your companies
purse will spell a great doom on the entire management of your if you
ever embark on such business as this may lead to the loss of
properties as well as the most important staff of your companies; this
which may be effected as a result of insolvency.

Cheers!

Eniola Adewale
Facebook.com/NairaInvestmentClub





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