It is hard to gauge how much sympathy one should have for the refugees from dot.com investment. Make no mistake, there was little altruism involved when small investors and institutions quite literally pleasured themselves as ICT stocks, led by the dot.coms, rose to unprecedented levels.

Likewise, it is hard to condone the day-traders who responded to the collapse of many of these companies by picking up a semi-automatic and wandering into the offices of their local broker, seeking revenge for supposed betrayal. Human greed is probably the most distasteful of human vices.

Most ‘small investors’ – not just those who ‘dabbled in the stock market’ but those whose pension funds are based largely on equity investments by institutions – got murdered by the collapse of technology shares. Five years on and they are not in a forgiving mood.

Do the math...
It’s easy to work out the extent of this financial calamity. One of the nifty little bits of TelecomRedux, which you can find by clicking on ‘R-100 Index’ in the Main Menu to the left, is a share tracker. If you click on the weird-looking graph icon you get through to share information for the company in question. Click on the ‘5y’ option below the little chart and Armageddon unfolds before your eyes.

One rule of thumb when measuring peak to pit is that a fall to 10% of the highest price means survival; 5% means borderline survival; less than that means oblivion or Chapter 11. Believe me, some of the dot.com high-fliers traded at 0.01% of their 2000 zenith before the investment world got wise.

Make no mistake, investors were caned by Chapter 11 and the global equivalents of the US bankruptcy mechanism. Small wonder that small investors tap what is left of their still-singed digits onto the parts of their crania containing seared memory and think, “do you think I am stupid?”.

No you are not. But you were back then. Stupid and greedy.

What’s in a name?
One way of checking out of this debate is to examine how shares, and their prices, relate to the companies whose values they purport to represent.

We are heading out on a limb here, so if your attention span is limited you should really go somewhere else. The philosophy of language tells us much about the philosophy of share ownership.

One of the key debates in language and linguistics concerns the relationship between a word, a name or a label and the object which it describes. So you can know what a knife is without knowing the word ‘knife’. Place this is in a foreign language scenario and it makes sense immediately. Someone in France asks me to pass them ‘un couteau’. I don’t understand. The person asking me the question must decide whether I don’t know the meaning of the word ‘couteau’ or whether I don’t actually know what a knife is.

Technology shares are exactly the same. Does a share perform (or outperfom, or underperfom) or does the real-life company to which the share is tenuously and non-umbilically linked do so? Hence we hear lines such as ‘technology shares dropped on the Dow after XYX reported lower-than-expected earnings…’. Does that mean that one company messes up and the rest take a share of the blame, even if they are heading in the other, more positive direction? Likewise, when ‘market sentiment’ carriers share price upwards, even to the ridiculous levels seen in the boom, what does that really tell us about the shares and the company’s value as measured by its share price?

Is it that we mis-understand the link between a share certificate and the company in which it represents a stake, just as we often mis-align words and their meanings and the objects they describe? Wittgenstein and Derrida spent a lot of time on linguistic issues like these. Sadly, neither made much money out of the stock market.
Jim Chalmers

Tomorrow: end users. Do they get what they deserve?