Irrational Exuberance

Just over ten years ago in a speech to Congress Alan Greenspan proposed that the reason for the rising stock market was Irrational Exuberance.

I have watched the range of multiples paid for general aviation service companies double over the last seven years.

Most of the fundamentals for the GA industry have been strong. Business jet sales have reached new highs almost every year, backlogs are at record levels, and the number of hours flown has steadily increased. All this has occurred in the face of what I have called the perfect storm – the dot-com meltdown, 9-11, and record high fuel prices. More waves from this storm are reaching the shores of general aviation as I write this:

• An antiquated Air Traffic Control System;
• An FAA with no funds or direction from Congress to improve this situation;
• Airlines increasing the size of their fleet with smaller aircraft;
• An airport infrastructure unable to accommodate these changes;
  

And then there are the collapsing worldwide debt markets… Could all this mean a tsunami is approaching?

On the bright side, after 1996 when Greenspan tagged the stock market with Irrational Exuberance, the market set record highs for the next four years until the real irrational exuberance of the dot-com era burst that bubble.