New York: You've heard of "irrational exuberance", right? That's the expression Alan Greenspan coined more than a decade ago when he warned that investors could be bidding stock prices too high. His worry was that escalating asset values were trumping reality.

These days, the opposite seems to be the case. Call it "irrational pessimism", a fear that stock prices are headed in only one direction - lower and lower - because asset values and profits seem certain to fall.

But before buying into the notion that all is lost, it's worth remembering that stock indices today are almost exactly where they were in 1996 when then-Federal Reserve Chairman Greenspan issued his warning.

Investors ignored him then, pushing stocks higher for more than three years until the internet stock bubble burst in 2000. Now, a growing number of markets experts are saying the time may be near when the Cassandras of doom should also be ignored.

"You can get to emotional extremes in both directions of the market," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Savvy investors think in those terms and they know how to get that to work in their favour."

By that, he points to the short-sellers who are playing a big role in what the market is doing today. They make money betting stocks will drop, and have set the tone in this current decline, which began after the market reached record highs in October 2007.

Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors, takes that one step farther. "The shorts are staging raids on our companies," he said. "For the last two years, the best bet you could make on the market was against it."

Sorrentino knows that because his firm owns 6.4 million shares of GE, and he can't understand why the stock is trading where it is given that parts of the Fairfield, Connecticut-based company by his count are worth a lot more than where its shares are trading now.

He's convinced the shorts have made it tough for anyone in the market - at GE and beyond - to think positively because they could get burned. Therefore, investors have decided it is easier to follow than fight them, even if a company's finances say something else.

A case study of GE illustrates how this may be playing out. Even though GE is in many different businesses from jet engines to entertainment to lending, investors seem to be focused entirely on its finance arm, GE Capital. Once a major profit generator for the company, now there are worries that it is short on liquidity and could post big losses.

The shorts' efforts have then been backed by nervous individual investors who now have reason to sell since GE announced plans February 27 to cut its dividend for the first time since 1938 to save $9 billion a year. GE will pay shareholders a 10-cents-a-share dividend beginning in the third quarter, 68 per cent lower than the company's original plan of 31 cents.

All that selling is putting fund managers on edge, especially foreigners like sovereign wealth funds that had counted on GE as a safe investment. Of particular concern is whether GE's triple-A credit rating could be in jeopardy if its finance arm lacks capital.

All that shows how GE's stock has been ravaged by "irrational pessimism" - fed by the shorts but potentially without much to back it up.

The negative environment in the overall market is driving away prospective buyers, said Darin Newsom, senior analyst at the Omaha, Nebraska-based market information company DTN. "Right now no one wants to support this market," he said.

London (AFP) The London FTSE 100 will be seeking a quick recovery when traders return tomorrow after Europe's biggest stock market plunged nearly eight per cent to six-year lows last week.

London's FTSE 100 index of leading shares ended the week down 7.82 per cent, or almost 300 points, to 3,530.73 points, compared with the previous Friday.

The FTSE 100 had on Tuesday closed at its lowest level for six years by hitting 3,512.09 points, as markets worldwide were unsettled by fears for the world financial system and the ability of governments to overcome a deepening recession.

In Britain, "manufacturing data and survey continue to be dire, with the sector being hit very hard by sharply contracting domestic demand, deteriorating activity in key export markets, persistent very tight credit conditions and intense competition," said IHS Global Insight economist Howard Archer.