In the stages 4 and 5 above, one of the key signals to an over confident market is when the quality opportunities start running out, and the 'suppliers' begin manufacturing clones just to keep the momentum going. Take a look at Chinese private equity in the nineties. There were a number of excellent value opportunities in the market, where a few people were making some above-average returns until London and New York decided that they could develop 'funds' to invest in all these exciting opportunities.

The reason investors lost so much money is that it turned out there just weren't enough quality private equity opportunities in place to feed the purchasing demand. In the mad rush to get in on the action at any cost, these funds started purchasing anything that could be reasonably construed as private equity, a strategy which was obviously very much in China's favour as it encouraged more investment directly into its own pockets but which left lots of unsuspecting Westerners seriously out of pocket.

The same can be said for outsourcing. It is in countries like India's interest to keep Western companies in the outsourcing cycle; this is what is contributing so massively to the GDP growth, and short-term thinking consultancy companies have the incentive to keep recommending outsourcing as a viable alternative to keep the fees rolling in. The big irony is that outsourcing as a cost-saving phenomenon is going to leave some Western organizations seriously out of pocket just as boom-bust cycles in markets have consistently left the retail investors.