Green investment is all the rage. But does it deliver? Does it pay off and produce strong profits for the investor.

This piece in the latest edition of The Economist, Backing greens with greenbacks, advises us to exercise some caution.

"Most green companies are not a matter of a couple of geeks and a website. Just as telecom companies laid down billions of dollars worth of fibre-optic cables, environmental companies require large amounts of capital-for building a wind farm or a tidal barrage-or the patience to invest in new technologies, such as cellulosic ethanol or thin-film solar panels.

"This means that the shares are likely to be volatile. The returns are highly uncertain, because the big profits (if any) are many years away. News events such as technological breakthroughs or changes in government policy will have a much bigger impact on valuations."

Part of the problem is the many competing solutions to climate change. One day it's solar, the next day it's wind, then it's geothermal energy. Which makes it very hard for investors to pick winners.

But while climate change and oil prices remain key issues, there will be no shortage of investors willing to put up the money. They should not expect immediate returns.

Can the biggest get bigger? Can companies get too big to grow? That's the interesting question raised in this Harvard Business Review piece that looks at research showing how companies get to a size where they hit a plateau and can't grow anymore.

The piece states two obvious solutions: keep the business units small enough and scout around for new business opportunities.

I would say one of the best examples of this quandary is Wal-Mart. The retail giant has filled up the United States and it would be hard to find new arenas of growth. Wal-Mart now accounts for 10 dollars out of every 100 that Americans spend in any store anywhere in the country and in a lot of towns, it accounts for 33 cents in every dollar spent on groceries.

True, Wal-Mart's been doing well in the wake of the subprime mortgage crisis as Americans rein in their spending, something that Slate writer explains in his excellent piece The Wal-Mart Puzzle.

But it's hard to see it owning more of the retail economy than it currently has.

Wal-Mart has been looking at new growth options. One is expanding overseas. The other is opening up so-called medical clinics run by what's called "nurse practitioners", something the New York Times covered earlier this year.

It's not that Wal-Mart is in trouble. But it's unlikely to return to the era when it was growing at 12-20 per cent.

The problem with the crisis now is that we have this illusion of market fundamentalism, that the markets are ultimately perfect and self-correcting. But that's a religion built on false premises, says financier George Soros in this interesting New York Review of Books interview.

Soros blames a lot of it on the regulators. Whilst a lot of people could see disaster, the regulators at the Federal Reserve and Treasury ignored it until it was too late.

"But I don't hold them personally responsible because you have a whole establishment involved. The economics profession has developed theories of "random walks" and "rational expectations" that are supposed to account for market movements. That's what you learn in college. Now, when you come into the market, you tend to forget it because you realize that that's not how the markets work. But nevertheless, it's in some way the basis of your thinking."

Soros says the situation is a lot worse than recognized with the disruption in the financial markets and the US housing crisis which, he warns, is going to get a lot worse and problems with such adjustable-rate mortgages shaping up to be as as bad as subprime mortgages.

And in the final wash-up, he says, the US will no longer the economic superpower.

What to make of the good economic news? Is the lower unemployment rate cause for celebration? And what of the improving productivity figures and shrinking trade deficit? Don't pop the champagne corks, warns Associated Press economics correspondent Jeannine Aversa.

The numbers might just be a mirage masking deeper problems in the US economy.

The drop in the official unemployment comes with more people being forced to take part-time employment and coincides with employers cutting jobs for the fourth month in a row. Similarly, the supposedly improved productivity is the result of people working fewer hours. And the shrinking trade deficit is very much the result of people spending less. What's making them tighten their belts even more is the fall in the US dollar which is making imported goods more expensive.

And the really worrying part is that consumer borrowing and credit card charges are on the increase as people try to make up for the shortfall in their paychecks.

After its involvement in the shooting of 17 Iraqi citizens last year, a criminal investigation by the FBI, internal investigations by the State Department and the Pentagon, and high-profile Congressional hearings, the people at Blackwater walk free with reports that it won't face criminal charges.

And just to fill it out, the State Department has just renewed its contract with Blackwater to provide security for American diplomats in Iraq for another year, reports the Seattle Times.

The sad truth is that Blackwater has been cleared because the US Government can't afford not to have it providing services when it is hell-bent on staying in Iraq. So much for ethics at government level.

"We cannot operate without private security firms in Iraq," Patrick F. Kennedy, the under secretary of state for management told the New York Times. "If the contractors were removed, we would have to leave Iraq."

Tribune Media Services writer Bob Koehler accuses the media of colluding with the Bush administration's greatest evil.

"It's hard for me to read anything about Iraq in the mainstream media without being tormented by the way it's written: especially by what I would call the requisite spin and omission. Thus every travesty of our occupation, every hellish mishap, every stealth brutality that somehow finds its way into the spotlight, is presented to us context-free. This is the media's ongoing gift to George Bush (and John McCain),'' writes Koehler. "The Los Angeles Times, for instance, in its May 4 story about the investigation of the Nisoor Square massacre, doesn't trouble us with references to other Blackwater shooting sprees; much less the larger context of invasion, mission accomplished, and five years of occupation in which more than a million Iraqis have died; much less the ample testimony of returning vets that "the hadjis" of occupied Iraq are routinely belittled, mistreated and dehumanized. If it had done so, the massacre in question would suddenly be a piece in a far larger picture that would make almost all Americans recoil in shame."

AIG, in combination with the soaring oil price, managed to drag down the US market after it posted a first quarter loss of $7.8 billion on the back of the mortgage-related downturn. And the reality is that they don't know whether they've hit the bottom. AIG is raising $12.5 billion in capital for one reason: to prop up its balance sheet and that's a real indictment of the company.

The reality is that AIG's fortunes won't improve until the US credit and housing markets pick up and no-one knows for sure when that's going to happen. And analysts now warn that the insurer is likely to be in for a period of instability and a management shake-up. "Management capability issues, which have been smoldering for a while, are likely to flare up,'' David Havens, a credit analyst at UBS AG in Stamford, Connecticut, said in a note to investors, reports Bloomberg. "One of AIG's constant weaknesses has been its complexity. It's come back to bite them.''

That might explain why The Street.com's Jim Cramer says that the latest debacle is of Enron proportions. Cramer also wants the Securities and Exchange Commission to investigate. Oh yes, and he wants chief executive officer Martin Sullivan's head.

"This company's in trouble, and not just because of the capital raising. You don't raise capital and raise the dividend,'' writes Cramer. "That's so obvious as to be painful. Clearly, AIG has no idea what it owns, so any amount of capital it raises is pure conjecture. Everyone at the top is over his head. They don't know what they are doing ... I would stay away from anything AIG. If I were them, I would have cut the dividend and raised $20 billion. Why not? Oh, and keeping Marty Sullivan at the top? Hysterically funny."

Fair point. But even if Sullivan goes, this company will need a miracle turnaround in the housing and credit market, not just another leader, to find its way back. Investors shouldn't hold their breath.