Finance 2.0

A Times article on the beneficial effects of activist hedge fund activities concluded by saying, "invest off of this knowledge, but know that your investment edge will disappear soon as everyone else figures out the same thing." Particularly after that article. Hedge funds, it seems, despite their vaunted secrecy, bring about greater speed of idea circulation.

Hedge fund activism, says the article, is better than pension fund or mutual fund activism. Why? Cuz hedge funds got skin in the game. Make a bad call, it's their ass. They care a lot. Activist hedge funds are lots of rational profit-seeking agents seeking transparency.

Lots of little entities facilitating the flow of information, taking power away from a set of legacy institutions. As hedge funds to i-banks and mutual funds, so blogs to networks, so distributed computing to mainframes.

Volatility goes down, and it's a smoother ride up. Except for when all the lemmings pile in together, as with the GM downgrade last spring and the associated disruptions. But that too passed.

Is capital allocated better? Who knows. But it feels OK now.