Who are the good guys again?...

I have no investments in anything but land and cheap wines, but I do follow the drama that is the stock market. After Friday's plunge at the end of a bad week, I was startled to see the biggest day in 5 years on Wall Street.

Wall Street's wild ride resumed Monday with the Dow industrials soaring 286 points, marking its biggest point gain in nearly 5 years, helped by financial sector strength and subsiding credit market fears.

The Dow Jones industrial average (up 286.87 to 13,468.78, Charts) soared 286 points, or 2.2 percent, staging its biggest point gain since October 2002, just a day before the Federal Reserve holds its policy meeting. [More]

The unsung heroes may be - surprisingly - yesterday's villains: hedge funds.

And so, far from causing financial fires, hedge funds often act as firefighters. They plunge into infernos because they understand financial risks better than others and are less likely to get burned by them.

Armed with abundant capital, much of it from foreigners, they make it less likely that markets will plunge irrationally low. They have not repealed all bubbles for all time, but in some ways they can stabilize the system.

Before the crises of the 1990s, many economists believed that financial globalization was a good thing. After the crises, the consensus turned; economists reported little to no correlation between openness to global capital and economic growth -- not least because their data now included open countries that had experienced growth-destroying crises.

But, depending on how the next few weeks turn out, the consensus may swing back again. Maybe historians will determine that, in the first phase of financial globalization, governments and financiers didn't know how to manage the attendant risks. Maybe they will record that, finally, in this decade, they grew better at it. [More]

Two lessons for this farmer from this news. First, there is more money wandering around the world than I could imagine even after several adult beverages and 2) maybe hedge fund managers do deserve to be paid more than anyone in the universe.

..the top 25 hedge fund managers combined appear to have earned more than all 500 S&P 500 CEOs combined (both realized and estimated). [More]

Tell me again why I pay attention to the Fed Chairman.