2007: Crazy Happens, Part 1

This column was originally published on RealMoney on Dec. 21 at 3:00 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Writing in a Forbes column about what he sees as an unsustainably low valuation for a French telecom stock, money manager Ken Fisher wrote, "Crazy happens in France." I believe crazy happens in the U.S. financial markets, too.

Among other things, I think it is crazy that more than 9,000 hedge funds are in existence. Hedge funds are the highest-cost legal investment option in the free world. The expenses that hedge fund investors bear put variable annuities, front- and back-loaded mutual funds and broker-wrap accounts to shame. The typical fund carries an annual expense ratio of 2%, plus a percentage of the profits on the order of 20% or more.

Taken alone, high expenses should not be a deterrent to investing in the best hedge funds. I'm in favor of paying top dollar for consistently tremendous performance produced by certain elite hedge fund managers such as George Soros, Michael Steinhardt, Ed Lampert and Steven Cohen. ...