Australian chutzpah would be admirable if it were not so risible

It is like watching an implausible cinematic plotline unravel over a long period towards a predictable finale, while aching-bum syndrome kicks in.

The price Macquarie is offering - 580p per share - remains woefully short of the LSE's trading level in the market, currently 824p.

That should tell the private equity bidders something. But, no.

Even if the predator - probably a more apt noun this time than most times it is applied to unsolicited bidders - increased its offer by a pound or so, it would still be nowhere near high enough.

There would also be a resulting credibility gap for Macquarie (even more than the current one) as how could it defend paying even this much more when it has already described the LSE as a low-growth utility business?

Which the LSE isn't. Financial exchanges are a business of peaks and troughs based on the general state of the business world, flotations, takeovers and the desire for financial information. Expertise and large investment in technology go to the heart of it.

As a result, the LSE, booming now, could be fluctuation writ large, not utility.

It only suits Macquarie to call the exchange a low-growth utility because its own bid is loaded up with debt, a classic private equity strategy of trading off the price against dependable "utility"-like cash flows from the organisation being acquired.

The truth is the LSE is defending a position of considerable strength. Equity markets, flotations and takeover activity are much stronger again (Macquarie might have had more success if it had made its move in more challenging times, say 2001).

But the "acquirer" presses risibly on, while all the trading figures from the LSE are going up sharply, from the booming popularity of its SETS electronic trading to the axiom of it being the destination of choice for international flotations.

It is like offering someone a buoy when they are actually water-skiing with a smile.

Yesterday's 590m of cash sweeteners from the LSE to shareholders in its defence is nice.

But, even if the amount had remained at roughly half this level, shareholders should reject a bid short on logic, strapped for cash, creating a hostage to fortune because of its highly leveraged nature, and now not even very entertaining.

Hedges or bubbles?

NOT a few pessimists see hedge funds as the next big asset "bubble" waiting to burst.

When things go well, hedge funds make a lot of money, both for investors and for the investment bankers who got fed up with the restrictions of working in big organisations and wanted to open their shoulders a bit.

But few dispute hedge funds' lack of transparency and the risks posed by how highly-leveraged they are. Some liken the threat to the split-caps scandal of recent years. The split-cap funds collapsed in a devastating ripple effect after the heavily borrowed vehicles invested in each other.

It is said that hedge funds are also now borrowing to go into other leveraged hedge funds as they seek ever greater returns.

Despite this, latest figures suggest the pessimists are still whistling in the wind. Hedge funds' popularity continues unabated.

The Credit Suisse/Tremont Hedge Fund Index rose over 3 per cent in January - its best monthly return for five years.

After a relatively pale 2005, as old-fashioned equities came back into fashion, funds have entered 2006 in seemingly ruder health.

Investment returns in January are up in all those esoteric areas such as bets on emerging markets and convertible arbitrage.

The sirens warning of disaster are being steadfastly ignored. Meanwhile, the Financial Services Authority and London Stock Exchange are probably torn two ways in the debate.

They are obviously happy with the fantastic liquidity the funds give to the financial markets; but equally they must be concerned by their lack of detailed knowledge of the intricacies of the funds' workings, and that maybe the whole thing is a glossy deck of cards that will one day collapse.