The stock market’s rebound has been so fast and furious that it might make folks forget that we just experienced a nasty credit crisis and market downturn. Have sinking home values not registered with the national psyche? Surf around on Zillow.com and witness the vast amounts of wealth disappearing over the last few months as homeowners see their most significant asset crumbling on a shaky credit foundation. Of course, institutional money managers are the ones buying furiously and fueling this market rebound. It is entirely plausible that, unlike the average American, their homes are not their most significant asset. Maybe most of their wealth is stored in Swiss bank accounts, gold bullion, Impressionist paintings, or first edition copies of Superman and Batman. Thus, unlike Barack Obama, Hillary Clinton, and John McCain (average Americans all), hedge fund managers don’t feel your pain.

But we are all shareholders now. Even as our home values continue to sink, our brokerage accounts are softening the pain as equities turned in a strong performance over the last week. Technology stocks, much to my chagrin, turned in a 3.4% pop. In investing, paradoxically, there is nothing as potentially humbling as having a strong opinion. The S&P 500 and Dow Jones Industrial Average followed the leader and also rallied impressively. Curiously, REIT stocks topped them all, suggesting that the market is discounting further weakness in real estate.

“Go East Young Man!” That ought to be the rallying cry for ambitious college graduates. Learn an Asian language and stake your future in emerging markets. While almost all equity markets have performed negatively over the last twelve months, emerging markets continue to appreciate at a blistering pace with Asia being a driving force. I count myself lucky that my parents taught me to speak Cantonese-Chinese. They displayed amazing persistence as I was not a receptive student to one of the most difficult languages in the world to master. I am still amazingly inept at it, but I could survive in Hong Kong and Guangzhou.

The Black Bubble inflated just a tiny bit. Nonetheless, crude oil set a new record high – topping $127 per barrel before settling at $126.02 per barrel. As the summer driving season approaches, will the high cost of oil discourage road warrior Americans from taking that trip to the Grand Canyon and other national monuments?

Macro

American corporations are flush with cash. Big blue chips are flush with cash. Mid-sized companies are flush with cash. Small capitalization technology companies are flush with cash; actually, a wide swath of technology companies is flush with cash. So while the major market indexes have rebounded strongly, many individual company stocks are still way off their price highs. We need more dudes like Carl Icahn.

Mr. Icahn last week announced that he had accumulated a significant stake in Yahoo! (YHOO) and plans to nominate an alternative board in order to force a sale of Yahoo! to Microsoft (MSFT). He contends that the current Yahoo! board acted irresponsibly by rejecting Microsoft’s buyout bid.

This is precisely the time for cash-rich companies to go shopping for fallen competitors on the cheap. If the pickings are slim, then they ought to deploy their cash and buy back shares. If corporate managers cannot put corporate coffers to good use by engaging in business activities that produce strong returns on investment (ROI), they should return that cash to shareholders.

There are plenty of situations that could use a good activist investor to spur intelligent deployment of cash. Smart acquisitions and stock buyback programs would further bolster the current rally. There are few good reasons, given the prevailing environment, to hoard cash.

Micro

CBS in $1.8B deal for online news, info site CNet – This is exactly what I’m talking about. CBS Corporation (CBS) has a decent balance sheet and plenty of cash to make this acquisition of CNet Networks (CNET). Startup entrepreneurs rejoice! With Rupert Murdoch’s News Corporation (NWS-A) busily gobbling up web companies to bolster its Fox Interactive Media unit and Time Warner buying new properties in an attempt to make its eventual spinoff of AOL more attractive, the rest of the media giants will play lemming to catch up. Suddenly, everyone wants to be Web 2.0! Here’s a very informative piece from Amy Webb showing who owns what in Web 2.0 – a handy thing to keep at the side of your desk if you’re a venture capitalist with some Web 2.0 in your portfolio:

Meet Carl Icahn’s Yahoo Board – Let’s revisit the drama that is Yahoo! Mark Cuban is on the alternative board. Cuban is the smart fellow who sold Broadcast.com for $5.7 billion at the height of the dotcom bubble. He also had the foresight to sell whatever shares he had for cold hard cash. In life, timing is everything. This time though, the payoff for Cuban will not be quite so lucrative. If Icahn is successful with this proxy battle, I liken Cuban’s likely short stint, as a director, to community service. He’ll perform a service to the community of Yahoo! shareholders by forcing a sale to Microsoft.

Comcast to Acquire Plaxo – Here is one that doesn’t make sense, no matter how flush Comcast’s (CMCSA) coffers are. Did I mention that big media companies will begin to behave like lemmings? If the big cable giant is going to move into this space, it should also set its sights on LinkedIn.

Ask.com buys Dictionary.com parent Lexico – Ask.com, owned by IAC/InterActiveCorp (IACI) takes ownership of Lexico for a reported $100 million. IAC/InterActiveCorp is another one of these bigger tech companies with a boatload of cash. The options are simple – invest it, buy competitors, or return to shareholders. IAC/InterActiveCorp will undergo big changes itself as it prepares to spin off non-core properties.

Natus Shareholders Throw A Fit – Let’s look at a different kind of tech. Natus Medical (BABY) develops and sells medical devices that help in the screening, detecting, and monitoring of newborn conditions. It filed to issue a secondary public offering of 3.5 million shares. Shareholders reacted violently to the potential dilution, but the company is simply attempting to raise more cash in order to make more acquisitions. It is essentially the same theme being played out over in the software industry with Microsoft, AOL, and IAC/InterActiveCorp. Full Disclosure: I currently have a long or short position in BABY in one or more of my private investment partnerships.

My short thesis was based on the potential for developing technologies from obscure upstarts to steal market share from Netflix and competitor Blockbuster (BBI). I also reasoned that Comcast (CMCSA) is really the company, however hated cable companies might be from a customer service point of view, that has the greatest chance of success in the battle for the future of digital video distribution.

For any chance that Netflix stands to survive the creative destruction of innovation, the company indeed needs to be spending more money developing next generation technology for content distribution. The market’s shortsightedness is punishing the company for the one thing it should absolutely be doing to ensure long-term survival. The only other way for it to acquire the technology to survive is to buy it from technology startups that are actively trying to address the digital content distribution problem.

So although my trade is working, the reason for the stock’s drop is not what I posited. Long term, I stand by my short on Netflix and Blockbuster, their valuations are currently too high once their competitive advantages are eroded by new technologies.

With so much at stake, the future of video promises to be a most entertaining saga. Many players are trying to figure out how to navigate the shifting technological landscape. How video entertainment is created, delivered, and sold is changing with breathtaking speed. New competitors are entering the market and current leaders are scrambling to defend their turf.

Blockbuster (BBI), playing the part of copycat, will soon announce a set-top box similar to what Netflix (NFLX) unveiled at the Consumer Electronics Show earlier this year. The two companies have seen their fortunes move in opposite directions. Blockbuster’s stock has fallen about 49% over the past year while Netflix has seen a 48% rise in its stock price. I have to commend Netflix for attempting to rewrite their own game changing model. It pioneered the mail order rental model, put a very good Internet component to the ordering process, and now is trying not to fall prey to outside innovation by tackling the problem and opportunity of digitized video delivery. If creative destruction is going to happen, you might as well do it to yourself. At least the two companies are trying; laggard Movie Gallery (MOVIQ.PK) looks dead even as it attempts to exit bankruptcy.

But will any of this matter? Distributing a digital set-top box that allows Netflix and Blockbuster to deliver video over a digital network puts them squarely in competition with Comcast (CMCSA) and other large cable network operators. Comcast already has pretty good video-on-demand services and owns that relationship with the consumer. It already has millions of cable lines breaching the last-mile problem. Getting consumers to adopt newfangled digital set-top boxes will be much easier for Comcast and its cable peers than for Blockbuster and Netflix.

Investors will also have to keep an eye on the currently free and rudimentary video sharing services such as YouTube (GOOG), GoFish (GOFH.OB), and their private brethren. There are dozens of free video sharing sites that are growing quickly by allowing users to upload and share home videos, amateur content, and the equivalent of podcasts – videocasts. What I call the Age of Amateurs has taken hold of public attention but that will give way back to the professional content producers. They’re cute now, but how many skateboarding dogs and Obama Girls can we watch? As with all things social on the Internet, we will grow up. Granted, I think the future will be kind to a creative combination of the amateur and the professional. Joost, founded by the guys who brought us the popular VoIP service called Skype (EBAY), looks like a potential winner in that regard.

The challenge for these video sharing social networks will be in improving video compression software such that professional-quality video can be beamed down Internet pipes without loss of viewing quality. Companies like Sorenson Media, Fibridge, and DivX (DIVX) are all trying different approaches to solving that problem. Full disclosure: I’ve performed very preliminary, basic consulting for a Sorenson Media subsidiary. If video compression codecs can improve exponentially, Comcast, Blockbuster, and Netflix may well have to concede the future of video to the Joosts and YouTubes of the world.

Bottom Line: my bet is that Comcast wins the battle on professional video-on-demand and the video sharing sites will own the rest. I would bet against Blockbuster and Netflix in the long term. The shorts agree on this one as both Netflix and Blockbuster have tremendous numbers of shares short as a percentage of their respective floats.